-----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, OgKR/h6nQYInOpH8cT5j7qwp+PT4fpOjRzjfjWK5tFUESRKd1J7qqD9/SOySBOy9 IuMYmTymg30OBsD6hxBIIQ== 0000950131-97-001646.txt : 19970311 0000950131-97-001646.hdr.sgml : 19970311 ACCESSION NUMBER: 0000950131-97-001646 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970310 SROS: NONE 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: 97553118 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 BRINSON PARTNERS AND SWISSKEY SEMI-ANNUAL REPORTS ---------------------------- THE BRINSON FUNDS BRINSON GLOBAL FUND BRINSON GLOBAL EQUITY FUND BRINSON GLOBAL BOND FUND SEMI-ANNUAL REPORT DECEMBER 31, 1996 LOGO GLOBAL INSTITUTIONAL ASSET MANAGEMENT ---------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CFA, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their institutional investment management organizations into a single investment management business operating as Brinson Partners, Inc. in North America and SBC Brinson in its other world-wide locations. We are a global investment management organization with over $72 billion in institutional assets under discretionary active management. We are also the investment advisor for SBC Private Banking mutual fund assets which total $47 billion. The firm manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other institutional investors located throughout the world. Our organization employs over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, Inc., an established U.S.-based leader in the investment business located in Chicago, acts as the headquarters of our world-wide investment management process. The firm began managing international securities and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients and has offered fully integrated global portfolios since then. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Global Fund................................................................... 6 Schedule of Investments.....................................................10 Financial Statements........................................................18 Financial Highlights........................................................21 Global Equity Fund............................................................23 Schedule of Investments.....................................................27 Financial Statements........................................................33 Financial Highlights........................................................36 Global Bond Fund..............................................................38 Schedule of Investments.....................................................41 Financial Statements........................................................44 Financial Highlights........................................................47 The Brinson Funds--Notes to Financial Statements..............................49 ------------------------------------------------------------- 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO February 19, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the December 31, 1996 Semi-Annual Report for the Global Fund, Global Equity Fund and Global Bond Fund. This Report presents our current global economic and market outlook, as well as the Funds' recent investment strategies and performance. To summarize this information: Global Fund For the period from August 31, 1992 (performance inception date) to December 31, 1996, the Fund provided an annualized total return of 11.37%. The Fund returned 9.11% in the second half of 1996. The strategy of underweighting the overpriced equity markets in favor of the attractive bond markets remains in place. A portion of foreign currency exposure is hedged into U.S. dollars. Global Equity Fund For the period from January 31, 1994 (performance inception date) to December 31, 1996, the Fund provided an annualized total return of 11.33%. The Fund returned 7.67% in the second half of 1996. Reflecting only modestly attractive equity markets, the Fund maintains its 15% cash hedge. Primary underweights include the U.S. market, in light of its overvaluation and increasing volatility. A portion of foreign currency exposure is hedged into U.S. dollars. Global Bond Fund For the period from July 31, 1993 (performance inception date) to December 31, 1996, the Fund provided an annualized total return of 8.41%. The Fund returned 7.03% in the second half of 1996. Bond markets are generally attractive. Yields in Japan are unsustainably low, making that market very unattractive. It remains the largest underweight in the portfolio. A portion of foreign currency exposure is hedged into U.S. dollars. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Sincerely, /s/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO A weaker yen is helping Japan recover from its recent recession. Prices at the consumer level appear to have stopped falling, and the economy has started showing real growth, although the expansion has been neither strong nor consistent. The weaker yen and incipient recovery may, however, reduce the pressure to address structural reform. The lack of unequivocal public support for reformist candidates in the most recent election also may delay deregulation. In pursuit of monetary union, the core European countries are trying to meet the Maastricht criteria. This has produced restrictive fiscal policies at a time of weak economic growth, thus exacerbating structural weaknesses in labor markets. The peripheral European economies have benefited from the drive to EMU, as bond yields and borrowing costs have dropped considerably. The U.S. economy remains among the most productive of the developed countries, due in large part to its flexible labor market. Increases in oil prices to the $25 per barrel range have not flowed through to higher consumer price inflation. Central banks have been acting more responsibly since the last major bout of inflation around 1980. Increases in the relative prices of inputs are no longer being accommodated and turned into general price increases. GLOBAL ENVIRONMENT
6 months 1 year 3 years Annualized MAJOR MARKETS ended ended ended 08/31/92* Total Return in U.S. Dollars 12/31/96 12/31/96 12/31/96 to 12/31/96 - ----------------------------------------------------------------------------- U.S. Equity 9.92% 21.21% 18.24% 17.31% Non-U.S. Equities (currency unhedged) 2.19 7.11 8.76 11.51 Non-U.S. Equities (currency hedged) 4.25 14.64 8.16 12.48 U.S. Bonds 4.94 3.63 6.07 6.82 Non-U.S. Bonds (currency unhedged) 5.45 4.10 9.67 8.64 Non-U.S. Bonds (currency hedged) 7.98 11.82 8.18 9.79 U.S. Cash Equivalents 2.56 5.16 4.87 4.26 - ----------------------------------------------------------------------------- MAJOR CURRENCIES 6 months 1 year 3 years Annualized Percent Change Relative to U.S. ended ended ended 8/31/92* Dollars 12/31/96 12/31/96 12/31/96 to 12/31/96 - ----------------------------------------------------------------------------- Yen -5.50% -11.13% -1.30% 1.39% Pound 10.14 10.22 4.97 -3.33 Deutschemark -1.23 -7.12 4.06 -2.08 Canadian Dollar -0.36 -0.50 -1.15 -3.09 - -----------------------------------------------------------------------------
*Inception date of the Brinson Global Fund ------------------------------------------------------------ 5 GLOBAL FUND - ------------------------------------------------------------------------------- LOGO The Global Fund is diversified across the equity and fixed income markets of the U.S. and a broad range of other countries. This Fund is actively managed within an asset allocation framework, involving value-based market, currency and individual security selection. Our senior asset allocation, equity and fixed income professionals form the investment team for this portfolio, supported by a globally integrated market analysis system. Security selection within each market is based on the fundamental research of our analytical teams in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo. The Brinson Global Fund has provided an annualized return of 11.37% since its inception on August 31, 1992. This compares with the corresponding 12.86% return of its benchmark, the GSMI Mutual Fund Index. Fund performance over this period was achieved with an annualized volatility of 4.70%, well below the benchmark volatility of 6.03%. For the year ended December 31, 1996, the Fund returned 14.10%, while the benchmark returned 12.53%. For the second half of 1996, the Brinson Global Fund returned 9.11% compared to the 6.60% return of the benchmark. Positive contributors to relative performance were security selection, particularly in the U.S. and in the Japanese equity market, an overweight in emerging markets debt, and the currency risk hedging. The primary negative contributor was the underweight in most equity markets and the overweight in bonds. Apart from emerging markets debt, which provided a return in 1996 of approximately 40%, bond markets turned in poor performance relative to equities. The U.S. bond market lagged markets elsewhere, with a total return that failed to exceed cash returns. Bond yields in the U.S. rose substantially in the first half of the year on stronger than anticipated economic news. In other developed markets, bond returns were generally quite good. The peripheral European bond markets performed well, as spreads over German yields declined substantially due to the market's anticipation of a single currency in the coming years. The U.S. equity market return of better than 20% was outdone by many of the European markets which were driven by a combination of lower interest rates and the anticipation of a profits recovery. The Japanese equity market stood in stark contrast with a local currency loss of almost 5% for the year. This was due in part to the failure of government spending programs and loose monetary policy to produce sustained economic growth. While the emerging debt markets were producing spectacular gains, emerging equities were much more subdued with an aggregate dollar return of under 10%. Returns in the high yield bond market, at over 12%, not surprisingly fell between equity and bond returns. Currency risk hedges were beneficial during the year, as the overpriced yen and deutschemark-bloc currencies depreciated against the U.S. dollar. The risk hedges also benefitted from interest rates in the U.S. exceeding rates in the overpriced currencies. Asset allocation strategy continues to underweight equity markets, as prices remain in excess of fundamental value. Bond markets, apart from Japan, remain overweight as they provide the most attractive relative value. Emerging markets debt is also overweight, with small underweights in emerging equity and high yield bonds. Currency strategy remains focused on controlling the risks in overpriced core European currencies, and to a lesser extent the yen. ------------------------------------------------------------ 6 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year 3 years Annualized ended ended ended 8/31/92* to 12/31/96 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------------------------- BRINSON GLOBAL FUND 9.11% 14.10% 11.58% 11.37% GSMI Mutual Fund Index (currency unhedged)** 6.60 12.53 12.70 12.86 GSMI Mutual Fund Index (currency hedged)** 7.29 14.94 12.60 13.18 - -------------------------------------------------------------------------
*Inception date of the Brinson Global Fund. **An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth in the value of an investment in the Brinson Global Fund and the GSMI Mutual Fund Index (currency unhedged and hedged) if you had invested $100,000 on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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 VS. GSMI MUTUAL FUND INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
GSMI Mutual GSMI Mutual Brinson Fund Index Fund Index Global Fund (currency unhedged) (currency hedged) ----------- ------------------- ----------------- 08/31/92 $100,000 $100,000 $100,000 12/31/92 $103,293 $103,082 $105,615 06/30/93 $110,757 $111,937 $112,864 12/31/93 $114,805 $117,988 $119,787 06/30/94 $111,614 $116,488 $115,598 12/31/94 $112,637 $119,668 $118,694 06/30/95 $125,642 $136,475 $132,328 12/31/95 $139,824 $150,088 $148,772 06/30/96 $146,227 $158,424 $159,374 12/31/96 $159,542 $168,888 $170,992
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. ------------------------------------------------------------ 7 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - --------------------------------------------------------------------------------------------- U.S. EQUITY 40.0% 25.0% Large Cap. Stocks 28.0 17.5 Small/Int. Cap. 12.0 7.5 NON-U.S. EQUITIES 22.0 17.0 Japan Equities 6.8 3.8 Other Equities 15.2 13.2 EMERGING MARKETS EQUITIES 3.0 2.0 DOLLAR BONDS 21.0 28.5 U.S. Bonds 19.0 26.5 International $ Bonds 2.0 2.0 HIGH YIELD BONDS 3.0 2.5 NON-U.S. BONDS 9.0 22.0 Japan Bonds 2.5 0.0 Other Bonds 6.5 22.0 EMERGING MARKETS DEBT 2.0 3.0 CASH EQUIVALENTS 0.0 0.0 - --------------------------------------------------------------------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ------------------------------------------------------------------------------ 1. Chase Manhattan Corp. 1.32% 2. Xerox Corp. 1.03 3. Lockheed Martin Corp. 1.02 4. Burlington Northern Santa Fe 1.01 5. Corning, Inc. 0.96 6. Citicorp 0.92 7. Philip Morris Companies, Inc. 0.91 8. Aon Corp. 0.85 9. Goodyear Tire & Rubber Co. 0.78 10. Enron Corp. 0.71 - ------------------------------------------------------------------------------
CURRENCY ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - -------------------------------------- U.S. 66.0% 86.5% Japan 9.3 0.0 U.K. 4.8 4.8 Continental Europe 12.9 3.2 Canada 1.4 1.4 Emerging Markets 3.0 2.0 Other 2.6 2.1 - -------------------------------------- 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ------------------------------------------------------------------------------ 1. British Telecommunications PLC 0.22% 2. General Electric Co. PLC 0.22 3. Royal Dutch Petroleum Co. 0.21 4. Lloyds TSB Group PLC 0.21 5. Broken Hill Proprietary Co. Ltd. 0.21 6. Telecom Corp. of New Zealand Ltd. 0.20 7. Royal Dutch Petroleum Co. NY Shares 0.19 8. British Petroleum Co. PLC 0.19 9. Matsushita Electric Industrial Co. 0.18 10. Toray Industries, Inc. 0.17 - ------------------------------------------------------------------------------
------------------------------------------------------------ 8 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.18% Housing/Paper........................................................... 1.12 Metals.................................................................. 0.14 ----- 1.44 Capital Investment Capital Goods........................................................... 2.48 Technology.............................................................. 1.60 ----- 4.08 Consumer Autos/Durables.......................................................... 0.07 Discretionary........................................................... 1.80 Health: Drugs........................................................... 2.23 Health: Non-Drugs....................................................... 1.10 Non-Durables............................................................ 3.10 Retail/Apparel.......................................................... 1.14 ----- 9.44 Energy................................................................... 1.37 Financial Banks................................................................... 2.78 Non-Banks............................................................... 2.54 ----- 5.32 Post Venture............................................................. 1.26 Services................................................................. 1.76 Transportation........................................................... 1.71 Utilities................................................................ 0.85 Miscellaneous............................................................ 0.75 ----- Total U.S. Equities................................................... 27.98* ----- NON-U.S. EQUITIES Airlines................................................................. 0.04 Appliances & Household Durables.......................................... 0.36 Automobiles.............................................................. 0.51 Banking.................................................................. 2.04 Beverages & Tobacco...................................................... 0.42 Broadcasting & Publishing................................................ 0.28 Building Materials....................................................... 0.32 Business & Public Service................................................ 0.56 Chemicals................................................................ 0.72 Construction............................................................. 0.31 Data Processing.......................................................... 0.17 Electric Components...................................................... 0.21 Electronics.............................................................. 0.76 Energy................................................................... 1.54 Financial Services....................................................... 0.27 - --------------------------------------------------------------------------------
Food & House Products................................................... 0.88% Forest Products......................................................... 0.32 Gold Mining............................................................. 0.02 Health & Personal Care.................................................. 0.71 Industrial Components................................................... 0.36 Insurance............................................................... 0.77 Leisure & Tourism....................................................... 0.11 Machinery & Engineering................................................. 0.25 Merchandising........................................................... 0.73 Metals--Steel........................................................... 0.36 Miscellaneous Materials................................................. 0.12 Multi-Industry.......................................................... 0.80 Non-Ferrous Metals...................................................... 0.40 Real Estate............................................................. 0.14 Recreation.............................................................. 0.08 Shipping................................................................ 0.16 Telecommunications...................................................... 0.95 Textiles and Apparel.................................................... 0.05 Transportation.......................................................... 0.15 Utilities............................................................... 1.10 ------ Total Non-U.S. Equities.............................................. 16.97* ------ EMERGING MARKETS EQUITIES............................................... 1.90 ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 1.18 CMO.................................................................... 0.10 Consumer............................................................... 0.82 Energy................................................................. 0.14 Financial.............................................................. 1.10 Industrial............................................................. 0.68 Telecommunications..................................................... 0.37 ------ 4.39 U.S. Government Agencies................................................ 7.73 U.S. Government Obligations............................................. 5.50 International Dollar Bonds.............................................. 3.64 ------ Total U.S. Bonds..................................................... 21.26* ------ HIGH YIELD BONDS........................................................ 2.57 ------ NON-U.S. BONDS Foreign Government Bonds................................................ 21.73 ------ EMERGING MARKETS DEBT................................................... 3.69 ------ SHORT-TERM INVESTMENTS.................................................. 7.41* ------ TOTAL INVESTMENTS.................................................... 103.51 LIABILITIES, LESS CASH AND OTHER ASSETS................................. (3.51) ------ NET ASSETS........................................................... 100.00% ======
* The Fund held a long position in Topix futures on December 31, 1996 which increased Japanese equity exposure from 3.85% to 4.24%. The Fund held a long position in U.S. Treasury futures which increased U.S. bond exposure from 21.26% to 25.86%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 27.98% to 24.55%. These three adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 7.41% to 5.85%. ------------------------------------------------------------ 9 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------- ------------ Equities -- 46.85% U.S. EQUITIES -- 27.98% Aetna Life & Casualty Co............................. 32,200 $ 2,576,000 Allergan, Inc........................................ 53,700 1,913,062 Allstate Corp........................................ 29,600 1,713,100 Alza Corp. (b)....................................... 52,400 1,355,850 Aon Corp............................................. 70,200 4,361,175 Automatic Data Processing, Inc....................... 51,200 2,195,200 Avon Products, Inc................................... 38,100 2,176,463 Bard (C.R.), Inc..................................... 32,500 910,000 Beckman Instruments, Inc............................. 21,000 805,875 Birmingham Steel Corp................................ 21,000 399,000 Boston Technology, Inc. (b).......................... 20,900 600,875 Brinker International, Inc. (b)...................... 21,200 339,200 Brinson Post-Venture Fund (b)........................ 423,765 6,462,793 Burlington Northern Santa Fe......................... 59,900 5,173,862 Centerior Energy Co.................................. 44,100 474,075 Chase Manhattan Corp................................. 75,700 6,756,225 Choice Hotels International, Inc. (b)................ 34,250 603,656 CIGNA Corp........................................... 26,000 3,552,250 Circuit City Stores, Inc............................. 9,300 280,163 Citicorp............................................. 45,800 4,717,400 CMS Energy Corp...................................... 57,300 1,926,712 Coca-Cola Enterprises, Inc........................... 28,000 1,358,000 Comerica, Inc........................................ 14,400 754,200 Comverse Technology, Inc. (b)........................ 9,700 366,781 Corning, Inc......................................... 105,600 4,884,000 CPC International, Inc............................... 12,900 999,750 CVS Corp............................................. 41,500 1,717,063 Dial Corp............................................ 51,500 759,625 EMC Corp./Mass. (b).................................. 75,700 2,507,562 Enron Corp........................................... 83,700 3,609,563 Federal Express Corp. (b)............................ 77,900 3,466,550 Federated Department Stores (b)...................... 30,600 1,044,225 FileNet Corp. (b).................................... 12,500 400,000 First American Corp.-Tenn............................ 3,900 224,737 First Data Corp...................................... 44,678 1,630,747 First of America Bank Corp........................... 6,700 402,838 Footstar, Inc. (b)................................... 11,884 295,614 Ford Motor Co........................................ 30,800 981,750 Forest Laboratories, Inc. (b)........................ 35,600 1,165,900 Gannett Co., Inc..................................... 35,000 2,620,625 General Instrument Corp. (b)......................... 104,000 2,249,000 Genzyme Corp. (b).................................... 21,100 458,925 Geon Co.............................................. 7,700 151,113 Goodyear Tire & Rubber Co............................ 77,400 3,976,425 Harnischfeger Industries, Inc........................ 23,100 1,111,687 Health Care and Retirement Corp. (b)................. 38,700 1,107,788 Interpublic Group of Companies, Inc.................. 26,100 1,239,750 James River Corp. of Virginia........................ 30,100 997,062 Kimberly-Clark Corp.................................. 25,200 2,400,300 Kroger Co. (b)....................................... 22,100 1,027,650 Lockheed Martin Corp................................. 57,196 5,233,434 Lyondell Petrochemical Co............................ 57,300 1,260,600 Manor Care, Inc...................................... 34,250 924,750 Martin Marietta Materials, Inc....................... 15,338 356,609 Masco Corp........................................... 34,700 1,249,200 Mattel, Inc.......................................... 125,275 $ 3,476,381 Nabisco Holdings Corp. Class A....................... 38,000 1,477,250 National Semiconductor Corp. (b)..................... 21,200 516,750 Nextel Communications, Inc. Class A (b).............. 52,700 688,394 Old Republic International Corp...................... 26,150 699,512 Peco Energy Co....................................... 33,100 835,775 Pentair, Inc......................................... 27,700 893,325 Pharmacia & Upjohn, Inc.............................. 66,700 2,642,988 Philip Morris Companies, Inc......................... 41,300 4,651,413 Rhone-Poulenc Rorer, Inc............................. 17,800 1,390,625 RJR Nabisco Convertible Preferred "C"................ 170,600 1,151,550 Schering Plough Corp................................. 46,000 2,978,500 Seagate Technology, Inc. (b)......................... 14,400 568,800 Timken Co............................................ 22,000 1,009,250 Tyson Foods, Inc. Class A............................ 62,800 2,150,900 Ultramar Diamond Shamrock Corp....................... 59,554 1,883,395 US Bancorp........................................... 31,900 1,433,506 USF&G Corp........................................... 24,400 509,350 Vencor, Inc. (b)..................................... 27,400 866,525 Viad Corp............................................ 51,500 849,750 Westvaco Corp........................................ 12,550 360,813 Whitman Corp......................................... 2,400 54,900 WMX Technologies, Inc................................ 83,700 2,730,713 Xerox Corp........................................... 99,800 5,251,975 York International Corp.............................. 21,500 1,201,313 360 Communications Co. (b)........................... 18,266 422,401 ------------ Total U.S. Equities.................................. 142,922,813 ------------ NON-U.S. EQUITIES -- 16.97% AUSTRALIA -- 0.91% Amcor Ltd............................................ 34,400 221,045 Boral Ltd............................................ 46,100 131,087 Broken Hill Proprietary Co. Ltd...................... 73,780 1,050,149 CRA Ltd.............................................. 25,645 402,294 David Jones Ltd...................................... 115,100 159,988 Lend Lease Corp. Ltd................................. 8,056 156,129 M.I.M. Holdings Ltd.................................. 98,726 138,013 National Australia Bank Ltd.......................... 42,947 504,858 News Corp. Ltd....................................... 89,190 470,390 News Corp. Ltd. Preferred............................ 22,000 97,855 Pacific Dunlop Ltd................................... 59,600 151,485 Qantas Airways Ltd................................... 68,828 114,805 Santos Ltd........................................... 49,800 201,732 WMC Ltd.............................................. 39,100 246,277 Westpac Bank Corp. Ltd............................... 81,138 461,436 Woolworth's Ltd...................................... 60,000 144,400 ------------ 4,651,943 ------------ BELGIUM -- 0.56% Delhaize-Le Lion S.A................................. 2,900 172,095 Electrabel S.A....................................... 2,260 534,326 Fortis AG............................................ 2,099 336,348 Fortis AG Strip (b).................................. 42 21 Generale de Banque S.A............................... 300 107,431
- -------------------------------------------------------------------------------- 10 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------- ------------ BELGIUM -- (CONTINUED) Groupe Bruxelles Lambert S.A......................... 1,150 $ 147,893 Kredietbank NV....................................... 950 311,039 Petrofina S.A........................................ 1,195 379,968 Societe Generale de Belgique......................... 2,053 160,934 Solvay S.A. Class A.................................. 390 238,497 Tractebel............................................ 605 8,761 Tractebel Warrants "99" (b).......................... 605 281,411 Union Miniere Group S.A. (b)......................... 2,545 172,260 ------------ 2,850,984 ------------ CANADA -- 0.52% Alcan Aluminium Ltd.................................. 6,100 205,841 Bank of Montreal..................................... 1,200 38,173 Barrick Gold Corp.................................... 4,400 126,003 BCE, Inc............................................. 2,900 138,166 Canadian National Railway Co......................... 4,200 159,653 Canadian Pacific Ltd................................. 13,900 365,603 Hudson's Bay Co...................................... 4,100 68,503 Imperial Oil Ltd..................................... 5,000 235,298 Moore Corp. Ltd...................................... 3,900 80,811 Noranda, Inc......................................... 6,300 140,424 Northern Telecom Ltd................................. 2,400 149,190 NOVA Corp............................................ 10,400 92,193 Royal Bank of Canada................................. 6,200 217,584 Seagram Co. Ltd...................................... 5,300 209,780 Thomson Corp......................................... 13,600 300,160 TransCanada Pipelines Ltd............................ 8,300 145,338 ------------ 2,672,720 ------------ FINLAND -- 0.26% Merita Ltd. Class A (b).............................. 44,200 137,136 Nokia Ab Class A..................................... 12,100 700,429 Outokumpu OY Class A................................. 6,900 117,520 Pohjola Insurance Group Class B...................... 2,900 65,123 Sampo Insurance Co. Ltd. Class A..................... 1,000 78,759 UPM-Kymmene Corp. (b)................................ 11,900 249,154 ------------ 1,348,121 ------------ FRANCE -- 1.81% Accor S.A............................................ 2,392 302,296 Alcatel Alsthom...................................... 3,182 255,113 AXA S.A.............................................. 1,500 95,216 Banque Nationale de Paris............................ 12,230 472,384 CEP Communications................................... 984 69,370 CEP Communications Warrants "97" (b)................. 1,984 2,271 Cie Bancaire S.A..................................... 2,811 331,997 Cie de Saint Gobain.................................. 4,150 585,935 Cie de Suez.......................................... 5,445 231,051 Cie Generale des Eaux................................ 6,124 757,446 Colas................................................ 854 123,204 Credit Local de France............................... 5,359 465,937 Elf Aquitaine S.A.................................... 6,034 548,187 Groupe Danone........................................ 800 111,259 L'Oreal S.A.......................................... 100 37,586 Lafarge S.A.......................................... 2,600 $ 155,689 LVMH................................................. 2,649 738,339 Michelin Class B..................................... 7,020 378,229 Pechiney S.A. Class A................................ 5,684 237,694 Peugeot S.A.......................................... 5,970 670,645 Rhone-Poulenc Class A................................ 14,300 486,596 SEITA................................................ 5,500 229,577 Societe Generale..................................... 5,026 542,364 Total S.A. Class B................................... 8,796 714,008 UAP.................................................. 10,820 269,527 Usinor Sacilor....................................... 28,100 408,092 ------------ 9,220,012 ------------ GERMANY -- 1.49% Allianz AG Holding................................... 338 607,527 BASF AG.............................................. 10,360 396,626 Bayer AG............................................. 14,080 570,564 Bayerische Motoren Werke AG.......................... 520 358,341 Commerzbank AG....................................... 11,060 280,609 Daimler-Benz AG (b).................................. 5,880 402,531 Deutsche Bank AG..................................... 10,601 493,902 Deutsche Telekom AG (b).............................. 18,600 387,425 Henkel KGaA-Vorzug AG................................ 4,550 224,385 Hochtief AG.......................................... 2,500 98,144 Hoechst AG........................................... 4,890 226,239 M.A.N. AG............................................ 790 190,439 Mannesmann AG........................................ 957 411,216 Metro AG............................................. 3,200 250,211 Muenchener Rueckver AG............................... 171 414,434 Muenchener Rueckver AG Warrants "98" (b)............. 2 416 Preussag AG.......................................... 1,192 269,169 RWE AG............................................... 7,600 317,591 Schering AG.......................................... 4,885 411,759 Siemens AG........................................... 3,650 169,154 Thyssen AG........................................... 1,850 327,600 Veba AG.............................................. 8,839 507,593 Volkswagen AG........................................ 750 310,249 ------------ 7,626,124 ------------ HONG KONG -- 0.25% Cheung Kong Holdings Ltd............................. 15,000 133,324 China Light & Power Co. Ltd.......................... 28,000 124,527 Guoco Group Ltd...................................... 15,000 83,970 Hang Seng Bank Ltd................................... 10,200 123,958 Hong Kong Telecommunications Ltd..................... 43,200 69,534 Hutchison Whampoa Ltd................................ 27,000 212,058 Jardine Matheson Holdings ADR (c).................... 9,600 63,360 New World Development Co. Ltd........................ 17,000 114,837 Sun Hung Kai Properties Ltd.......................... 8,000 97,997 Swire Pacific Ltd. Class A........................... 14,000 133,486 Wharf (Holdings) Ltd................................. 22,000 109,788 ------------ 1,266,839 ------------
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SHARES VALUE ------------- ------------ ITALY -- 0.55% Assicurazioni Generali............................... 15,080 $ 285,136 Danieli & Co. Savings (Risp)......................... 26,000 108,583 Edison Spa........................................... 17,200 108,596 ENI ADR (c).......................................... 8,000 413,000 ENI Spa.............................................. 24,000 122,881 Fiat Spa-Priv........................................ 103,000 169,691 INA-Istituto Nazionale delle Assicurazioni........... 47,000 61,080 Istituto Mobilaire Italiano Spa...................... 36,200 309,503 Italgas Spa.......................................... 22,300 92,911 La Rinascente........................................ 19,000 109,964 La Rinascente Savings (Risp)......................... 19,200 48,994 La Rinascente Warrants "99" (b)...................... 1,400 616 Mediobanca Spa....................................... 6,000 32,298 Montedison Spa (b)................................... 374,700 254,811 SAI-Savings (Risp)................................... 16,500 58,545 Telecom Italia Spa................................... 183,500 357,224 Telecom Italia Mobile Spa............................ 199,500 284,063 ------------ 2,817,896 ------------ JAPAN -- 3.85% Amada Co. Ltd........................................ 35,000 271,388 Asahi Glass Co. Ltd.................................. 42,000 394,417 Bank of Tokyo-Mitsubishi Ltd......................... 31,800 589,041 Canon, Inc........................................... 30,000 661,670 Canon Sales Co., Inc................................. 12,100 268,958 Citizen Watch Co. Ltd................................ 32,000 228,827 Dai Nippon Printing Co. Ltd.......................... 32,000 559,662 Daiichi Pharmaceutical Co. Ltd....................... 23,000 368,571 Daikin Industries Ltd................................ 34,000 301,714 Daiwa House Industry Co. Ltd......................... 17,000 218,230 Fanuc................................................ 13,900 444,292 Fujitsu.............................................. 21,000 195,399 Hitachi Ltd.......................................... 68,000 632,722 Honda Motor Co....................................... 9,000 256,655 Inax................................................. 44,000 325,252 Isetan............................................... 12,000 155,079 Ito Yokado Co. Ltd................................... 12,000 521,065 Kaneka Corp.......................................... 17,000 86,853 Keio Teito Electric Railway.......................... 39,000 190,178 Kinki Nippon Railway................................. 39,000 242,931 Kirin Brewery Co. Ltd................................ 37,000 363,402 Kokuyo............................................... 7,000 172,482 Kuraray Co. Ltd...................................... 30,000 276,557 Kyocera Corp......................................... 3,000 186,612 Maeda Road Construction.............................. 8,000 92,358 Matsushita Electric Industrial Co.................... 55,000 895,580 Mitsubishi Paper Mills............................... 43,000 167,821 NGK Insulators....................................... 56,000 530,714 Nintendo Corp. Ltd................................... 2,900 207,125 Nippon Denso Co. Ltd................................. 23,000 552,856 Nippon Meat Packers, Inc............................. 22,000 284,311 Nippon Steel Co...................................... 28,000 82,502 Okumura.............................................. 35,000 212,286 Osaka Gas Co......................................... 141,000 385,087 Sankyo Co. Ltd....................................... 25,000 706,470 Sanwa Bank Ltd....................................... 18,000 245,025 Secom................................................ 8,000 483,157 Seino Transportation................................. 12,000 $ 132,334 Sekisui House Ltd.................................... 66,000 670,975 Shinmaywa Industries Ltd............................. 31,000 227,820 Sony Corp............................................ 10,200 666,994 Sumitomo Bank........................................ 36,000 517,963 Sumitomo Electric Industries......................... 28,000 390,797 Takeda Chemical Industries........................... 26,000 544,327 TDK Corp............................................. 6,000 390,282 Tokio Marine & Fire Insurance Co..................... 31,000 291,118 Tokyo Electric Power................................. 14,900 326,062 Tokyo Steel Mfg...................................... 25,000 355,389 Tonen Corp........................................... 25,000 290,773 Toray Industries, Inc................................ 141,000 868,571 Toshiba Corp......................................... 81,000 508,038 Toyo Suisan Kaisha................................... 19,000 189,886 Toyota Motor Corp.................................... 9,000 258,206 Yamazaki Baking Co. Ltd.............................. 17,000 270,957 ------------ 19,657,741 ------------ MALAYSIA -- 0.24% Hume Industries (Malaysia) Bhd....................... 17,000 107,028 Kuala Lumpur Kepong Bhd.............................. 39,500 100,099 Land & General Holdings Bhd.......................... 39,000 93,427 Malayan Banking Bhd.................................. 8,000 88,695 Malaysia International Shipping Bhd (Frgn.).......... 34,000 100,970 Nestle (Malaysia) Bhd................................ 4,000 32,152 Public Bank Bhd (Frgn.).............................. 55,000 116,512 Resorts World Bhd.................................... 13,000 59,196 Sime Darby Bhd....................................... 40,000 157,593 Telekom Malaysia Bhd................................. 9,000 80,182 Tenaga Nasional Bhd.................................. 47,000 225,183 YTL Corp. Bhd........................................ 14,000 75,391 ------------ 1,236,428 ------------ NETHERLANDS -- 1.17% ABN AMRO Holdings NV................................. 7,689 499,649 Akzo Nobel NV........................................ 1,100 150,084 DSM NV............................................... 1,910 188,162 Hoogovens NV......................................... 2,900 120,715 ING Groep NV......................................... 20,723 745,199 KLM Royal Dutch Air Lines NV......................... 4,500 126,438 KPN NV............................................... 13,046 497,041 Philips Electronics NV............................... 6,480 262,242 Royal Dutch Petroleum Co............................. 6,100 1,068,214 Royal Dutch Petroleum Co. NY Shares (c).............. 5,800 990,350 Unilever NV.......................................... 4,550 803,885 Vendex International NV.............................. 7,551 322,610 VNU-Ver Ned Uitgevers................................ 10,600 221,229 ------------ 5,995,818 ------------ NEW ZEALAND -- 0.57% Brierley Investments Ltd............................. 535,200 495,380 Carter Holt Harvey Ltd............................... 191,400 434,109 Fletcher Challenge Building.......................... 60,525 186,027
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------- ------------ NEW ZEALAND (CONTINUED) Fletcher Challenge Energy............................ 60,525 $ 175,335 Fletcher Challenge Forest Ltd........................ 126,333 211,552 Fletcher Challenge Paper............................. 121,050 248,891 Telecom Corp. of New Zealand Ltd..................... 198,000 1,010,076 Telecom Corp. of New Zealand Ltd. ADS (c)............ 2,000 162,000 ------------ 2,923,370 ------------ SPAIN -- 0.70% Acerinox S.A......................................... 1,000 144,224 Banco Bilbao-Vizcaya S.A............................. 5,000 269,460 Banco Central Hispanoamericano....................... 5,010 128,452 Banco Intercontinental Espanol S.A................... 730 112,973 Banco Popular Espanol S.A............................ 1,190 233,288 Banco Santander S.A.................................. 3,800 242,768 Cia Sevillana de Electricidad........................ 7,106 80,579 Empresa Nacional de Electridad S.A................... 5,900 419,112 Fomento de Construcciones y Contratas S.A............ 1,450 134,884 Gas Natural SDG S.A.................................. 700 162,522 Iberdrola S.A........................................ 37,600 531,878 Mapfre Corp.......................................... 2,300 139,865 Repsol S.A........................................... 4,100 156,971 Repsol S.A. ADR (c).................................. 4,100 156,313 Telefonica de Espana................................. 20,300 470,532 Vallehermosa S.A..................................... 4,000 86,565 Viscofan Envolturas Celulosicas S.A.................. 6,400 93,485 ------------ 3,563,871 ------------ SWITZERLAND -- 0.34% ABB AG (Bearer)...................................... 80 99,203 CS Holdings AG (Reg.)................................ 1,073 109,881 Nestle S.A. (Reg.)................................... 463 495,517 Novartis AG (Reg.)................................... 378 431,574 Roche Holding AG (Gen.).............................. 36 279,243 Schweiz Bankgesellschaft (Bearer).................... 106 92,603 Societe Generale de Surveillance Holding S.A. (Bearer)............................... 30 73,509 Zurich Versicherungs (Reg.).......................... 569 157,644 ------------ 1,739,174 ------------ UNITED KINGDOM -- 3.75% Abbey National PLC................................... 25,000 327,315 Bank of Scotland..................................... 40,000 211,193 Bass PLC............................................. 15,800 222,006 B.A.T. Industries PLC................................ 85,184 706,343 Booker PLC........................................... 19,100 130,591 British Energy PLC................................... 183,000 460,397 British Gas PLC...................................... 175,900 675,844 British Petroleum Co. PLC............................ 79,244 950,033 British Steel PLC.................................... 144,000 395,550 British Telecommunications PLC....................... 167,500 1,130,905 Charter PLC.......................................... 19,292 244,493 Coats Viyella PLC.................................... 103,300 235,135 FKI PLC.............................................. 80,700 278,990 General Electric Co. PLC............................. 169,700 $ 1,109,454 Glaxo Wellcome PLC................................... 25,000 405,614 Grand Metropolitan PLC............................... 110,200 865,682 Guinness PLC......................................... 84,900 664,757 Hanson PLC........................................... 180,900 252,325 Hillsdown Holdings PLC............................... 125,200 428,547 House of Fraser PLC.................................. 136,800 359,384 HSBC Holdings PLC.................................... 28,500 637,019 Imperial Chemicals Industries PLC.................... 9,000 118,372 Legal & General Group PLC............................ 60,750 386,770 Lloyds TSB Group PLC................................. 144,779 1,066,701 Marks & Spencer PLC.................................. 72,000 605,032 Millennium Chemicals, Inc. (b)....................... 1,327 23,554 Mirror Group PLC..................................... 57,800 213,176 National Power PLC................................... 37,900 317,185 National Westminster Bank PLC........................ 24,800 290,953 Northern Foods PLC................................... 76,000 265,993 Peninsular & Oriental Steam Navigation Co....................................... 69,600 702,790 Reckitt & Colman PLC................................. 12,658 156,844 Redland PLC.......................................... 23,200 145,521 RJB Mining PLC....................................... 47,300 348,092 Royal & Sun Alliance Insurance Group PLC............. 40,199 305,810 RTZ Corp. PLC........................................ 26,100 418,324 Sainsbury (J.) PLC................................... 56,000 371,864 Scottish Hydro-Electric PLC.......................... 44,900 252,049 Sears PLC............................................ 160,700 261,278 Sedgwick Group PLC................................... 111,400 250,712 SmithKline Beecham PLC............................... 33,400 462,730 Smurfit (Jefferson) Group PLC........................ 57,000 169,254 Tesco PLC............................................ 44,800 271,806 Thames Water PLC..................................... 33,000 345,926 Unilever PLC......................................... 15,400 373,337 Vodafone Group PLC................................... 45,600 192,373 Yorkshire Water PLC.................................. 13,000 157,633 ------------ 19,165,656 ------------ Total Non-U.S. Equities.............................. 86,736,697 ------------ EMERGING MARKETS EQUITIES -- 1.90% Brinson Emerging Markets Equity Fund (b)............. 952,086 9,698,142 ------------ Total Equities (Cost $200,781,462)................... 239,357,652 ------------ FACE AMOUNT VALUE -------------- ------------ Bonds -- 49.25% U.S. BONDS -- 21.26% U.S. CORPORATE BONDS -- 4.39% BellSouth Corp. 9.125%, due 07/01/03............... $ 199,759 $ 211,177 Capital One Bank 6.830%, due 05/17/99.............. 2,000,000 2,009,232
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------------- ------------ U.S. CORPORATE BONDS (CONTINUED) Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.......................................... $ 1,265,000 $ 1,258,675 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03.......................................... 1,050,000 1,064,543 Chemical Master Credit Card Trust 95-2A 6.230%, due 06/15/03.......................................... 1,430,000 1,426,311 Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,014,050 Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,784 Coca-Cola Enterprises 6.700%, due 10/15/36......... 2,000,000 2,017,024 Edison Mission Energy Funding 7.330%, due 09/15/08. 720,000 723,600 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.......................................... 125,550 125,688 Ford Motor Co. 7.250%, due 10/01/08................ 2,000,000 2,017,046 GMAC MTN 6.500%, due 04/19/99...................... 1,350,000 1,357,156 Green Tree Financial 94-2 8.300%, due 05/15/19..... 435,000 460,091 Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,500,000 1,509,084 News America Corp. 7.750%, due 01/20/24............ 1,755,000 1,677,597 Premier Auto Trust 4.220%, due 03/02/99............ 30,119 29,777 Premier Auto Trust 96-4A 6.400%, due 10/06/01...... 275,000 276,320 Salomon, Inc. 6.750%, due 02/15/03................. 550,000 537,073 Spiegel Master Trust 95-A 7.500%, due 09/15/04..... 300,000 310,359 Standard Credit Card Trust 95-1A 8.250%, due 01/07/05.......................................... 500,000 541,830 Thrift Financial Corp. 11.250%, due 01/01/16....... 36,739 39,876 Time Warner Entertainment, Inc. 8.375%, due 03/15/23.......................................... 1,100,000 1,118,125 Time Warner, Inc. 9.150%, due 02/01/23............. 980,000 1,062,004 WMX Technologies, Inc. 7.000%, due 10/15/06........ 1,500,000 1,497,482 ------------ 22,449,904 ------------ INTERNATIONAL DOLLAR BONDS -- 3.64% Abbey National PLC 7.350%, due 10/29/49............ 250,000 252,385 ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01.... 250,000 249,820 AT&T Corp. 8.250%, due 01/11/00.................... 675,000 710,001 BBV International 7.000%, due 12/01/25............. 2,200,000 2,058,331 City of Oslo 7.875%, due 02/03/97.................. 1,200,000 1,202,077 Deutsche Bank Financial 6.700%, due 12/13/06....... $ 210,000 $ 205,750 Hanson PLC Notes 6.750%, due 09/15/05.............. 790,000 773,681 International Telecom Satellite 8.125%, due 02/28/05.......................................... 335,000 361,533 Japanese Development Bank 8.375%, due 02/15/01..... 1,000,000 1,071,485 Korea Development Bank 6.625%, due 11/21/03........ 250,000 248,143 LKB 8.125%, due 01/27/00........................... 380,000 399,326 Petroliam Nasional 7.125%, due 08/15/05............ 450,000 453,834 Province of Quebec 7.500%, due 07/15/23............ 175,000 174,694 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.............................. 1,910,000 1,941,912 Republic of Columbia EMTN 8.660%, due 10/07/16..... 1,000,000 1,047,945 Republic of Italy 6.875%, due 09/27/23............. 150,000 141,800 Republic of South Africa 9.625%, due 12/15/99...... 1,000,000 1,063,750 Royal Bank of Scotland 7.375%, due 04/01/06........ 220,000 219,257 Quimica & Minera Chile 144-A 7.700%, due 09/15/06.. 1,500,000 1,533,612 Southern Investments UK 6.800%, due 12/01/06....... 1,625,000 1,590,595 Swedbank FRN 7.383%, due 10/29/49.............................. 300,000 306,750 7.500%, due 11/29/49.............................. 2,200,000 2,252,250 Telstra Corp. Ltd. 6.500%, due 11/28/05............ 350,000 341,577 ------------ 18,600,508 ------------ U.S. GOVERNMENT AGENCIES -- 7.73% Federal Home Loan Mortgage Corp. 9.200%, due 08/25/97.............................. 200,000 204,516 6.520%, due 01/02/02.............................. 3,000,000 3,008,853 9.000%, due 03/01/17.............................. 381,007 407,948 5.800%, due 08/15/19.............................. 2,025,000 1,891,512 6.500%, due 05/15/21.............................. 1,105,804 1,003,495 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.............................. 1,820,248 1,854,947 9.000%, due 05/01/24.............................. 1,142,277 1,219,221 Federal National Mortgage Association 7.600%, due 01/10/97.............................. 200,000 200,097 5.000%, due 06/01/01.............................. 1,596,985 1,535,596 6.500%, due 03/01/03 ............................. 3,775,000 3,734,909 6.220%, due 03/13/06.............................. 1,700,000 1,643,478 8.000%, due 02/25/07.............................. 1,200,000 1,231,188 9.000%, due 08/01/21.............................. 312,467 332,577 6.500%, due 08/25/21.............................. 1,500,000 1,434,315 8.200%, due 08/25/21.............................. 59,076 60,358
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE --------------- ------------ U.S. GOVERNMENT AGENCIES (CONTINUED) Federal National Mortgage Association (continued) 8.000%, due 05/01/22.............................. $ 154,570 $ 157,372 8.500%, due 07/01/22.............................. 776,184 815,638 7.500%, due 05/01/25.............................. 1,906,918 1,906,323 6.500%, due 03/01/26.............................. 9,483,616 9,047,967 Government National Mortgage Association 11.000%, due 09/15/15............................. 245,070 273,712 8.500%, due 08/15/17.............................. 801,933 845,783 8.500%, due 05/15/21.............................. 66,619 68,992 8.000%, due 08/15/22.............................. 502,399 516,305 8.000%, due 11/15/22.............................. 497,932 511,715 8.000%, due 12/15/22.............................. 1,709,085 1,756,393 7.500%, due 11/15/24.............................. 2,761,369 2,771,586 6.500%, due 03/20/26.............................. 1,132,354 1,073,260 ------------ 39,508,056 ------------ U.S. GOVERNMENT OBLIGATIONS-- 5.50% U.S. Treasury Coupon Strips 0.000%, due 02/15/03 principal only................................... 225,000 154,024 0.000%, due 05/15/08 principal only................................... 5,855,000 2,786,453 U.S. Treasury Notes and Bonds 5.500%, due 11/15/98.............................. 1,825,000 1,811,312 6.250%, due 10/31/01.............................. 420,000 420,263 7.000%, due 07/15/06.............................. 9,000,000 9,351,567 8.125%, due 05/15/21.............................. 11,695,000 13,566,200 ------------ 28,089,819 ------------ Total U.S. Bonds................................... 108,648,287 ------------ HIGH YIELD BONDS -- 2.57% Brinson High Yield Fund (b)........................ 1,065,360 13,122,570 ------------ NON-U.S. BONDS -- 21.73% BELGIUM -- 0.97% Kingdom of Belgium 8.750%, due 06/25/02.............................. BEF 32,000,000 1,189,454 9.000%, due 03/28/03.............................. 54,000,000 2,041,883 8.500%, due 10/01/07.............................. 46,000,000 1,728,376 ------------ 4,959,713 ------------ CANADA -- 2.75% Government of Canada 7.500%, due 09/01/00.............................. CAD 4,350,000 3,418,714 7.250%, due 06/01/03.............................. 4,600,000 3,585,992 4.250%, due 12/01/21 (d).......................... 5,500,000 4,428,909 9.000%, due 06/01/25.............................. 2,085,000 1,873,062 4.250%, due 12/01/26 (d).......................... 1,000,000 760,678 ------------ 14,067,355 ------------ DENMARK -- 2.24% Kingdom of Denmark 9.000%, due 11/15/98.............................. DKR 3,200,000 $ 590,754 9.000%, due 11/15/00.............................. 14,600,000 2,820,305 8.000%, due 05/15/03.............................. 2,600,000 488,230 7.000%, due 12/15/04.............................. 17,500,000 3,092,144 8.000%, due 03/15/06.............................. 17,000,000 3,170,083 7.000%, due 11/10/24.............................. 7,900,000 1,269,593 ------------ 11,431,109 ------------ FRANCE -- 2.75% Government of France (OAT) 8.500%, due 03/28/00.............................. FRF 3,400,000 740,666 9.500%, due 01/25/01.............................. 8,300,000 1,899,100 8.500%, due 04/25/03.............................. 2,400,000 545,675 8.250%, due 02/27/04.............................. 5,400,000 1,217,381 7.500%, due 04/25/05.............................. 29,000,000 6,270,029 8.500%, due 12/26/12.............................. 14,500,000 3,399,148 ------------ 14,071,999 ------------ GERMANY -- 4.72% Bundesrepublik Deutscheland 7.000%, due 09/20/99.............................. DEM 7,000,000 4,900,590 8.500%, due 08/21/00.............................. 2,600,000 1,917,397 8.375%, due 05/21/01.............................. 1,900,000 1,412,517 8.250%, due 09/21/01.............................. 4,650,000 3,454,536 8.000%, due 07/22/02.............................. 825,000 611,991 6.500%, due 07/15/03.............................. 4,800,000 3,312,128 6.750%, due 07/15/04.............................. 7,800,000 5,431,302 6.250%, due 01/04/24.............................. 2,900,000 1,785,991 Treuhandanstalt 6.250%, due 03/04/04.............................. 1,900,000 1,286,763 ------------ 24,113,215 ------------ ITALY -- 2.52% Republic of Italy (BTP) 9.500%, due 12/01/97..............................ITL 900,000,000 604,341 8.500%, due 01/01/99.............................. 3,100,000,000 2,122,394 8.500%, due 08/01/99.............................. 855,000,000 587,788 9.500%, due 12/01/99.............................. 4,500,000,000 3,184,775 11.500%, due 03/01/03............................. 3,500,000,000 2,796,777 9.000%, due 10/01/03.............................. 1,900,000,000 1,367,675 8.500%, due 04/01/04.............................. 3,100,000,000 2,188,655 ------------ 12,852,405 ------------ NETHERLANDS -- 2.90% Government of Nederlands 6.250%, due 07/15/98.............................. NLG 1,400,000 843,383 8.500%, due 03/15/01.............................. 1,000,000 664,566 8.750%, due 09/15/01.............................. 1,300,000 878,967 6.500%, due 04/15/03.............................. 3,100,000 1,919,466 8.500%, due 06/01/06.............................. 8,650,000 5,996,040
- -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE --------------- ------------ NETHERLANDS (CONTINUED) 8.250%, due 02/15/07............................. NLG 4,500,000 $ 3,084,986 7.500%, due 04/15/10............................. 2,200,000 1,441,059 ------------ 14,828,467 ------------ SWEDEN -- 0.67% Government of Sweden 10.250%, due 05/05/03............................ SWK 12,300,000 2,192,275 6.000%, due 02/09/05............................. 8,500,000 1,206,382 ------------ 3,398,657 ------------ UNITED KINGDOM -- 2.21% UK Treasury 7.000%, due 11/06/01............................. GBP 810,000 1,373,278 8.000%, due 06/10/03............................. 1,400,000 2,476,895 8.500%, due 12/07/05............................. 2,870,000 5,232,666 8.500%, due 07/16/07............................. 1,200,000 2,198,785 ------------ 11,281,624 ------------ Total Non-U.S. Bonds.............................. 111,004,544 ------------ EMERGING MARKETS DEBT -- 3.69% Brinson Emerging Markets Debt Fund (b)............ 1,118,170 18,876,502 ------------ Total Bonds (Cost $239,824,367)................... 251,651,903 ------------ Short-Term Investments -- 7.41% U.S. GOVERNMENT OBLIGATIONS-- 0.32% U.S. Treasury Bills 5.063%, due 05/01/97.......... 1,677,000 1,648,895 ------------ COMMERCIAL PAPER -- 7.09% Burlington Northern Santa Fe 5.650%, due 01/17/97. 2,000,000 1,994,978 Case Credit Corp. 5.510%, due 01/07/97............................. 1,500,000 1,498,622 5.600%, due 01/09/97............................. 2,000,000 1,997,511 Cincinnati Bell, Inc. 7.250%, due 01/02/97........ 477,000 476,904 CNA Financial Corp. 6.250%, due 01/23/97.......... 1,500,000 1,494,271 Crown Cork & Seal Co., Inc. 5.520%, due 01/10/97............................. 2,000,000 1,997,240 5.580%, due 01/29/97............................. 2,500,000 2,489,150 5.580%, due 01/31/97............................. 2,000,000 1,990,700 CSX Corp. 5.520%, due 01/15/97.................... 1,500,000 1,496,780 Lockheed Martin Corp. 7.250%, due 01/02/97........ 5,500,000 5,498,892 PanEnergy Corp. 6.050%, due 01/17/97.............. 2,000,000 1,994,622 Rite Aid Corp. 5.650%, due 01/06/97............................. 2,000,000 1,998,431 5.600%, due 01/21/97............................. 2,000,000 1,993,778 Tyson Foods, Inc. 5.750%, due 01/09/97............ 1,700,000 1,697,828 U.S. West Capital Funding, Inc. 5.600%, due 02/12/97......................................... 1,500,000 1,490,200 Vastar Resources, Inc. 6.020%, due 01/02/97.............................. $ 2,000,000 $ 1,999,666 6.850%, due 01/03/97.............................. 2,115,000 2,111,378 Whirlpool Financial Corp. 6.000%, due 01/03/97..... 2,000,000 1,999,333 ------------ 36,220,284 ------------ Total Short-Term Investments (Cost $37,869,023).... 37,869,179 ------------ Total Investments (Cost $478,474,852)--103.51% (a) 528,878,734 ------------ Liabilities, less cash and other assets--(3.51%)................................... (17,938,839) ------------ Net Assets--100%................................... $510,939,895 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 16 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $478,474,852; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $57,680,749 Gross unrealized depreciation................................ (7,276,867) ----------- Net unrealized appreciation............................... $50,403,882 ===========
(b) Non-income producing security. (c) Denominated in U.S. dollars. (d) Linked to Canada's retail price index. Reset semi-annually. FRN: Floating rate note--The rate disclosed is that in effect at December 31, 1996. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- -------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Danish Kroner............... 05/30/97 3,000,000 $ 512,591 $ 5,105 French Franc................ 05/30/97 4,000,000 776,385 8,188 Japanese Yen................ 05/30/97 50,000,000 439,864 1,460 FORWARD FOREIGN CURRENCY SALE CONTRACTS Belgian Franc............... 05/30/97 250,000,000 7,950,837 (113,847) British Pound............... 05/30/97 3,100,000 5,284,397 (135,297) Canadian Dollar............. 05/30/97 13,600,000 10,014,643 195,567 Danish Kroner............... 05/30/97 70,000,000 11,960,446 (168,986) Dutch Guilder............... 05/30/97 35,000,000 20,436,274 (261,270) French Franc................ 05/30/97 125,000,000 24,262,033 (410,257) German Mark................. 05/30/97 48,000,000 31,447,014 (428,742) Italian Lira................ 05/30/97 11,500,000,000 7,521,248 (78,123) Japanese Yen................ 05/30/97 2,300,000,000 20,233,736 404,802 Swiss Franc................. 05/30/97 2,200,000 1,663,420 24,215 --------- Total...................... $(957,185) =========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of December 31,1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN/(LOSS) ---------- ------------- ----------- ----------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 52 contracts................. March 1997 $ 5,592,078 $ 5,542,875 $ (49,203) 10 year U.S. Treasury Notes, 116 contracts................ March 1997 12,803,625 12,658,500 (145,125) 30 year U.S. Treasury Bonds, 47 contracts................. March 1997 5,384,375 5,293,375 (91,000) INDEX FUTURES BUY CONTRACTS Topix, 16 contracts........... March 1997 2,118,204 2,029,120 (89,084) INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 47 con- tracts....................... March 1997 17,748,625 17,495,750 252,875 --------- $(121,537) =========
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 were $561,512 and $1,648,895, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $435,474,852)....................... $480,718,727 Affiliated issuers (Cost $43,000,000).......................... 48,160,007 Foreign currency, at value (Cost $268,768)...................... 273,987 Receivables: Investment securities sold..................................... 36,201,820 Dividends...................................................... 495,147 Interest....................................................... 4,864,834 Fund shares sold............................................... 292,949 Variation margin (Note 5)...................................... 201,512 Other assets.................................................... 14,939 ------------ TOTAL ASSETS................................................. 571,223,922 ------------ LIABILITIES: Payables: Investment securities purchased................................ 26,580,751 Fund shares redeemed........................................... 31,916,576 Due to custodian bank.......................................... 304,430 Investment advisory fees (Note 2).............................. 358,713 Net unrealized depreciation on forward foreign currency con- tracts........................................................ 957,185 Accrued expenses............................................... 166,372 ------------ TOTAL LIABILITIES............................................ 60,284,027 ------------ NET ASSETS....................................................... $510,939,895 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)........................................ $459,324,649 Accumulated distributions in excess of net investment income.... (2,066,623) Accumulated net realized gain................................... 4,399,273 Net unrealized appreciation..................................... 49,282,596 ------------ NET ASSETS................................................... $510,939,895 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $493,628,321 and 40,916,008 shares is- sued and outstanding) (Note 7)................................ $ 12.06 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $17,311,574 and 1,439,613 shares is- sued and outstanding) (Note 7)................................ $ 12.03 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Interest......................................................... $ 8,220,543 Dividends (net of $121,144 for foreign taxes withheld)........... 2,124,459 ----------- TOTAL INCOME.................................................. 10,345,002 ----------- EXPENSES: Advisory (Note 2)................................................ 2,019,630 Administration................................................... 158,049 Custodian........................................................ 70,489 Distribution (Note 6)............................................ 51,006 Other............................................................ 300,151 ----------- TOTAL EXPENSES................................................ 2,599,325 ----------- NET INVESTMENT INCOME ........................................ 7,745,677 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 17,819,350 Futures contracts............................................... (335,713) Foreign currency transactions................................... 3,705,567 ----------- Net realized gain............................................. 21,189,204 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 16,277,908 Futures contracts............................................... (194,980) Forward contracts............................................... (294,833) Translation of other assets and liabilities denominated in for- eign currency.................................................. 50,176 ----------- Change in net unrealized appreciation or depreciation......... 15,838,271 ----------- Net realized and unrealized gain................................. 37,027,475 ----------- Net increase in net assets resulting from operations............. $44,773,152 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income........................ $ 7,745,677 $ 15,718,942 Net realized gain............................ 21,189,204 33,576,934 Change in net unrealized appreciation or de- preciation.................................. 15,838,271 13,188,606 ------------- ------------- Net increase in net assets resulting from op- erations.................................... 44,773,152 62,484,482 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income..... (17,593,746) (20,214,114) Distributions in excess of net investment in- come........................................ (7,066,588) (1,430,745) Distributions from net realized gain......... (26,428,094) (10,937,826) ------------- ------------- Total distributions to shareholders*......... (51,088,428) (32,582,685) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................. 60,598,529 109,483,562 Shares issued on reinvestment of distribu- tions....................................... 49,580,586 31,162,315 Shares redeemed.............................. (64,887,080) (64,262,463) ------------- ------------- Net increase in net assets resulting from capital share transactions (Note 7)......... 45,292,035 76,383,414 ------------- ------------- TOTAL INCREASE IN NET ASSETS.............. 38,976,759 106,285,211 ------------- ------------- NET ASSETS: Beginning of period.......................... 471,963,136 365,677,925 ------------- ------------- End of period (including accumulated undis- tributed net investment income of ($2,066,623) and $9,848,069 respectively)... $ 510,939,895 $471,963,136 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net in- vestment income: Brinson Fund Class........................... $ (23,918,105) $ (21,444,413) SwissKey Fund Class.......................... (742,229) (200,446) Distributions from net realized gain: Brinson Fund Class........................... (25,579,684) (10,892,522) SwissKey Fund Class.......................... (848,410) (45,304) ------------- ------------- Total distributions to shareholders.......... $ (51,088,428) $ (32,582,685) ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR ENDED JUNE 30 AUGUST 31, 1992* DECEMBER 31, 1996 ---------------------------- THROUGH BRINSON FUND CLASS (UNAUDITED) 1996 1995 1994 JUNE 30, 1993 - ------------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income. 0.48 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... 0.62 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- -------- Total income from investment operations......... 1.10 1.81 1.29 0.10 1.07 -------- -------- -------- -------- -------- Less distributions: Distributions from and in excess of net investment income.... (0.61) (0.62) (0.27) (0.27) (0.20) Distributions from and in excess of net realized gain........ (0.65) (0.32) (0.10) (0.27) -- -------- -------- -------- -------- -------- Total distributions. (1.26) (0.94) (0.37) (0.54) (0.20) -------- -------- -------- -------- -------- Net asset value, end of period................. $ 12.06 $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== ======== Total return (non- annualized)............ 9.11% 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $493,628 $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.01%** 1.04% 1.09% 1.14% 1.35%** After expense reim- bursement............ N/A N/A N/A 1.10% 1.05%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.08%** 3.69% 4.27% 3.21% 3.26%** After expense reim- bursement............ N/A N/A N/A 3.25% 3.56%** Portfolio turnover rate.................. 84% 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0307 $ 0.0291 N/A N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 12.18 $ 11.60 ------- ------- Income from investment operations: Net investment income....................... 0.43 0.39 Net realized and unrealized gain............ 0.64 1.10 ------- ------- Total income from investment operations... 1.07 1.49 ------- ------- Less distributions: Distributions from and in excess of net in- vestment income............................ (0.57) (0.59) Distributions from net realized gain........ (0.65) (0.32) ------- ------- Total distributions....................... (1.22) (0.91) ------- ------- Net asset value, end of period................ $ 12.03 $ 12.18 ======= ======= Total return (non-annualized)................. 8.89% 13.24% Ratios/Supplemental data Net assets, end of period (in 000s).......... $17,312 $14,030 Ratio of expenses to average net assets...... 1.66%** 1.69%** Ratio of net investment income to average net assets...................................... 2.43%** 3.04%** Portfolio turnover rate...................... 84% 142% Average commission rate paid per share....... $0.0307 $0.0291
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Global Equity Fund is actively managed, providing a fully integrated approach to the primary equity markets across the world. Market selection and currency strategies are managed within a global asset allocation framework. Industry strategies and individual security selections are based on the fundamental research of our analytical teams in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo. The Brinson Global Equity Fund has provided an annualized return of 11.33% since January 31, 1994 (performance inception date), compared to the 11.32% return of its benchmark, the MSCI World Equity (Free) Index. For the year ended December 31, 1996, the Fund returned 17.26%, while the benchmark returned 13.92%. For the second half of 1996, the Fund returned 7.67% compared to the Index return of 6.18%. Currency allocation and equity management strategies within markets contributed positively to Fund performance during the year. Market allocation strategies, notable for a U.S. equity market underweight and cash risk hedge, detracted from performance. Global equity markets were generally strong in 1996. Despite a return of 24.05% for the MSCI U.S. component, the U.S. equity market was not the strongest market during 1996. In the global equity index there were 11 markets that outperformed the U.S. market, Spain being the strongest with a U.S. dollar hedged return of 46.76%. The relatively low performance of the MSCI World Equity (Free) Index, was due to the weak showing from Japan, the worst performing market, which registered a meager U.S. dollar hedged return of 0.06%. The U.S. market provided positive returns during each calendar quarter of 1996, ending the year with a fourth quarter return of 8.28%. Japanese equities, on the other hand, started the year with a strong first half gain of 10.23%. The third and fourth quarters offset nearly all of the first half gains. In the fourth quarter Japan generated a U.S. dollar hedged loss of -6.49%, the only market to provide a negative return. Currency movements contributed substantially to the performance of the Global Equity Fund relative to the MSCI World Equity benchmark. During the year, the Fund maintained a significant underweight to the Japanese yen and underweights in the core European currencies. The aggregate European currency underweight was similar in magnitude to the yen underweight. The U.S. dollar overweight averaged nearly 35% during the year. The Japanese yen declined by 11.13%, and the core European currency depreciations ranged from 14.31% for the Swiss franc to 5.93% for the French franc. The Fund maintained neutral or overweight positions to currencies that appreciated over the course of 1996. Security selection derived most of its added value from equity management in the U.S. and Japan. ------------------------------------------------------------ 23 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
Annualized 6 months 1 year 1/31/94* ended ended to 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------ BRINSON GLOBAL EQUITY FUND 7.67% 17.26% 11.33% MSCI World Equity (Free) Index (currency unhedged) 6.18 13.92 11.32 MSCI World Equity (Free) Index (currency hedged) 7.39 18.53 11.09 - ------------------------------------------------------
*Performance inception date of the Brinson Global Equity Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth in the value of an investment in the Brinson Global Equity Fund and the MSCI World Equity (Free) Index (currency unhedged and hedged) if you had invested $100,000 on January 31, 1994, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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 VS. MSCI WORLD EQUITY (FREE) INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Brinson MSCI World Equity MSCI World Equity Global Equity (Free) Index (Free) Index Fund (currency unhedged) (currency hedged) ------------- ------------------- ----------------- 01/31/94 $100,000 $100,000 $100,000 03/31/94 $ 93,500 $ 94,435 $ 92,315 06/30/94 $ 95,303 $ 97,410 $ 92,876 09/30/94 $ 98,114 $ 99,575 $ 94,331 12/31/94 $ 95,652 $ 98,955 $ 94,327 03/31/95 $ 96,565 $103,724 $ 93,528 06/30/95 $101,080 $108,285 $ 97,701 09/30/95 $109,443 $114,453 $107,608 12/31/95 $116,632 $120,024 $114,647 03/31/96 $122,748 $125,053 $121,423 06/30/96 $127,020 $128,777 $126,533 09/30/96 $129,326 $130,623 $129,049 12/31/96 $136,769 $136,729 $135,888
1/31/94 = $100,000 Data through 12/31/96 Fund returns are net of all fees and costs, while the Index returns are based solely on the market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 24 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO MARKET ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - --------------------------------- U.S. 43.2% 33.2% Japan 17.5 14.5 Australia 1.6 2.6 Belgium 0.6 1.7 Canada 2.6 1.5 France 3.8 5.1 Germany 4.4 4.4 Hong Kong 2.0 0.8 Italy 1.7 1.8 Malaysia 1.4 0.7 Netherlands 2.6 3.2 New Zealand 0.2 1.8 Spain 1.2 1.9 Sweden 1.4 0.0 Switzerland 3.0 0.8 U.K. 10.4 10.5 Other Markets 2.4 0.5 Cash Reserves 0.0 15.0 - --------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - --------------------------------------------------- 1. Chase Manhattan Corp. 1.86% 2. Xerox Corp. 1.46 3. Lockheed Martin Corp. 1.44 4. Burlington Northern Santa Fe 1.43 5. Corning, Inc. 1.35 6. Citicorp 1.31 7. Philip Morris Companies, Inc. 1.28 8. Aon Corp. 1.20 9. Goodyear Tire & Rubber Co. 1.10 10. Enron Corp. 1.00 - ---------------------------------------------------
CURRENCY ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - --------------------------------- U.S. 43.2% 71.7% Japan 17.5 7.5 Australia 1.6 1.6 Belgium 0.6 0.0 Canada 2.6 2.6 France 3.8 0.0 Germany 4.4 0.0 Hong Kong 2.0 0.0 Italy 1.7 1.8 Malaysia 1.4 0.6 Netherlands 2.6 0.0 New Zealand 0.2 1.8 Spain 1.2 1.2 Sweden 1.4 0.0 Switzerland 3.0 0.0 U.K. 10.4 10.4 Other Markets 2.4 0.8 - --------------------------------- 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ---------------------------------------------------------------- 1. Royal Dutch Petroleum Co. 0.82% 2. Matsushita Electric Industrial Co. 0.62 3. Broken Hill Proprietary Co. Ltd. 0.61 4. Toray Industries, Inc. 0.59 5. British Telecommunications PLC 0.58 6. General Electric Co. PLC 0.57 7. Lloyds TSB Group PLC 0.55 8. Telecom Corp of New Zealand Ltd. 0.55 9. British Petroleum Co. PLC 0.49 10. Sankyo Co. Ltd. 0.49 - ----------------------------------------------------------------
------------------------------------------------------------ 25 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.26% Housing/Paper........................................................... 1.58 Metals.................................................................. 0.20 ----- 2.04 Capital Investments Capital Goods........................................................... 3.49 Technology.............................................................. 2.25 ----- 5.74 Consumer Autos/Durables.......................................................... 0.10 Discretionary........................................................... 2.53 Health: Drugs........................................................... 3.13 Health: Non-Drugs....................................................... 1.55 Non-Durables............................................................ 4.36 Retail/Apparel.......................................................... 1.60 ----- 13.27 Energy................................................................... 1.93 Financial Banks................................................................... 3.91 Non-Banks............................................................... 3.57 ----- 7.48 Services................................................................. 2.47 Transportation........................................................... 2.41 Utilities................................................................ 1.20 Miscellaneous............................................................ 1.01 ----- Total U.S. Equities................................................... 37.55* -----
- ------------------------------------------------------------ NON-U.S. EQUITIES Airlines................................................................ 0.12% Appliances & Household Durables......................................... 1.24 Automobiles............................................................. 1.53 Banking................................................................. 5.63 Beverages & Tobacco..................................................... 1.20 Broadcasting & Publishing............................................... 0.72 Building Materials...................................................... 0.72 Business & Public Service............................................... 1.84 Chemicals............................................................... 2.10 Construction............................................................ 1.00 Data Processing......................................................... 0.60 Electric Components..................................................... 0.78 Electronics............................................................. 2.26 Energy.................................................................. 4.23 Financial Services...................................................... 0.75 Food & House Products................................................... 2.46 Forest Products......................................................... 1.06 Gold Mining............................................................. 0.06 Health & Personal Care.................................................. 2.29 Industrial Components................................................... 1.26 Insurance............................................................... 2.10 Leisure & Tourism....................................................... 0.28 Machinery & Engineering................................................. 0.76 Merchandising........................................................... 2.17 Metals-Steel............................................................ 0.95 Miscellaneous Materials................................................. 0.68 Multi-Industry.......................................................... 2.16 Non-Ferrous Metal....................................................... 1.18 Real Estate............................................................. 0.41 Recreation.............................................................. 0.30 Shipping................................................................ 0.40 Telecommunications...................................................... 2.12 Textiles & Apparel...................................................... 0.13 Transportation.......................................................... 0.49 Utilities............................................................... 3.02 ------ Total Non-U.S. Equities.............................................. 49.00* ------ SHORT-TERM INVESTMENTS.................................................. 12.62* ------ TOTAL INVESTMENTS.................................................... 99.17 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.83 ------ NET ASSETS........................................................... 100.00% ======
* The Fund held a short position in stock index futures on December 31, 1996 which reduced U.S. equity exposure from 37.55% to 32.49%. The Fund held a long position in Topix futures which increased Japanese equity exposure from 13.77% to 14.71%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 12.62% to 16.74%. ------------------------------------------------------------ 26 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- Equities -- 86.55% U.S. EQUITIES -- 37.55% Aetna Life & Casualty Co................................ 7,200 $ 576,000 Allergan, Inc........................................... 12,000 427,500 Allstate Corp........................................... 6,200 358,825 Alza Corp. (b).......................................... 11,700 302,738 Aon Corp................................................ 15,700 975,362 Automatic Data Processing, Inc.......................... 11,500 493,063 Avon Products, Inc...................................... 8,500 485,562 Bard (C.R.), Inc........................................ 7,300 204,400 Beckman Instruments, Inc................................ 4,700 180,363 Birmingham Steel Corp................................... 4,700 89,300 Boston Technology, Inc. (b)............................. 4,700 135,125 Brinker International, Inc. (b)......................... 3,200 51,200 Burlington Northern Santa Fe............................ 13,400 1,157,425 Centerior Energy Co..................................... 9,900 106,425 Chase Manhattan Corp.................................... 16,900 1,508,325 Choice Hotels International, Inc. (b)................... 7,700 135,712 CIGNA Corp.............................................. 5,800 792,425 Circuit City Stores, Inc................................ 1,700 51,213 Citicorp................................................ 10,300 1,060,900 CMS Energy Corp......................................... 12,800 430,400 Coca-Cola Enterprises, Inc.............................. 6,300 305,550 Comerica, Inc........................................... 3,200 167,600 Comverse Techonology, Inc. (b).......................... 2,200 83,187 Corning, Inc............................................ 23,600 1,091,500 CPC International, Inc.................................. 2,900 224,750 Dial Corp............................................... 11,500 169,625 EMC Corp./Mass (b)...................................... 16,900 559,813 Enron Corp.............................................. 18,800 810,750 Federal Express Corp. (b)............................... 17,400 774,300 Federated Department Stores (b)......................... 6,800 232,050 FileNet Corp. (b)....................................... 2,800 89,600 First American Corp.-Tenn............................... 800 46,100 First Data Corp......................................... 9,804 357,846 First of America Bank Corp.............................. 1,500 90,187 Footstar, Inc. (b)...................................... 3,598 89,500 Ford Motor Co........................................... 6,500 207,188 Forest Laboratories, Inc. (b)........................... 8,000 262,000 Gannett Co., Inc........................................ 7,800 584,025 General Instrument Corp. (b)............................ 23,300 503,862 Genzyme Corp. (b)....................................... 4,700 102,225 Geon Co................................................. 1,700 33,363 Goodyear Tire & Rubber Co............................... 17,300 888,788 Harnischfeger Industries, Inc........................... 5,200 250,250 Health Care and Retirement Corp. (b).................... 8,650 247,606 Interpublic Group of Companies, Inc..................... 5,800 275,500 James River Corp. of Virginia........................... 6,700 221,938 Kimberly-Clark Corp..................................... 5,700 542,925 Kroger Co. (b).......................................... 4,900 227,850 Lockheed Martin Corp.................................... 12,751 1,166,716 Lyondell Petrochemical Co............................... 12,800 281,600 Manor Care, Inc......................................... 7,700 207,900 Martin Marietta Materials, Inc.......................... 3,535 82,189 Masco Corp.............................................. 7,300 262,800 Mattel, Inc............................................. 28,050 778,388 Melville Corp........................................... 9,300 384,787
Nabisco Holdings Corp. Class A.......................... 8,500 $ 330,438 National Semiconductor Corp. (b)........................ 4,800 117,000 Nextel Communications, Inc. Class A (b)................. 11,800 154,137 Old Republic International Corp......................... 6,050 161,838 Peco Energy Co.......................................... 7,200 181,800 Pentair, Inc............................................ 5,500 177,375 Pharmacia & Upjohn, Inc................................. 14,900 590,413 Philip Morris Companies, Inc............................ 9,200 1,036,150 Rhone-Poulenc Rorer, Inc................................ 3,500 273,437 RJR Nabisco Convertible Preferred "C"................... 38,200 257,850 Schering Plough Corp.................................... 10,300 666,925 Seagate Technology, Inc. (b)............................ 3,200 126,400 Timken Co............................................... 4,900 224,788 Tyson Foods, Inc. Class A............................... 14,100 482,925 Ultramar Diamond Shamrock Corp.......................... 13,252 419,094 US Bancorp.............................................. 7,100 319,056 USF&G Corp.............................................. 5,500 114,813 Vencor, Inc. (b)........................................ 6,100 192,912 Viad Corp............................................... 11,500 189,750 Westvaco Corp........................................... 2,850 81,938 Whitman Corp............................................ 700 16,012 WMX Technologies, Inc................................... 19,100 623,137 Xerox Corp.............................................. 22,400 1,178,800 York International Corp................................. 4,800 268,200 360 Communications Co. (b).............................. 4,033 93,263 ----------- Total U.S. Equities..................................... 30,404,972 ----------- NON-U.S. EQUITIES -- 49.00% AUSTRALIA -- 2.66% Amcor Ltd............................................... 14,100 90,603 Boral Ltd............................................... 23,800 67,676 Broken Hill Proprietary Co. Ltd......................... 34,450 490,345 CRA Ltd................................................. 12,063 189,233 David Jones Ltd......................................... 57,000 79,230 Lend Lease Corp. Ltd.................................... 4,197 81,340 M.I.M. Holdings Ltd..................................... 49,446 69,122 National Australia Bank Ltd............................. 19,475 228,936 News Corp. Ltd.......................................... 40,536 213,788 News Corp. Ltd. Preferred............................... 9,000 40,032 Pacific Dunlop Ltd...................................... 33,600 85,401 Qantas Airways Ltd...................................... 23,982 40,001 Santos Ltd.............................................. 23,000 93,169 WMC Ltd................................................. 18,300 115,265 Westpac Bank Corp. Ltd.................................. 37,545 213,520 Woolworth's Ltd......................................... 25,000 60,167 ----------- 2,157,828 ----------- BELGIUM -- 1.46% Delhaize-Le Lion S.A.................................... 1,200 71,212 Electrabel S.A.......................................... 950 224,606 Fortis AG............................................... 894 143,256 Fortis AG Strip (b)..................................... 14 7 General de Banque S.A................................... 100 35,810 Groupe Bruxelles Lambert S.A............................ 530 68,160 Kredietbank NV.......................................... 365 119,504
- -------------------------------------------------------------------------------- 27 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- BELGIUM (CONTINUED) Petrofina S.A........................................... 510 $ 162,162 Societe Generale de Belgique............................ 840 65,847 Solvay S.A. Class A..................................... 165 100,903 Tractebel............................................... 200 93,028 Tractebel Warrants "99" (b)............................. 200 2,896 Union Miniere Group S.A. (b)............................ 1,420 96,114 ----------- 1,183,505 ----------- CANADA -- 1.48% Alcan Aluminium Ltd..................................... 2,500 84,361 Bank of Montreal........................................ 2,300 73,165 Barrick Gold Corp....................................... 1,600 45,819 BCE, Inc................................................ 1,100 52,408 Canadian National Railway Co............................ 2,000 76,025 Canadian Pacific Ltd.................................... 5,700 149,923 Hudson's Bay Co......................................... 3,400 56,807 Imperial Oil Ltd........................................ 2,000 94,119 Moore Corp. Ltd......................................... 2,200 45,586 Noranda, Inc............................................ 2,600 57,953 Northern Telecom Ltd.................................... 1,000 62,163 NOVA Corp............................................... 4,300 38,118 Royal Bank of Canada.................................... 2,500 87,735 Seagram Co. Ltd......................................... 2,200 87,079 Thomson Corp............................................ 5,600 123,596 TransCanada Pipelines Ltd............................... 3,400 59,536 ----------- 1,194,393 ----------- FINLAND -- 0.69% Merita Ltd. Class A (b)................................. 16,700 51,814 Nokia Ab Class A........................................ 5,000 289,434 Outokumpu Class A....................................... 2,600 44,283 Pohjola Insurance Group Class B......................... 1,200 26,947 Sampo Insurance Co. Ltd. Class A........................ 700 55,131 UPM-Kymmene Corp. (b)................................... 4,500 94,218 ----------- 561,827 ----------- FRANCE -- 4.90% Accor S.A............................................... 877 110,833 Alcatel Alsthom......................................... 1,461 117,134 AXA S.A................................................. 600 38,086 Banque Nationale de Paris............................... 5,380 207,803 CEP Communications...................................... 404 28,481 CEP Communications Warrants "97" (b).................... 704 806 Cie Bancaire S.A........................................ 1,192 140,783 Cie de Saint Gobain..................................... 1,757 248,069 Cie de Suez............................................. 2,317 98,319 Cie Generale des Eaux................................... 2,671 330,362 Colas................................................... 330 47,608 Credit Local de France.................................. 2,503 217,623 Elf Aquitaine S.A....................................... 2,650 240,752 Groupe Danone........................................... 300 41,722 L'Oreal S.A............................................. 200 75,173 Lafarge S.A............................................. 1,000 59,880
LVMH.................................................... 1,130 $ 314,958 Michelin Class B........................................ 3,234 174,244 Pechiney S.A. Class A................................... 3,013 125,998 Peugeot S.A............................................. 2,640 296,566 Rhone-Poulenc Class A................................... 6,600 224,583 SEITA................................................... 1,900 79,308 Societe Generale........................................ 2,061 222,406 Total S.A. Class B...................................... 3,459 280,781 UAP..................................................... 4,309 107,338 Usinor Sacilor.......................................... 9,400 136,515 ----------- 3,966,131 ----------- GERMANY -- 3.91% Allianz AG Holding...................................... 155 278,600 BASF AG................................................. 4,250 162,708 Bayer AG................................................ 5,750 233,007 Bayerische Motoren Werke AG............................. 230 158,497 Commerzbank AG.......................................... 4,550 115,440 Daimler-Benz AG (b)..................................... 2,400 164,298 Deutsche Bank AG........................................ 4,650 216,644 Deutsche Telekom AG (b)................................. 7,750 161,427 Henkel KGaA-Vorzug AG................................... 1,850 91,234 Hochtief AG............................................. 1,250 49,072 Hoechst AG.............................................. 2,000 92,531 M.A.N. AG............................................... 320 77,140 Mannesmann AG........................................... 380 163,283 Metro AG................................................ 1,220 95,393 Muenchener Rueckver AG.................................. 77 186,617 Muenchener Rueckver AG Warrants "98" (b)................ 3 625 Preussag AG............................................. 460 103,874 RWE AG.................................................. 3,100 129,544 Schering AG............................................. 2,000 168,581 Siemens AG.............................................. 1,400 64,881 Thyssen AG.............................................. 700 123,957 Veba AG................................................. 3,600 206,735 Volkswagen AG........................................... 300 124,100 ----------- 3,168,188 ----------- HONG KONG -- 0.75% Cheung Kong Holdings Ltd................................ 6,000 53,330 China Light & Power Co. Ltd............................. 11,000 48,921 Guoco Group Ltd......................................... 9,000 50,382 Hang Seng Bank Ltd...................................... 5,800 70,486 Hong Kong Telecommunications Ltd........................ 16,000 25,753 Hutchison Whampoa Ltd................................... 14,000 109,956 Jardine Matheson Holdings ADR (c)....................... 3,600 23,760 New World Development Co. Ltd........................... 9,000 60,796 Sun Hung Kai Properties Ltd............................. 5,000 61,248 Swire Pacific Ltd. Class A.............................. 7,000 66,743 Wharf (Holdings) Ltd.................................... 8,000 39,923 ----------- 611,298 -----------
- -------------------------------------------------------------------------------- 28 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- ITALY -- 1.45% Assicurazioni Generali.................................. 5,940 $ 112,315 Danieli & Co. Savings (Risp)............................ 8,000 33,410 Edison Spa.............................................. 8,000 50,510 ENI ADR (c)............................................. 2,300 118,738 ENI Spa................................................. 22,000 112,641 Fiat Spa-Priv........................................... 44,000 72,489 INA-Istituto Nazionale de Assicurazioni................. 14,000 18,194 Istituto Mobilaire Italiano Spa......................... 15,000 128,247 Italgas Spa............................................. 9,000 37,498 La Rinascente........................................... 5,000 28,938 La Rinascente Savings (Risp)............................ 6,000 15,311 La Rinascente Warrants "99" (b)......................... 550 242 Mediobanca Spa.......................................... 2,800 15,073 Montedison Spa (b)...................................... 154,560 105,107 SAI-Savings (Risp)...................................... 7,000 24,837 Telecom Italia Spa...................................... 86,000 167,418 Telecom Italia Mobile Spa............................... 92,000 130,996 ----------- 1,171,964 ----------- JAPAN -- 13.77% Amada Co. Ltd........................................... 21,000 162,833 Asahi Glass Co. Ltd..................................... 24,000 225,381 Bank of Tokyo-Mitsubishi Ltd............................ 17,600 326,010 Canon, Inc.............................................. 17,000 374,946 Canon Sales Co., Inc.................................... 6,600 146,705 Citizen Watch Co. Ltd................................... 19,000 135,866 Dai Nippon Printing Co. Ltd............................. 18,000 314,810 Daiichi Pharmaceutical Co. Ltd.......................... 13,000 208,323 Daikin Industries Ltd................................... 20,000 177,478 Daiwa House Industry Co. Ltd............................ 9,000 115,534 Fanuc................................................... 7,900 252,511 Fujitsu................................................. 12,000 111,657 Hitachi Ltd............................................. 39,000 362,884 Honda Motor Co.......................................... 5,000 142,586 Inax.................................................... 25,000 184,802 Isetan.................................................. 6,000 77,539 Ito Yokado Co. Ltd...................................... 7,000 303,955 Kaneka Corp............................................. 9,000 45,981 Keio Teito Electric Railway............................. 23,000 112,156 Kinki Nippon Railway.................................... 23,000 143,267 Kirin Brewery Co. Ltd................................... 21,000 206,255 Kokuyo.................................................. 4,000 98,561 Kuraray Co. Ltd......................................... 17,000 156,716 Kyocera Corp. .......................................... 2,000 124,408 Maeda Road Construction................................. 3,000 34,634 Matsushita Electric Industrial Co....................... 31,000 504,782 Mitsubishi Paper Mills.................................. 21,000 81,959 NGK Insulators.......................................... 32,000 303,265 Nintendo Corp. Ltd...................................... 1,500 107,134 Nippon Denso Co. Ltd.................................... 13,000 312,484 Nippon Meat Packers, Inc................................ 13,000 168,002 Nippon Steel Co......................................... 14,000 41,251 Okumura................................................. 18,000 109,176 Osaka Gas Co............................................ 81,000 221,220
Sankyo Co. Ltd.......................................... 14,000 $ 395,623 Sanwa Bank Ltd. ........................................ 9,000 122,512 Secom................................................... 5,000 301,973 Seino Transportation.................................... 6,000 66,167 Sekisui House Ltd....................................... 38,000 386,319 Shinmaywa Industries Ltd................................ 18,000 132,282 Sony Corp............................................... 6,000 392,349 Sumitomo Bank........................................... 21,000 302,145 Sumitomo Electric Industries............................ 16,000 223,313 Takeda Chemical Industries.............................. 15,000 314,035 TDK Corp................................................ 4,000 260,188 Tokio Marine & Fire Insurance Co........................ 18,000 169,036 Tokyo Electric Power.................................... 8,300 181,632 Tokyo Steel Mfg......................................... 14,500 206,126 Tonen Corp.............................................. 13,000 151,202 Toray Industries, Inc................................... 78,000 480,486 Toshiba Corp............................................ 46,000 288,516 Toyo Suisan Kaisha...................................... 11,000 109,934 Toyota Motor Corp....................................... 5,000 143,448 Yamazaki Baking Co. Ltd................................. 8,000 127,509 ----------- 11,149,866 ----------- MALAYSIA -- 0.54% Hume Industries (Malaysia) Bhd.......................... 7,000 44,070 Kuala Lumpur Kepong Bhd................................. 15,000 38,012 Land & General Holdings Bhd............................. 15,000 35,933 Malayan Banking Bhd..................................... 2,600 28,826 Malaysia International Shipping Bhd (Frgn.)............. 10,000 29,697 Nestle (Malaysia) Bhd................................... 1,000 8,038 Public Bank Bhd (Frgn.)................................. 17,667 37,425 Resorts World Bhd....................................... 4,000 18,215 Sime Darby Bhd.......................................... 15,000 59,097 Telekom Malaysia Bhd.................................... 3,000 26,728 Tenaga Nasional Bhd..................................... 18,000 86,241 YTL Corp. Bhd........................................... 4,000 21,540 ----------- 433,822 ----------- NETHERLANDS -- 3.10% ABN AMRO Holdings NV.................................... 3,219 209,178 Akzo Nobel NV........................................... 500 68,220 DSM NV.................................................. 680 66,990 Hoogovens NV............................................ 900 37,463 ING Groep NV............................................ 8,956 322,058 KLM Royal Dutch Air Lines NV............................ 1,900 53,385 KPN NV.................................................. 5,565 212,021 Philips Electronics NV.................................. 2,850 115,338 Royal Dutch Petroleum Co................................ 3,800 665,445 Royal Dutch Petroleum Co. NY Shares (c)................. 1,200 204,900 Unilever NV............................................. 1,900 335,688 Vendex International NV................................. 3,119 133,257 VNU-Ver Ned Uitgevers................................... 4,000 83,483 ----------- 2,507,426 -----------
- -------------------------------------------------------------------------------- 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- NEW ZEALAND -- 1.62% Brierley Investments Ltd................................ 231,000 $ 213,813 Carter Holt Harvey Ltd.................................. 79,500 180,312 Fletcher Challenge Building............................. 30,750 94,512 Fletcher Challenge Energy............................... 29,550 85,604 Fletcher Challenge Forest Ltd........................... 49,803 83,398 Fletcher Challenge Paper................................ 60,500 124,394 Telecom Corp. of New Zealand Ltd........................ 87,000 443,821 Telecom Corp. of New Zealand Ltd. ADS (c)............... 1,100 89,100 ----------- 1,314,954 ----------- SPAIN -- 1.62% Acerinox S.A. .......................................... 400 57,690 Banco Bilbao-Vizcaya S.A................................ 1,800 97,006 Banco Central Hispanoamericano.......................... 1,700 43,586 Banco Intercontinental Espanol S.A...................... 300 46,427 Banco Popular Espanol S.A............................... 400 78,416 Banco Santander S.A..................................... 1,600 102,218 Cia Sevillana de Electricidad........................... 2,113 23,961 Empresa Nacional de Electridad S.A...................... 2,050 145,624 Fomento de Construcciones y Contratas S.A.......................................... 500 46,512 Gas Natural SDG S.A. ................................... 300 69,652 Iberdrola S.A........................................... 13,000 183,894 Mapfre Corp. ........................................... 900 54,730 Repsol S.A.............................................. 3,300 126,342 Telefonica de Espana.................................... 7,500 173,842 Vallehermosa S.A........................................ 1,200 25,969 Viscofan Envolturas Celulosicas S.A..................... 2,300 33,596 ----------- 1,309,465 ----------- SWITZERLAND -- 0.90% ABB AG (Bearer)......................................... 30 37,201 CS Holdings AG (Reg.)................................... 396 40,552 Nestle S.A. (Reg.)...................................... 213 227,959 Novartis AG (Reg.)...................................... 140 160,219 Roche Holding AG (Gen.)................................. 18 139,622 Schweiz Bankgesellschaft (Bearer)....................... 42 36,692 Societe Generale de Surveillance Holding S.A. (Bearer).. 11 26,953 Zurich Versicherungs (Reg.)............................. 203 56,242 ----------- 725,440 ----------- UNITED KINGDOM -- 10.15% Abbey National PLC...................................... 11,000 144,018 Bank of Scotland........................................ 16,000 84,477 Bass PLC................................................ 6,800 95,547 B.A.T. Industries PLC................................... 35,000 290,219 Booker PLC.............................................. 10,500 71,791 British Energy PLC...................................... 75,000 188,687 British Gas PLC......................................... 71,500 274,718 British Petroleum Co. PLC............................... 33,416 400,615 British Steel PLC....................................... 62,000 170,306 British Telecommunications PLC.......................... 69,700 470,591 Charter PLC............................................. 9,531 120,789
Coats Viyella PLC....................................... 45,000 $ 102,430 FKI PLC................................................. 38,875 134,396 General Electric Co. PLC................................ 71,100 464,833 Glaxo Wellcome PLC...................................... 11,500 186,582 Grand Metropolitan PLC.................................. 46,000 361,355 Guinness PLC............................................ 36,300 284,225 Hanson PLC.............................................. 72,000 100,428 Hillsdown Holdings PLC.................................. 53,000 181,414 House of Fraser PLC..................................... 59,000 154,997 HSBC Holdings PLC....................................... 12,000 268,218 Imperial Chemical Industries PLC........................ 5,000 65,762 Legal & General Group PLC............................... 28,000 178,265 Lloyds TSB Group PLC.................................... 60,630 446,709 Marks & Spencer PLC..................................... 29,500 247,895 Millennium Chemicals, Inc. (b).......................... 500 8,875 Mirror Group PLC........................................ 24,000 88,516 National Power PLC...................................... 19,000 159,011 National Westminster Bank PLC........................... 10,800 126,706 Northern Foods PLC...................................... 32,000 111,997 Peninsular & Oriental Steam Navigation Co............... 29,000 292,829 Reckitt & Colman PLC.................................... 6,175 76,514 Redland PLC............................................. 9,500 59,589 RJB Mining PLC.......................................... 21,000 154,544 Royal & Sun Alliance Insurance Group PLC................ 16,697 127,021 RTZ Corp. PLC........................................... 11,200 179,511 Sainsbury (J.) PLC...................................... 23,000 152,730 Scottish Hydro-Electric PLC............................. 17,200 96,553 Sears PLC............................................... 66,000 107,308 Sedgwick Group PLC...................................... 48,000 108,027 SmithKline Beecham PLC.................................. 13,900 192,573 Smurfit (Jefferson) Group PLC........................... 30,000 89,081 Tesco PLC............................................... 22,000 133,476 Thames Water PLC........................................ 16,000 167,722 Unilever PLC............................................ 6,500 157,578 Vodafone Group PLC...................................... 19,600 82,687 Yorkshire Water PLC..................................... 5,000 60,628 ----------- 8,222,743 ----------- Total Non-U.S. Equities................................. 39,678,850 ----------- Total Equities (Cost $61,753,091)....................... 70,083,822 -----------
FACE AMOUNT VALUE ---------- ----------- Short-Term Investments --12.62% U.S. GOVERNMENT OBLIGATIONS -- 0.39% U.S. Treasury Bills 5.063%, due 05/01/97................ $ 325,000 $ 319,553 ----------- COMMERCIAL PAPER -- 12.23% Burlington Northern Santa Fe 5.650%, due 01/17/97................................... 500,000 498,744 Case Credit Corp. 5.510%, due 01/07/97................................... 500,000 499,541 Cincinnati Bell, Inc. 7.250%, due 01/02/97................................... 2,441,000 2,440,508
- -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- COMMERCIAL PAPER (CONTINUED) CNA Financial Corp. 6.250%, due 01/23/97................................... $ 500,000 $ 498,090 Crown Cork & Seal Co., Inc. 5.520%, due 01/10/97 500,000 499,310 5.580%, due 01/29/97................................... 500,000 497,830 PanEnergy Corp. 6.050%, due 01/17/97................................... 1,000,000 997,311 Rite Aid Corp. 5.650%, due 01/06/97................................... 500,000 499,608 5.600%, due 01/21/97................................... 700,000 697,822 Tyson Foods, Inc. 5.750%, due 01/09/07................................... 750,000 749,042 US West Capital Funding, Inc. 5.600%, due 02/12/97................................... 532,000 528,524 Vastar Resources, Inc. 6.020%, due 01/02/97................................... 500,000 499,916 6.850%, due 01/10/97................................... 1,000,000 998,288 ----------- 9,904,534 ----------- Total Short-Term Investments (Cost $10,224,050)..................................... 10,224,087 ----------- Total Investments (Cost $71,977,141) -- 99.17% (a)....................... 80,307,909 ----------- Cash and other assets, less liabilities --0.83%......... 675,731 ----------- Net Assets -- 100%...................................... $80,983,640 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $71,977,141; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $10,899,783 Gross unrealized depreciation................................ (2,569,015) ----------- Net unrealized appreciation.............................. $ 8,330,768 ===========
(b)Non-income producing security (c)Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Equity Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- --------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar................ 06/04/97 1,100,000 $ 810,230 $(19,958) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar.............. 06/04/97 950,000 753,566 14,604 Belgian Franc.................. 06/04/97 36,800,000 1,170,765 12,324 Dutch Guilder.................. 06/04/97 3,800,000 2,219,550 28,040 French Franc................... 06/04/97 19,500,000 3,786,028 18,331 German Mark.................... 06/04/97 4,400,000 2,883,595 36,500 Hong Kong Dollars.............. 06/04/97 4,400,000 568,746 (130) Japanese Yen................... 06/04/97 500,000,000 4,401,739 150,419 Spanish Peseta................. 06/04/97 48,000,000 368,164 4,397 Swiss Franc.................... 06/04/97 900,000 680,839 27,822 -------- Total...................... $272,349 ========
FUTURES CONTRACTS (NOTE 5) The Global Equity Fund had the following open index futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN ---------- ------------- ---------- ---------- INDEX FUTURES BUY CONTRACTS Topix, 6 contracts.............. March 1997 $ 791,419 $ 760,920 $(30,499) INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 11 con- tracts......................... March 1997 4,128,600 4,094,750 33,850 -------- Total........................ $ 3,351 ========
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $211,098 and $319,553, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $71,977,141) (Note 1)................. $80,307,909 Cash.............................................................. 2,540,769 Foreign currency, at value (Cost $97,461)......................... 95,800 Receivables: Investment securities sold....................................... 265,153 Dividends........................................................ 152,214 Fund shares sold................................................. 113,121 Variation margin (Note 5)........................................ 80,051 Due from advisor................................................. 13,080 Net unrealized appreciation on forward foreign currency contracts. 272,349 Other assets...................................................... 7,401 ----------- TOTAL ASSETS................................................... 83,847,847 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 2,624,845 Fund shares redeemed............................................. 8,461 Accrued expenses................................................. 230,901 ----------- TOTAL LIABILITIES.............................................. 2,864,207 ----------- NET ASSETS......................................................... $80,983,640 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7).......................................... $72,056,258 Accumulated undistributed net investment income................... 204,604 Accumulated net realized gain..................................... 112,758 Net unrealized appreciation....................................... 8,610,020 ----------- NET ASSETS..................................................... $80,983,640 =========== OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $38,631,262 and 3,393,011 shares issued and outstanding) (Note 7)....................................... $ 11.39 =========== SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $42,352,378 and 3,721,883 shares issued and outstanding) (Note 7)....................................... $ 11.38 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $50,249 for foreign taxes withheld)............. $ 623,914 Interest.......................................................... 212,723 ---------- TOTAL INCOME................................................... 836,637 ---------- EXPENSES: Advisory (Note 2)................................................. 276,132 Distribution (Note 6)............................................. 141,145 Accounting........................................................ 71,001 Custodian......................................................... 50,480 Professional...................................................... 38,272 Other............................................................. 126,012 ---------- TOTAL EXPENSES................................................. 703,042 Expenses deferred by Advisor (Note 2).......................... (216,697) ---------- NET EXPENSES................................................... 486,345 ---------- NET INVESTMENT INCOME ......................................... 350,292 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 2,476,667 Futures contracts................................................ (492,032) Foreign currency transactions.................................... 273,229 ---------- Net realized gain.............................................. 2,257,864 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 2,471,472 Futures contracts................................................ (23,546) Forward contracts................................................ 268,593 Translation of other assets and liabilities denominated in for- eign currency................................................... 3,943 ---------- Change in net unrealized appreciation or depreciation.......... 2,720,462 ---------- Net realized and unrealized gain................................... 4,978,326 ---------- Net increase in net assets resulting from operations............... $5,328,618 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 350,292 $ 462,604 Net realized gain............................. 2,257,864 8,259,766 Change in net unrealized appreciation or depreciation................................. 2,720,462 1,258,707 ------------ ----------- Net increase in net assets resulting from op- erations..................................... 5,328,618 9,981,077 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class............................ (176,096) (295,340) SwissKey Fund Class........................... (53,287) (41,698) Distributions from net realized gain: Brinson Fund Class............................ (3,076,894) (1,399,995) SwissKey Fund Class........................... (3,396,000) (1,621,590) ------------ ----------- Total distributions to shareholders........... $ (6,702,277) $(3,358,623) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold................................... 19,387,404 11,563,213 Shares issued in acquisition of SBC World Growth Fund (Note 1)......................... -- 25,670,575 Shares issued on reinvestment of distribu- tions........................................ 6,291,113 3,336,320 Shares redeemed............................... (3,459,300) (7,760,045) ------------ ----------- Net increase in net assets resulting from cap- ital share transactions (Note 7)........................ 22,219,217 32,810,063 ------------ ----------- TOTAL INCREASE IN NET ASSETS............... 20,845,558 39,432,517 ------------ ----------- NET ASSETS: Beginning of period........................... 60,138,082 20,705,565 ------------ ----------- End of period (including accumulated undis- tributed net investment income of $204,604 and $90,547, respectively)................... $ 80,983,640 $60,138,082 ============ ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR YEAR JANUARY 28, 1994* DECEMBER 31, 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ----------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 11.57 $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- ------- Income from investment operations: Net investment income. 0.03 0.18 0.18 0.07 Net realized and unrealized gain (loss)............... 0.84 2.29 0.39 (0.54) ------- ------- ------- ------- Total income (loss) from investment op- erations........... 0.87 2.47 0.57 (0.47) ------- ------- ------- ------- Less distributions: Distributions from net investment income.... (0.06) (0.14) (0.04) (0.04) Distributions from and in excess of net re- alized gain.......... (0.99) (0.69) (0.09) -- ------- ------- ------- ------- Total distributions. (1.05) (0.83) (0.13) (0.04) ------- ------- ------- ------- Net asset value, end of period................. $ 11.39 $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= ======= Total return (non- annualized)............ 7.67% 25.66% 6.06% (4.70%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $38,631 $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.62%** 1.77% 2.06% 2.65%** After expense reim- bursement............ 1.00%** 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 0.80%** 0.57% 0.71% 0.24%** After expense reim- bursement............ 1.42%** 1.34% 1.77% 1.89%** Portfolio turnover rate.................. 17% 74% 36% 21% Average commission rate paid per share........ $0.0259 $0.0288 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.57 $ 10.35 ------- ------- Income from investment operations: Net investment gain (loss).................. 0.02 (0.01) Net realized and unrealized gain............ 0.80 1.93 ------- ------- Total income from investment operations... 0.82 1.92 ------- ------- Less distributions: Distributions from net investment income.... (0.02) (0.01) Distributions from net realized gain........ (0.99) (0.69) ------- ------- Total distributions....................... (1.01) (0.70) ------- ------- Net asset value, end of period................ $ 11.38 $ 11.57 ======= ======= Total return (non-annualized)................. 7.23% 19.25% Ratios/Supplemental data Net assets, end of period (in 000s).......... $42,353 $33,012 Ratio of expenses to average net assets: Before expense reimbursement................ 2.38%** 2.53%** After expense reimbursement................. 1.76%** 1.76%** Ratio of net investment income (loss) to av- erage net assets: Before expense reimbursement................ 0.04%** (0.19%)** After expense reimbursement................. 0.66%** 0.58%** Portfolio turnover rate...................... 17% 74% Average commission rate paid per share....... $0.0259 $0.0288
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO The Global Bond Fund is actively managed, providing a fully integrated treatment of the U.S. and other major fixed income markets across the world. This global approach takes full advantage of relationships both within and across markets, based on consistent analysis of macroeconomic and market conditions. Market and currency strategies are developed in a global asset allocation framework, in conjunction with senior fixed income professionals in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo. The Brinson Global Bond Fund has provided an annualized return of 8.41% since July 31, 1993 (performance inception date). Its benchmark, the Salomon World Government Bond Index, returned 8.35%. For the year ended December 31, 1996, the Fund returned 9.30%, while the benchmark returned 3.63%. In the second half of 1996, the Fund produced a return of 7.03% compared to the 5.18% return of the benchmark. Market/currency allocation and bond management strategies all contributed positively to Fund performance in 1996. Market allocation contributions were broadly derived from European and Canadian bond market overweights against the U.S. The Japanese bond market underweight detracted from Fund performance. The currency allocation strategy added value in nearly every currency. Bond management was strong, particularly in the U.S. market. Bond markets around the world began a period of strength in early 1995 that was grounded on a foundation of poor performance in 1994. The strength the global markets experienced in 1995 was protracted into 1996 for essentially every bond market except for the U.S. In U.S. dollar-hedged terms, the Salomon Brothers Index returned 8.68% in 1996. The U.S. market posted a lackluster return of 2.73% while the non-U.S. portion of the index (hedged) returned 11.82% during the year. The Fund benefited from a U.S. bond market underweight through the middle of October, when the Fund shifted to a neutral stance. The Fund also benefited from an overweight in core European markets during the year. Despite low yields in Japan, the market generated a relatively strong return; consequently, the Fund's underweight in Japan detracted from performance. Currency allocation strategy contributed substantially to the performance of the Global Bond Fund relative to the Salomon Brothers World Government Bond Index. During the year, the Fund maintained significant underweights to the Japanese yen and the core European currencies. The aggregate European currency underweight was similar in magnitude to the yen underweight. The U.S. dollar overweight averaged about 35% during the year. The Japanese yen declined by 11.13%, and the core European currency depreciations ranged from 14.31% for the Swiss franc to 5.93% for the French franc. The Fund maintained neutral or overweight positions to currencies that appreciated over the course of 1996. Bond management was particularly strong in the U.S. due to issue selection in the mortgage-backed and corporate sectors. Security selection contributions were mixed outside the U.S. ------------------------------------------------------------ 38 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year 3 years Annualized ended ended ended 7/31/93* 12/31/96 12/31/96 12/31/96 to 12/31/96 - --------------------------------------------------------------------------- BRINSON GLOBAL BOND FUND 7.03% 9.30% 8.27% 8.41% Salomon World Government Bond Index (currency unhedged) 5.18 3.63 8.08 8.35 Salomon World Government Bond Index (currency hedged) 6.87 8.68 7.22 7.83 - ---------------------------------------------------------------------------
*Performance inception date of the Brinson Global Bond Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund and the Salomon World Government Bond Index (currency unhedged and hedged) if you had invested $100,000 on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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 VS. SALOMON WORLD GOVERNMENT BOND INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [CHART APPEARS HERE] Brinson Global Salomon World Gov't Bond Salomon World Gov't Bond Bond Fund Index (currency unhedged) Index (currency hedged) -------------- ------------------------- ------------------------ 7/31/93 $100,000 $100,000 $100,000 9/30/93 $102,201 $104,236 $102,650 12/31/93 $103,859 $104,193 $104,963 3/31/94 $100,762 $104,198 $101,652 6/30/94 $ 99,215 $104,883 $ 99,722 9/30/94 $100,150 $106,111 $ 99,850 12/31/94 $100,240 $106,618 $101,027 3/31/95 $104,412 $118,276 $105,636 6/30/95 $110,464 $124,592 $111,126 9/30/95 $114,823 $123,284 $114,256 12/31/95 $120,612 $126,918 $119,043 3/31/96 $120,491 $124,543 $118,866 6/30/96 $123,165 $125,050 $121,059 9/30/96 $127,459 $128,473 $125,071 12/31/96 $131,830 $131,529 $129,378 7/31/93 = $100,000 Data Through 12/31/96 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. ------------------------------------------------------------ 39 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - ------------------------------- U.S. 33.0% 33.0% Japan 18.7 5.2 Australia 1.1 0.0 Austria 0.9 0.0 Belgium 2.7 2.8 Canada 3.3 8.0 Denmark 1.7 6.3 Finland 0.5 0.0 France 7.5 7.9 Germany 9.6 13.4 Italy 6.7 7.0 Netherlands 3.4 8.2 Spain 2.8 0.0 Sweden 1.7 1.9 Switzerland 0.4 0.0 U.K. 6.0 6.3 - ------------------------------- 100.0% 100.0%
INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed........................................................... 0.70% CMO.................................................................... 0.41 Consumer............................................................... 0.69 Financial.............................................................. 1.66 Industrial............................................................. 0.81 Telecommunications..................................................... 0.64 ------ 4.91 International Dollar Bonds............................................. 1.83 U.S. Government Agencies............................................... 9.85 U.S. Government Obligations............................................ 11.92 ------ Total U.S. Bonds..................................................... 28.51* ------ NON-U.S. BONDS Foreign Financial Bonds................................................. 23.90 Foreign Government Bonds................................................ 41.78 ------ Total Non-U.S. Bonds................................................. 65.68 ------ SHORT-TERM INVESTMENTS.................................................. 6.01* ------ TOTAL INVESTMENTS.................................................... 100.20 LIABILITIES, LESS CASH AND OTHER ASSETS ................................ (0.20) ------ NET ASSETS........................................................... 100.00% ====== - --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on December 31, 1996 which increased U.S. bond exposure from 28.51% to 32.47% and decreased the Fund's exposure to Short-Term Investments from 6.01% to 2.05%. CURRENCY ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - ------------------------------- U.S. 33.0% 57.4% Japan 18.7 8.7 Australia 1.1 1.1 Austria 0.9 0.0 Belgium 2.7 2.8 Canada 3.3 3.2 Denmark 1.7 1.7 Finland 0.5 0.0 France 7.5 1.5 Germany 9.6 5.6 Italy 6.7 7.0 Netherlands 3.4 0.0 Spain 2.8 2.8 Sweden 1.7 1.9 Switzerland 0.4 0.0 U.K. 6.0 6.3 - ------------------------------- 100.0% 100.0%
------------------------------------------------------------ 40 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Bonds -- 94.19% U.S. BONDS -- 28.51% U.S. CORPORATE BONDS -- 4.91% Asset Securitization Corp. 96-D3 7.210%, due 10/13/26.................................... $ 140,000 $ 142,805 Capital One Bank 6.830%, due 05/17/99 ................................... 200,000 200,923 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.................................... 125,000 124,375 Chrysler Financial Corp. MTN 6.500%, due 08/21/97.................................... 165,000 165,784 Ford Credit Auto Lease Trust 6.350%, due 10/15/98.................................... 134,247 134,592 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.................................... 65,914 65,986 Ford Motor Co. 7.250%, due 10/01/08.................................... 200,000 201,705 GMAC MTN 6.750%, due 06/10/02.................................... 200,000 200,754 Green Tree Financial 94-2 8.300%, due 05/15/19.................................... 25,000 26,442 Lockheed Martin Corp. 7.700%, due 06/15/08.................................... 125,000 130,854 News America Corp. 7.750%, due 01/20/24.................................... 275,000 262,871 The Money Store 94-A3 5.525%, due 09/15/18.................................... 86,249 84,622 Time Warner Entertainment, Inc. 8.375%, due 03/15/23.................................... 235,000 238,872 Time Warner, Inc. 9.150%, due 02/01/23.................................... 40,000 43,347 ----------- 2,023,932 ----------- INTERNATIONAL DOLLAR BONDS -- 1.83% Korea Development Bank 6.625%, due 11/21/03.................................... 90,000 89,331 Province of Quebec 7.500%, due 07/15/23.................................... 235,000 234,589 Republic of South Africa 9.625%, due 12/15/99.................................... 125,000 132,969 Royal Bank of Scotland 7.375%, due 04/01/06.................................... 300,000 298,987 ----------- 755,876 ----------- U.S. GOVERNMENT AGENCIES -- 9.85% Federal Home Loan Mortgage Corp. 6.520%, due 01/02/02.................................... 300,000 300,885 6.750%, due 05/30/06.................................... 65,000 65,479 7.000%, due 04/15/07.................................... 193,904 190,836 5.800%, due 08/15/19.................................... 90,000 84,067 6.500%, due 05/15/21.................................... 107,708 97,743 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.................................... 113,402 115,564 9.000%, due 05/01/24.................................... 324,175 346,012 9.500%, due 04/01/25.................................... 31,268 33,652 Federal National Mortgage Association 6.500%, due 03/01/03.................................... 455,000 450,168 6.220%, due 03/13/06.................................... 150,000 145,013 6.500%, due 04/25/08.................................... 110,333 105,251 9.000%, due 08/01/21.................................... 31,246 33,256
8.500%, due 07/01/22................................... $ 22,762 $ 23,919 7.500%, due 05/01/25................................... 385,767 385,647 6.500%, due 02/01/26................................... 78,160 74,569 6.500%, due 03/01/26................................... 820,000 782,331 7.000%, due 03/01/26................................... 180,000 176,119 7.500%, due 12/01/26................................... 299,101 299,119 Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only..................... 116,861 36,012 0.000%, due 07/01/26 principal only.................... 103,393 69,564 Government National Mortgage Association 6.500%, due 03/20/26................................... 68,926 65,329 Independent National Mortgage Corp. 8.350%, due 06/25/25............................................... 175,000 179,209 ----------- 4,059,744 ----------- U.S. GOVERNMENT OBLIGATIONS-- 11.92% U.S. Treasury Coupon Strips 0.000%, due 05/15/08 principal only.................... 245,000 116,598 U.S. Treasury Notes and Bonds 6.250%, due 10/31/01................................... 1,660,000 1,661,038 7.000%, due 07/15/06................................... 940,000 976,719 8.125%, due 05/15/21................................... 1,860,000 2,157,600 ----------- 4,911,955 ----------- Total U.S. Bonds........................................ 11,751,507 ----------- NON-U.S. BONDS -- 65.68% BELGIUM -- 2.73% Kingdom of Belgium 8.750%, due 06/25/02............................... BEF 14,000,000 520,386 9.000%, due 03/28/03................................... 4,000,000 151,251 7.500%, due 07/29/08................................... 13,000,000 453,298 ----------- 1,124,935 ----------- CANADA -- 7.96% British Columbia 7.750%, due 06/16/03............................... CAD 1,050,000 835,993 7.250%, due 09/21/05................................... 1,290,000 981,193 Government of Canada 4.250%, due 12/01/21(b)................................ 1,820,000 1,465,566 ----------- 3,282,752 ----------- DENMARK -- 6.21% City of Copenhagen 6.250%, due 03/15/01............................... DKR 2,400,000 424,147 Great Belt 7.000%, due 09/02/03................................... 10,650,000 1,895,692 Kingdom of Denmark 7.000%, due 11/10/24................................... 1,500,000 241,062 ----------- 2,560,901 -----------
- -------------------------------------------------------------------------------- 41 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------- ----------- FRANCE -- 7.73% Eurofima 8.625%, due 09/01/99............................ FRF 5,100,000 $ 1,096,897 Government of France (OAT) 8.500%, due 12/26/12................................ 3,100,000 726,714 8.500%, due 04/25/23................................ 2,400,000 563,218 KFW International Finance 7.750%, due 02/17/98................................ 2,600,000 523,568 Kingdom of Finland 9.000%, due 08/13/03................................ 1,200,000 278,147 ----------- 3,188,544 ----------- GERMANY -- 13.23% Bundesrepublik Deutscheland 6.250%, due 01/04/24............................ DEM 800,000 492,687 European Economic Community 6.500%, due 03/10/00................................ 2,650,000 1,833,901 Kingdom of Norway 6.125%, due 05/05/98................................ 1,040,000 698,125 LKB Baden-Wurt Finance 6.500%, due 09/15/08................................ 1,300,000 866,751 Republic of Ireland 7.250%, due 03/18/03................................ 2,200,000 1,562,455 ----------- 5,453,919 ----------- ITALY -- 6.64% Bayerische Landesbank 10.750%, due 03/01/03........................... ITL 1,000,000,000 771,950 European Investment Bank 12.750%, due 02/15/00............................... 150,000,000 115,546 Landesbank Rheinland 8.250%, due 06/02/98................................ 750,000,000 502,532 LKB Baden-Wurt Finance 10.750%, due 04/14/03............................... 950,000,000 734,915 Republic of Italy (BTP) 9.500%, due 02/01/01................................ 850,000,000 613,867 ----------- 2,738,810 ----------- JAPAN -- 5.52% Asian Development Bank 5.000%, 02/05/03................................ JPY 40,000,000 400,620 Government of Japan No.133 7.300%, due 09/20/00................................ 25,000,000 262,019 Government of Japan No.144 6.000%, due 12/20/01................................ 50,000,000 516,628 Republic of Austria 5.000%, due 01/22/01................................ 50,000,000 490,006 World Bank 5.250%, due 03/20/02...................... 60,000,000 604,484 ----------- 2,273,757 -----------
NETHERLANDS -- 7.88% Government of Nederlands 7.500%, due 11/15/99................................ NLG 1,355,000 $ 858,968 International Nederland Verzekeringen 6.250%, due 12/28/05................................................ 1,800,000 1,062,726 Rabobank 6.750%, due 06/25/03.................................... 1,400,000 873,149 Republic of Austria 6.250%, due 02/28/24.................................... 825,000 453,165 ----------- 3,248,008 ----------- SWEDEN - 1.79% Kingdom of Sweden 6.000%, due 02/09/05.................................SWK 5,200,000 738,022 ----------- UNITED KINGDOM -- 5.99% Abbey National 8.750%, due 05/24/04.................................GBP 350,000 620,721 British Gas PLC 8.125%, due 03/31/03.................................... 545,000 940,901 UK Treasury 7.750%, due 09/08/06.................................... 45,000 78,291 9.000%, due 10/13/08.................................... 260,000 492,589 8.000%, due 09/27/13.................................... 190,000 335,439 ----------- 2,467,941 ----------- Total Non-U.S. Bonds..................................... 27,077,589 ----------- Total Bonds (Cost $37,402,378)........................... 38,829,096 ----------- Short-Term Investments-- 6.01% GOVERNMENT OBLIGATIONS -- 0.06% U.S. Treasury Bills 5.063%, due 05/01/97................. 25,000 24,581 ----------- COMMERCIAL PAPER -- 5.95% Cincinnati Bell, Inc. 7.250%, 01/02/97........................................ 207,000 206,958 CNA Financial Corp. 6.250%, due 01/23/97.................................... 500,000 498,090 Crown Cork & Seal Co., 5.520%, due 01/10/97.................................... 500,000 499,310 PanEnergy Corp. 6.05%, due 01/17/97..................................... 500,000 498,656 Vastar Resources, Inc. 6.020%, due 01/02/97.................................... 500,000 499,916 Whirlpool Financial Corp. 6.000%, due 01/03/97.................................... 250,000 249,917 ----------- 2,452,847 ----------- Total Short-Term Investments (Cost $2,477,425)....................................... 2,477,428 ----------- Total Investments (Cost $39,879,803) -- 100.20% (a)....................... 41,306,524 ----------- Liabilities, less cash and other assets -- (0.20%)....... (81,085) ----------- Net Assets -- 100%....................................... $41,225,439 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 42 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $39,879,803; and net unrealized appreciation consisted of: Gross unrealized appreciation................................. $1,660,144 Gross unrealized depreciation................................. (233,423) ---------- Net unrealized appreciation............................... $1,426,721 ==========
(b)Linked to Canada's retail price index. Reset semi-annually. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- --------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar.......... 05/30/97 500,000 $ 396,624 $(10,376) Japanese Yen............... 05/05/97 165,000,000 1,451,551 (35,306) Spanish Peseta............. 05/30/97 138,000,000 1,058,498 216 FORWARD FOREIGN CURRENCY SALE CONTRACTS Canadian Dollar............ 05/30/97 2,900,000 2,135,475 32,084 Danish Kroner.............. 05/30/97 11,300,000 1,930,758 536 Dutch Guilder.............. 05/30/97 5,800,000 3,386,583 7,215 French Franc............... 05/30/97 14,000,000 2,717,348 (14,645) German Mark ............... 05/30/97 5,200,000 3,406,760 842 -------- Total.................. $(19,734) ========
FUTURES CONTRACTS (NOTE 5) The Global Bond Fund had the following open futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE LOSS ---------- -------- -------- ---------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 6 con- tracts................................ March 1997 $645,375 $639,563 $ (5,812) 10 year U.S. Treasury Notes, 5 con- tracts................................ March 1997 554,063 545,625 (8,438) 30 year U.S. Treasury Bonds, 4 con- tracts................................ March 1997 460,000 450,500 (9,500) -------- Total.............................. $(23,750) ========
The market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $24,581. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 43 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $39,879,803) (Note 1)................ $41,306,524 Cash............................................................. 1,186,716 Foreign currency, at value (Cost $79,558)........................ 77,444 Receivables: Investment securities sold...................................... 1,106,341 Interest........................................................ 1,142,553 Fund shares sold................................................ 6,533 Due from advisor................................................ 20,580 Other assets..................................................... 5,655 ----------- TOTAL ASSETS.................................................. 44,852,346 ----------- LIABILITIES: Payables: Investment securities purchased................................. 2,821,281 Fund shares redeemed............................................ 645,334 Variation margin (Note 5)....................................... 12,312 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 19,734 Accrued expenses................................................ 128,246 ----------- TOTAL LIABILITIES............................................. 3,626,907 ----------- NET ASSETS........................................................ $41,225,439 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $41,356,690 Accumulated distributions in excess of net investment income..... (1,448,556) Accumulated distributions in excess of net realized gain......... (63,232) Net unrealized appreciation...................................... 1,380,537 ----------- NET ASSETS.................................................... $41,225,439 =========== OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $37,704,006 and 3,937,187 shares issued and outstanding) (Note 7)....................................... $ 9.58 =========== SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $3,521,433 and 368,181 shares issued and outstanding) (Note 7)........................................... $ 9.56 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 44 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Interest.......................................................... $1,352,589 ---------- TOTAL INCOME................................................... 1,352,589 ---------- EXPENSES: Advisory (Note 2)................................................. 159,408 Accounting........................................................ 62,618 Professional...................................................... 31,464 Transfer agent.................................................... 24,856 Custodian......................................................... 21,192 Registration...................................................... 20,504 Administration.................................................... 18,520 Distribution (Note 6)............................................. 9,380 Other............................................................. 21,839 ---------- TOTAL EXPENSES................................................. 369,781 Expenses deferred and reimbursed by Advisor (Note 2)........... (168,938) ---------- NET EXPENSES................................................... 200,843 ---------- NET INVESTMENT INCOME.......................................... 1,151,746 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 723,433 Futures contracts................................................ 77,372 Foreign currency transactions.................................... (126,037) ---------- Net realized gain............................................... 674,768 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 935,964 Futures contracts................................................ (21,891) Forward contracts................................................ 123,239 Translation of other assets and liabilities denominated in for- eign currency................................................... 12,863 ---------- Change in net unrealized appreciation or depreciation........... 1,050,175 ---------- Net realized and unrealized gain.................................. 1,724,943 ---------- Net increase in net assets resulting from operations.............. $2,876,689 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1996 JUNE (UNAUDITED) 30, 1996 ----------------- ----------- OPERATIONS: Net investment income.......................... $ 1,151,746 $ 2,351,810 Net realized gain.............................. 674,768 4,022,906 Change in net unrealized appreciation or depre- ciation ...................................... 1,050,175 (1,992,544) ----------- ----------- Net increase in net assets resulting from oper- ations........................................ 2,876,689 4,382,172 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income....... (2,204,689) (3,447,154) Distributions in excess of net investment in- come.......................................... (1,615,023) (1,534,232) Distributions from net realized gain........... (769,789) (355,057) ----------- ----------- Total distributions to shareholders*........... (4,589,501) (5,336,443) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................... 4,488,660 14,584,928 Shares issued on reinvestment of distributions. 3,667,961 3,954,345 Shares redeemed................................ (9,937,375) (24,728,515) ----------- ----------- Net (decrease) in net assets resulting from capital share transactions (Note 7)........... (1,780,754) (6,189,242) ----------- ----------- TOTAL (DECREASE) IN NET ASSETS.............. (3,493,566) (7,143,513) ----------- ----------- NET ASSETS: Beginning of period............................ 44,719,005 51,862,518 ----------- ----------- End of period (including accumulated undistrib- uted net investment income of ($1,448,556) and $1,052,943, respectively)..................... $41,225,439 $44,719,005 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net invest- ment income Brinson Fund Class............................ (3,503,032) (4,734,956) SwissKey Fund Class........................... (316,680) (246,430) Distributions from net realized gain Brinson Fund Class............................ (704,236) (338,786) SwissKey Fund Class........................... (65,553) (16,271) ----------- ----------- Total distributions to shareholders............ (4,589,501) (5,336,443) ----------- -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 46 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR YEAR JULY 30, 1993* DECEMBER 31, 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 10.04 $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- ------- Income (loss) from in- vestment operations: Net investment income ..................... 0.93 0.84 0.50 0.45 Net realized and unrealized gain (loss)............... (0.24) 0.31 0.58 (0.52) ------- ------- ------- ------- Total income (loss) from investment op- erations........... 0.69 1.15 1.08 (0.07) ------- ------- ------- ------- Less distributions: Distributions from and in excess of net in- vestment income...... (0.96) (1.40) (0.24) (0.28) Distributions from and in excess of net re- alized gain.......... (0.19) (0.10) -- (0.10) ------- ------- ------- ------- Total distributions. (1.15) (1.50) (0.24) (0.38) ------- ------- ------- ------- Net asset value, end of period................. $ 9.58 $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= ======= Total return (non- annualized)............ 7.03% 11.50% 11.34% (0.79%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $37,704 $41,066 $51,863 $36,849 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.69%** 1.65% 1.43% 1.78%** After expense reim- bursement............ 0.90%** 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 4.66%** 4.98% 5.53% 4.03%** After expense reim- bursement............ 5.45%** 5.73% 6.06% 4.91%** Portfolio turnover rate.................. 107% 184% 199% 189%
* Commencement of investment operations ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 47 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $10.02 $10.56 ------ ------ Income from investment operations: Net investment income....................... 0.91 0.78 Net realized and unrealized gain (loss)..... (0.24) 0.15 ------ ------ Total income from investment operations... 0.67 0.93 ------ ------ Less distributions: Distributions from and in excess of net in- vestment income............................ (0.94) (1.37) Distributions from net realized gain........ (0.19) (0.10) ------ ------ Total distributions....................... (1.13) (1.47) ------ ------ Net asset value, end of period................ $ 9.56 $10.02 ====== ====== Total return (non-annualized)................. 6.76% 9.17% Ratios/Supplemental data Net assets, end of period (in 000s).......... $3,521 $3,653 Ratio of expenses to average net assets: Before expense reimbursement................ 2.18%** 2.14%** After expense reimbursement................. 1.39%** 1.39%** Ratio of net investment income to average net assets: Before expense reimbursement................ 4.17%** 4.49%** After expense reimbursement................. 4.96%** 5.24%** Portfolio turnover rate...................... 107% 184%
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 48 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 seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Fund Class and SwissKey Fund 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 Trust entered into an Agreement and Plan of Reorganization dated June 16, 1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995, pursuant to the Plan of Reorganization, the Trust acquired all of the net assets of the SBC World Growth Fund of the SwissKey Funds, which totalled $25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund. The SwissKey Fund shares were then distributed to shareholders of the SBC World Growth Fund according to their respective interests, and the SBC World Growth Fund was dissolved. The total net assets of the Global Equity Fund were $47,088,147 immediately after the acquisition. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a "Fund," collectively 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. 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. Investments in affiliated investment companies are valued each day based on the closing net asset value of the fund. U.S. equity securities traded over the counter are priced at the most recent bid price. Fixed income/debt securities are valued by using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. 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 the mean between the bid and the asked forward points added to the current exchange rate. 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, income receipts and expense accruals are translated at the prevailing exchange rate on 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 in the statement 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 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 have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1996. Therefore, no federal income tax provision was required. - -------------------------------------------------------------------------------- 49 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 generally accepted accounting principles. 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 the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Fund Class shares will not incur any of the distribution expenses. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles 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, the Funds pay the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates, for the six months ended December 31, 1996, were as follows:
FEES ADVISORY BRINSON CLASS SWISSKEY CLASS ADVISORY DEFERRED AND/OR FEE EXPENSE CAP EXPENSE CAP FEES REIMBURSED -------- ------------- -------------- ---------- --------------- Global Fund............. 0.80% 1.10% 1.75% $2,019,630 $ -- Global Equity Fund...... 0.80 1.00 1.76 276,132 216,697 Global Bond Fund........ 0.75 0.90 1.39 159,408 168,938
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $5,888, $2,208 and $2,208 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. At December 31, 1996, the Global Fund was invested in shares of certain affiliated investment companies also sponsored by Brinson Partners, Inc. These investments are listed in the schedule of investments and represent 9.43% of the Fund's total net assets. At December 31, 1996, net unrealized appreciation on these investments was $5,160,007. 3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $408,770,372 $397,827,575 Global Equity Fund.................................... 21,925,975 10,301,042 Global Bond Fund...................................... 41,276,806 44,423,362
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 - -------------------------------------------------------------------------------- 50 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 the 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 statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the six months ended December 31, 1996, 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. 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 statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Fund Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey Fund Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 7.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 YEAR ENDED (UNAUDITED) JUNE 30, 1996 --------------------- ---------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ------------ Sales: Brinson Fund Class................ 4,583,763 $57,951,937 7,972,013 $ 95,544,500 SwissKey Fund Class............... 211,635 2,646,592 1,155,619 13,939,062 --------- ----------- --------- ------------ Total Sales.................... 4,795,398 $60,598,529 9,127,632 $109,483,562 ========= =========== ========= ============ Dividend Reinvestment: Brinson Fund Class................ 4,022,259 $48,025,771 2,632,284 $ 30,918,724 SwissKey Fund Class............... 130,547 1,554,814 20,488 243,591 --------- ----------- --------- ------------ Total Dividend Reinvestment.... 4,152,806 $49,580,585 2,652,772 $ 31,162,315 ========= =========== ========= ============ Redemptions: Brinson Fund Class................ 5,171,939 $64,203,767 5,330,521 $ 63,966,318 SwissKey Fund Class............... 54,093 683,312 24,583 296,145 --------- ----------- --------- ------------ Total Redemptions.............. 5,226,032 $64,887,079 5,355,104 $ 64,262,463 ========= =========== ========= ============
- -------------------------------------------------------------------------------- 51 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL EQUITY FUND ------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 YEAR ENDED (UNAUDITED) JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Fund Class............... 837,664 $ 9,913,092 285,419 $ 3,205,567 SwissKey Fund Class.............. 808,570 9,474,311 746,285 8,357,646 --------- ----------- --------- ----------- Total Sales................... 1,646,234 $19,387,403 1,031,704 $11,563,213 ========= =========== ========= =========== Shares issued in acquisition of SBC World Growth Fund: Brinson Fund Class............... -- -- -- -- SwissKey Fund Class.............. -- $ -- 2,474,177 $25,670,575 --------- ----------- --------- ----------- Total......................... -- $ -- 2,474,177 $25,670,575 ========= =========== ========= =========== Dividend Reinvestment: Brinson Fund Class............... 288,818 $ 3,237,655 160,063 $ 1,694,631 SwissKey Fund Class.............. 272,630 3,053,458 155,720 1,641,689 --------- ----------- --------- ----------- Total Dividend Reinvestment... 561,448 $ 6,291,113 315,783 $ 3,336,320 ========= =========== ========= =========== Redemptions: Brinson Fund Class............... 77,459 $ 944,496 186,600 $ 2,055,092 SwissKey Fund Class.............. 212,095 2,514,803 523,404 5,704,953 --------- ----------- --------- ----------- Total Redemptions............. 289,554 $ 3,459,299 710,004 $ 7,760,045 ========= =========== ========= =========== GLOBAL BOND FUND ------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 YEAR ENDED (UNAUDITED) JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Fund Class............... 402,651 $ 4,150,385 1,094,889 $10,985,420 SwissKey Fund Class.............. 32,865 338,275 345,211 3,599,508 --------- ----------- --------- ----------- Total Sales................... 435,516 $ 4,488,660 1,440,100 $14,584,928 ========= =========== ========= =========== Dividend Reinvestment: Brinson Fund Class............... 348,609 $ 3,318,757 374,786 $ 3,722,031 SwissKey Fund Class.............. 36,719 349,204 23,414 232,314 --------- ----------- --------- ----------- Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345 ========= =========== ========= =========== Redemptions: Brinson Fund Class............... 905,614 $ 9,248,017 2,369,683 $24,686,522 SwissKey Fund Class.............. 65,831 689,358 4,197 41,993 --------- ----------- --------- ----------- Total Redemptions............. 971,445 $ 9,937,375 2,373,880 $24,728,515 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- THE BRINSON FUNDS --------------------------------------------------------------------- Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris Singapore . Sydney . Tokyo . Zurich LOGO 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 ---------------------------- THE BRINSON FUNDS BRINSON U.S. BALANCED FUND BRINSON U.S. EQUITY FUND BRINSON U.S. BOND FUND SEMI-ANNUAL REPORT DECEMBER 31, 1996 LOGO GLOBAL INSTITUTIONAL ASSET MANAGEMENT ---------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CFA, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their institutional investment management organizations into a single investment management business operating as Brinson Partners, Inc. in North America and SBC Brinson in its other world-wide locations. We are a global investment management organization with over $72 billion in institutional assets under discretionary active management. We are also the investment advisor for SBC Private Banking mutual fund assets which total $47 billion. The firm manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other institutional investors located throughout the world. Our organization employs over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, Inc., an established U.S.-based leader in the investment business located in Chicago, acts as the headquarters of our world-wide investment management process. The firm began managing international securities and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients and has offered fully integrated global portfolios since then. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 U.S. Economic and Market Highlights........................................... 5 U.S. Balanced Fund............................................................ 6 Schedule of Investments..................................................... 9 Financial Statements........................................................12 Financial Highlights........................................................15 U.S. Equity Fund..............................................................17 Schedule of Investments.....................................................20 Financial Statements........................................................22 Financial Highlights........................................................25 U.S. Bond Fund................................................................27 Schedule of Investments.....................................................30 Financial Statements........................................................31 Financial Highlights........................................................34 The Brinson Funds--Notes to Financial Statements..............................36 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO February 19, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the December 31, 1996 Semi-Annual Report for the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. This Report presents our current U.S. economic and market outlook, as well as the Funds' recent investment strategies and performance. To summarize this information: U.S. Balanced Fund For the period from December 31, 1994 (performance inception date) to December 31, 1996, the Fund provided an annualized total return of 18.16%. For the second half of 1996, the Fund returned 8.02%. The Fund's market allocation has been characterized by an underweight in the U.S. equity market and an overweight to the U.S. bond market where return and risk characteristics are presently more attractive. U.S. Equity Fund For the period from February 28, 1994 (performance inception date) to December 31, 1996, the Fund provided an annualized total return of 21.47%. The Fund returned 12.96% in the second half of 1996. Fund strategy presently maintains a modest overweight in stocks with high book- to-price, earnings variability and financial leverage characteristics. In addition, the Fund is underweighted the foreign earnings exposure embedded in U.S. corporate earnings, particularly relative to the S&P 500. Current industry positions include relative overweights in capital goods, banks, transportation, insurance, healthcare and consumer non-durables issues. The Fund remains underweighted in energy, technology, utility, chemicals and retail/apparel stocks. U.S. Bond Fund For the period from August 31, 1995 (performance inception date) to December 31, 1996, the Fund provided an annualized total return of 6.84%. For the second half of 1996, the Fund returned 5.42%. Fund strategy currently maintains a duration target of 1.3 times that of the benchmark. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Sincerely, /s/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. ------------------------------------------------------------ 4 U.S. ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO Real GDP grew 2.5% in 1996, consisting of quarterly growth rates alternating between strong and modest. This was consistent with our view that the economy will continue to produce moderate growth, although with typical fluctuations from period to period. Overall, growth is at a level approximating the economy's long-run potential. While the bond market has been adjusting yields, often by substantial amounts, on the slightest bit of news, inflation has remained consistently moderate. Even though oil prices rose to $25 per barrel last year, there was little impact discernible on intermediate or final goods prices. While consumer price inflation has been running between 2.25% and 3.25% since 1991, other measures of inflation, such as the personal consumption deflator and the core CPI, have shown even less price pressure. The Federal Reserve continues to act as though operating with a de facto inflation target, rather than attempting to satisfy non-inflation aims. With November's election leaving the balance of power generally unchanged, fiscal policy is reasonably likely to remain geared toward deficit control. While any future economic weakness would offset the relatively strong tax revenues at present, lawmakers realize that many voters are increasingly reluctant to pay for programs with benefits which do not clearly exceed the costs. U.S. ENVIRONMENT MAJOR MARKETS One Year Ended December 31, 1996 [BAR GRAPH APPEARS HERE] Total Return U.S. Cash Equivalents 5.16 U.S. Bonds 3.63 U.S. Equities 21.21 SALOMON U.S. TREASURY BENCHMARK RETURNS One Year Ended December 31, 1996 [BAR GRAPH APPEARS HERE] Total Return Maturity (Years) ---------------- 1 5.68 2 4.80 3 4.21 5 2.43 10 0.07 30 -4.44 TOP TEN INDUSTRY RETURNS RELATIVE TO S&P 500 One Year Ended December 31, 1996 [BAR GRAPH APPEARS HERE] Oil Service 42.7 Cosmetics 25.93 Misc. Finance 16.11 Miscellaneous 14.82 Aerospace 13.96 Business Machines 11.35 Domestic Petroleum Reserves 11.15 Apparel, Textiles 10.77 Thrift Institutions 9.57 Banks 9.28 Source: BARRA BOTTOM TEN INDUSTRY RETURNS RELATIVE TO S&P 500 One Year Ended December 31, 1996 Media -13.57 Water Transport -13.76 Pollution Control -16.31 Forest Products -16.63 Precious Metals -17.46 Electric Utilities -19.17 Telephone, Telegraph -19.9 Iron & Steel -24.98 Trucking, Freight -34.51 Coal & Uranium -40.81 Source: BARRA ------------------------------------------------------------ 5 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO The U.S. Balanced Fund is an actively managed portfolio that applies our value- based asset allocation process to U.S. stocks, bonds and cash. This Fund's investment strategy is developed in the context of our global asset allocation process and is based on analysis of long-term economic and market conditions. The Brinson U.S. Balanced Fund has provided an annualized return of 18.16% since its inception on December 31, 1994. This compares with the corresponding 21.96% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the year ended December 31, 1996, the Fund produced a total return of 11.32% compared to the benchmark return of 14.90%. In the second half of 1996, the Fund returned 8.02% while the benchmark returned 8.25%. Security selection within all the asset classes contributed positively to relative performance, while the equity underweight and bond overweight adversely affected relative performance. Although inflation was relatively stable throughout 1996, the bond market experienced a year of rising yields. Coming out of 1995, yields were relatively low, but they climbed rather strongly through June. The moderately strong economy in the first half of the year, coupled with higher oil prices, caused concern that both real rates and inflation may rise. These fears diminished somewhat in the second half, allowing rates to decline. However, yields failed to drop to levels seen at the start of the year, resulting in aggregate bond market performance that was positive but inferior to cash returns. The equity market turned in another banner year, with broad market indices showing returns of more than 20%. However, there were large divergences in relative performance. Small stock performance was outpaced by the returns to large capitalization stocks by approximately 500 basis points. After a few weeks of strength in January and early February, the equity market was flat until mid-September. However, as interest rates fell from that point to the start of December, equities again produced extremely good returns. The S&P 500 Index rose roughly 100 points in these two and a half months, from about 660 to 760. The equity market appears increasingly willing to extrapolate recent strong earnings growth and low volatility indefinitely into the future. At year-end, equity price gains had driven the market to an overpricing of around 25%. Looking forward, return expectations in stocks appear insufficient compensation for the risks. Therefore, we have maintained a reduced exposure in the allocation to equities, with an offsetting increase in the allocation to bonds. ------------------------------------------------------------ 6 U.S. BALANCED FUND - -------------------------------------------------------------------------------- TOTAL RETURN
6 months 1 year Annualized ended ended 12/31/94* 12/31/96 12/31/96 to 12/31/96 - ---------------------------------------------------------------- BRINSON U.S. BALANCED FUND 8.02% 11.32% 18.16% - ---------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 8.25 14.90 21.96 - ----------------------------------------------------------------
*Performance inception date of the Brinson U.S. Balanced Fund. **An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth income taxes payable by in the value of an shareholders on income investment in the Brinson dividends and capital gain U.S. Balanced Fund and the distributions. Past U.S. Balanced Mutual Fund performance is no guarantee Index if you had invested of future results. Share $100,000 on December 31, price and return will vary 1994, and had reinvested all with market conditions; your income dividends and investors may realize a gain capital gain distributions or loss upon redemption. through December 31, 1996. No adjustment has been made for any BRINSON U.S. BALANCED FUND VS. U.S. BALANCED MUTUAL FUND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] U.S. Balanced Brinson Mutual Fund U.S. Balanced Index ------------- ------------- 12/31/94 $100,000 $100,000 3/31/95 106,400 107,439 6/30/95 113,909 116,004 9/30/95 119,285 123,636 12/31/95 125,481 129,452 3/31/96 127,662 133,344 6/30/96 129,312 137,403 9/30/96 132,405 140,915 12/31/96 139,686 148,740 12/31/94 = $100,000 Data through 12/31/96 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. LOGO ------------------------------------------------------------ 7 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.29% Housing/Paper.......................................................... 1.77 Metals................................................................. 0.23 ----- 2.29 Capital Investment Capital Goods.......................................................... 3.91 Technology............................................................. 2.53 ----- 6.44 Consumer Autos/Durables......................................................... 0.11 Discretionary.......................................................... 2.84 Health: Drugs.......................................................... 3.51 Health: Non-Drugs...................................................... 1.74 Non-Durables........................................................... 4.90 Retail/Apparel......................................................... 1.79 ----- 14.89 Energy.................................................................. 2.16 Financial Banks.................................................................. 4.39 Non-Banks.............................................................. 4.01 ----- 8.40 Services................................................................ 2.78% Transportation.......................................................... 2.70 Utilities............................................................... 1.34 Miscellaneous........................................................... 1.13 ------ Total U.S. Equities.................................................. 42.13* ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 3.16 CMO.................................................................... 0.54 Consumer............................................................... 1.51 Financial.............................................................. 1.65 Industrial............................................................. 0.86 Telecommunications..................................................... 1.62 ------ 9.34 International Dollar Bonds.............................................. 6.04 U.S. Government Agencies................................................ 16.96 U.S. Government Obligations............................................. 21.03 ------ Total U.S. Bonds..................................................... 53.37* ------ SHORT-TERM INVESTMENTS.................................................. 10.20* ------ TOTAL INVESTMENTS.................................................... 105.70 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (5.70) ------ NET ASSETS.............................................................. 100.00% ======
*The Fund held a long position in U.S. Treasury futures on December 31, 1996 which increased U.S. bond exposure from 53.37% to 61.65%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 42.13% to 33.99%. These two adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 10.20% to 10.06%. ASSET ALLOCATION As of December 31, 1996 (Unaudited)
CURRENT BENCHMARK STRATEGY - ------------------------------------ U.S. Equity 65% 35% U.S. Bonds 35 65 Cash Equivalents 0 0 - ------------------------------------ 100% 100%
TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
PERCENT OF NET ASSETS - --------------------------------------------- 1. Chase Manhattan Corp. 2.09% 2. Xerox Corp. 1.63 3. Lockheed Martin Corp. 1.62 4. Burlington Northern Santa Fe 1.61 5. Corning, Inc. 1.52 6. Citicorp 1.46 7. Philip Morris Companies, Inc. 1.45 8. Aon Corp. 1.36 9. Goodyear Tire & Rubber Co. 1.24 10. Enron Corp. 1.12 - ---------------------------------------------
------------------------------------------------------------ 8 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 42.13% Aetna Life & Casualty Co................................... 24,900 $ 1,992,000 Allergan, Inc.............................................. 40,400 1,439,250 Allstate Corp.............................................. 22,300 1,290,613 Alza Corp. (b)............................................. 39,400 1,019,475 Aon Corp................................................... 52,900 3,286,412 Automatic Data Processing, Inc............................. 39,700 1,702,138 Avon Products, Inc......................................... 26,700 1,525,237 Bard (C.R.), Inc........................................... 24,400 683,200 Beckman Instruments, Inc................................... 15,800 606,325 Birmingham Steel Corp...................................... 15,900 302,100 Boston Technology, Inc. (b)................................ 15,800 454,250 Brinker International, Inc. (b)............................ 14,200 227,200 Burlington Northern Santa Fe............................... 45,100 3,895,513 Centerior Energy Co........................................ 33,200 356,900 Chase Manhattan Corp....................................... 56,900 5,078,325 Choice Hotels International, Inc. (b)...................... 25,800 454,725 CIGNA Corp................................................. 19,600 2,677,850 Circuit City Stores, Inc................................... 6,900 207,862 Citicorp................................................... 34,400 3,543,200 CMS Energy Corp............................................ 43,100 1,449,238 Coca-Cola Enterprises, Inc................................. 16,100 780,850 Comerica, Inc.............................................. 10,800 565,650 Comverse Technology, Inc. (b).............................. 7,300 276,031 Corning, Inc............................................... 79,500 3,676,875 CPC International, Inc..................................... 9,700 751,750 CVS Corp................................................... 31,300 1,295,037 Dial Corp.................................................. 38,700 570,825 EMC Corp./Mass. (b)........................................ 53,800 1,782,125 Enron Corp................................................. 62,800 2,708,250 Federal Express Corp. (b).................................. 58,800 2,616,600 Federated Department Stores (b)............................ 23,000 784,875 FileNet Corp. (b).......................................... 6,100 195,200 First American Corp.-Tenn.................................. 2,600 149,825 First Data Corp............................................ 33,258 1,213,917 First of America Bank Corp................................. 5,100 306,638 Foodstar, Inc. (b)......................................... 12,379 307,928 Ford Motor Co.............................................. 23,000 733,125 Forest Laboratories, Inc. (b).............................. 26,800 877,700 Gannett Co., Inc........................................... 26,300 1,969,212 General Instrument Corp. (b)............................... 78,300 1,693,238 Genzyme Corp. (b).......................................... 15,900 345,825 Geon Co.................................................... 5,800 113,825 Goodyear Tire & Rubber Co.................................. 58,400 3,000,300 Harnischfeger Industries, Inc.............................. 17,200 827,750 Health Care and Retirement Corp. (b)....................... 29,150 834,419 Interpublic Group of Companies, Inc........................ 19,600 931,000 James River Corp. of Virginia.............................. 22,700 751,937 Kimberly-Clark Corp........................................ 18,900 1,800,225 Kroger Co. (b)............................................. 16,600 771,900 Lockheed Martin Corp....................................... 42,971 3,931,847 Lyondell Petrochemical Co.................................. 43,100 948,200 Manor Care, Inc............................................ 25,800 696,600 Martin Marietta Materials, Inc............................. 11,936 277,512 Masco Corp................................................. 25,400 914,400 Mattel, Inc................................................ 93,950 2,607,112 Nabisco Holdings Corp. Class A............................. 28,600 1,111,825 National Semiconductor Corp. (b)........................... 15,900 387,563 Nextel Communications, Inc. Class A (b).................... 39,700 518,581 Old Republic International Corp............................ 18,750 501,562
SHARES VALUE ---------- ----------- Peco Energy Co.......................................... 24,500 $ 618,625 Pentair, Inc............................................ 18,500 596,625 Pharmacia & Upjohn, Inc................................. 50,300 1,993,138 Philip Morris Companies, Inc............................ 31,200 3,513,900 Rhone-Poulenc Rorer, Inc................................ 13,400 1,046,875 RJR Nabisco Convertible Preferred "C"................... 128,300 866,025 Schering Plough Corp.................................... 34,600 2,240,350 Seagate Technology, Inc. (b)............................ 10,600 418,700 Timken Co............................................... 16,600 761,525 Tyson Foods, Inc. Class A............................... 47,300 1,620,025 Ultramar Diamond Shamrock Corp.......................... 44,790 1,416,484 US Bancorp.............................................. 24,000 1,078,500 USF&G Corp.............................................. 18,300 382,012 Vencor, Inc. (b)........................................ 20,700 654,637 Viad Corp............................................... 38,700 638,550 Westvaco Corp........................................... 9,450 271,688 Whitman Corp............................................ 1,700 38,887 WMX Technologies, Inc................................... 64,000 2,088,000 Xerox Corp.............................................. 74,900 3,941,613 York International Corp................................. 16,200 905,175 360 Communications Co. (b).............................. 13,700 316,812 ----------- Total U.S. Equities (Cost $80,838,984).................. 102,127,993 ----------- FACE AMOUNT VALUE ---------- ----------- Bonds -- 53.37% U.S. CORPORATE BONDS -- 9.34% AirTouch Communications 7.500%, due 07/15/06............ $2,000,000 $ 2,059,328 American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03................................... 1,280,000 1,300,250 BellSouth Corp. 0.000%, due 12/15/15.................... 3,175,000 704,844 Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,009,232 Chase Manhattan Auto Owner Trust 96C-4A 6.150%, due 03/15/02............................ 1,360,000 1,353,200 Chase Manhattan Credit Card Master Trust 96-4A 6.730%, due 02/15/03........................................... 2,000,000 2,027,700 Chrysler Financial Corp. MTN 6.500%, due 08/21/97....... 1,000,000 1,004,753 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 09/25/98............................................... 2,000,000 2,005,380 Ford Motor Credit Corp. MTN 5.370%, due 09/08/98........ 945,000 933,695 GE Capital Mtg. Services, Inc. 94-9A 6.500%, due 02/25/24............................................... 1,560,557 1,309,432 GMAC MTN 6.750%, due 06/10/02........................... 1,000,000 1,003,768 Lockheed Martin Corp. 7.700%, due 06/15/08.............. 2,000,000 2,093,670 News America Corp. 7.750%, due 01/20/24................. 1,000,000 955,896 Telecommunications, Inc. 9.800%, due 02/01/12........... 2,100,000 2,274,647 Time Warner Entertainment, Inc. 8.375%, due 03/15/23........................................... 1,125,000 1,143,537 Time Warner, Inc. 9.150%, due 02/01/23.................. 425,000 460,563 ----------- 22,639,895 -----------
- -------------------------------------------------------------------------------- 9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- INTERNATIONAL DOLLAR BONDS--6.04% BCH Cayman Islands Ltd. 7.700%, due 07/15/06........... $ 2,100,000 $ 2,161,226 International Bank for Reconstruction & Development 6.375%, due 07/21/05.................................. 1,500,000 1,479,513 LKB 8.125%, due 01/27/00............................... 1,780,000 1,870,527 Petroliam Nasional 7.125%, due 08/15/05................ 1,500,000 1,512,779 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.......................................... 1,735,000 1,763,988 Republic of Italy 6.875%, due 09/27/23................. 1,500,000 1,426,980 S.E. Banken 144-A 6.625%, due 03/29/49................. 2,000,000 1,970,000 Southern Investments UK 6.800%, due 12/01/06........... 930,000 910,310 Swedbank FRN 7.500%, due 11/29/49...................... 1,500,000 1,535,625 ----------- 14,630,948 ----------- U.S. GOVERNMENT AGENCIES--16.96% Federal Home Loan Mortgage Corp. 6.520%, due 01/02/02.. 3,500,000 3,510,329 6.500%, due 05/15/21.................................. 1,192,691 1,082,343 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.................................. 872,323 888,952 9.000%, due 03/01/24.................................. 423,904 452,458 9.500%, due 04/01/25.................................. 1,375,782 1,480,685 Federal National Mortgage Association 6.500%, due 03/01/03.................................. 2,560,000 2,532,813 8.000%, due 12/18/11.................................. 1,000,000 1,033,750 7.500%, due 05/01/25.................................. 1,477,313 1,476,852 6.500%, due 03/01/26.................................. 9,864,563 9,411,414 7.000%, due 03/01/26.................................. 1,000,000 978,438 7.500%, due 12/01/26.................................. 2,632,083 2,632,241 Federal National Mortgage Association Strip 8.000%, due 07/01/24 interest only.................... 1,096,078 337,767 0.000%, due 07/01/26 principal only................... 994,546 669,141 Government National Mortgage Association 11.000%, due 09/15/15................................. 345,360 385,723 8.000%, due 08/15/22.................................. 1,004,798 1,032,610 7.000%, due 06/15/23.................................. 419,966 410,911 7.000%, due 07/15/23.................................. 415,773 406,808 7.000%, due 09/15/23.................................. 95,784 93,718 9.000%, due 07/15/24.................................. 164,420 173,258 8.500%, due 11/15/24.................................. 180,521 186,952 8.500%, due 01/15/25.................................. 374,518 387,860 9.000%, due 05/15/25.................................. 478,039 503,734 7.500%, due 06/15/25.................................. 2,097,195 2,099,607 8.000%, due 02/15/26.................................. 2,329,109 2,393,579 6.500%, due 03/20/26.................................. 1,486,831 1,409,237 8.000%, due 09/15/26.................................. 4,231,054 4,315,675 Independent National Mortgage Corp. 8.350%, due 06/25/25.............................................. 800,000 819,240 ----------- 41,106,095 -----------
FACE AMOUNT VALUE ----------- ------------ U.S. GOVERNMENT OBLIGATIONS--21.03% U.S. Treasury Coupon Strip 0.000%, due 05/15/08 principal only...................................... $ 9,305,000 $ 4,428,343 U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................ 2,105,000 2,089,213 6.250%, due 10/31/01................................ 10,115,000 10,121,322 7.000%, due 07/15/06................................ 15,230,000 15,824,929 8.125%, due 05/15/21................................ 15,965,000 18,519,400 ------------ 50,983,207 ------------ Total U.S. Bonds (Cost $129,757,543)................. 129,360,145 ------------ SHORT-TERM INVESTMENTS--10.20% U.S. GOVERNMENT OBLIGATIONS--0.44% U.S. Treasury Bills 5.063%, due 05/01/97............. 1,085,000 1,066,816 ------------ COMMERCIAL PAPER--9.76% Burlington Northern Santa Fe 5.650%, due 01/17/97.... 1,000,000 997,489 Case Credit Corp. 5.510%, due 01/07/97................................ 1,000,000 999,082 5.600%, due 01/09/97................................ 1,000,000 998,755 Cincinnati Bell, Inc. 7.250%, due 01/02/97........... 5,922,000 5,920,807 CNA Financial Corp. 6.250%, due 01/23/97............. 1,000,000 996,181 Crown Cork & Seal Co., Inc. 5.580%, due 01/29/97................................ 2,500,000 2,489,150 5.580%, due 01/31/97................................ 2,000,000 1,990,700 PanEnergy Corp. 6.050%, due 01/17/97................. 1,500,000 1,495,967 Rite Aid Corp. 5.650%, due 01/06/97................................ 1,000,000 999,215 5.600%, due 01/21/97................................ 2,300,000 2,292,844 Tyson Foods, Inc. 5.750%, due 01/09/97............... 989,000 987,736 US West Capital Funding Inc. 5.600%, due 02/12/97.... 1,500,000 1,490,200 Vastar Resources, Inc. 6.020%, due 01/02/97.......... 1,000,000 999,833 Whirlpool Financial Corp. 6.000%, due 01/03/97....... 1,000,000 999,667 ------------ 23,657,626 ------------ Total Short-Term Investments (Cost $24,724,389)...... 24,724,442 ------------ Total Investments (Cost $235,320,916)--105.70% (a).................... 256,212,580 ------------ Liabilities, less cash and other assets--(5.70%)..... (13,806,437) ------------ Net Assets--100%..................................... $242,406,143 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $235,320,916; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $23,263,277 Gross unrealized depreciation................................ (2,371,613) ----------- Net unrealized appreciation................................ $20,891,664 ===========
(b) Non-income producing security MTN: Medium term note FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE LOSS ---------- ------------- ----------- ---------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 55 contracts...... March 1997 $ 5,916,531 $ 5,862,656 $ (53,875) 10 Year U.S. Treasury Note, 89 contracts...... March 1997 9,861,375 9,712,125 (149,250) 30 Year U.S. Treasury Bond, 40 contracts...... March 1997 4,599,531 4,505,000 (94,531) INDEX FUTURES SALE CON- TRACTS Standard & Poor's 500, 53 contracts............... March 1997 19,689,500 19,729,250 (39,750) --------- Total.................. $(337,406) =========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $1,066,816. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $235,320,916) (Note 1).............. $256,212,580 Cash............................................................ 5,756,041 Receivables: Investment securities sold..................................... 415,655 Dividends...................................................... 181,703 Interest....................................................... 1,700,017 Fund shares sold............................................... 191,981 Variation margin (Note 4)...................................... 380,337 Other assets.................................................... 28,745 ------------ TOTAL ASSETS................................................. 264,867,059 ------------ LIABILITIES: Payables: Investment securities purchased................................ 22,156,538 Fund shares redeemed........................................... 36,974 Investment advisory fees (Note 2).............................. 74,069 Accrued expenses............................................... 193,335 ------------ TOTAL LIABILITIES............................................ 22,460,916 ------------ NET ASSETS....................................................... $242,406,143 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)........................................ $218,436,635 Accumulated distributions in excess of net investment income.... (187) Accumulated net realized gain................................... 3,415,437 Net unrealized appreciation..................................... 20,554,258 ------------ NET ASSETS................................................... $242,406,143 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $240,953,839 and 20,423,505 shares is- sued and outstanding) (Note 6)................................ $ 11.80 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,452,304 and 123,608 shares issued and outstanding) (Note 6)..................................... $ 11.75 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME Interest.......................................................... $ 4,451,939 Dividends......................................................... 897,064 ----------- TOTAL INCOME................................................... 5,349,003 ----------- EXPENSES: Advisory (Note 2)................................................. 814,540 Administration.................................................... 80,184 Custodian......................................................... 68,520 Distribution (Note 5)............................................. 2,858 Other............................................................. 214,159 ----------- TOTAL EXPENSES................................................. 1,180,261 Expenses deferred by Advisor (Note 2).......................... (246,439) ----------- NET EXPENSES................................................... 933,822 ----------- NET INVESTMENT INCOME ......................................... 4,415,181 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 9,666,826 Futures contracts................................................ (461,484) ----------- Net realized gain.............................................. 9,205,342 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 4,616,972 Futures contracts................................................ (401,550) ----------- Change in net unrealized appreciation or depreciation.......... 4,215,422 ----------- Net realized and unrealized gain.................................. 13,420,764 ----------- Net increase in net assets resulting from operations.............. $17,835,945 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 4,415,181 $ 8,308,870 Net realized gain............................. 9,205,342 8,233,205 Change in net unrealized appreciation or de- preciation................................... 4,215,422 8,676,412 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 17,835,945 25,218,487 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class........................... (5,812,532) (7,711,341) SwissKey Fund Class.......................... (34,116) (9,781) Distributions from net realized gain: Brinson Fund Class........................... (10,324,916) (9,885,505) SwissKey Fund Class.......................... (65,779) (992) ------------ ------------ Total distributions to shareholders........... (16,237,343) (17,607,619) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 19,283,736 81,710,433 Shares issued on reinvestment of distribu- tions........................................ 16,166,850 17,593,608 Shares redeemed............................... (23,251,338) (36,030,444) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)..................................... 12,199,248 63,273,597 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 13,797,850 70,884,465 ------------ ------------ NET ASSETS: Beginning of period........................... 228,608,293 157,723,828 ------------ ------------ End of period (including accumulated undis- tributed net investment income of ($187) and $1,459,205, respectively).................... $242,406,143 $228,608,293 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR DECEMBER 30, 1994* DECEMBER 31, 1996 ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------- Net asset value, beginning of period.................. $ 11.71 $ 11.23 $ 10.00 -------- -------- -------- Income from investment op- erations: Net investment income..... 0.23 0.44 .23 Net realized and unrealized gain.......... 0.71 1.04 1.16 -------- -------- -------- Total income from in- vestment operations.... 0.94 1.48 1.39 -------- -------- -------- Less distributions: Distributions from net in- vestment income.......... (0.31) (0.43) (0.16) Distributions from net re- alized gain.............. (0.54) (0.57) -- -------- -------- -------- Total distributions..... (0.85) (1.00) (0.16) -------- -------- -------- Net asset value, end of pe- riod....................... $ 11.80 $ 11.71 $ 11.23 ======== ======== ======== Total return (non- annualized)................ 8.02% 13.52% 13.91% Ratios/Supplemental data Net assets, end of period (in 000s)................. $240,954 $227,829 $157,724 Ratio of expenses to aver- age net assets: Before expense reimburse- ment..................... 1.01%** 1.01% 1.06% After expense reimburse- ment..................... 0.80%** 0.80% 0.80% Ratio of net investment in- come to average net as- sets: Before expense reimburse- ment..................... 3.58%** 3.76% 4.36% After expense reimburse- ment..................... 3.79%** 3.97% 4.63% Portfolio turnover rate.... 172% 240% 196% Average commission rate paid per share............ $0.0492 $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.67 $ 11.38 ------- ------- Income from investment operations: Net investment income....................... 0.20 0.42 Net realized and unrealized gain............ 0.70 0.86 ------- ------- Total income from investment operations... 0.90 1.28 ------- ------- Less distributions: Distributions from net investment income.... (0.28) (0.42) Distributions from net realized gain........ (0.54) (0.57) ------- ------- Total distributions....................... (0.82) (0.99) ------- ------- Net asset value, end of period................ $ 11.75 $ 11.67 ======= ======= Total return (non-annualized)................. 7.75% 11.54% Ratios/Supplemental data Net assets, end of period (in 000s).......... $ 1,452 $ 779 Ratio of expenses to average net assets: Before expense reimbursement................ 1.51%** 1.51%** After expense reimbursement................. 1.30%** 1.30%** Ratio of net investment income to average net assets: Before expense reimbursement................ 3.08%** 3.26%** After expense reimbursement................. 3.29%** 3.47%** Portfolio turnover rate...................... 172% 240% Average commission rate paid per share....... $0.0492 $0.0481
*Commencement of SwissKey Fund Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The U.S. Equity Fund is an actively managed portfolio that invests in common stocks of U.S. corporations. The Fund is diversified by issue and industry; it is typically 70% invested in large capitalization stocks, with the remaining 30% in intermediate and small capitalization stocks. Investment strategies emphasize stock selection with attention to the management of factor and industry exposures. For the period February 28, 1994 (performance inception date) to December 31, 1996, the Brinson U.S. Equity Fund provided an annualized return of 21.47% compared to its benchmark, the Wilshire 5000 Index, return of 19.06%. For the year ended December 31, 1996, the Fund returned 25.65%, while the benchmark returned 21.21%. The total return of the Brinson U.S. Equity Fund was 12.96% for the second six months of 1996, compared to the 9.92% return for the Wilshire 5000 Index. The following paragraphs review the sources of excess returns in the second half of 1996. The strong excess return of the U.S. Equity Fund in 1996 was attributable to a number of favorable industry and individual stock positions. Foremost among these was the sizeable overweighting in commercial banks where lower interest rates, sound credit quality and consolidation combined to produce strong industry performance. In addition, bank stock selection over and above the industry effect added meaningfully to Fund results. In the large capitalization sector, Citicorp and Chase Manhattan both posted total returns in excess of 50%. A package of smaller regional banks also performed well. These included U.S. Bancorp, Comerica, State Street Boston, First of America, Magna Group and First American of Tennessee. Another important industry position last year was the significant Fund underweighting in both telephone and electric utility stocks. In the area of traditional telephone utilities, we believe new technology, intensifying competition and regulatory adjustments will narrow the gap between telephone pricing and cost of service in many regional markets. Electric utilities are also likely to suffer a breakdown in regulatory protection due to the advent of independent power producers, the wheeling of electric power and difficulty earning an adequate return on stranded investments. Insurance and retail are two groups where industry performance was market-like in 1996 but where our collective issue selections added meaningfully to results. The strategy in insurance has been to concentrate on those companies where managements are restructuring and reorienting operations toward core lines of business. Such companies included Cigna, Aon, Allstate, Aetna, USF&G and Old Republic International. Similarly, the emphasis in retail was on those issues where managements were altering the business model with a clear focus on raising bottom line profitability. Our stock holdings here were CVS (formerly Melville), Federated Department Stores and Food Lion. Technology was an industry where an underweight detracted from Fund excess return in 1996. Nevertheless, stock selections such as EMC Corp., Seagate Technology and National Semiconductor more than compensated for the shortfall. In addition, a number of our telecommunications equipment related holdings performed well including Corning, Comverse Technology, Boston Technology and Octel Communications. Other noteworthy individual stock contributors to Fund results last year were Avon Products, Philip Morris, Coca Cola Enterprises and Tyson Foods. ------------------------------------------------------------ 17 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
Annualized 6 months 1 year 2/28/94* ended ended to 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------ BRINSON U.S. EQUITY FUND 12.96% 25.65% 21.47% - ------------------------------------------------------ Wilshire 5000 Index 9.92 21.21 19.06 - ------------------------------------------------------
*Performance inception date of the Brinson U.S. Equity Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth any income taxes payable by in the value of an shareholders on income divi- investment in the Brinson dends and capital gain dis- U.S. Equity Fund and the tributions. Past perfor- Wilshire 5000 Index if you mance is no guarantee of fu- had invested $100,000 on ture results. Share price February 28, 1994, and had and return will vary with reinvested all your income market conditions; investors dividends and capital gain may realize a gain or loss distributions through upon redemption. December 31, 1996. No adjustment has been made for BRINSON U.S. EQUITY FUND VS. WILSHIRE 5000 INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE]
Brinson U.S. Wilshire Equity Fund 500 INDEX ---------- --------- 02/28/94 $100,000 $100,000 03/31/94 $ 94,294 $ 95,472 06/30/94 $ 97,000 $ 94,729 09/30/94 $101,926 $ 99,877 12/31/94 $ 98,368 $ 99,109 03/31/95 $107,625 $108,058 06/30/95 $117,802 $118,147 09/30/95 $128,939 $128,945 12/31/95 $138,288 $135,235 03/31/96 $148,998 $142,832 06/30/96 $153,820 $149,125 09/30/96 $158,881 $153,345 12/31/96 $173,586 $163,921
2/28/94 = $100,000 Data Through 12/31/96 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. ------------------------------------------------------------ 18 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.65% Housing/Paper.......................................................... 4.04 Metals................................................................. 0.52 ----- 5.21 Capital Investments Capital Goods.......................................................... 8.94 Technology............................................................. 5.77 ----- 14.71 Consumer Autos/Durables......................................................... 0.25 Discretionary.......................................................... 6.49 Health: Drugs.......................................................... 8.02 Health: Non-Drugs...................................................... 3.96 Non-Durables........................................................... 11.18 Retail/Apparel......................................................... 4.09 ----- 33.99 Energy.................................................................. 4.94% Financial Banks.................................................................. 10.03 Non-Banks.............................................................. 9.15 ------ 19.18 Services................................................................ 6.34 Transportation.......................................................... 6.17 Utilities............................................................... 3.07 Miscellaneous........................................................... 2.61 ------ Total U.S. Equities.................................................. 96.22* ------ SHORT-TERM INVESTMENTS.................................................. 3.51* ------ TOTAL INVESTMENTS.................................................... 99.73 CASH AND OTHER ASSETS, LESS LIABILITIES ...................................................... 0.27 ------ NET ASSETS.............................................................. 100.00% ======
*The Fund held a net long position in stock index futures on December 31, 1996 which increased U.S. equity exposure from 96.22% to 100% and reduced exposure to Short-Term investments from 3.51% to -0.27%. - -------------------------------------------------------------------------------- TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - --------------------------------------------- 1. Chase Manhattan Corp. 4.77% 2. Xerox Corp. 3.71 3. Lockheed Martin Corp. 3.70 4. Burlington Northern Santa Fe 3.65 5. Corning, Inc. 3.45 6. Citicorp 3.33 7. Philip Morris Companies, Inc. 3.29 8. Aon Corp. 3.08 9. Goodyear Tire & Rubber Co. 2.81 10. Enron Corp. 2.55 - ---------------------------------------------
- -------------------------------------------------------------------------------- 19 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 96.22% Aetna Life & Casualty Co................................... 40,300 $ 3,224,000 Allergan, Inc.............................................. 67,300 2,397,563 Allstate Corp.............................................. 37,400 2,164,525 Alza Corp. (b)............................................. 65,600 1,697,400 Aon Corp................................................... 87,900 5,460,787 Automatic Data Processing, Inc............................. 64,100 2,748,288 Avon Products, Inc......................................... 47,700 2,724,862 Bard (C.R.), Inc........................................... 40,700 1,139,600 Beckman Instruments, Inc................................... 26,300 1,009,263 Birmingham Steel Corp...................................... 26,400 501,600 Boston Technology, Inc. (b)................................ 26,200 753,250 Brinker International, Inc. (b)............................ 26,600 425,600 Burlington Northern Santa Fe............................... 75,000 6,478,125 Centerior Energy Co........................................ 55,300 594,475 Chase Manhattan Corp....................................... 94,700 8,451,975 Choice Hotels International, Inc. (b)...................... 42,900 756,113 CIGNA Corp................................................. 32,500 4,440,312 Circuit City Stores, Inc. (b).............................. 11,200 337,400 Citicorp................................................... 57,400 5,912,200 CMS Energy Corp............................................ 71,700 2,410,913 Coca-Cola Enterprises, Inc................................. 35,100 1,702,350 Comerica, Inc.............................................. 18,100 947,987 Comverse Technology, Inc. (b).............................. 12,200 461,313 Corning, Inc............................................... 132,200 6,114,250 CPC International, Inc. ................................... 16,200 1,255,500 CVS Corp. ................................................. 51,900 2,147,363 Dial Corp.................................................. 64,400 949,900 EMC Corp./Mass. (b)........................................ 94,500 3,130,312 Enron Corp................................................. 104,800 4,519,500 Federal Express Corp. (b).................................. 97,600 4,343,200 Federated Department Stores (b)............................ 38,300 1,306,988 FileNet Corp. (b).......................................... 15,600 499,200 First American Corp.-Tenn. ................................ 4,700 270,836 First Data Corp............................................ 56,230 2,052,395 First of America Bank Corp................................. 8,400 505,050 Footstar, Inc. (b)......................................... 14,925 371,259 Ford Motor Co.............................................. 34,800 1,109,250 Forest Laboratories, Inc. (b).............................. 44,600 1,460,650 Gannett Co., Inc........................................... 43,800 3,279,525 General Instrument Corp. (b)............................... 130,200 2,815,575 Genzyme Corp. (b).......................................... 26,500 576,375 Geon Co. .................................................. 9,700 190,363 Goodyear Tire & Rubber Co.................................. 96,900 4,978,237 Harnischfeger Industries, Inc. ............................ 28,900 1,390,813 Health Care and Retirement Corp. (b)....................... 48,550 1,389,744 Interpublic Group of Companies, Inc........................ 32,600 1,548,500 James River Corp. of Virginia.............................. 37,700 1,248,812 Kimberly-Clark Corp........................................ 31,600 3,009,900 Kroger Co. (b)............................................. 27,600 1,283,400 Lockheed Martin Corp....................................... 71,627 6,553,871 Lyondell Petrochemical Co.................................. 71,700 1,577,400 Manor Care, Inc. .......................................... 42,900 1,158,300 Martin Marietta Materials, Inc. ........................... 19,157 445,400 Masco Corp. ............................................... 41,400 1,490,400 Mattel, Inc................................................ 156,875 4,353,281 Nabisco Holdings Corp. Class A............................. 47,500 1,846,562
SHARES VALUE ---------- ------------ National Semiconductor Corp. (b)........................ 25,900 $ 631,313 Nextel Communications, Inc. Class A (b)................. 66,000 862,125 Old Republic International Corp......................... 30,850 825,237 Peco Energy Co. ........................................ 41,900 1,057,975 Pentair, Inc............................................ 34,700 1,119,075 Pharmacia & Upjohn, Inc. ............................... 83,500 3,308,688 Philip Morris Companies, Inc............................ 51,800 5,833,975 Rhone-Poulene Rorer, Inc. .............................. 22,100 1,726,562 RJR Nabisco Convertible Preferred "C"................... 213,600 1,441,800 Schering Plough Corp.................................... 57,500 3,723,125 Seagate Technology, Inc. (b)............................ 17,600 695,200 Timken Co............................................... 27,600 1,266,150 Tyson Foods, Inc. Class A............................... 78,600 2,692,050 Ultramar Diamond Shamrock Corp. ........................ 74,718 2,362,957 US Bancorp.............................................. 39,900 1,793,006 USF&G Corp.............................................. 30,500 636,688 Vencor, Inc. (b)........................................ 34,300 1,084,737 Viad Corp. ............................................. 64,400 1,062,600 Westvaco Corp........................................... 15,700 451,375 Whitman Corp............................................ 3,300 75,488 WMX Technologies, Inc................................... 107,000 3,490,875 Xerox Corp. ............................................ 125,000 6,578,125 York International Corp................................. 27,000 1,508,625 360 Communications Co. (b).............................. 22,733 525,701 ------------ Total U.S. Equities (Cost $144,329,405)................. 170,665,464 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 3.51% U.S. GOVERNMENT OBLIGATIONS -- 0.17% U.S. Treasury Bills 5.063%, due 05/01/97................ $ 300,000 $ 294,972 ------------ COMMERCIAL PAPER -- 3.34% Cincinnati Bell, Inc. 7.250%, due 01/02/97.............. 2,430,000 2,429,511 CNA Financial Corp. 6.250%, due 01/23/97................ 500,000 498,090 Crown Cork & Seal Co., Inc. 5.580%, due 01/29/97........ 500,000 497,830 Tyson Foods, Inc. 5.750%, due 01/09/97.................. 261,000 260,667 Vastar Resources, Inc. 6.850%, due 01/10/97............. 1,500,000 1,497,431 Whirlpool Financial Corp. 6.000%, due 01/03/97.......... 750,000 749,750 ------------ 5,933,279 ------------ Total Short-Term Investments (Cost $6,228,216)...................................... 6,228,251 ------------ Total Investments (Cost $150,557,621) -- 99.73% (a)...................... 176,893,715 ------------ Cash and other assets, less liabilities -- 0.27%........ 472,135 ------------ Net Assets -- 100%...................................... $177,365,850 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 20 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $150,557,621; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $28,243,273 Gross unrealized depreciation................................ (1,907,179) ----------- Net unrealized appreciation................................ $26,336,094 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN/(LOSS) ---------- ---------- ---------- ----------- INDEX FUTURES BUY CONTRACTS Standard & Poors 500, 18 contracts.................. March 1997 $6,785,075 $6,700,500 $(84,575) INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 1 contract................... March 1997 377,600 377,250 5,350 -------- $(79,225) ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $294,972. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $150,557,621) (Note 1) .............. $176,893,715 Cash............................................................. 3,238,167 Receivables: Investment securities sold...................................... 711,094 Dividends....................................................... 306,932 Fund shares sold................................................ 309,665 Other assets..................................................... 24,831 ------------ TOTAL ASSETS.................................................. 181,484,404 ------------ LIABILITIES: Payables: Investment securities purchased................................. 2,707,175 Fund shares redeemed............................................ 1,074,412 Variation margin (Note 4)....................................... 175,550 Investment advisory fees (Note 2)............................... 36,162 Accrued expenses................................................ 125,255 ------------ TOTAL LIABILITIES............................................. 4,118,554 ------------ NET ASSETS........................................................ $177,365,850 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $147,729,146 Accumulated undistributed net investment income.................. 4,145 Accumulated net realized gain.................................... 3,375,690 Net unrealized appreciation...................................... 26,256,869 ------------ NET ASSETS.................................................... $177,365,850 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $166,642,358 and 11,008,767 shares is- sued and outstanding) (Note 6)................................. $ 15.14 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $10,723,492 and 709,464 shares issued and outstanding) (Note 6)...................................... $ 15.11 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Dividends......................................................... $ 1,360,510 Interest.......................................................... 153,130 ----------- TOTAL INCOME................................................... 1,513,640 ----------- EXPENSES: Advisory (Note 2)................................................. 530,359 Administration.................................................... 48,142 Custodian......................................................... 47,719 Accounting........................................................ 41,800 Registration...................................................... 40,734 Distribution (Note 5)............................................. 19,756 Other............................................................. 83,749 ----------- TOTAL EXPENSES................................................. 812,259 Expenses deferred by Advisor (Note 2).......................... (186,334) ----------- NET EXPENSES................................................... 625,925 ----------- NET INVESTMENT INCOME.......................................... 887,715 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments...................................................... 9,682,760 Futures contracts................................................ 377,715 ----------- Net realized gain ............................................. 10,060,475 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 8,716,058 Futures contracts ............................................... (76,450) ----------- Change in net unrealized appreciation or depreciation.......... 8,639,608 ----------- Net realized and unrealized gain ................................. 18,700,083 ----------- Net increase in net assets resulting from operations.............. $19,587,798 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 887,715 $ 1,333,171 Net realized gain ............................ 10,060,475 7,826,393 Change in net unrealized appreciation or de- preciation .................................. 8,639,608 13,357,238 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 19,587,798 22,516,802 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class.......................... (1,048,487) (1,233,245) SwissKey Fund Class......................... (51,089) (17,809) Distributions from net realized gain: Brinson Fund Class.......................... (12,393,320) (1,764,213) SwissKey Fund Class......................... (838,501) (2,611) ------------ ------------ Total distributions to shareholders........... (14,331,397) (3,017,878) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 36,689,740 71,976,805 Shares issued on reinvestment of distribu- tions........................................ 13,560,021 2,944,272 Shares redeemed............................... (9,869,057) (5,264,717) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)............. 40,380,704 69,656,360 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 45,637,105 89,155,284 ------------ ------------ NET ASSETS: Beginning of period........................... 131,728,745 42,573,461 ------------ ------------ End of period (including accumulated undis- tributed net investment income of $4,145 and $216,006, respectively)...................... $177,365,850 $131,728,745 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR YEAR FEBRUARY 22, 1994* DECEMBER 31, 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 14.59 $ 11.53 $ 9.65 $10.00 -------- -------- ------- ------ Income from investment operations: Net investment income. 0.08 0.17 0.16 0.05 Net realized and unrealized gain (loss)............... 1.80 3.31 1.89 (0.36) -------- -------- ------- ------ Total income (loss) from investment operations......... 1.88 3.48 2.05 (0.31) -------- -------- ------- ------ Less distributions: Distributions from net investment income.... (0.10) (0.17) (0.14) (0.04) Distributions from net realized gain........ (1.23) (0.25) (0.03) -- -------- -------- ------- ------ Total distributions. (1.33) (0.42) (0.17) (0.04) -------- -------- ------- ------ Net asset value, end of period................. 15.14 $ 14.59 $ 11.53 $ 9.65 ======== ======== ======= ====== Total return (non- annualized)............ 12.96% 30.57% 21.45% (3.10%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $166,642 $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.04%** 1.14% 1.70% 5.40% ** After expense reim- bursement............ 0.80%** 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reim- bursement............ 0.95%** 1.13% 1.09% (2.82%)** After expense reim- bursement............ 1.19%** 1.47% 1.99% 1.78% ** Portfolio turnover rate.................. 25% 36% 33% 9% Average commission rate paid per share........ $ 0.0445 $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 14.58 $ 11.94 ------- ------- Income from investment operations: Net investment income....................... 0.04 0.10 Net realized and unrealized gain............ 1.79 2.92 ------- ------- Total income from investment operations... 1.83 3.02 ------- ------- Less distributions: Distributions from net investment income.... (0.07) (0.13) Distributions from net realized gain........ (1.23) (0.25) ------- ------- Total distributions....................... (1.30) (0.38) ------- ------- Net asset value, end of period................ $ 15.11 $ 14.58 ======= ======= Total return (non-annualized)................. 12.63% 25.70% Ratios/Supplemental data Net assets, end of period (in 000s).......... $10,724 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement................ 1.56%** 1.66%** After expense reimbursement................. 1.32%** 1.32%** Ratio of net investment income to average net assets: Before expense reimbursement................ 0.43%** 0.61%** After expense reimbursement................. 0.67%** 0.95%** Portfolio turnover rate...................... 25% 36% Average commission rate paid per share....... $0.0445 $0.0457
*Commencement of SwissKey Fund Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar- denominated investment-grade fixed income securities. Our goal for the Fund is to achieve a total return superior to that of an unmanaged market index. Macroeconomic and monetary analysis are the key elements in our strategy. We develop expectations about the returns on U.S. bonds based on the divergence of current market yields from our estimates of equilibrium yields. Relative value analysis serves as the basis of both our sector and individual security selection. The Brinson U.S. Bond Fund produced an annualized return of 6.84% since its inception on August 31, 1995 compared to the Salomon Brothers Broad Investment Grade (BIG) Bond Index return of 6.78%. In 1996, U.S. fixed income markets proved disappointing to investors by underperforming both cash and most riskier asset classes. For the year ended December 31, 1996, the Fund produced a total return of 3.53% compared to the Benchmark return of 3.63%. In the second half of 1996, the Fund returned 5.42% compared to the Benchmark return of 4.94%. The underlying economic fundamentals that influence bond prices and yields were unusually well behaved in 1996. The pace of real economic activity fluctuated around a stable path with alternating periods of above- and below-trend growth. Inflation rates were stable. Treasury deficits continued to decline. Federal Reserve interest rate policies were steady. The overnight funds target rate was cut from 5.50% to 5.25% at the end of January 1996 and remained unchanged at the 5.25% level through the balance of the year. In 1996, U.S. interest rates were more volatile than the underlying economic fundamentals. Investor expectations shifted in reaction to fluctuations in economic data that were often statistical noise. During 1996, sentiment shifted from optimism that a slow-growth economy would prompt further Federal Reserve easing, to pessimism that an economy near full employment would overheat, resulting in either an up-tick in inflation or Fed tightening or both. Interest rates, which were at their lows for the year at the beginning of 1996, rose fairly steadily in the first half of 1996 and moved irregularly lower in the second half. Year over year, Treasury yields rose 35 basis points for one- year maturities, while yields in the three-to-ten year range were up approximately 80 basis points. Thirty-year Treasury bond yields, which were below 6.00% at the beginning of 1996, rose to a high of 7.20% by mid-year and fell to 6.65% by year-end. As a result of these shifts, the yield curve steepened from cash to intermediate maturities while modestly flattening from intermediate to long maturities. Our investment strategies in early 1997 involve overweights in the ten-year and longer segments of the yield curve and corresponding underweights in intermediate maturities. This results in a Fund duration that is 1.3 times the duration of the benchmark. Intermediate and long-term U.S. interest rates are well above our equilibrium estimates. If market forces bring yields back in line with our estimates of value, U.S. bonds will deliver total returns well in excess of current yield levels as bond prices appreciate. ------------------------------------------------------------ 27 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
Annualized 6 months 1 year 8/31/95* ended ended to 12/31/96 12/31/96 12/31/96 - --------------------------------------------------------------------------- BRINSON U.S. BOND FUND 5.42% 3.53% 6.84% - --------------------------------------------------------------------------- Salomon Brothers Broad Investment Grade (BIG) Bond Index 4.94 3.63 6.78 - ---------------------------------------------------------------------------
*Inception date of the Brinson U.S. Bond Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth made for any income taxes in the value of an payable by shareholders on investment in the Brinson income dividends and capital U.S. Bond Fund and the gain distributions. Past Salomon Brothers Broad performance is no guarantee Investment Grade (BIG) Bond of future results. Share Index if you had invested price and return will vary $100,000 on August 31, 1995, with market conditions; and had reinvested all your investors may realize a gain income dividends and capital or loss upon redemption. gain distributions through December 31, 1996. No adjustment has been BRINSON U.S. BOND FUND VS. SALOMON BROTHERS BIG BOND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE]
Brinson U.S. Bond Fund Salomon Brothers Big Bond Index ---------------------- ------------------------------- 8/31/95 $100,000 $100,000 9/30/95 $100,900 $100,940 12/31/95 $105,493 $105,322 3/31/96 $103,140 $103,496 6/30/96 $103,600 $104,003 9/30/96 $105,478 $105,939 12/31/96 $109,217 $109,141
8/31/95 = 100,000 Data through 12/31/96 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. ------------------------------------------------------------ 28 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percentage of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-backed........................................................... 4.18% CMO.................................................................... 2.61 Financial.............................................................. 12.76 Industrial............................................................. 1.67 Telecommunications..................................................... 2.55 ------ Total U.S. Corporate Bonds........................................... 23.77 U.S. Government Agencies................................................ 27.83 U.S. Government Obligations............................................. 39.67 International Dollar Bonds.............................................. 4.43 ------ Total U.S. Bonds..................................................... 95.70 ------ SHORT-TERM INVESTMENTS.................................................. 7.10 ------ TOTAL INVESTMENTS.................................................... 102.80 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (2.80) ------ NET ASSETS.............................................................. 100.00% ======
------------------------------------------------------------ 29 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ---------- Bonds -- 95.70% U.S. CORPORATE BONDS -- 23.77% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03.................................... $ 100,000 $ 101,582 Capital One Bank 6.830%, due 05/17/99.................... 185,000 185,854 Citicorp Mortgage Securities 5.750%, due 06/25/09........ 89,877 76,116 Countrywide Funding FRN 6.650%, due 12/01/03............. 250,000 239,688 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02................................................ 100,000 100,269 GMAC MTN 7.450%, due 06/05/97............................ 250,000 251,980 Green Tree Financial 94-2 8.300%, due 05/15/19........... 160,000 169,229 Lehman Brothers Holdings 7.250%, due 04/15/03............ 225,000 226,363 Lockheed Martin Corp. 7.700%, due 06/15/08............... 150,000 157,025 News America Corp. 7.750%, due 01/20/24.................. 250,000 238,974 Premier Auto Trust 96-4A, 6.400%, due 10/06/01........... 190,000 190,912 Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 292,949 ---------- 2,230,941 ---------- INTERNATIONAL DOLLAR BONDS -- 4.43% Hanson PLC Notes 6.750%, due 09/15/05.................... 100,000 97,934 Republic of Italy 6.875%, due 09/27/23................... 250,000 237,830 Royal Bank of Scotland 7.375%, due 04/01/06.............. 80,000 79,730 ---------- 415,494 ---------- U.S. GOVERNMENT AGENCIES -- 27.83% Federal Home Loan Mortgage Corp. 6.750%, due 05/30/06.................................... 150,000 151,106 5.800%, due 08/15/19.................................... 330,000 308,246 6.500%, due 05/15/21.................................... 86,167 78,194 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03.................................... 111,475 108,828 8.000%, due 11/01/22.................................... 72,660 74,627 Federal National Mortgage Association 6.500%, due 03/01/03.................................... 250,000 247,345 8.000%, due 12/18/11.................................... 100,000 103,375 7.500%, due 05/01/25.................................... 210,419 210,353 6.500%, due 02/01/26.................................... 131,483 125,494 6.500%, due 03/01/26.................................... 59,456 56,725 Federal National Mortgage Association Strip 8.000%, due 07/01/24 interest only...................... 104,772 32,287 0.000%, due 07/01/26 principal only..................... 93,546 62,938
FACE AMOUNT VALUE ---------- ---------- Government National Mortgage Association 9.000%, due 12/15/17................................... $ 68,304 $ 73,159 7.500%, due 12/15/22................................... 409,733 411,979 7.500%, due 06/15/25................................... 132,176 132,328 6.500%, due 03/20/26................................... 118,159 111,992 6.000%, due 11/20/26................................... 199,775 199,935 Independent National Mortgage Corp. 8.350%, due 06/25/25............................................... 120,000 122,886 ---------- 2,611,797 ---------- U.S. GOVERNMENT OBLIGATIONS -- 39.67% U.S. Treasury Coupon Strip 0.000%, due 05/15/08 principal only............................ 285,000 135,634 U.S. Treasury Notes and Bonds 6.250%, due 10/31/01................................... 595,000 595,372 6.500%, due 05/15/05................................... 530,000 533,810 7.000%, due 07/15/06................................... 535,000 555,899 8.125%, due 05/15/21................................... 1,640,000 1,902,400 ---------- 3,723,115 ---------- Total U.S. Bonds (Cost $9,003,871)...................... 8,981,347 ---------- Short-Term Investments -- 7.10% COMMERCIAL PAPER -- 7.10% Cincinnati Bell, 7.250%, due 01/02/97................... 491,000 490,901 Duracell, Inc. 6.750%, due 01/02/97..................... 176,000 175,967 ---------- Total Short-Term Investments (Cost $666,868)........................................ 666,868 ---------- Total Investments (Cost $9,670,739) -- 102.80%(a)........................ 9,648,215 ---------- Liabilities, less cash and other assets --(2.80%) (a)... (263,154) ---------- Net Assets -- 100%...................................... $9,385,061 ==========
(a) Aggregate cost for federal income tax purposes was $9,670,739; and net unrealized depreciation consisted of: Gross unrealized ap- preciation.......... $ 59,916 Gross unrealized de- preciation.......... (82,440) -------- Net unrealized de- preciation......... $(22,524) ========
FRN: Floating rate note--The rate disclosed is that in effect at December 31, 1996. MTN: Medium Term Note See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $9,670,739) (Note 1)................. $ 9,648,215 Cash............................................................. 272,993 Receivables: Investment securities sold...................................... 351,190 Interest........................................................ 99,507 Fund shares sold................................................ 52,466 Due from Advisor (Note 2)....................................... 14,375 Other assets..................................................... 10,208 ----------- TOTAL ASSETS.................................................. 10,448,954 ----------- LIABILITIES: Payables: Investment securities purchased................................. 968,564 Accrued expenses................................................ 95,329 ----------- TOTAL LIABILITIES............................................. 1,063,893 ----------- NET ASSETS........................................................ $ 9,385,061 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $ 9,330,105 Accumulated undistributed net investment income.................. 19,834 Accumulated net realized gain.................................... 57,646 Net unrealized depreciation ..................................... (22,524) ----------- NET ASSETS.................................................... $ 9,385,061 =========== OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $8,891,698 and 882,581 shares issued and outstanding) (Note 6)...................................... $ 10.07 =========== SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $493,363 and 49,046 shares issued and outstanding) (Note 6).......................................... $ 10.06 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Interest............................................................ $ 312,360 --------- TOTAL INCOME..................................................... 312,360 --------- EXPENSES: Registration........................................................ 26,797 Professional........................................................ 24,656 Advisory (Note 2)................................................... 23,187 Accounting.......................................................... 22,986 Transfer Agent...................................................... 20,802 Printing............................................................ 17,664 Custodian........................................................... 10,086 Distribution (Note 5)............................................... 1,089 Other............................................................... 9,634 --------- TOTAL EXPENSES................................................... 156,901 Expenses deferred and reimbursed by Advisor (Note 2)............. (128,202) --------- NET EXPENSES..................................................... 28,699 --------- NET INVESTMENT INCOME ........................................... 283,661 --------- NET REALIZED AND UNREALIZED GAIN: Net realized gain................................................... 89,999 Change in net unrealized appreciation or depreciation............... 123,739 --------- Net realized and unrealized gain.................................... 213,738 --------- Net increase in net assets resulting from operations................ $ 497,399 =========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED AUGUST 31, 1995* DECEMBER 31, 1996 THROUGH (UNAUDITED) JUNE 30, 1996 OPERATIONS: ----------------- ---------------- Net investment income...................... $ 283,661 $ 456,231 Net realized gain/(loss)................... 89,999 (11,035) Change in net unrealized appreciation or depreciation.............................. 123,739 (146,263) ---------- ----------- Net increase in net assets resulting from operations................................ 497,399 298,933 ---------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income... (353,857) (363,467) Distributions from net realized gain....... (713) -- Distributions in excess of net realized gain...................................... -- (23,339) ---------- ----------- Total distributions to shareholders**...... (354,570) (386,806) ---------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold................................ 864,572 10,200,031 Shares issued on reinvestment of distribu- tions..................................... 344,994 386,807 Shares redeemed............................ (1,649,868) (867,431) ---------- ----------- Net increase (decrease) in net assets re- sulting from capital share transactions (Note 6).................................. (440,302) 9,719,407 ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS. (297,473) 9,631,534 ---------- ----------- NET ASSETS: Beginning of period........................ 9,682,534 51,000 ---------- ----------- End of period (including accumulated undis- tributed net investment income of $19,834 and $90,190, respective- ly)....................................... $9,385,061 $ 9,682,534 ========== =========== * Commencement of investment operations **Distributions By Class: Distributions from net investment income: Brinson Fund Class........................ (335,801) (350,335) SwissKey Fund Class....................... (18,056) (13,132) Distributions from and in excess of net re- alized gain: Brinson Fund Class........................ (675) (23,071) SwissKey Fund Class....................... (38) (268) ---------- ----------- Total distributions to shareholders........ (354,570) (386,806) ---------- -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED AUGUST 31, 1995* DECEMBER 31, 1996 THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period........ $ 9.93 $10.00 ------ ------ Income from investment operations: Net investment income..................... 0.32 0.50 Net realized and unrealized gain (loss)... 0.22 (0.14) ------ ------ Total income from investment operations. 0.54 0.36 ------ ------ Less distributions: Distributions from net investment income.. (0.40) (0.40) Distributions in excess of net realized gain..................................... -- (0.03) ------ ------ Total distributions..................... (0.40) (0.43) ------ ------ Net asset value, end of period.............. $10.07 $ 9.93 ====== ====== Total return (non-annualized)............... 5.42% 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)........ $8,892 $9,047 Ratio of expenses to average net assets: Before expense reimbursement.............. 3.35%** 3.63%** After expense reimbursement............... 0.60%** 0.60%** Ratio of net investment income to average net assets: Before expense reimbursement.............. 3.37%** 3.00%** After expense reimbursement............... 6.12%** 6.03%** Portfolio turnover rate.................... 265% 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED AUGUST 31, 1995* DECEMBER 31, 1996 THROUGH JUNE 30, SWISSKEY FUND CLASS (UNAUDITED) 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period........ $ 9.92 $10.00 ------ ------ Income from investment operations: Net investment income..................... 0.30 0.46 Net realized and unrealized gain (loss)... 0.22 (0.13) ------ ------ Total income from investment operations. 0.52 0.33 ------ ------ Less distributions: Distributions from net investment income.. (0.38) (0.38) Distributions in excess of net realized gain..................................... -- (0.03) ------ ------ Total distributions..................... (0.38) (0.41) ------ ------ Net asset value, end of period.............. $10.06 $ 9.92 ====== ====== Total return (non-annualized)............... 5.19% 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)........ $ 493 $ 636 Ratio of expenses to average net assets: Before expense reimbursement.............. 3.82%** 4.10%** After expense reimbursement............... 1.07%** 1.07%** Ratio of net investment income to average net assets: Before expense reimbursement.............. 2.90%** 2.53%** After expense reimbursement............... 5.65%** 5.56%** Portfolio turnover rate.................... 265% 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 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 seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Fund Class and SwissKey Fund 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 following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively 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. Securities for which the most recent bid price or 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. U.S. equity securities, traded over-the-counter, are valued at the most recent bid price. Debt securities are valued at the most recent bid price by using market quotations or independent services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. 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. C. INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D. 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 have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1996, therefore, no federal income tax provision was required. E. 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 generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. F. INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by the Funds will be borne on a pro rata basis by each of the classes, except that the Brinson Fund Class will not incur any of the distribution expenses. G. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles 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. - -------------------------------------------------------------------------------- 36 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 the Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1996, were as follows:
BRINSON SWISSKEY CLASS CLASS ADVISORY EXPENSE EXPENSE ADVISORY FEES DEFERRED FEE CAP CAP FEES AND/OR REIMBURSED -------- ------- -------- -------- ----------------- U.S. Balanced Fund......... 0.70% 0.80% 1.30% $814,540 $246,439 U.S. Equity Fund........... 0.70 0.80 1.32 530,359 186,334 U.S. Bond Fund............. 0.50 0.60 1.07 23,187 128,202
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 were $3,680, $2,576 and $1,656 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $383,484,882 $384,396,868 U.S. Equity Fund...................................... 63,102,416 37,150,734 U.S. Bond Fund........................................ 23,975,970 24,362,303
4. 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. 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 statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5. DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Fund Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey Fund Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. - -------------------------------------------------------------------------------- 37 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. BALANCED FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 YEAR ENDED (UNAUDITED) JUNE 30, 1996 ---------------------- --------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ----------- Sales: Brinson Fund Class............... 1,510,640 $ 18,264,307 6,944,846 $80,934,038 SwissKey Fund Class.............. 83,085 1,019,429 67,290 776,395 --------- ------------ --------- ----------- Total Sales.................... 1,593,725 $ 19,283,736 7,012,136 $81,710,433 ========= ============ ========= =========== Dividend Reinvestment: Brinson Fund Class............... 1,371,436 $ 16,128,084 1,540,774 $17,588,758 SwissKey Fund Class.............. 3,308 38,766 422 4,850 --------- ------------ --------- ----------- Total Dividend Reinvestment.... 1,374,744 $ 16,166,850 1,541,196 $17,593,608 ========= ============ ========= =========== Redemptions: Brinson Fund Class............... 1,910,824 $ 22,882,958 3,073,501 $36,019,481 SwissKey Fund Class.............. 29,540 368,380 957 10,963 --------- ------------ --------- ----------- Total Redemptions.............. 1,940,364 $ 23,251,338 3,074,458 $36,030,444 ========= ============ ========= =========== U.S. EQUITY FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 YEAR ENDED (UNAUDITED) JUNE 30, 1996 ---------------------- --------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ----------- Sales: Brinson Fund Class............... 2,041,391 $ 30,854,921 5,125,613 $66,685,850 SwissKey Fund Class.............. 381,237 5,834,819 375,655 5,290,955 --------- ------------ --------- ----------- Total Sales.................... 2,422,628 $ 36,689,740 5,501,268 $71,976,805 ========= ============ ========= =========== Dividend Reinvestment: Brinson Fund Class............... 876,492 $ 13,191,199 222,497 $ 2,935,334 SwissKey Fund Class.............. 24,539 368,822 644 8,938 --------- ------------ --------- ----------- Total Dividend Reinvestment.... 901,031 $ 13,560,021 223,141 $ 2,944,272 ========= ============ ========= =========== Redemptions: Brinson Fund Class............... 568,938 $ 8,826,760 380,602 $ 5,174,675 SwissKey Fund Class.............. 65,737 1,042,297 6,874 90,042 --------- ------------ --------- ----------- Total Redemptions.............. 634,675 $ 9,869,057 387,476 $ 5,264,717 ========= ============ ========= =========== U.S. BOND FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 ---------------------- --------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ----------- Sales: Brinson Fund Class............... 69,080 $ 707,725 953,454 $ 9,550,552 SwissKey Fund Class.............. 15,038 156,847 63,717 649,479 --------- ------------ --------- ----------- Total Sales.................... 84,118 $ 864,572 1,017,171 $10,200,031 ========= ============ ========= =========== Dividend Reinvestment: Brinson Fund Class............... 33,381 $ 336,476 37,309 $ 373,407 SwissKey Fund Class.............. 846 8,518 1,362 13,400 --------- ------------ --------- ----------- Total Dividend Reinvestment.... 34,227 $ 344,994 38,671 $ 386,807 ========= ============ ========= =========== Redemptions: Brinson Fund Class............... 131,050 $ 1,335,859 84,593 $ 856,547 SwissKey Fund Class.............. 30,962 314,009 1,055 10,884 --------- ------------ --------- ----------- Total Redemptions.............. 162,012 $ 1,649,868 85,648 $ 867,431 ========= ============ ========= ===========
- -------------------------------------------------------------------------------- 38 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- 39 THE BRINSON FUNDS --------------------------------------------------------------------- Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris Singapore . Sydney . Tokyo . Zurich LOGO 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 LOGO ---------------------------- THE BRINSON FUNDS BRINSON NON-U.S. EQUITY FUND SEMI-ANNUAL REPORT DECEMBER 31, 1996 GLOBAL INSTITUTIONAL ASSET MANAGEMENT ---------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CFA, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUND'S ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their institutional investment management organizations into a single investment management business operating as Brinson Partners, Inc. in North America and SBC Brinson in its other world-wide locations. We are a global investment management organization with over $72 billion in institutional assets under discretionary active management. We are also the investment advisor for SBC Private Banking mutual fund assets which total $47 billion. The firm manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other institutional investors located throughout the world. Our organization employs over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, Inc., an established U.S.-based leader in the investment business located in Chicago, acts as the headquarters of our world-wide investment management process. The firm began managing international securities and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients and has offered fully integrated global portfolios since then. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Non-U.S. Equity Fund.......................................................... 6 Schedule of Investments....................................................... 9 Financial Statements..........................................................14 Financial Highlights..........................................................17 Notes to Financial Statements.................................................19 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO February 19, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the December 31, 1996 Semi-Annual Report for the Non-U.S. Equity Fund. This Report presents our current global economic and market outlook, as well as the Fund's recent investment strategies and performance. To summarize this information: For the period from August 31, 1993 (inception date of the Fund) to December 31, 1996, the Fund provided an annualized total return of 7.42%. In the second half of 1996, the Fund returned 5.37%. Market Strategy The Fund continues to hold a 5.00% strategic cash position reflecting our view that, with very few exceptions, non-U.S. equity markets are modestly attractive. The Japanese equity market, which is the largest component of the index, is notably more overpriced than most of the other non-U.S. markets. Given our valuation analyses and fundamental considerations, we are underweight in Japan by 6.50%. Currency Strategy Currency strategy continues to emphasize those currencies that offer the highest expected cash returns in U.S. dollar terms. We continue to have limited exposure to the overvalued DM-bloc currencies and maintain an underweight in the yen. Offsetting these underweights is an overweight in the U.S. dollar. Our position is near neutral in the British pound, and in the Australian and Canadian dollars. We look forward to the challenges ahead and, as always, welcome your thoughts and comments. Sincerely, /s/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO A weaker yen is helping Japan recover from its recent recession. Prices at the consumer level appear to have stopped falling, and the economy has started showing real growth, although the expansion has been neither strong nor consis- tent. The weaker yen and incipient recovery may, however, reduce the pressure to address structural reform. The lack of unequivocal public support for re- formist candidates in the most recent election also may delay deregulation. In pursuit of monetary union, the core European countries are trying to meet the Maastricht criteria. This has produced restrictive fiscal policies at a time of weak economic growth, thus exacerbating structural weaknesses in labor markets. The peripheral European economies have benefited from the drive to EMU, as bond yields and borrowing costs have dropped considerably. The U.S. economy remains among the most productive of the developed countries, due in large part to its flexible labor market. Increases in oil prices to the $25 per barrel range have not flowed through to higher consumer price inflation. Central banks have been acting more responsi- bly since the last major bout of inflation around 1980. Increases in the rela- tive prices of inputs are no longer being accommodated and turned into general price increases. NON-U.S. EQUITY ENVIRONMENT MAJOR MARKETS
Total Return in 6 months 1 year 3 years Annualized U.S. Dollar ended ended ended 8/31/93* Hedged Terms 12/31/96 12/31/96 12/31/96 to 12/31/96 - -------------------------------------------------------- Japan -9.23% 0.06% 6.52% 1.57% U.K. 12.70 15.18 8.92 11.38 Germany 11.32 25.10 8.00 11.40 France 11.21 30.73 4.72 5.58 Canada 18.79 30.20 14.93 15.34 Netherlands 17.64 41.40 18.93 20.49 Australia 7.71 7.71 4.31 7.23 - -------------------------------------------------------- MAJOR CURRENCIES Percent Change 6 months 1 year 3 years Annualized Relative to ended ended ended 8/31/93* U.S. Dollars 12/31/96 12/31/96 12/31/96 to 12/31/96 - ------------------------------------------------------- Yen -5.50% -11.13% -1.30% -3.05% Pound 10.14 -10.22 4.97 4.29 Deutschemark -1.23 -7.12 4.06 2.59 Canadian Dollar -0.36 -0.50 -1.15 -1.10 - -------------------------------------------------------
*Inception date of the Non-U.S. Equity Fund ------------------------------------------------------------ 5 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Non-U.S. Equity Fund invests in the common stocks of companies headquartered outside the U.S. We believe that in a non-U.S. investment program the country allocation decision is the most important. Country assessments are developed by the non-U.S. strategy team in Chicago working with our investment teams in Basel, Frankfurt, London, Paris, Singapore, Sydney and Tokyo. Currency strategies are separately developed and coordinated with market allocations. Our industry strategies and individual security selections are determined by fundamental research. Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund has earned an annualized return of 7.42% versus 7.48% for the benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. For the year ended December 31, 1996, the Fund returned 12.75% while the benchmark returned 7.11%. For the second half of 1996, the Brinson Non-U.S. Equity Fund returned 5.37% compared to the 2.19% return of the benchmark. During 1996 the majority of the developed markets earned double-digit returns, continuing 1995's strong performance. The best performing markets in dollar- hedged terms were Spain, rising 46.76%; Finland, gaining 44.95%; the Netherlands, increasing 41.39%; Sweden, up 39.86% and Hong Kong, adding 33.02%. The majority of other markets also earned double-digit returns. In sharp contrast, Japan was the weakest market, gaining 0.06% in dollar-hedged terms, followed by Singapore, growing 1.42%. The only other markets with single digit returns were Italy, rising 4.23%; New Zealand, adding 5.08%; and Australia, up 7.71%. Since inception, market allocation has added to returns, but detracted somewhat from 1996 performance. Strategic cash, overweights in several Anglo-Saxon markets and underweights of Sweden, Switzerland and Hong Kong combined to reduce returns. Value was added from the strategy of underweighting Japan and Singapore, while overweighting Finland, the Netherlands, Spain and France. Currency management has added solidly to returns since inception and was the greatest positive contributor to 1996 performance, helped by both the strength of the U.S. dollar and other dollar-bloc currencies and the weakness of the yen and the DM-bloc currencies. The current U.S. dollar overweight is driven by an underweighted exposure to the Japanese yen and minimal positions in the DM-bloc currencies. During 1996, stock selection was strongly positive, largely due to excellent Japan stock selection, combined with good results in Canada, Germany and Italy. Positive stock selection from Japan resulted from the portfolio's exposure to high-quality defensive issues and exporters, and underexposure to financials and real estate. A negative contribution came from France and Malaysia, where outperforming momentum and small stocks were avoided. ------------------------------------------------------------ 6 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year 3 years Annualized ended ended ended 8/31/93* 12/31/96 12/31/96 12/31/96 to 12/31/96 - ------------------------------------------------------------------------- BRINSON NON-U.S. EQUITY FUND 5.37% 12.75% 9.55% 7.42% MSCI Non-U.S. Equity (Free) Index (currency unhedged)** 2.19 7.11 8.76 7.48 MSCI Non-U.S. Equity (Free) Index (currency hedged)** 4.25 14.64 8.16 7.94 - -------------------------------------------------------------------------
*Inception date of the Brinson Non-U.S. Equity Fund **Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth No adjustment has been made in the value of an for any income taxes payable investment in the Brinson by shareholders on income Non-U.S. Equity Fund and the dividends and capital gain MSCI Non-U.S. Equity (Free) distributions. Past Index (currency unhedged and performance is no guarantee hedged) if you had invested of future results. Share $100,000 on August 31, 1993, price and return will vary and had reinvested all your with market conditions; income dividends and capital investors may realize a gain gain distributions through or loss upon redemption. December 31, 1996. BRINSON NON-U.S. EQUITY FUND VS. MSCI NON-U.S. EQUITY (FREE) INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [CHART APPEARS HERE] MSCI Non-U.S. Equity MSCI Non-U.S. Equity Brinson Non-U.S. (Free) Index (Free) Index Equity Fund (currency unhedged) (currency unhedged) ---------------- -------------------- -------------------- 8/31/93 $100,000 $100,000 $100,000 12/31/93 96,550 98,875 101,957 3/31/94 95,749 101,980 100,085 6/30/94 97,555 106,879 100,900 9/30/94 99,065 107,516 100,475 12/31/94 97,454 106,277 100,278 3/31/95 95,239 108,396 93,398 6/30/95 97,454 109,552 94,494 9/30/95 106,616 114,063 105,245 12/31/95 112,610 118,746 112,544 3/31/96 115,932 122,431 119,285 6/30/96 120,489 124,467 123,756 9/30/96 121,244 124,631 125,100 12/31/96 126,964 127,189 129,020 8/31/93 = $100,000 Data through 12/31/96 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. ------------------------------------------------------------- 7 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NON-U.S. EQUITIES Airlines................................................................. 0.26% Appliances & Household Durables.......................................... 2.12 Automobiles.............................................................. 2.83 Banking.................................................................. 10.80 Beverages & Tobacco...................................................... 2.28 Broadcasting & Publishing................................................ 1.37 Building Materials....................................................... 1.14 Business & Public Service................................................ 3.21 Chemicals................................................................ 3.88 Construction............................................................. 1.88 Data Processing.......................................................... 1.00 Electric Components...................................................... 1.23 Electronics.............................................................. 4.09 Energy................................................................... 8.08 Financial Services....................................................... 1.44 Food & House Products.................................................... 4.61 Forest Products.......................................................... 1.77 Gold Mining.............................................................. 0.10 Health & Personal Care................................................... 3.99 Industrial Components.................................................... 2.15 Insurance................................................................ 4.09 Leisure & Tourism........................................................ 0.61 - --------------------------------------------------------------------------------
Machinery & Engineering................................................ 1.38% Merchandising.......................................................... 4.16 Metals-Steel........................................................... 1.94 Miscellaneous Materials................................................ 1.15 Multi-Industry......................................................... 4.28 Non-Ferrous Metals..................................................... 2.16 Real Estate............................................................ 0.76 Recreation............................................................. 0.54 Shipping............................................................... 0.77 Telecommunications..................................................... 4.99 Textiles & Apparel..................................................... 0.23 Transportation......................................................... 0.83 Utilities.............................................................. 5.89 ------ Total Non-U.S. Equities.............................................. 92.01* ------ SHORT-TERM INVESTMENTS................................................. 6.43* ------ TOTAL INVESTMENTS.................................................... 98.44 CASH AND OTHER ASSETS, LESS LIABILITIES...................................................... 1.56 ------ NET ASSETS........................................................... 100.00% ======
MARKET AND CURRENCY STRATEGY As of December 31, 1996 (Unaudited)
Portfolio ----------------- Market Currency Strategy Strategy Index - --------------------------------------- U.S. Dollar 0.0% 35.5% 0.0% Japan 24.2 20.7 30.7 Australia 4.9 2.9 2.8 Belgium 3.2 1.2 1.1 Canada 2.9 3.9 4.5 Finland 1.5 1.5 0.6 France 9.6 1.1 6.6 Germany 8.3 3.8 7.8 Hong Kong 1.4 0.4 3.6 Italy 3.3 3.3 2.9 Malaysia 1.3 1.3 2.5 Netherlands 6.1 0.6 4.5 New Zealand 3.3 3.3 0.4 Spain 3.6 2.1 2.2 Sweden 0.0 0.0 2.4 Switzerland 1.6 0.1 5.4 U.K. 19.8 18.3 18.2 Cash Reserves 5.0 0.0 0.0 Other Markets 0.0 0.0 3.8 - --------------------------------------- 100.0% 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ----------------------- 1. Royal Dutch Petroleum Co. 1.73% 2. British Telecommunications PLC 1.13 3. General Electric Co. PLC 1.12 4. Broken Hill Proprietary Co. Ltd. 1.07 5. Lloyds TSB Group PLC 1.07 6. Matsushita Electric Industrial Co. 1.05 7. British Petroleum Co. PLC 1.05 8. Toray Industries, Inc. 1.03 9. Telecom Corp. of New Zealand Ltd. 0.95 10. Grand Metropolitan PLC 0.87 - ---------------------------------------------
*The Fund held a long position in Topix futures on December 31, 1996 which increased Japanese equity exposure from 23.34% to 25.03% and decreased the Fund's exposure to Short-Term Investments from 6.43% to 4.74% ------------------------------------------------------------ 8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ Non-U.S. Equities -- 92.01% AUSTRALIA -- 4.76% Amcor Ltd................................................. 85,700 $ 550,685 Boral Ltd. ............................................... 120,000 341,223 Broken Hill Proprietary Co. Ltd. ......................... 192,270 2,736,679 CRA Ltd. ................................................. 66,210 1,038,640 David Jones Ltd. ......................................... 316,600 440,071 Lend Lease Corp. Ltd. .................................... 21,578 418,192 M.I.M. Holdings Ltd. ..................................... 271,976 380,205 National Australia Bank Ltd. ............................. 110,448 1,298,356 News Corp. Ltd. .......................................... 231,257 1,219,656 News Corp. Ltd. Preferred................................. 60,000 266,878 Pacific Dunlop Ltd. ...................................... 152,700 388,118 Qantas Airways Ltd. ...................................... 203,161 338,871 Santos Ltd................................................ 128,900 522,152 WMC Ltd. ................................................. 100,700 634,274 Westpac Bank Corp. Ltd. .................................. 209,851 1,193,434 Woolworth's Ltd. ......................................... 163,000 392,287 ------------ 12,159,721 ------------ BELGIUM -- 3.18% Delhaize-Le Lion S.A. .................................... 8,100 480,678 Electrabel S.A. .......................................... 6,265 1,481,218 Fortis AG................................................. 5,700 913,378 Fortis AG Strip (b)....................................... 90 45 General de Banque S.A..................................... 1,300 465,536 Groupe Bruxelles Lambert S.A. ............................ 3,530 453,968 Kredietbank NV............................................ 2,410 789,057 Petrofina S.A. ........................................... 3,275 1,041,336 Societe Generale de Belgique.............................. 5,828 456,853 Solvay S.A. Class A....................................... 1,235 755,242 Tractebel................................................. 1,650 767,484 Tractebel Warrants "99" (b)............................... 1,350 19,550 Union Miniere Group S.A. (b).............................. 7,080 479,214 ------------ 8,103,559 ------------ CANADA -- 2.66% Alcan Aluminium Ltd. ..................................... 14,500 489,293 Bank of Montreal.......................................... 13,100 416,723 Barrick Gold Corp. ....................................... 8,800 252,006 BCE, Inc. ................................................ 8,200 390,676 Canadian National Railway Co. ............................ 10,000 380,125 Canadian Pacific Ltd. .................................... 33,100 870,608 Hudson's Bay Co. ......................................... 13,500 225,558 Imperial Oil Ltd. ........................................ 11,900 560,010 Moore Corp. Ltd. ......................................... 13,000 269,371 Noranda, Inc. ............................................ 15,100 336,572 Northern Telecom Ltd. .................................... 5,000 310,813 NOVA Corp. ............................................... 22,700 201,229 Royal Bank of Canada...................................... 15,000 526,412 Seagram Co. Ltd. ......................................... 12,700 502,681 Thomson Corp. ............................................ 32,400 715,088 TransCanada Pipelines Ltd. ............................... 19,700 344,959 ------------ 6,792,124 ------------ FINLAND -- 1.44% Merita Ltd. Class A (b)................................... 127,400 395,275 Nokia Ab Class A.......................................... 30,200 1,748,180
SHARES VALUE ------- ---------- Outokumpu OY Class A........................................ 20,800 $ 354,263 Pohjola Insurance Group Class B............................. 8,100 181,894 Sampo Insurance Co. Ltd. Class A............................ 3,500 275,656 UPM-Kymmene Corp. (b)....................................... 34,000 711,868 ---------- 3,667,136 ---------- FRANCE -- 9.43% Accor S.A. ................................................. 6,395 808,186 Alcatel Alsthom............................................. 8,725 699,517 AXA S.A. ................................................... 3,900 247,562 Banque Nationale de Paris................................... 31,930 1,233,298 CEP Communications.......................................... 2,300 162,146 CEP Communications Warrants "97" (b)........................ 4,400 5,036 Cie Bancaire S.A. .......................................... 7,588 896,192 Cie de Saint Gobain......................................... 10,913 1,540,797 Cie de Suez................................................. 13,844 587,452 Cie Generale des Eaux....................................... 15,864 1,962,135 Colas....................................................... 1,977 285,216 Credit Local de France...................................... 14,550 1,265,047 Elf Aquitaine S.A. ......................................... 15,634 1,420,343 GAN-Groupe des Assurances Nationales (b).................... 880 17,774 Groupe Danone............................................... 2,200 305,961 L'Oreal S.A. ............................................... 400 150,345 Lafarge S.A. ............................................... 7,600 455,091 LVMH........................................................ 6,915 1,927,373 Michelin Class B............................................ 18,350 988,677 Pechiney S.A. Class A (b)................................... 15,993 668,798 Peugeot S.A. ............................................... 15,580 1,750,191 Rhone-Poulenc Class A....................................... 36,500 1,242,012 Sanofi...................................................... 1 99 SEITA....................................................... 12,500 521,765 Societe Generale............................................ 12,640 1,364,003 Total S.A. Class B.......................................... 22,895 1,858,482 UAP-Union des Assurances de Paris........................... 26,884 669,682 Usinor Sacilor.............................................. 71,900 1,044,194 ---------- 24,077,374 ---------- GERMANY -- 7.53% Allianz AG Holding.......................................... 908 1,632,055 BASF AG..................................................... 25,780 986,970 Bayer AG.................................................... 34,990 1,417,900 Bayerische Motoren Werke AG................................. 1,300 895,854 Commerzbank AG.............................................. 27,540 698,731 Daimler-Benz AG (b)......................................... 14,650 1,002,904 Deutsche Bank AG............................................ 26,367 1,228,441 Deutsche Telekom AG (b)..................................... 43,600 908,157 Henkel KGaA-Vorzug AG....................................... 11,550 569,593 Hochtief AG................................................. 7,400 290,507 Hoechst AG.................................................. 11,680 540,383 M.A.N. AG................................................... 1,840 443,553 Mannesmann AG............................................... 2,457 1,055,756 Metro AG.................................................... 7,958 622,243 Muenchener Rueckver AG...................................... 462 1,119,700 Muenchener Rueckver AG Warrants "98" (b).................... 12 2,500 Preussag AG................................................. 2,969 670,438 RWE AG...................................................... 19,000 793,978 Schering AG................................................. 12,192 1,027,669 Siemens AG.................................................. 9,200 426,360 Thyssen AG.................................................. 4,700 832,282
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ GERMANY (CONTINUED) Veba AG................................................. 21,988 $ 1,262,694 Volkswagen AG........................................... 1,900 785,965 ------------ 19,214,633 ------------ HONG KONG -- 1.52% Cheung Kong Holdings Ltd. .............................. 38,000 337,755 China Light & Power Co. Ltd. ........................... 78,000 346,895 Guoco Group Ltd. ....................................... 48,000 268,704 Hang Seng Bank Ltd. .................................... 31,500 382,811 Hong Kong Telecommunications Ltd. ...................... 135,200 217,616 Hutchison Whampoa Ltd. ................................. 85,000 667,591 Jardine Matheson Holdings ADR (c)....................... 31,200 205,920 New World Development Co. Ltd. ......................... 53,000 358,020 Sun Hung Kai Properties Ltd. ........................... 28,000 342,991 Swire Pacific Ltd. Class A ............................. 44,000 419,527 Wharf (Holdings) Ltd. .................................. 68,000 339,345 ------------ 3,887,175 ------------ ITALY -- 2.98% Assicurazioni Generali.................................. 41,250 779,965 Danieli & Co. Savings (Risp)............................ 73,000 304,867 Edison Spa.............................................. 46,000 290,431 Eni Spa................................................. 40,000 204,801 Eni ADR (c)............................................. 22,100 1,140,913 Fiat Spa-Priv........................................... 324,000 533,785 INA-Istituto Nazionale de Assicurazioni................. 136,000 176,742 Istituto Mobilaire Italiano Spa......................... 99,000 846,432 Italgas Spa............................................. 61,000 254,150 La Rinascente........................................... 35,000 202,565 La Rinascente Savings (Risp)............................ 46,000 117,382 La Rinascente Warrants "99" (b)......................... 2,800 1,232 Mediobanca Spa.......................................... 21,000 113,045 Montedison Spa (b)...................................... 1,060,380 721,100 SAI-Savings (Risp)...................................... 47,000 166,764 Telecom Italia Spa...................................... 502,000 977,258 Telecom Italia Mobile Spa............................... 538,000 766,044 ------------ 7,597,476 ------------ JAPAN -- 23.34% Amada Co. Ltd. ......................................... 106,000 821,918 Asahi Glass Co. Ltd. ................................... 125,000 1,173,861 Bank of Tokyo-Mitsubishi Ltd. .......................... 95,000 1,759,714 Canon, Inc.............................................. 90,000 1,985,009 Canon Sales Co., Inc. .................................. 35,200 782,424 Citizen Watch Co. Ltd. ................................. 96,000 686,482 Dai Nippon Printing Co. Ltd. ........................... 95,000 1,661,497 Daiichi Pharmaceutical Co. Ltd.......................... 68,000 1,089,687 Daikin Industries Ltd................................... 104,000 922,891 Daiwa House Industry Co. Ltd............................ 52,000 667,528 Fanuc................................................... 42,100 1,345,662 Fujitsu................................................. 61,000 567,589 Hitachi Ltd............................................. 204,000 1,898,165 Honda Motor Co.......................................... 27,000 769,966 Inax.................................................... 132,000 975,756 Isetan.................................................. 36,000 465,237 Ito-Yokado Co. Ltd...................................... 38,000 1,650,039 Kaneka Corp............................................. 52,000 265,667 Keio Teito Electric Railway............................. 118,000 575,411
SHARES VALUE ------- ------------ Kinki Nippon Railway...................................... 119,000 $ 741,251 Kirin Brewery Co. Ltd..................................... 113,000 1,109,848 Kokuyo.................................................... 22,000 542,087 Kuraray Co. Ltd........................................... 92,000 848,109 Kyocera Corp. ............................................ 9,000 559,835 Maeda Road Construction................................... 24,000 277,074 Matsushita Electric Industrial Co. ....................... 165,000 2,686,741 Mitsubishi Paper Mills.................................... 129,000 503,463 NGK Insulators............................................ 169,000 1,601,620 Nintendo Corp. Ltd........................................ 9,500 678,513 Nippon Denso Co. Ltd...................................... 71,000 1,706,643 Nippon Meat Packers, Inc.................................. 67,000 865,857 Nippon Steel Co........................................... 83,000 244,559 Okumura................................................... 109,000 661,118 Orix Corp................................................. 2,000 83,053 Osaka Gas Co.............................................. 426,000 1,163,453 Sankyo Co. Ltd. .......................................... 76,000 2,147,670 Sanwa Bank Ltd. .......................................... 51,000 694,236 Secom..................................................... 24,000 1,449,470 Seino Transportation ..................................... 37,000 408,030 Sekisui House Ltd. ....................................... 200,000 2,033,256 Shinmaywa Industries Ltd. ................................ 96,000 705,505 Sony Corp................................................. 31,600 2,066,374 Sumitomo Bank............................................. 110,000 1,582,666 Sumitomo Electric Industries.............................. 85,000 1,186,353 Takeda Chemical Industries................................ 77,000 1,612,044 TDK Corp.................................................. 19,000 1,235,892 Tokio Marine & Fire Insurance Co.......................... 94,000 882,743 Tokyo Electric Power...................................... 45,500 995,692 Tokyo Steel Mfg........................................... 76,700 1,090,333 Tonen Corp................................................ 75,000 872,319 Toray Industries, Inc..................................... 425,000 2,618,032 Toshiba Corp.............................................. 243,000 1,524,115 Toyo Suisan Kaisha........................................ 57,000 569,656 Toyota Motor Corp......................................... 27,000 774,619 Yamazaki Baking Co. Ltd. ................................. 50,000 796,933 ------------ 59,583,665 ------------ MALAYSIA -- 1.25% Hume Industries (Malaysia) Bhd............................ 48,000 302,198 Kuala Lumpur Kepong Bhd................................... 109,000 276,222 Land & General Holdings Bhd............................... 108,500 259,919 Malayan Banking Bhd....................................... 21,000 232,825 Malaysia International Shipping Bhd (Frgn.)............... 63,000 187,092 Nestle (Malaysia) Bhd..................................... 9,000 72,342 Public Bank Bhd (Frgn.)................................... 102,000 216,076 Resorts World Bhd......................................... 39,000 177,589 Sime Darby Bhd............................................ 101,000 397,921 Telekom Malaysia Bhd...................................... 34,000 302,910 Tenaga Nasional Bhd....................................... 120,000 574,936 YTL Corp. Bhd............................................. 34,000 183,092 ------------ 3,183,122 ------------
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ NETHERLANDS -- 5.99% ABN AMRO Holdings NV.................................... 19,560 $ 1,271,055 Akzo Nobel NV........................................... 2,500 341,100 DSM NV.................................................. 4,850 477,794 Hoogovens NV............................................ 7,100 295,542 ING Groep NV............................................ 52,834 1,899,910 KLM Royal Dutch Air Lines NV............................ 11,400 320,310 KPN NV.................................................. 33,797 1,287,635 Philips Electronics NV.................................. 16,700 675,840 Royal Dutch Petroleum Co................................ 25,230 4,418,204 Royal Dutch Petroleum Co. NY Shares (c)................. 5,200 887,900 Unilever NV............................................. 11,440 2,021,197 Vendex International NV................................. 19,450 830,985 VNU-Ver Ned Uitgevers................................... 27,100 565,595 ------------ 15,293,067 ------------ NEW ZEALAND -- 3.04% Brierley Investments Ltd................................ 1,395,600 1,291,766 Carter Holt Harvey Ltd.................................. 481,600 1,092,303 Fletcher Challenge Building............................. 156,550 481,165 Fletcher Challenge Energy............................... 156,550 453,512 Fletcher Challenge Forest Ltd........................... 317,445 531,580 Fletcher Challenge Paper................................ 313,100 643,765 Telecom Corp. of New Zealand Ltd........................ 474,200 2,419,079 Telecom Corp. of New Zealand Ltd. ADS (c)............... 10,500 850,500 ------------ 7,763,670 ------------ SPAIN -- 3.50% Acerinox S.A. .......................................... 2,500 360,561 Banco Bilbao-Vizcaya S. A............................... 12,500 673,650 Banco Central Hispanoamericano.......................... 11,430 293,054 Banco Intercontinental Espanol S.A...................... 2,091 323,597 Banco Popular Espanol S.A............................... 2,880 564,597 Banco Santander S.A..................................... 11,500 734,692 Cia Sevillana de Electricidad........................... 20,403 231,362 Empresa Nacional de Electridad S.A...................... 15,200 1,079,746 Fomento de Construcciones y Contratas S.A............... 4,300 400,000 Gas Natural SDG S.A. ................................... 1,500 348,261 Iberdrola S.A........................................... 80,600 1,140,142 Mapfre Corp. ........................................... 5,800 352,704 Repsol S.A.............................................. 6,200 237,371 Repsol S.A. ADR (c)..................................... 15,500 590,937 Telefonica de Espana.................................... 52,700 1,221,530 Vallehermosa S.A........................................ 7,700 166,638 Viscofan Envolturas Celulosicas S.A..................... 15,300 223,487 ------------ 8,942,329 ------------ SWITZERLAND -- 1.79% ABB AG (Bearer)......................................... 210 260,408 CS Holdings AG (Reg.)................................... 2,678 274,242 Nestle S.A. (Reg.)...................................... 1,251 1,338,860 Novartis AG (Reg.)...................................... 957 1,092,635 Roche Holding AG (Gen.)................................. 99 767,919 Schweiz Bankgesellschaft (Bearer)....................... 270 235,875
SHARES VALUE ------- ------------ Societe Generale de Surveillance Holding S.A. (Bearer)..... 75 $ 183,772 Zurich Versicherungs (Reg.)................................ 1,491 413,087 ------------ 4,566,798 ------------ UNITED KINGDOM -- 19.60% Abbey National PLC......................................... 63,000 824,833 Bank of Scotland........................................... 104,000 549,101 Bass PLC................................................... 39,500 555,015 B.A.T. Industries PLC...................................... 222,000 1,840,818 Booker PLC................................................. 50,500 345,281 British Energy PLC......................................... 479,000 1,205,083 British Gas PLC............................................ 451,300 1,733,987 British Petroleum Co. PLC.................................. 223,252 2,676,502 British Steel PLC.......................................... 379,000 1,041,066 British Telecommunications PLC............................. 428,200 2,891,065 Charter PLC................................................ 57,171 724,544 Coats Viyella PLC.......................................... 261,100 594,323 FKI PLC.................................................... 213,625 738,529 General Electric Co. PLC................................... 436,700 2,855,030 Glaxo Wellcome PLC......................................... 67,500 1,095,157 Grand Metropolitan PLC..................................... 282,700 2,220,765 Guinness PLC............................................... 224,200 1,755,460 Hanson PLC................................................. 451,500 629,766 Hillsdown Holdings PLC..................................... 321,900 1,101,831 House of Fraser PLC........................................ 360,800 947,849 HSBC Holdings PLC.......................................... 72,000 1,609,310 Imperial Chemical Industries PLC........................... 24,000 315,660 Legal & General Group PLC.................................. 159,000 1,012,288 Lloyds TSB Group PLC....................................... 370,185 2,727,446 Marks & Spencer PLC........................................ 184,900 1,553,755 Millennium Chemicals, Inc. (b)............................. 3,707 65,799 Mirror Group PLC........................................... 153,600 566,504 National Power PLC......................................... 106,500 891,297 National Westminster Bank PLC.............................. 64,500 756,713 Northern Foods PLC......................................... 144,000 503,988 Peninsular & Oriental Steam Navigation Co.................. 177,700 1,794,335 Reckitt & Colman PLC....................................... 34,746 430,534 Redland PLC................................................ 57,600 361,294 RJB Mining PLC............................................. 131,000 964,060 Royal & Sun Alliance Insurance Group PLC................... 106,149 807,517 RTZ Corp. PLC.............................................. 70,800 1,134,763 Sainsbury (J.) PLC......................................... 147,000 976,142 Scottish Hydro-Electric PLC................................ 116,800 655,663 Sears PLC.................................................. 437,700 711,646 Sedgwick Group PLC......................................... 294,000 661,664 SmithKline Beecham PLC..................................... 84,800 1,174,835 Smurfit (Jefferson) Group PLC.............................. 156,000 463,221 Tesco PLC.................................................. 126,900 769,913 Thames Water PLC........................................... 84,600 886,830 Unilever PLC............................................... 40,200 974,556 Vodafone Group PLC......................................... 118,500 499,919 Yorkshire Water PLC........................................ 36,000 436,522 ------------ 50,032,179 ------------ Total Non-U.S. Equities (Cost $215,959,551)....................................... 234,864,028 ------------
- -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ------------ Short-Term Investments -- 6.43% COMMERCIAL PAPER -- 6.43% Burlington Northern Santa Fe 5.650%, due 01/17/97................................ $ 1,500,000 $ 1,496,233 Case Credit Corp. 5.510%, due 01/07/97................................ 1,000,000 999,082 Cincinnati Bell, Inc. 7.250%, due 01/02/97................................ 3,032,000 3,031,389 Crown Cork & Seal Co., Inc. 5.520%, due 01/10/97................................ 2,000,000 1,997,240 5.580%, due 01/29/97................................ 1,000,000 995,660 5.580%, due 01/31/97................................ 1,000,000 995,350 CSX Corp. 5.520%, due 01/15/97....................... 1,500,000 1,496,780 Rite Aid Corp. 5.650%, due 01/06/97................................ 1,500,000 1,498,823 5.600%, due 01/21/97................................ 1,000,000 996,889 Tyson Foods, Inc. 5.750%, due 01/09/97................................ 900,000 898,850 Vastar Resources, Inc. 6.020%, due 01/02/97................................ 1,000,000 999,833 Whirlpool Financial Corp. 6.000%, due 01/03/97................................ 1,000,000 999,667 ------------ Total Short-Term Investments (Cost $16,405,796).................................. 16,405,796 ------------ Total Investments (Cost $232,365,347) -- 98.44% (a)................... 251,269,824 ------------ Cash and other assets, less liabilities -- 1.56%........................... 3,994,983 ------------ Net Assets -- 100%................................... $255,264,807 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $232,365,347; net unrealized appreciation consisted of: Gross unrealized appreciation............................... $ 31,057,745 Gross unrealized depreciation............................... (12,153,268) ------------ Net unrealized appreciation............................... $ 18,904,477 ============
(b) Non-income producing security (c) Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Non-U.S. Equity Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------ ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar......... 02/20/97 3,200,000 $ 2,342,279 $ (60,845) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 02/20/97 5,750,000 4,564,330 (122,570) Belgian Franc........... 02/20/97 135,000,000 4,264,267 202,899 British Pound........... 02/20/97 2,150,000 3,675,500 (363,834) Dutch Guilder........... 02/20/97 23,500,000 13,629,905 584,762 French Franc............ 02/20/97 113,000,000 21,799,221 576,855 German Mark............. 02/20/97 16,400,000 10,675,842 439,372 Hong Kong Dollars....... 02/20/97 17,600,000 2,275,681 (6) Japanese Yen............ 02/20/97 505,000,000 4,381,039 294,604 Spanish Peseta.......... 02/20/97 420,000,000 3,224,988 72,233 Swiss Franc............. 02/20/97 5,700,000 4,266,553 387,268 ---------- Total................. $2,010,738 ========== FUTURES CONTRACTS (NOTE 5) The Non-U.S. Equity Fund had the following open index futures contracts as of December 31, 1996: SETTLEMENT CURRENT UNREALIZED DATE COST VALUE LOSS ---------- ------------ ----------- ---------- INDEX FUTURES BUY CON- TRACTS Topix, 34 contracts..... March 1997 $ 4,484,708 $ 4,311,881 $ (172,827) ==========
The segregated cash pledged to cover margin requirements for the open positions at December 31, 1996 was $1,068,007. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $232,365,347) (Note 1)............... $251,269,824 Cash............................................................. 6,576,841 Foreign currency, at value (Cost $796,042)....................... 805,150 Receivables: Investment securities sold...................................... 528,733 Dividends....................................................... 640,537 Fund shares sold................................................ 120,851 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 2,010,738 Other assets..................................................... 50,759 ------------ TOTAL ASSETS.................................................. 262,003,433 ------------ LIABILITIES: Payables: Investment securities purchased................................. 5,090,839 Fund shares redeemed............................................ 1,093,192 Variation margin (Note 5)....................................... 172,827 Investment advisory fees (Note 2)............................... 160,210 Accrued expenses................................................ 221,558 ------------ TOTAL LIABILITIES............................................. 6,738,626 ------------ NET ASSETS........................................................ $255,264,807 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $233,253,507 Accumulated undistributed net investment income.................. 199,582 Accumulated net realized gain.................................... 1,042,476 Net unrealized appreciation...................................... 20,769,242 ------------ NET ASSETS.................................................... $255,264,807 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $253,355,869 and 22,855,725 shares is- sued and outstanding) (Note 7)................................. $ 11.09 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,908,938 and 173,185 shares issued and outstanding) (Note 7)...................................... $ 11.02 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $295,617 for foreign taxes withheld)........... $ 2,331,420 Interest......................................................... 507,549 ----------- TOTAL INCOME.................................................. 2,838,969 ----------- EXPENSES: Advisory (Note 2)................................................ 933,582 Administration................................................... 72,871 Accounting....................................................... 70,594 Custodian........................................................ 45,674 Distribution (Note 6)............................................ 6,504 Other............................................................ 147,475 ----------- TOTAL EXPENSES................................................ 1,276,700 Expenses deferred by Advisor (Note 2)......................... (103,191) ----------- NET EXPENSES.................................................. 1,173,509 ----------- NET INVESTMENT INCOME ........................................ 1,665,460 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 5,365,490 Futures contracts............................................... (541,034) Foreign currency transactions................................... 878,088 ----------- Net realized gain............................................. 5,702,544 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ............................... 5,665,728 Futures contracts .............................................. (192,976) Forward contracts............................................... (54,807) Translation of other assets and liabilities denominated in for- eign currency.................................................. 15,312 ----------- Change in net unrealized appreciation or depreciation......... 5,433,257 ----------- Net realized and unrealized gain.................................. 11,135,801 ----------- Net increase in net assets resulting from operations.............. $12,801,261 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 1,665,460 $ 3,265,964 Net realized gain............................. 5,702,544 22,260,813 Change in net unrealized appreciation or de- preciation .................................. 5,433,257 10,918,989 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 12,801,261 36,445,766 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class........................... (2,168,905) (3,057,609) SwissKey Fund Class.......................... (10,222) (8,629) Distributions from net realized gain: Brinson Fund Class........................... (12,209,010) (8,632,717) SwissKey Fund Class.......................... (94,152) (14,731) ------------ ------------ Total distributions to shareholders.......... (14,482,289) (11,713,686) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 49,366,958 86,752,018 Shares issued on reinvestment of distribu- tions........................................ 14,118,771 10,473,903 Shares redeemed............................... (20,168,223) (56,648,208) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 7)............. 43,317,506 40,577,713 ------------ ------------ TOTAL INCREASE IN NET ASSETS................ 41,636,478 65,309,793 ------------ ------------ NET ASSETS: Beginning of period........................... 213,628,329 148,318,536 ------------ ------------ End of period (including accumulated undis- tributed net investment income of $199,582 and $785,599, respectively).................. $255,264,807 $213,628,329 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED DECEMBER 31, YEAR YEAR AUGUST 31, 1993* 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 11.17 $ 9.68 $ 9.69 $ 10.00 -------- -------- -------- ------- Income from investment operations: Net investment income. 0.07 0.18 0.15 0.10 Net realized and unrealized gain (loss)............... 0.51 2.05 (0.16) (0.34) -------- -------- -------- ------- Total income (loss) from investment operations......... 0.58 2.23 (0.01) (0.24) -------- -------- -------- ------- Less distributions: Distributions from net investment income.... (0.10) (0.18) -- (0.07) Distributions from net realized gain........ (0.56) (0.56) -- -- -------- -------- -------- ------- Total distributions. (0.66) (0.74) -- (0.07) -------- -------- -------- ------- Net asset value, end of period................. $ 11.09 $ 11.17 $ 9.68 $ 9.69 ======== ======== ======== ======= Total return (non- annualized)............ 5.37% 23.64% (0.10%) (2.45%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $253,356 $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.08%** 1.20% 1.23% 1.60%** After expense reim- bursement............ 1.00%** 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 1.35%** 1.67% 1.93% 1.28%** After expense reim- bursement............ 1.43%** 1.87% 2.16% 1.88%** Portfolio turnover rate.................. 12% 20% 14% 12% Average commission rate paid per share........ $ 0.0224 $ 0.0219 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.12 $ 10.26 ------- ------- Income from investment operations: Net investment income....................... 0.02 0.12 Net realized and unrealized gain............ 0.50 1.45 ------- ------- Total income from investment operations... 0.52 1.57 ------- ------- Less distributions: Distributions from net investment income.... (0.06) (0.15) Distributions from net realized gain........ (0.56) (0.56) ------- ------- Total distributions....................... (0.62) (0.71) ------- ------- Net asset value, end of period................ $ 11.02 $ 11.12 ======= ======= Total return (non-annualized)................. 4.85% 15.78% Ratios/Supplemental data Net assets, end of period (in 000s).......... $ 1,909 $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement................ 1.92%** 2.04%** After expense reimbursement................. 1.84%** 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement................ 0.51%** 0.83%** After expense reimbursement................. 0.59%** 1.03%** Portfolio turnover rate...................... 12% 20% Average commission rate paid per share....... $0.0224 $0.0219
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 NON-U.S. EQUITY FUND -- 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 seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. The Fund has two classes of shares outstanding, Brinson Fund Class and SwissKey Fund Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share of the Fund represents an identical interest in the investments of the Fund and has the same rights. The following is a summary of significant accounting policies consistently followed by the Non-U.S. Equity Fund (the "Fund") in the preparation of its 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. 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 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 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, income receipts and expense accruals are translated at the prevailing exchange rate on 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 statement 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 amortization of premiums and 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 Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1996, therefore, no federal income tax provision was required. F. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its 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 generally accepted accounting principles. 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 the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Fund Class shares will not incur any of the distribution expenses of the SwissKey Fund Class. H. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles 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. - -------------------------------------------------------------------------------- 19 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00% and 1.84% of the average daily net assets of the Brinson Fund Class and SwissKey Fund Class, respectively. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1996, were as follows:
ADVISORY ADVISORY FEES FEE FEES DEFERRED -------- -------- -------- Non-U.S. Equity Fund................................. 0.80% $933,582 $103,191
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees' fees paid to unaffiliated trustees were $3,496. 3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ----------- ----------- Non-U.S. Equity Fund.................................... $54,054,840 $24,504,265
4. FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages 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 the 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 Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the six months ended December 31, 1996, was the Fund's custodian. 5. FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund 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 Fund enters into such contracts to hedge a portion of its portfolio. 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 Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, 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 Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6. DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Fund Class of shares. Annual fees under the Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the SwissKey Fund Class. - -------------------------------------------------------------------------------- 20 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
SIX MONTHS ENDED DECEMBER 31, 1996 YEAR ENDED (UNAUDITED) JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Fund Class............ 4,323,938 $48,513,082 8,044,119 $85,398,213 SwissKey Fund Class........... 77,339 853,876 125,829 1,353,805 --------- ----------- --------- ----------- Total Sales................ 4,401,277 $49,366,958 8,169,948 $86,752,018 ========= =========== ========= =========== Dividend Reinvestment: Brinson Fund Class............ 1,296,079 $14,049,499 998,992 $10,452,496 SwissKey Fund Class........... 6,426 69,272 2,042 21,407 --------- ----------- --------- ----------- Total Dividend Reinvest- ment...................... 1,302,505 $14,118,771 1,001,034 $10,473,903 ========= =========== ========= =========== Redemptions: Brinson Fund Class............ 1,774,371 $19,898,922 5,347,882 $56,492,091 SwissKey Fund Class........... 24,099 269,301 14,352 156,117 --------- ----------- --------- ----------- Total Redemptions.......... 1,798,470 $20,168,223 5,362,234 $56,648,208 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 21 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- THE BRINSON FUNDS --------------------------------------------------------- Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris Singapore . Sydney . Tokyo . Zurich LOGO 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 LOGO SWISSKEY FUNDS SWISSKEY GLOBAL FUND SWISSKEY GLOBAL EQUITY FUND SWISSKEY GLOBAL BOND FUND SEMI-ANNUAL REPORT DECEMBER 31, 1996 Your Key to Performance ----------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CFA, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their institutional investment management organizations into a single investment management business operating as Brinson Partners, Inc. in North America and SBC Brinson in its other world-wide locations. We are a global investment management organization with over $72 billion in institutional assets under discretionary active management. We are also the investment advisor for SBC Private Banking mutual fund assets which total $47 billion. The firm manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other institutional investors located throughout the world. Our organization employs over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, Inc., an established U.S.-based leader in the investment business located in Chicago, acts as the headquarters of our world-wide investment management process. The firm began managing international securities and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients and has offered fully integrated global portfolios since then. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Global Fund................................................................... 6 Schedule of Investments...................................................10 Financial Statements......................................................18 Financial Highlights......................................................21 Global Equity Fund............................................................23 Schedule of Investments...................................................27 Financial Statements......................................................33 Financial Highlights......................................................36 Global Bond Fund..............................................................38 Schedule of Investments...................................................41 Financial Statements......................................................44 Financial Highlights......................................................47 The SwissKey Funds--Notes to Financial Statements.............................49 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO February 19, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the December 31, 1996 Semi-Annual Report for the Global Fund, Global Equity Fund and Global Bond Fund. This Report presents our current global economic and market outlook, as well as the Funds' recent investment strategies and performance. To summarize this information: Global Fund For the period from July 31, 1995 to December 31, 1996, the Fund provided an annualized total return of 15.93%. The Fund returned 8.89% in the second half of 1996. The strategy of underweighting the overpriced equity markets in favor of the attractive bond markets remains in place. A portion of foreign currency exposure is hedged into U.S. dollars. Global Equity Fund For the period from July 31, 1995 to December 31, 1996, the Fund provided an annualized total return of 18.93%. The Fund returned 7.23% in the second half of 1996. Reflecting only modestly attractive equity markets, the Fund maintains its 15% cash hedge. Primary underweights include the U.S. market, in light of its overvaluation and increasing volatility. A portion of foreign currency exposure is hedged into U.S. dollars. Global Bond Fund For the period from July 31, 1995 to December 31, 1996, the Fund provided an annualized total return of 11.40%. The Fund returned 6.76% in the second half of 1996. Bond markets are generally attractive. Yields in Japan are unsustainably low, making that market very unattractive. It remains the largest underweight in the portfolio. A portion of foreign currency exposure is hedged into U.S. dollars. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Please visit our website at http://networth.galt.com/swisskey Sincerely, /s/ Raoul Weil /s/ Raymond Simon Raoul Weil Raymond Simon Managing Director Executive Director PRIVATE [LOGO] BANKING PRIVATE [LOGO] BANKING ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO A weaker yen is helping Japan recover from its recent recession. Prices at the consumer level appear to have stopped falling, and the economy has started showing real growth, although the expansion has been neither strong nor consistent. The weaker yen and incipient recovery may, however, reduce the pressure to address structural reform. The lack of unequivocal public support for reformist candidates in the most recent election also may delay deregulation. In pursuit of monetary union, the core European countries are trying to meet the Maastricht criteria. This has produced restrictive fiscal policies at a time of weak economic growth, thus exacerbating structural weaknesses in labor markets. The peripheral European economies have benefited from the drive to EMU, as bond yields and borrowing costs have dropped considerably. The U.S. economy remains among the most productive of the developed countries, due in large part to its flexible labor market. Increases in oil prices to the $25 per barrel range have not flowed through to higher consumer price inflation. Central banks have been acting more responsibly since the last major bout of inflation around 1980. Increases in the relative prices of inputs are no longer being accommodated and turned into general price increases. GLOBAL ENVIRONMENT
6 months 1 year MAJOR MARKETS ended ended Total Return in U.S. Dollars 12/31/96 12/31/96 - -------------------------------------------------------- U.S. Equity 9.92% 21.21% Non-U.S. Equities (currency unhedged) 2.19 7.11 Non-U.S. Equities (currency hedged) 4.25 14.64 U.S. Bonds 4.94 3.63 Non-U.S. Bonds (currency unhedged) 5.45 4.10 Non-U.S. Bonds (currency hedged) 7.98 11.82 U.S. Cash Equivalents 2.56 5.16 - -------------------------------------------------------- MAJOR CURRENCIES 6 months 1 year Percent Change Relative to U.S. ended ended Dollars 12/31/96 12/31/96 - -------------------------------------------------------- Yen -5.50% -11.13% Pound 10.14 10.22 Deutschemark -1.23 -7.12 Canadian Dollar -0.36 -0.50 - --------------------------------------------------------
------------------------------------------------------------ 5 GLOBAL FUND - ------------------------------------------------------------------------------- LOGO The Global Fund is diversified across the equity and fixed income markets of the U.S. and a broad range of other countries. This Fund is actively managed within an asset allocation framework, involving value-based market, currency and individual security selection. Our senior asset allocation, equity and fixed income professionals form the investment team for this portfolio, supported by a globally integrated market analysis system. Security selection within each market is based on the fundamental research of our analytical teams in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo. The SwissKey Global Fund has provided an annualized return of 15.93% since its inception on July 31, 1995. This compares with the corresponding 13.74% return of its benchmark, the GSMI Mutual Fund Index. For the year ended December 31, 1996, the Fund returned 13.54%, while the benchmark returned 12.53%. For the second half of 1996, the SwissKey Global Fund returned 8.89% compared to the 6.60% return of the benchmark. Positive contributors to relative performance were security selection, particularly in the U.S. and in the Japanese equity market, an overweight in emerging markets debt, and the currency risk hedging. The primary negative contributor was the underweight in most equity markets and the overweight in bonds. Apart from emerging markets debt, which provided a return in 1996 of approximately 40%, bond markets turned in poor performance relative to equities. The U.S. bond market lagged markets elsewhere, with a total return that failed to exceed cash returns. Bond yields in the U.S. rose substantially in the first half of the year on stronger than anticipated economic news. In other developed markets, bond returns were generally quite good. The peripheral European bond markets performed well, as spreads over German yields declined substantially due to the market's anticipation of a single currency in the coming years. The U.S. equity market return of better than 20% was outdone by many of the European markets which were driven by a combination of lower interest rates and the anticipation of a profits recovery. The Japanese equity market stood in stark contrast with a local currency loss of almost 5% for the year. This was due in part to the failure of government spending programs and loose monetary policy to produce sustained economic growth. While the emerging debt markets were producing spectacular gains, emerging equities were much more subdued with an aggregate dollar return of under 10%. Returns in the high yield bond market, at over 12%, not surprisingly fell between equity and bond returns. Currency risk hedges were beneficial during the year, as the overpriced yen and deutschemark-bloc currencies depreciated against the U.S. dollar. The risk hedges also benefitted from interest rates in the U.S. exceeding rates in the overpriced currencies. Asset allocation strategy continues to underweight equity markets, as prices remain in excess of fundamental value. Bond markets, apart from Japan, remain overweight as they provide the most attractive relative value. Emerging markets debt is also overweight, with small underweights in emerging equity and high yield bonds. Currency strategy remains focused on controlling the risks in overpriced core European currencies, and to a lesser extent the yen. ------------------------------------------------------------ 6 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 7/31/95* to 12/31/96 12/31/96 12/31/96 - -------------------------------------------------------- SWISSKEY GLOBAL FUND 8.89% 13.54% 15.93% GSMI Mutual Fund Index** 6.60 12.53 13.74 - --------------------------------------------------------
*Inception date of the SwissKey Global Fund. **An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Fund and the GSMI Mutual Fund Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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. SWISSKEY GLOBAL FUND VS. GSMI MUTUAL FUND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] SwissKey GSMI Mutual Global Fund Fund Index ----------- ----------- 7/31/95 $10,000 $10,000 9/30/95 10,293 10,232 12/31/95 10,861 10,665 3/31/96 11,091 10,963 6/30/96 11,324 11,258 9/30/96 11,687 11,505 12/31/96 12,332 12,001 7/31/95 = $10,000 Data through 12/31/96 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction forfees or transaction costs for rebalancing. ------------------------------------------------------------ 7 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - ------------------------------------------------------------ U.S. EQUITY 40.0% 25.0% Large Cap. Stocks 28.0 17.5 Small/Int. Cap. 12.0 7.5 NON-U.S. EQUITIES 22.0 17.0 Japan Equities 6.8 3.8 Other Equities 15.2 13.2 EMERGING MARKETS EQUITIES 3.0 2.0 DOLLAR BONDS 21.0 28.5 U.S. Bonds 19.0 26.5 International $ Bonds 2.0 2.0 HIGH YIELD BONDS 3.0 2.5 NON-U.S. BONDS 9.0 22.0 Japan Bonds 2.5 0.0 Other Bonds 6.5 22.0 EMERGING MARKETS DEBT 2.0 3.0 CASH EQUIVALENTS 0.0 0.0 - ------------------------------------------------------------ 100.0% 100.0%
CURRENCY ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - -------------------------------------- U.S. 66.0% 86.5% Japan 9.3 0.0 U.K. 4.8 4.8 Continental Europe 12.9 3.2 Canada 1.4 1.4 Emerging Markets 3.0 2.0 Other 2.6 2.1 - -------------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ------------------------------------------------------------------------------ 1. Chase Manhattan Corp. 1.32% 2. Xerox Corp. 1.03 3. Lockheed Martin Corp. 1.02 4. Burlington Northern Santa Fe 1.01 5. Corning, Inc. 0.96 6. Citicorp 0.92 7. Philip Morris Companies, Inc. 0.91 8. Aon Corp. 0.85 9. Goodyear Tire & Rubber Co. 0.78 10. Enron Corp. 0.71 - ------------------------------------------------------------------------------
TOP TEN NON-U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ------------------------------------------------------------------------------ 1. British Telecommunications PLC 0.22% 2. General Electric Co. PLC 0.22 3. Royal Dutch Petroleum Co. 0.21 4. Lloyds TSB Group PLC 0.21 5. Broken Hill Proprietary Co. Ltd. 0.21 6. Telecom Corp. of New Zealand Ltd. 0.20 7. Royal Dutch Petroleum Co. NY Shares 0.19 8. British Petroleum Co. PLC 0.19 9. Matsushita Electric Industrial Co. 0.18 10. Toray Industries, Inc. 0.17 - ------------------------------------------------------------------------------
------------------------------------------------------------ 8 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.18% Housing/Paper........................................................... 1.12 Metals.................................................................. 0.14 ----- 1.44 Capital Investment Capital Goods........................................................... 2.48 Technology.............................................................. 1.60 ----- 4.08 Consumer Autos/Durables.......................................................... 0.07 Discretionary........................................................... 1.80 Health: Drugs........................................................... 2.23 Health: Non-Drugs....................................................... 1.10 Non-Durables............................................................ 3.10 Retail/Apparel.......................................................... 1.14 ----- 9.44 Energy................................................................... 1.37 Financial Banks................................................................... 2.78 Non-Banks............................................................... 2.54 ----- 5.32 Post Venture............................................................. 1.26 Services................................................................. 1.76 Transportation........................................................... 1.71 Utilities................................................................ 0.85 Miscellaneous............................................................ 0.75 ----- Total U.S. Equities................................................... 27.98* ----- NON-U.S. EQUITIES Airlines................................................................. 0.04 Appliances & Household Durables.......................................... 0.36 Automobiles.............................................................. 0.51 Banking.................................................................. 2.04 Beverages & Tobacco...................................................... 0.42 Broadcasting & Publishing................................................ 0.28 Building Materials....................................................... 0.32 Business & Public Service................................................ 0.56 Chemicals................................................................ 0.72 Construction............................................................. 0.31 Data Processing.......................................................... 0.17 Electric Components...................................................... 0.21 Electronics.............................................................. 0.76 Energy................................................................... 1.54 Financial Services....................................................... 0.27 - --------------------------------------------------------------------------------
Food & House Products................................................... 0.88% Forest Products......................................................... 0.32 Gold Mining............................................................. 0.02 Health & Personal Care.................................................. 0.71 Industrial Components................................................... 0.36 Insurance............................................................... 0.77 Leisure & Tourism....................................................... 0.11 Machinery & Engineering................................................. 0.25 Merchandising........................................................... 0.73 Metals--Steel........................................................... 0.36 Miscellaneous Materials................................................. 0.12 Multi-Industry.......................................................... 0.80 Non-Ferrous Metals...................................................... 0.40 Real Estate............................................................. 0.14 Recreation.............................................................. 0.08 Shipping................................................................ 0.16 Telecommunications...................................................... 0.95 Textiles and Apparel.................................................... 0.05 Transportation.......................................................... 0.15 Utilities............................................................... 1.10 ------ Total Non-U.S. Equities.............................................. 16.97* ------ EMERGING MARKETS EQUITIES............................................... 1.90 ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 1.18 CMO.................................................................... 0.10 Consumer............................................................... 0.82 Energy................................................................. 0.14 Financial.............................................................. 1.10 Industrial............................................................. 0.68 Telecommunications..................................................... 0.37 ------ 4.39 U.S. Government Agencies................................................ 7.73 U.S. Government Obligations............................................. 5.50 International Dollar Bonds.............................................. 3.64 ------ Total U.S. Bonds..................................................... 21.26* ------ HIGH YIELD BONDS........................................................ 2.57 ------ NON-U.S. BONDS Foreign Government Bonds................................................ 21.73 ------ EMERGING MARKETS DEBT................................................... 3.69 ------ SHORT-TERM INVESTMENTS.................................................. 7.41* ------ TOTAL INVESTMENTS.................................................... 103.51 LIABILITIES, LESS CASH AND OTHER ASSETS................................. (3.51) ------ NET ASSETS........................................................... 100.00% ======
* The Fund held a long position in Topix futures on December 31, 1996 which increased Japanese equity exposure from 3.85% to 4.24%. The Fund held a long position in U.S. Treasury futures which increased U.S. bond exposure from 21.26% to 25.86%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 27.98% to 24.55%. These three adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 7.41% to 5.85%. ------------------------------------------------------------ 9 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- Equities -- 46.85% U.S. EQUITIES -- 27.98% Aetna Life & Casualty Co............................. 32,200 $ 2,576,000 Allergan, Inc........................................ 53,700 1,913,062 Allstate Corp........................................ 29,600 1,713,100 Alza Corp. (b)....................................... 52,400 1,355,850 Aon Corp............................................. 70,200 4,361,175 Automatic Data Processing, Inc....................... 51,200 2,195,200 Avon Products, Inc................................... 38,100 2,176,463 Bard (C.R.), Inc..................................... 32,500 910,000 Beckman Instruments, Inc............................. 21,000 805,875 Birmingham Steel Corp................................ 21,000 399,000 Boston Technology, Inc. (b).......................... 20,900 600,875 Brinker International, Inc. (b)...................... 21,200 339,200 Brinson Post-Venture Fund (b)........................ 423,765 6,462,793 Burlington Northern Santa Fe......................... 59,900 5,173,862 Centerior Energy Co.................................. 44,100 474,075 Chase Manhattan Corp................................. 75,700 6,756,225 Choice Hotels International, Inc. (b)................ 34,250 603,656 CIGNA Corp........................................... 26,000 3,552,250 Circuit City Stores, Inc............................. 9,300 280,163 Citicorp............................................. 45,800 4,717,400 CMS Energy Corp...................................... 57,300 1,926,712 Coca-Cola Enterprises, Inc........................... 28,000 1,358,000 Comerica, Inc........................................ 14,400 754,200 Comverse Technology, Inc. (b)........................ 9,700 366,781 Corning, Inc......................................... 105,600 4,884,000 CPC International, Inc............................... 12,900 999,750 CVS Corp............................................. 41,500 1,717,063 Dial Corp............................................ 51,500 759,625 EMC Corp./Mass. (b).................................. 75,700 2,507,562 Enron Corp........................................... 83,700 3,609,563 Federal Express Corp. (b)............................ 77,900 3,466,550 Federated Department Stores (b)...................... 30,600 1,044,225 FileNet Corp. (b).................................... 12,500 400,000 First American Corp.-Tenn............................ 3,900 224,737 First Data Corp...................................... 44,678 1,630,747 First of America Bank Corp........................... 6,700 402,838 Footstar, Inc. (b)................................... 11,884 295,614 Ford Motor Co........................................ 30,800 981,750 Forest Laboratories, Inc. (b)........................ 35,600 1,165,900 Gannett Co., Inc..................................... 35,000 2,620,625 General Instrument Corp. (b)......................... 104,000 2,249,000 Genzyme Corp. (b).................................... 21,100 458,925 Geon Co.............................................. 7,700 151,113 Goodyear Tire & Rubber Co............................ 77,400 3,976,425 Harnischfeger Industries, Inc........................ 23,100 1,111,687 Health Care and Retirement Corp. (b)................. 38,700 1,107,788 Interpublic Group of Companies, Inc.................. 26,100 1,239,750 James River Corp. of Virginia........................ 30,100 997,062 Kimberly-Clark Corp.................................. 25,200 2,400,300 Kroger Co. (b)....................................... 22,100 1,027,650 Lockheed Martin Corp................................. 57,196 5,233,434 Lyondell Petrochemical Co............................ 57,300 1,260,600 Manor Care, Inc...................................... 34,250 924,750 Martin Marietta Materials, Inc....................... 15,338 356,609 Masco Corp........................................... 34,700 1,249,200 Mattel, Inc.......................................... 125,275 3,476,381 Nabisco Holdings Corp. Class A....................... 38,000 1,477,250 National Semiconductor Corp. (b)..................... 21,200 516,750 Nextel Communications, Inc. Class A (b).............. 52,700 688,394 Old Republic International Corp...................... 26,150 699,512 Peco Energy Co....................................... 33,100 835,775 Pentair, Inc......................................... 27,700 893,325 Pharmacia & Upjohn, Inc.............................. 66,700 2,642,988 Philip Morris Companies, Inc......................... 41,300 4,651,413 Rhone-Poulenc Rorer, Inc............................. 17,800 1,390,625 RJR Nabisco Convertible Preferred "C"................ 170,600 1,151,550 Schering Plough Corp................................. 46,000 2,978,500 Seagate Technology, Inc. (b)......................... 14,400 568,800 Timken Co............................................ 22,000 1,009,250 Tyson Foods, Inc. Class A............................ 62,800 2,150,900 Ultramar Diamond Shamrock Corp....................... 59,554 1,883,395 US Bancorp........................................... 31,900 1,433,506 USF&G Corp........................................... 24,400 509,350 Vencor, Inc. (b)..................................... 27,400 866,525 Viad Corp............................................ 51,500 849,750 Westvaco Corp........................................ 12,550 360,813 Whitman Corp......................................... 2,400 54,900 WMX Technologies, Inc................................ 83,700 2,730,713 Xerox Corp........................................... 99,800 5,251,975 York International Corp.............................. 21,500 1,201,313 360 Communications Co. (b)........................... 18,266 422,401 ------------ Total U.S. Equities.................................. 142,922,813 ------------ NON-U.S. EQUITIES -- 16.97% AUSTRALIA -- 0.91% Amcor Ltd............................................ 34,400 221,045 Boral Ltd............................................ 46,100 131,087 Broken Hill Proprietary Co. Ltd...................... 73,780 1,050,149 CRA Ltd.............................................. 25,645 402,294 David Jones Ltd...................................... 115,100 159,988 Lend Lease Corp. Ltd................................. 8,056 156,129 M.I.M. Holdings Ltd.................................. 98,726 138,013 National Australia Bank Ltd.......................... 42,947 504,858 News Corp. Ltd....................................... 89,190 470,390 News Corp. Ltd. Preferred............................ 22,000 97,855 Pacific Dunlop Ltd................................... 59,600 151,485 Qantas Airways Ltd................................... 68,828 114,805 Santos Ltd........................................... 49,800 201,732 WMC Ltd.............................................. 39,100 246,277 Westpac Bank Corp. Ltd............................... 81,138 461,436 Woolworth's Ltd...................................... 60,000 144,400 ------------ 4,651,943 ------------ BELGIUM -- 0.56% Delhaize-Le Lion S.A................................. 2,900 172,095 Electrabel S.A....................................... 2,260 534,326 Fortis AG............................................ 2,099 336,348 Fortis AG Strip (b).................................. 42 21 Generale de Banque S.A............................... 300 107,431
- -------------------------------------------------------------------------------- 10 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- BELGIUM -- (CONTINUED) Groupe Bruxelles Lambert S.A......................... 1,150 $ 147,893 Kredietbank NV....................................... 950 311,039 Petrofina S.A........................................ 1,195 379,968 Societe Generale de Belgique......................... 2,053 160,934 Solvay S.A. Class A.................................. 390 238,497 Tractebel............................................ 605 8,761 Tractebel Warrants "99" (b).......................... 605 281,411 Union Miniere Group S.A. (b)......................... 2,545 172,260 ------------ 2,850,984 ------------ CANADA -- 0.52% Alcan Aluminium Ltd.................................. 6,100 205,841 Bank of Montreal..................................... 1,200 38,173 Barrick Gold Corp.................................... 4,400 126,003 BCE, Inc............................................. 2,900 138,166 Canadian National Railway Co......................... 4,200 159,653 Canadian Pacific Ltd................................. 13,900 365,603 Hudson's Bay Co...................................... 4,100 68,503 Imperial Oil Ltd..................................... 5,000 235,298 Moore Corp. Ltd...................................... 3,900 80,811 Noranda, Inc......................................... 6,300 140,424 Northern Telecom Ltd................................. 2,400 149,190 NOVA Corp............................................ 10,400 92,193 Royal Bank of Canada................................. 6,200 217,584 Seagram Co. Ltd...................................... 5,300 209,780 Thomson Corp......................................... 13,600 300,160 TransCanada Pipelines Ltd............................ 8,300 145,338 ------------ 2,672,720 ------------ FINLAND -- 0.26% Merita Ltd. Class A (b).............................. 44,200 137,136 Nokia Ab Class A..................................... 12,100 700,429 Outokumpu OY Class A................................. 6,900 117,520 Pohjola Insurance Group Class B...................... 2,900 65,123 Sampo Insurance Co. Ltd. Class A..................... 1,000 78,759 UPM-Kymmene Corp. (b)................................ 11,900 249,154 ------------ 1,348,121 ------------ FRANCE -- 1.81% Accor S.A............................................ 2,392 302,296 Alcatel Alsthom...................................... 3,182 255,113 AXA S.A.............................................. 1,500 95,216 Banque Nationale de Paris............................ 12,230 472,384 CEP Communications................................... 984 69,370 CEP Communications Warrants "97" (b)................. 1,984 2,271 Cie Bancaire S.A..................................... 2,811 331,997 Cie de Saint Gobain.................................. 4,150 585,935 Cie de Suez.......................................... 5,445 231,051 Cie Generale des Eaux................................ 6,124 757,446 Colas................................................ 854 123,204 Credit Local de France............................... 5,359 465,937 Elf Aquitaine S.A.................................... 6,034 548,187 Groupe Danone........................................ 800 111,259 L'Oreal S.A.......................................... 100 37,586 Lafarge S.A.......................................... 2,600 155,689 LVMH................................................. 2,649 738,339 Michelin Class B..................................... 7,020 378,229 Pechiney S.A. Class A................................ 5,684 237,694 Peugeot S.A.......................................... 5,970 670,645 Rhone-Poulenc Class A................................ 14,300 486,596 SEITA................................................ 5,500 229,577 Societe Generale..................................... 5,026 542,364 Total S.A. Class B................................... 8,796 714,008 UAP.................................................. 10,820 269,527 Usinor Sacilor....................................... 28,100 408,092 ------------ 9,220,012 ------------ GERMANY -- 1.49% Allianz AG Holding................................... 338 607,527 BASF AG.............................................. 10,360 396,626 Bayer AG............................................. 14,080 570,564 Bayerische Motoren Werke AG.......................... 520 358,341 Commerzbank AG....................................... 11,060 280,609 Daimler-Benz AG (b).................................. 5,880 402,531 Deutsche Bank AG..................................... 10,601 493,902 Deutsche Telekom AG (b).............................. 18,600 387,425 Henkel KGaA-Vorzug AG................................ 4,550 224,385 Hochtief AG.......................................... 2,500 98,144 Hoechst AG........................................... 4,890 226,239 M.A.N. AG............................................ 790 190,439 Mannesmann AG........................................ 957 411,216 Metro AG............................................. 3,200 250,211 Muenchener Rueckver AG............................... 171 414,434 Muenchener Rueckver AG Warrants "98" (b)............. 2 416 Preussag AG.......................................... 1,192 269,169 RWE AG............................................... 7,600 317,591 Schering AG.......................................... 4,885 411,759 Siemens AG........................................... 3,650 169,154 Thyssen AG........................................... 1,850 327,600 Veba AG.............................................. 8,839 507,593 Volkswagen AG........................................ 750 310,249 ------------ 7,626,124 ------------ HONG KONG -- 0.25% Cheung Kong Holdings Ltd............................. 15,000 133,324 China Light & Power Co. Ltd.......................... 28,000 124,527 Guoco Group Ltd...................................... 15,000 83,970 Hang Seng Bank Ltd................................... 10,200 123,958 Hong Kong Telecommunications Ltd..................... 43,200 69,534 Hutchison Whampoa Ltd................................ 27,000 212,058 Jardine Matheson Holdings ADR (c).................... 9,600 63,360 New World Development Co. Ltd........................ 17,000 114,837 Sun Hung Kai Properties Ltd.......................... 8,000 97,997 Swire Pacific Ltd. Class A........................... 14,000 133,486 Wharf (Holdings) Ltd................................. 22,000 109,788 ------------ 1,266,839 ------------
- -------------------------------------------------------------------------------- 11 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- ITALY -- 0.55% Assicurazioni Generali............................... 15,080 $ 285,136 Danieli & Co. Savings (Risp)......................... 26,000 108,583 Edison Spa........................................... 17,200 108,596 ENI ADR (c).......................................... 8,000 413,000 ENI Spa.............................................. 24,000 122,881 Fiat Spa-Priv........................................ 103,000 169,691 INA-Istituto Nazionale delle Assicurazioni........... 47,000 61,080 Istituto Mobilaire Italiano Spa...................... 36,200 309,503 Italgas Spa.......................................... 22,300 92,911 La Rinascente........................................ 19,000 109,964 La Rinascente Savings (Risp)......................... 19,200 48,994 La Rinascente Warrants "99" (b)...................... 1,400 616 Mediobanca Spa....................................... 6,000 32,298 Montedison Spa (b)................................... 374,700 254,811 SAI-Savings (Risp)................................... 16,500 58,545 Telecom Italia Spa................................... 183,500 357,224 Telecom Italia Mobile Spa............................ 199,500 284,063 ------------ 2,817,896 ------------ JAPAN -- 3.85% Amada Co. Ltd........................................ 35,000 271,388 Asahi Glass Co. Ltd.................................. 42,000 394,417 Bank of Tokyo-Mitsubishi Ltd......................... 31,800 589,041 Canon, Inc........................................... 30,000 661,670 Canon Sales Co., Inc................................. 12,100 268,958 Citizen Watch Co. Ltd................................ 32,000 228,827 Dai Nippon Printing Co. Ltd.......................... 32,000 559,662 Daiichi Pharmaceutical Co. Ltd....................... 23,000 368,571 Daikin Industries Ltd................................ 34,000 301,714 Daiwa House Industry Co. Ltd......................... 17,000 218,230 Fanuc................................................ 13,900 444,292 Fujitsu.............................................. 21,000 195,399 Hitachi Ltd.......................................... 68,000 632,722 Honda Motor Co....................................... 9,000 256,655 Inax................................................. 44,000 325,252 Isetan............................................... 12,000 155,079 Ito Yokado Co. Ltd................................... 12,000 521,065 Kaneka Corp.......................................... 17,000 86,853 Keio Teito Electric Railway.......................... 39,000 190,178 Kinki Nippon Railway................................. 39,000 242,931 Kirin Brewery Co. Ltd................................ 37,000 363,402 Kokuyo............................................... 7,000 172,482 Kuraray Co. Ltd...................................... 30,000 276,557 Kyocera Corp......................................... 3,000 186,612 Maeda Road Construction.............................. 8,000 92,358 Matsushita Electric Industrial Co.................... 55,000 895,580 Mitsubishi Paper Mills............................... 43,000 167,821 NGK Insulators....................................... 56,000 530,714 Nintendo Corp. Ltd................................... 2,900 207,125 Nippon Denso Co. Ltd................................. 23,000 552,856 Nippon Meat Packers, Inc............................. 22,000 284,311 Nippon Steel Co...................................... 28,000 82,502 Okumura.............................................. 35,000 212,286 Osaka Gas Co......................................... 141,000 385,087 Sankyo Co. Ltd....................................... 25,000 706,470 Sanwa Bank Ltd....................................... 18,000 245,025 Secom................................................ 8,000 483,157 Seino Transportation................................. 12,000 132,334 Sekisui House Ltd.................................... 66,000 670,975 Shinmaywa Industries Ltd............................. 31,000 227,820 Sony Corp............................................ 10,200 666,994 Sumitomo Bank........................................ 36,000 517,963 Sumitomo Electric Industries......................... 28,000 390,797 Takeda Chemical Industries........................... 26,000 544,327 TDK Corp............................................. 6,000 390,282 Tokio Marine & Fire Insurance Co..................... 31,000 291,118 Tokyo Electric Power................................. 14,900 326,062 Tokyo Steel Mfg...................................... 25,000 355,389 Tonen Corp........................................... 25,000 290,773 Toray Industries, Inc................................ 141,000 868,571 Toshiba Corp......................................... 81,000 508,038 Toyo Suisan Kaisha................................... 19,000 189,886 Toyota Motor Corp.................................... 9,000 258,206 Yamazaki Baking Co. Ltd.............................. 17,000 270,957 ------------ 19,657,741 ------------ MALAYSIA -- 0.24% Hume Industries (Malaysia) Bhd....................... 17,000 107,028 Kuala Lumpur Kepong Bhd.............................. 39,500 100,099 Land & General Holdings Bhd.......................... 39,000 93,427 Malayan Banking Bhd.................................. 8,000 88,695 Malaysia International Shipping Bhd (Frgn.).......... 34,000 100,970 Nestle (Malaysia) Bhd................................ 4,000 32,152 Public Bank Bhd (Frgn.).............................. 55,000 116,512 Resorts World Bhd.................................... 13,000 59,196 Sime Darby Bhd....................................... 40,000 157,593 Telekom Malaysia Bhd................................. 9,000 80,182 Tenaga Nasional Bhd.................................. 47,000 225,183 YTL Corp. Bhd........................................ 14,000 75,391 ------------ 1,236,428 ------------ NETHERLANDS -- 1.17% ABN AMRO Holdings NV................................. 7,689 499,649 Akzo Nobel NV........................................ 1,100 150,084 DSM NV............................................... 1,910 188,162 Hoogovens NV......................................... 2,900 120,715 ING Groep NV......................................... 20,723 745,199 KLM Royal Dutch Air Lines NV......................... 4,500 126,438 KPN NV............................................... 13,046 497,041 Philips Electronics NV............................... 6,480 262,242 Royal Dutch Petroleum Co............................. 6,100 1,068,214 Royal Dutch Petroleum Co. NY Shares (c).............. 5,800 990,350 Unilever NV.......................................... 4,550 803,885 Vendex International NV.............................. 7,551 322,610 VNU-Ver Ned Uitgevers................................ 10,600 221,229 ------------ 5,995,818 ------------ NEW ZEALAND -- 0.57% Brierley Investments Ltd............................. 535,200 495,380 Carter Holt Harvey Ltd............................... 191,400 434,109 Fletcher Challenge Building.......................... 60,525 186,027
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- NEW ZEALAND (CONTINUED) Fletcher Challenge Energy............................ 60,525 $ 175,335 Fletcher Challenge Forest Ltd........................ 126,333 211,552 Fletcher Challenge Paper............................. 121,050 248,891 Telecom Corp. of New Zealand Ltd..................... 198,000 1,010,076 Telecom Corp. of New Zealand Ltd. ADS (c)............ 2,000 162,000 ------------ 2,923,370 ------------ SPAIN -- 0.70% Acerinox S.A......................................... 1,000 144,224 Banco Bilbao-Vizcaya S.A............................. 5,000 269,460 Banco Central Hispanoamericano....................... 5,010 128,452 Banco Intercontinental Espanol S.A................... 730 112,973 Banco Popular Espanol S.A............................ 1,190 233,288 Banco Santander S.A.................................. 3,800 242,768 Cia Sevillana de Electricidad........................ 7,106 80,579 Empresa Nacional de Electridad S.A................... 5,900 419,112 Fomento de Construcciones y Contratas S.A............ 1,450 134,884 Gas Natural SDG S.A.................................. 700 162,522 Iberdrola S.A........................................ 37,600 531,878 Mapfre Corp.......................................... 2,300 139,865 Repsol S.A........................................... 4,100 156,971 Repsol S.A. ADR (c).................................. 4,100 156,313 Telefonica de Espana................................. 20,300 470,532 Vallehermosa S.A..................................... 4,000 86,565 Viscofan Envolturas Celulosicas S.A.................. 6,400 93,485 ------------ 3,563,871 ------------ SWITZERLAND -- 0.34% ABB AG (Bearer)...................................... 80 99,203 CS Holdings AG (Reg.)................................ 1,073 109,881 Nestle S.A. (Reg.)................................... 463 495,517 Novartis AG (Reg.)................................... 378 431,574 Roche Holding AG (Gen.).............................. 36 279,243 Schweiz Bankgesellschaft (Bearer).................... 106 92,603 Societe Generale de Surveillance Holding S.A. (Bearer)............................... 30 73,509 Zurich Versicherungs (Reg.).......................... 569 157,644 ------------ 1,739,174 ------------ UNITED KINGDOM -- 3.75% Abbey National PLC................................... 25,000 327,315 Bank of Scotland..................................... 40,000 211,193 Bass PLC............................................. 15,800 222,006 B.A.T. Industries PLC................................ 85,184 706,343 Booker PLC........................................... 19,100 130,591 British Energy PLC................................... 183,000 460,397 British Gas PLC...................................... 175,900 675,844 British Petroleum Co. PLC............................ 79,244 950,033 British Steel PLC.................................... 144,000 395,550 British Telecommunications PLC....................... 167,500 1,130,905 Charter PLC.......................................... 19,292 244,493 Coats Viyella PLC.................................... 103,300 235,135 FKI PLC.............................................. 80,700 278,990 General Electric Co. PLC............................. 169,700 1,109,454 Glaxo Wellcome PLC................................... 25,000 405,614 Grand Metropolitan PLC............................... 110,200 865,682 Guinness PLC......................................... 84,900 664,757 Hanson PLC........................................... 180,900 252,325 Hillsdown Holdings PLC............................... 125,200 428,547 House of Fraser PLC.................................. 136,800 359,384 HSBC Holdings PLC.................................... 28,500 637,019 Imperial Chemicals Industries PLC.................... 9,000 118,372 Legal & General Group PLC............................ 60,750 386,770 Lloyds TSB Group PLC................................. 144,779 1,066,701 Marks & Spencer PLC.................................. 72,000 605,032 Millennium Chemicals, Inc. (b)....................... 1,327 23,554 Mirror Group PLC..................................... 57,800 213,176 National Power PLC................................... 37,900 317,185 National Westminster Bank PLC........................ 24,800 290,953 Northern Foods PLC................................... 76,000 265,993 Peninsular & Oriental Steam Navigation Co....................................... 69,600 702,790 Reckitt & Colman PLC................................. 12,658 156,844 Redland PLC.......................................... 23,200 145,521 RJB Mining PLC....................................... 47,300 348,092 Royal & Sun Alliance Insurance Group PLC............. 40,199 305,810 RTZ Corp. PLC........................................ 26,100 418,324 Sainsbury (J.) PLC................................... 56,000 371,864 Scottish Hydro-Electric PLC.......................... 44,900 252,049 Sears PLC............................................ 160,700 261,278 Sedgwick Group PLC................................... 111,400 250,712 SmithKline Beecham PLC............................... 33,400 462,730 Smurfit (Jefferson) Group PLC........................ 57,000 169,254 Tesco PLC............................................ 44,800 271,806 Thames Water PLC..................................... 33,000 345,926 Unilever PLC......................................... 15,400 373,337 Vodafone Group PLC................................... 45,600 192,373 Yorkshire Water PLC.................................. 13,000 157,633 ------------ 19,165,656 ------------ Total Non-U.S. Equities.............................. 86,736,697 ------------ EMERGING MARKETS EQUITIES -- 1.90% Brinson Emerging Markets Equity Fund (b)............. 952,086 9,698,142 ------------ Total Equities (Cost $200,781,462)................... 239,357,652 ------------ FACE AMOUNT VALUE -------------- ------------ Bonds -- 49.25% U.S. BONDS -- 21.26% U.S. CORPORATE BONDS -- 4.39% BellSouth Corp. 9.125%, due 07/01/03............... $ 199,759 $ 211,177 Capital One Bank 6.830%, due 05/17/99.............. 2,000,000 2,009,232
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------------- ------------ U.S. CORPORATE BONDS (CONTINUED) Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.......................................... $ 1,265,000 $ 1,258,675 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03.......................................... 1,050,000 1,064,543 Chemical Master Credit Card Trust 95-2A 6.230%, due 06/15/03.......................................... 1,430,000 1,426,311 Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,014,050 Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,784 Coca-Cola Enterprises 6.700%, due 10/15/36......... 2,000,000 2,017,024 Edison Mission Energy Funding 7.330%, due 09/15/08. 720,000 723,600 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.......................................... 125,550 125,688 Ford Motor Co. 7.250%, due 10/01/08................ 2,000,000 2,017,046 GMAC MTN 6.500%, due 04/19/99...................... 1,350,000 1,357,156 Green Tree Financial 94-2 8.300%, due 05/15/19..... 435,000 460,091 Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,500,000 1,509,084 News America Corp. 7.750%, due 01/20/24............ 1,755,000 1,677,597 Premier Auto Trust 4.220%, due 03/02/99............ 30,119 29,777 Premier Auto Trust 96-4A 6.400%, due 10/06/01...... 275,000 276,320 Salomon, Inc. 6.750%, due 02/15/03................. 550,000 537,073 Spiegel Master Trust 95-A 7.500%, due 09/15/04..... 300,000 310,359 Standard Credit Card Trust 95-1A 8.250%, due 01/07/05.......................................... 500,000 541,830 Thrift Financial Corp. 11.250%, due 01/01/16....... 36,739 39,876 Time Warner Entertainment, Inc. 8.375%, due 03/15/23.......................................... 1,100,000 1,118,125 Time Warner, Inc. 9.150%, due 02/01/23............. 980,000 1,062,004 WMX Technologies, Inc. 7.000%, due 10/15/06........ 1,500,000 1,497,482 ------------ 22,449,904 ------------ INTERNATIONAL DOLLAR BONDS -- 3.64% Abbey National PLC 7.350%, due 10/29/49............ 250,000 252,385 ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01.... 250,000 249,820 AT&T Corp. 8.250%, due 01/11/00.................... 675,000 710,001 BBV International 7.000%, due 12/01/25............. 2,200,000 2,058,331 City of Oslo 7.875%, due 02/03/97.................. 1,200,000 1,202,077 Deutsche Bank Financial 6.700%, due 12/13/06....... 210,000 205,750 Hanson PLC Notes 6.750%, due 09/15/05.............. 790,000 773,681 International Telecom Satellite 8.125%, due 02/28/05.......................................... 335,000 361,533 Japanese Development Bank 8.375%, due 02/15/01..... 1,000,000 1,071,485 Korea Development Bank 6.625%, due 11/21/03........ 250,000 248,143 LKB 8.125%, due 01/27/00........................... 380,000 399,326 Petroliam Nasional 7.125%, due 08/15/05............ 450,000 453,834 Province of Quebec 7.500%, due 07/15/23............ 175,000 174,694 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.............................. 1,910,000 1,941,912 Republic of Columbia EMTN 8.660%, due 10/07/16..... 1,000,000 1,047,945 Republic of Italy 6.875%, due 09/27/23............. 150,000 141,800 Republic of South Africa 9.625%, due 12/15/99...... 1,000,000 1,063,750 Royal Bank of Scotland 7.375%, due 04/01/06........ 220,000 219,257 Quimica & Minera Chile 144-A 7.700%, due 09/15/06.. 1,500,000 1,533,612 Southern Investments UK 6.800%, due 12/01/06....... 1,625,000 1,590,595 Swedbank FRN 7.383%, due 10/29/49.............................. 300,000 306,750 7.500%, due 11/29/49.............................. 2,200,000 2,252,250 Telstra Corp. Ltd. 6.500%, due 11/28/05............ 350,000 341,577 ------------ 18,600,508 ------------ U.S. GOVERNMENT AGENCIES -- 7.73% Federal Home Loan Mortgage Corp. 9.200%, due 08/25/97.............................. 200,000 204,516 6.520%, due 01/02/02.............................. 3,000,000 3,008,853 9.000%, due 03/01/17.............................. 381,007 407,948 5.800%, due 08/15/19.............................. 2,025,000 1,891,512 6.500%, due 05/15/21.............................. 1,105,804 1,003,495 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.............................. 1,820,248 1,854,947 9.000%, due 05/01/24.............................. 1,142,277 1,219,221 Federal National Mortgage Association 7.600%, due 01/10/97.............................. 200,000 200,097 5.000%, due 06/01/01.............................. 1,596,985 1,535,596 6.500%, due 03/01/03 ............................. 3,775,000 3,734,909 6.220%, due 03/13/06.............................. 1,700,000 1,643,478 8.000%, due 02/25/07.............................. 1,200,000 1,231,188 9.000%, due 08/01/21.............................. 312,467 332,577 6.500%, due 08/25/21.............................. 1,500,000 1,434,315 8.200%, due 08/25/21.............................. 59,076 60,358
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------------- ------------ U.S. GOVERNMENT AGENCIES (CONTINUED) Federal National Mortgage Association (continued) 8.000%, due 05/01/22.............................. $ 154,570 $ 157,372 8.500%, due 07/01/22.............................. 776,184 815,638 7.500%, due 05/01/25.............................. 1,906,918 1,906,323 6.500%, due 03/01/26.............................. 9,483,616 9,047,967 Government National Mortgage Association 11.000%, due 09/15/15............................. 245,070 273,712 8.500%, due 08/15/17.............................. 801,933 845,783 8.500%, due 05/15/21.............................. 66,619 68,992 8.000%, due 08/15/22.............................. 502,399 516,305 8.000%, due 11/15/22.............................. 497,932 511,715 8.000%, due 12/15/22.............................. 1,709,085 1,756,393 7.500%, due 11/15/24.............................. 2,761,369 2,771,586 6.500%, due 03/20/26.............................. 1,132,354 1,073,260 ------------ 39,508,056 ------------ U.S. GOVERNMENT OBLIGATIONS-- 5.50% U.S. Treasury Coupon Strips 0.000%, due 02/15/03 principal only................................... 225,000 154,024 0.000%, due 05/15/08 principal only................................... 5,855,000 2,786,453 U.S. Treasury Notes and Bonds 5.500%, due 11/15/98.............................. 1,825,000 1,811,312 6.250%, due 10/31/01.............................. 420,000 420,263 7.000%, due 07/15/06.............................. 9,000,000 9,351,567 8.125%, due 05/15/21.............................. 11,695,000 13,566,200 ------------ 28,089,819 ------------ Total U.S. Bonds................................... 108,648,287 ------------ HIGH YIELD BONDS -- 2.57% Brinson High Yield Fund (b)........................ 1,065,360 13,122,570 ------------ NON-U.S. BONDS -- 21.73% BELGIUM -- 0.97% Kingdom of Belgium 8.750%, due 06/25/02.............................. BEF 32,000,000 1,189,454 9.000%, due 03/28/03.............................. 54,000,000 2,041,883 8.500%, due 10/01/07.............................. 46,000,000 1,728,376 ------------ 4,959,713 ------------ CANADA -- 2.75% Government of Canada 7.500%, due 09/01/00.............................. CAD 4,350,000 3,418,714 7.250%, due 06/01/03.............................. 4,600,000 3,585,992 4.250%, due 12/01/21 (d).......................... 5,500,000 4,428,909 9.000%, due 06/01/25.............................. 2,085,000 1,873,062 4.250%, due 12/01/26 (d).......................... 1,000,000 760,678 ------------ 14,067,355 ------------ DENMARK -- 2.24% Kingdom of Denmark 9.000%, due 11/15/98............................ DKR 3,200,000 $ 590,754 9.000%, due 11/15/00............................ 14,600,000 2,820,305 8.000%, due 05/15/03............................ 2,600,000 488,230 7.000%, due 12/15/04............................ 17,500,000 3,092,144 8.000%, due 03/15/06............................ 17,000,000 3,170,083 7.000%, due 11/10/24............................ 7,900,000 1,269,593 ------------ 11,431,109 ------------ FRANCE -- 2.75% Government of France (OAT) 8.500%, due 03/28/00............................ FRF 3,400,000 740,666 9.500%, due 01/25/01............................ 8,300,000 1,899,100 8.500%, due 04/25/03............................ 2,400,000 545,675 8.250%, due 02/27/04............................ 5,400,000 1,217,381 7.500%, due 04/25/05............................ 29,000,000 6,270,029 8.500%, due 12/26/12............................ 14,500,000 3,399,148 ------------ 14,071,999 ------------ GERMANY -- 4.72% Bundesrepublik Deutscheland 7.000%, due 09/20/99............................ DEM 7,000,000 4,900,590 8.500%, due 08/21/00............................ 2,600,000 1,917,397 8.375%, due 05/21/01............................ 1,900,000 1,412,517 8.250%, due 09/21/01............................ 4,650,000 3,454,536 8.000%, due 07/22/02............................ 825,000 611,991 6.500%, due 07/15/03............................ 4,800,000 3,312,128 6.750%, due 07/15/04............................ 7,800,000 5,431,302 6.250%, due 01/04/24............................ 2,900,000 1,785,991 Treuhandanstalt 6.250%, due 03/04/04............................ 1,900,000 1,286,763 ------------ 24,113,215 ------------ ITALY -- 2.52% Republic of Italy (BTP) 9.500%, due 12/01/97............................ ITL 900,000,000 604,341 8.500%, due 01/01/99............................ 3,100,000,000 2,122,394 8.500%, due 08/01/99............................ 855,000,000 587,788 9.500%, due 12/01/99............................ 4,500,000,000 3,184,775 11.500%, due 03/01/03........................... 3,500,000,000 2,796,777 9.000%, due 10/01/03............................ 1,900,000,000 1,367,675 8.500%, due 04/01/04............................ 3,100,000,000 2,188,655 ------------ 12,852,405 ------------ NETHERLANDS -- 2.90% Government of Nederlands 6.250%, due 07/15/98............................ NLG 1,400,000 843,383 8.500%, due 03/15/01............................ 1,000,000 664,566 8.750%, due 09/15/01............................ 1,300,000 878,967 6.500%, due 04/15/03............................ 3,100,000 1,919,466 8.500%, due 06/01/06............................ 8,650,000 5,996,040
- -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE --------------- ------------ NETHERLANDS (CONTINUED) 8.250%, due 02/15/07.............................. NLG 4,500,000 $ 3,084,986 7.500%, due 04/15/10.............................. 2,200,000 1,441,059 ------------ 14,828,467 ------------ SWEDEN -- 0.67% Government of Sweden 10.250%, due 05/05/03............................. SWK 12,300,000 2,192,275 6.000%, due 02/09/05.............................. 8,500,000 1,206,382 ------------ 3,398,657 ------------ UNITED KINGDOM -- 2.21% UK Treasury 7.000%, due 11/06/01.............................. GBP 810,000 1,373,278 8.000%, due 06/10/03.............................. 1,400,000 2,476,895 8.500%, due 12/07/05.............................. 2,870,000 5,232,666 8.500%, due 07/16/07.............................. 1,200,000 2,198,785 ------------ 11,281,624 ------------ Total Non-U.S. Bonds............................... 111,004,544 ------------ EMERGING MARKETS DEBT -- 3.69% Brinson Emerging Markets Debt Fund (b)............. 1,118,170 18,876,502 ------------ Total Bonds (Cost $239,824,367).................... 251,651,903 ------------ Short-Term Investments -- 7.41% U.S. GOVERNMENT OBLIGATIONS-- 0.32% U.S. Treasury Bills 5.063%, due 05/01/97........... 1,677,000 1,648,895 ------------ COMMERCIAL PAPER -- 7.09% Burlington Northern Santa Fe 5.650%, due 01/17/97.. 2,000,000 1,994,978 Case Credit Corp. 5.510%, due 01/07/97.............................. 1,500,000 1,498,622 5.600%, due 01/09/97.............................. 2,000,000 1,997,511 Cincinnati Bell, Inc. 7.250%, due 01/02/97......... 477,000 476,904 CNA Financial Corp. 6.250%, due 01/23/97........... 1,500,000 1,494,271 Crown Cork & Seal Co., Inc. 5.520%, due 01/10/97.............................. 2,000,000 1,997,240 5.580%, due 01/29/97.............................. 2,500,000 2,489,150 5.580%, due 01/31/97.............................. 2,000,000 1,990,700 CSX Corp. 5.520%, due 01/15/97..................... 1,500,000 1,496,780 Lockheed Martin Corp. 7.250%, due 01/02/97......... 5,500,000 5,498,892 PanEnergy Corp. 6.050%, due 01/17/97............... 2,000,000 1,994,622 Rite Aid Corp. 5.650%, due 01/06/97.............................. 2,000,000 1,998,431 5.600%, due 01/21/97.............................. 2,000,000 1,993,778 Tyson Foods, Inc. 5.750%, due 01/09/97............. 1,700,000 1,697,828 U.S. West Capital Funding, Inc. 5.600%, due 02/12/97.......................................... 1,500,000 1,490,200 Vastar Resources, Inc. 6.020%, due 01/02/97.............................. 2,000,000 1,999,666 6.850%, due 01/03/97.............................. 2,115,000 2,111,378 Whirlpool Financial Corp. 6.000%, due 01/03/97..... 2,000,000 1,999,333 ------------ 36,220,284 ------------ Total Short-Term Investments (Cost $37,869,023).... 37,869,179 ------------ Total Investments (Cost $478,474,852)--103.51% (a).................. 528,878,734 ------------ Liabilities, less cash and other assets--(3.51%)................................... (17,938,839) ------------ Net Assets--100%................................... $510,939,895 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 16 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $478,474,852; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $57,680,749 Gross unrealized depreciation................................ (7,276,867) ----------- Net unrealized appreciation.............................. $50,403,882 ===========
(b) Non-income producing security. (c) Denominated in U.S. dollars. (d) Linked to Canada's retail price index. Reset semi-annually. FRN: Floating rate note--The rate disclosed is that in effect at December 31, 1996. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- -------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Danish Kroner............... 05/30/97 3,000,000 $ 512,591 $ 5,105 French Franc................ 05/30/97 4,000,000 776,385 8,188 Japanese Yen................ 05/30/97 50,000,000 439,864 1,460 FORWARD FOREIGN CURRENCY SALE CONTRACTS Belgian Franc............... 05/30/97 250,000,000 7,950,837 (113,847) British Pound............... 05/30/97 3,100,000 5,284,397 (135,297) Canadian Dollar............. 05/30/97 13,600,000 10,014,643 195,567 Danish Kroner............... 05/30/97 70,000,000 11,960,446 (168,986) Dutch Guilder............... 05/30/97 35,000,000 20,436,274 (261,270) French Franc................ 05/30/97 125,000,000 24,262,033 (410,257) German Mark................. 05/30/97 48,000,000 31,447,014 (428,742) Italian Lira................ 05/30/97 11,500,000,000 7,521,248 (78,123) Japanese Yen................ 05/30/97 2,300,000,000 20,233,736 404,802 Swiss Franc................. 05/30/97 2,200,000 1,663,420 24,215 --------- Total..................... $(957,185) =========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN/(LOSS) ---------- ------------- ----------- ----------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 52 contracts................. March 1997 $ 5,592,078 $ 5,542,875 $ (49,203) 10 year U.S. Treasury Notes, 116 contracts................ March 1997 12,803,625 12,658,500 (145,125) 30 year U.S. Treasury Bonds, 47 contracts................. March 1997 5,384,375 5,293,375 (91,000) INDEX FUTURES BUY CONTRACTS Topix, 16 contracts........... March 1997 2,118,204 2,029,120 (89,084) INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 47 con- tracts....................... March 1997 17,748,625 17,495,750 252,875 --------- $(121,537) =========
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 were $561,512 and $1,648,895, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $435,474,852)....................... $480,718,727 Affiliated issuers (Cost $43,000,000).......................... 48,160,007 Foreign currency, at value (Cost $268,768)...................... 273,987 Receivables: Investment securities sold..................................... 36,201,820 Dividends...................................................... 495,147 Interest....................................................... 4,864,834 Fund shares sold............................................... 292,949 Variation margin (Note 5)...................................... 201,512 Other assets.................................................... 14,939 ------------ TOTAL ASSETS................................................. 571,223,922 ------------ LIABILITIES: Payables: Investment securities purchased................................ 26,580,751 Fund shares redeemed........................................... 31,916,576 Due to custodian bank.......................................... 304,430 Investment advisory fees (Note 2).............................. 358,713 Net unrealized depreciation on forward foreign currency con- tracts........................................................ 957,185 Accrued expenses............................................... 166,372 ------------ TOTAL LIABILITIES............................................ 60,284,027 ------------ NET ASSETS....................................................... $510,939,895 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)........................................ $459,324,649 Accumulated distributions in excess of net investment income.... (2,066,623) Accumulated net realized gain................................... 4,399,273 Net unrealized appreciation..................................... 49,282,596 ------------ NET ASSETS................................................... $510,939,895 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $493,628,321 and 40,916,008 shares is- sued and outstanding) (Note 7)................................ $ 12.06 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $17,311,574 and 1,439,613 shares is- sued and outstanding) (Note 7)................................ $ 12.03 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Interest......................................................... $ 8,220,543 Dividends (net of $121,144 for foreign taxes withheld)........... 2,124,459 ----------- TOTAL INCOME.................................................. 10,345,002 ----------- EXPENSES: Advisory (Note 2)................................................ 2,019,630 Administration................................................... 158,049 Custodian........................................................ 70,489 Distribution (Note 6)............................................ 51,006 Other............................................................ 300,151 ----------- TOTAL EXPENSES................................................ 2,599,325 ----------- NET INVESTMENT INCOME ........................................ 7,745,677 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 17,819,350 Futures contracts............................................... (335,713) Foreign currency transactions................................... 3,705,567 ----------- Net realized gain............................................. 21,189,204 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 16,277,908 Futures contracts............................................... (194,980) Forward contracts............................................... (294,833) Translation of other assets and liabilities denominated in for- eign currency.................................................. 50,176 ----------- Change in net unrealized appreciation or depreciation......... 15,838,271 ----------- Net realized and unrealized gain................................. 37,027,475 ----------- Net increase in net assets resulting from operations............. $44,773,152 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income........................ $ 7,745,677 $ 15,718,942 Net realized gain............................ 21,189,204 33,576,934 Change in net unrealized appreciation or de- preciation.................................. 15,838,271 13,188,606 ------------- ------------- Net increase in net assets resulting from op- erations.................................... 44,773,152 62,484,482 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income..... (17,593,746) (20,214,114) Distributions in excess of net investment in- come........................................ (7,066,588) (1,430,745) Distributions from net realized gain......... (26,428,094) (10,937,826) ------------- ------------- Total distributions to shareholders*......... (51,088,428) (32,582,685) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................. 60,598,529 109,483,562 Shares issued on reinvestment of distribu- tions....................................... 49,580,586 31,162,315 Shares redeemed.............................. (64,887,080) (64,262,463) ------------- ------------- Net increase in net assets resulting from capital share transactions (Note 7)......... 45,292,035 76,383,414 ------------- ------------- TOTAL INCREASE IN NET ASSETS.............. 38,976,759 106,285,211 ------------- ------------- NET ASSETS: Beginning of period.......................... 471,963,136 365,677,925 ------------- ------------- End of period (including accumulated undis- tributed net investment income of ($2,066,623) and $9,848,069 respectively)... $ 510,939,895 $471,963,136 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net in- vestment income: Brinson Fund Class........................... $ (23,918,105) $ (21,444,413) SwissKey Fund Class.......................... (742,229) (200,446) Distributions from net realized gain: Brinson Fund Class........................... (25,579,684) (10,892,522) SwissKey Fund Class.......................... (848,410) (45,304) ------------- ------------- Total distributions to shareholders.......... $ (51,088,428) $ (32,582,685) ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR ENDED JUNE 30 AUGUST 31, 1992* DECEMBER 31, 1996 ---------------------------- THROUGH BRINSON FUND CLASS (UNAUDITED) 1996 1995 1994 JUNE 30, 1993 - ------------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income. 0.48 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... 0.62 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- -------- Total income from investment operations......... 1.10 1.81 1.29 0.10 1.07 -------- -------- -------- -------- -------- Less distributions: Distributions from and in excess of net investment income.... (0.61) (0.62) (0.27) (0.27) (0.20) Distributions from and in excess of net realized gain........ (0.65) (0.32) (0.10) (0.27) -- -------- -------- -------- -------- -------- Total distributions. (1.26) (0.94) (0.37) (0.54) (0.20) -------- -------- -------- -------- -------- Net asset value, end of period................. $ 12.06 $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== ======== Total return (non- annualized)............ 9.11% 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $493,628 $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.01%** 1.04% 1.09% 1.14% 1.35%** After expense reim- bursement............ N/A N/A N/A 1.10% 1.05%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.08%** 3.69% 4.27% 3.21% 3.26%** After expense reim- bursement............ N/A N/A N/A 3.25% 3.56%** Portfolio turnover rate.................. 84% 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0307 $ 0.0291 N/A N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 12.18 $ 11.60 ------- ------- Income from investment operations: Net investment income....................... 0.43 0.39 Net realized and unrealized gain............ 0.64 1.10 ------- ------- Total income from investment operations... 1.07 1.49 ------- ------- Less distributions: Distributions from and in excess of net in- vestment income............................ (0.57) (0.59) Distributions from net realized gain........ (0.65) (0.32) ------- ------- Total distributions....................... (1.22) (0.91) ------- ------- Net asset value, end of period................ $ 12.03 $ 12.18 ======= ======= Total return (non-annualized)................. 8.89% 13.24% Ratios/Supplemental data Net assets, end of period (in 000s).......... $17,312 $14,030 Ratio of expenses to average net assets...... 1.66%** 1.69%** Ratio of net investment income to average net assets...................................... 2.43%** 3.04%** Portfolio turnover rate...................... 84% 142% Average commission rate paid per share....... $0.0307 $0.0291
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Global Equity Fund is actively managed, providing a fully integrated approach to the primary equity markets across the world. Market selection and currency strategies are managed within a global asset allocation framework. Industry strategies and individual security selections are based on the fundamental research of our analytical teams in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo. The SwissKey Global Equity Fund has provided an annualized return of 18.93% since its inception on July 31, 1995, compared to the 13.90% return of its benchmark, the MSCI World Equity (Free) Index. For the year ended December 31, 1996, the Fund returned 16.31%, while the benchmark returned 13.92%. For the second half of 1996, the Fund returned 7.23% compared to the Index return of 6.18%. Currency allocation and equity management strategies within markets contributed positively to Fund performance during the year. Market allocation strategies, notable for a U.S. equity market underweight and cash risk hedge, detracted from performance. Global equity markets were generally strong in 1996. Despite a return of 24.05% for the MSCI U.S. component, the U.S. equity market was not the strongest market during 1996. In the global equity index there were 11 markets that outperformed the U.S. market, Spain being the strongest with a U.S. dollar hedged return of 46.76%. The relatively low performance of the MSCI World Equity (Free) Index, was due to the weak showing from Japan, the worst performing market, which registered a meager U.S. dollar hedged return of 0.06%. The U.S. market provided positive returns during each calendar quarter of 1996, ending the year with a fourth quarter return of 8.28%. Japanese equities, on the other hand, started the year with a strong first half gain of 10.23%. The third and fourth quarters offset nearly all of the first half gains. In the fourth quarter Japan generated a U.S. dollar hedged loss of -6.49%, the only market to provide a negative return. Currency movements contributed substantially to the performance of the Global Equity Fund relative to the MSCI World Equity benchmark. During the year, the Fund maintained a significant underweight to the Japanese yen and underweights in the core European currencies. The aggregate European currency underweight was similar in magnitude to the yen underweight. The U.S. dollar overweight averaged nearly 35% during the year. The Japanese yen declined by 11.13%, and the core European currency depreciations ranged from 14.31% for the Swiss franc to 5.93% for the French franc. The Fund maintained neutral or overweight positions to currencies that appreciated over the course of 1996. Security selection derived most of its added value from equity management in the U.S. and Japan. ------------------------------------------------------------ 23 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
Annualized 6 months 1 year 7/31/95* ended ended to 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------------ SWISSKEY GLOBAL EQUITY FUND 7.23% 16.31% 18.93% MSCI World Equity (Free) Index 6.18 13.92 13.90 - ------------------------------------------------------------
*Inception date of the SwissKey Global Equity Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Equity Fund and the MSCI World Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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. SWISSKEY GLOBAL EQUITY FUND VS. MSCI WORLD EQUITY (FREE) INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] SwissKey Global MSCI World Equity Fund Equity (Free) Index --------------- ------------------- 7/31/95 $10,000 $10,000 9/30/95 10,329 10,066 12/31/95 10,993 10,556 3/31/96 11,539 10,998 6/30/96 11,925 11,325 9/30/96 12,110 11,488 12/31/96 12,787 12,025 7/31/95 = $10,000 Data through 12/31/96 Fund returns are net of all fees and costs, while the Index returns are based solely on the market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 24 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO MARKET ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - --------------------------------- U.S. 43.2% 33.2% Japan 17.5 14.5 Australia 1.6 2.6 Belgium 0.6 1.7 Canada 2.6 1.5 France 3.8 5.1 Germany 4.4 4.4 Hong Kong 2.0 0.8 Italy 1.7 1.8 Malaysia 1.4 0.7 Netherlands 2.6 3.2 New Zealand 0.2 1.8 Spain 1.2 1.9 Sweden 1.4 0.0 Switzerland 3.0 0.8 U.K. 10.4 10.5 Other Markets 2.4 0.5 Cash Reserves 0.0 15.0 - --------------------------------- 100.0% 100.0%
CURRENCY ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - --------------------------------- U.S. 43.2% 71.7% Japan 17.5 7.5 Australia 1.6 1.6 Belgium 0.6 0.0 Canada 2.6 2.6 France 3.8 0.0 Germany 4.4 0.0 Hong Kong 2.0 0.0 Italy 1.7 1.8 Malaysia 1.4 0.6 Netherlands 2.6 0.0 New Zealand 0.2 1.8 Spain 1.2 1.2 Sweden 1.4 0.0 Switzerland 3.0 0.0 U.K. 10.4 10.4 Other Markets 2.4 0.8 - --------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ----------------------------------------------- 1. Chase Manhattan Corp. 1.86% 2. Xerox Corp. 1.46 3. Lockheed Martin Corp. 1.44 4. Burlington Northern Santa Fe 1.43 5. Corning, Inc. 1.35 6. Citicorp 1.31 7. Philip Morris Companies, Inc. 1.28 8. Aon Corp. 1.20 9. Goodyear Tire & Rubber Co. 1.10 10. Enron Corp. 1.00 - -----------------------------------------------
TOP TEN NON-U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ----------------------------------------------- 1. Royal Dutch Petroleum Co. 0.82% 2. Matsushita Electric Industrial Co. 0.62 3. Broken Hill Proprietary Co. Ltd. 0.61 4. Toray Industries, Inc. 0.59 5. British Telecommunications PLC 0.58 6. General Electric Co. PLC 0.57 7. Lloyds TSB Group PLC 0.55 8. Telecom Corp of New Zealand Ltd. 0.55 9. British Petroleum Co. PLC 0.49 10. Sankyo Co. Ltd. 0.49 - -----------------------------------------------
------------------------------------------------------------ 25 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.26% Housing/Paper........................................................... 1.58 Metals.................................................................. 0.20 ----- 2.04 Capital Investments Capital Goods........................................................... 3.49 Technology.............................................................. 2.25 ----- 5.74 Consumer Autos/Durables.......................................................... 0.10 Discretionary........................................................... 2.53 Health: Drugs........................................................... 3.13 Health: Non-Drugs....................................................... 1.55 Non-Durables............................................................ 4.36 Retail/Apparel.......................................................... 1.60 ----- 13.27 Energy................................................................... 1.93 Financial Banks................................................................... 3.91 Non-Banks............................................................... 3.57 ----- 7.48 Services................................................................. 2.47 Transportation........................................................... 2.41 Utilities................................................................ 1.20 Miscellaneous............................................................ 1.01 ----- Total U.S. Equities................................................... 37.55* -----
- ------------------------------------------------------------ NON-U.S. EQUITIES Airlines................................................................ 0.12% Appliances & Household Durables......................................... 1.24 Automobiles............................................................. 1.53 Banking................................................................. 5.63 Beverages & Tobacco..................................................... 1.20 Broadcasting & Publishing............................................... 0.72 Building Materials...................................................... 0.72 Business & Public Service............................................... 1.84 Chemicals............................................................... 2.10 Construction............................................................ 1.00 Data Processing......................................................... 0.60 Electric Components..................................................... 0.78 Electronics............................................................. 2.26 Energy.................................................................. 4.23 Financial Services...................................................... 0.75 Food & House Products................................................... 2.46 Forest Products......................................................... 1.06 Gold Mining............................................................. 0.06 Health & Personal Care.................................................. 2.29 Industrial Components................................................... 1.26 Insurance............................................................... 2.10 Leisure & Tourism....................................................... 0.28 Machinery & Engineering................................................. 0.76 Merchandising........................................................... 2.17 Metals-Steel............................................................ 0.95 Miscellaneous Materials................................................. 0.68 Multi-Industry.......................................................... 2.16 Non-Ferrous Metal....................................................... 1.18 Real Estate............................................................. 0.41 Recreation.............................................................. 0.30 Shipping................................................................ 0.40 Telecommunications...................................................... 2.12 Textiles & Apparel...................................................... 0.13 Transportation.......................................................... 0.49 Utilities............................................................... 3.02 ------ Total Non-U.S. Equities.............................................. 49.00* ------ SHORT-TERM INVESTMENTS.................................................. 12.62* ------ TOTAL INVESTMENTS.................................................... 99.17 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.83 ------ NET ASSETS........................................................... 100.00% ======
* The Fund held a short position in stock index futures on December 31, 1996 which reduced U.S. equity exposure from 37.55% to 32.49%. The Fund held a long position in Topix futures which increased Japanese equity exposure from 13.77% to 14.71%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 12.62% to 16.74%. ------------------------------------------------------------ 26 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- Equities -- 86.55% U.S. EQUITIES -- 37.55% Aetna Life & Casualty Co................................ 7,200 $ 576,000 Allergan, Inc........................................... 12,000 427,500 Allstate Corp........................................... 6,200 358,825 Alza Corp. (b).......................................... 11,700 302,738 Aon Corp................................................ 15,700 975,362 Automatic Data Processing, Inc.......................... 11,500 493,063 Avon Products, Inc...................................... 8,500 485,562 Bard (C.R.), Inc........................................ 7,300 204,400 Beckman Instruments, Inc................................ 4,700 180,363 Birmingham Steel Corp................................... 4,700 89,300 Boston Technology, Inc. (b)............................. 4,700 135,125 Brinker International, Inc. (b)......................... 3,200 51,200 Burlington Northern Santa Fe............................ 13,400 1,157,425 Centerior Energy Co..................................... 9,900 106,425 Chase Manhattan Corp.................................... 16,900 1,508,325 Choice Hotels International, Inc. (b)................... 7,700 135,712 CIGNA Corp.............................................. 5,800 792,425 Circuit City Stores, Inc................................ 1,700 51,213 Citicorp................................................ 10,300 1,060,900 CMS Energy Corp......................................... 12,800 430,400 Coca-Cola Enterprises, Inc.............................. 6,300 305,550 Comerica, Inc........................................... 3,200 167,600 Comverse Techonology, Inc. (b).......................... 2,200 83,187 Corning, Inc............................................ 23,600 1,091,500 CPC International, Inc.................................. 2,900 224,750 Dial Corp............................................... 11,500 169,625 EMC Corp./Mass (b)...................................... 16,900 559,813 Enron Corp.............................................. 18,800 810,750 Federal Express Corp. (b)............................... 17,400 774,300 Federated Department Stores (b)......................... 6,800 232,050 FileNet Corp. (b)....................................... 2,800 89,600 First American Corp.-Tenn............................... 800 46,100 First Data Corp......................................... 9,804 357,846 First of America Bank Corp.............................. 1,500 90,187 Footstar, Inc. (b)...................................... 3,598 89,500 Ford Motor Co........................................... 6,500 207,188 Forest Laboratories, Inc. (b)........................... 8,000 262,000 Gannett Co., Inc........................................ 7,800 584,025 General Instrument Corp. (b)............................ 23,300 503,862 Genzyme Corp. (b)....................................... 4,700 102,225 Geon Co................................................. 1,700 33,363 Goodyear Tire & Rubber Co............................... 17,300 888,788 Harnischfeger Industries, Inc........................... 5,200 250,250 Health Care and Retirement Corp. (b).................... 8,650 247,606 Interpublic Group of Companies, Inc..................... 5,800 275,500 James River Corp. of Virginia........................... 6,700 221,938 Kimberly-Clark Corp..................................... 5,700 542,925 Kroger Co. (b).......................................... 4,900 227,850 Lockheed Martin Corp.................................... 12,751 1,166,716 Lyondell Petrochemical Co............................... 12,800 281,600 Manor Care, Inc......................................... 7,700 207,900 Martin Marietta Materials, Inc.......................... 3,535 82,189 Masco Corp.............................................. 7,300 262,800 Mattel, Inc............................................. 28,050 778,388 Melville Corp........................................... 9,300 384,787 Nabisco Holdings Corp. Class A.......................... 8,500 330,438 National Semiconductor Corp. (b)........................ 4,800 117,000 Nextel Communications, Inc. Class A (b)................. 11,800 154,137 Old Republic International Corp......................... 6,050 161,838 Peco Energy Co.......................................... 7,200 181,800 Pentair, Inc............................................ 5,500 177,375 Pharmacia & Upjohn, Inc................................. 14,900 590,413 Philip Morris Companies, Inc............................ 9,200 1,036,150 Rhone-Poulenc Rorer, Inc................................ 3,500 273,437 RJR Nabisco Convertible Preferred "C"................... 38,200 257,850 Schering Plough Corp.................................... 10,300 666,925 Seagate Technology, Inc. (b)............................ 3,200 126,400 Timken Co............................................... 4,900 224,788 Tyson Foods, Inc. Class A............................... 14,100 482,925 Ultramar Diamond Shamrock Corp.......................... 13,252 419,094 US Bancorp.............................................. 7,100 319,056 USF&G Corp.............................................. 5,500 114,813 Vencor, Inc. (b)........................................ 6,100 192,912 Viad Corp............................................... 11,500 189,750 Westvaco Corp........................................... 2,850 81,938 Whitman Corp............................................ 700 16,012 WMX Technologies, Inc................................... 19,100 623,137 Xerox Corp.............................................. 22,400 1,178,800 York International Corp................................. 4,800 268,200 360 Communications Co. (b).............................. 4,033 93,263 ----------- Total U.S. Equities..................................... 30,404,972 ----------- NON-U.S. EQUITIES -- 49.00% AUSTRALIA -- 2.66% Amcor Ltd............................................... 14,100 90,603 Boral Ltd............................................... 23,800 67,676 Broken Hill Proprietary Co. Ltd......................... 34,450 490,345 CRA Ltd................................................. 12,063 189,233 David Jones Ltd......................................... 57,000 79,230 Lend Lease Corp. Ltd.................................... 4,197 81,340 M.I.M. Holdings Ltd..................................... 49,446 69,122 National Australia Bank Ltd............................. 19,475 228,936 News Corp. Ltd.......................................... 40,536 213,788 News Corp. Ltd. Preferred............................... 9,000 40,032 Pacific Dunlop Ltd...................................... 33,600 85,401 Qantas Airways Ltd...................................... 23,982 40,001 Santos Ltd.............................................. 23,000 93,169 WMC Ltd................................................. 18,300 115,265 Westpac Bank Corp. Ltd.................................. 37,545 213,520 Woolworth's Ltd......................................... 25,000 60,167 ----------- 2,157,828 ----------- BELGIUM -- 1.46% Delhaize-Le Lion S.A.................................... 1,200 71,212 Electrabel S.A.......................................... 950 224,606 Fortis AG............................................... 894 143,256 Fortis AG Strip (b)..................................... 14 7 General de Banque S.A................................... 100 35,810 Groupe Bruxelles Lambert S.A............................ 530 68,160 Kredietbank NV.......................................... 365 119,504
- -------------------------------------------------------------------------------- 27 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- BELGIUM (CONTINUED) Petrofina S.A........................................... 510 $ 162,162 Societe Generale de Belgique............................ 840 65,847 Solvay S.A. Class A..................................... 165 100,903 Tractebel............................................... 200 93,028 Tractebel Warrants "99" (b)............................. 200 2,896 Union Miniere Group S.A. (b)............................ 1,420 96,114 ----------- 1,183,505 ----------- CANADA -- 1.48% Alcan Aluminium Ltd..................................... 2,500 84,361 Bank of Montreal........................................ 2,300 73,165 Barrick Gold Corp....................................... 1,600 45,819 BCE, Inc................................................ 1,100 52,408 Canadian National Railway Co............................ 2,000 76,025 Canadian Pacific Ltd.................................... 5,700 149,923 Hudson's Bay Co......................................... 3,400 56,807 Imperial Oil Ltd........................................ 2,000 94,119 Moore Corp. Ltd......................................... 2,200 45,586 Noranda, Inc............................................ 2,600 57,953 Northern Telecom Ltd.................................... 1,000 62,163 NOVA Corp............................................... 4,300 38,118 Royal Bank of Canada.................................... 2,500 87,735 Seagram Co. Ltd......................................... 2,200 87,079 Thomson Corp............................................ 5,600 123,596 TransCanada Pipelines Ltd............................... 3,400 59,536 ----------- 1,194,393 ----------- FINLAND -- 0.69% Merita Ltd. Class A (b)................................. 16,700 51,814 Nokia Ab Class A........................................ 5,000 289,434 Outokumpu Class A....................................... 2,600 44,283 Pohjola Insurance Group Class B......................... 1,200 26,947 Sampo Insurance Co. Ltd. Class A........................ 700 55,131 UPM-Kymmene Corp. (b)................................... 4,500 94,218 ----------- 561,827 ----------- FRANCE -- 4.90% Accor S.A............................................... 877 110,833 Alcatel Alsthom......................................... 1,461 117,134 AXA S.A................................................. 600 38,086 Banque Nationale de Paris............................... 5,380 207,803 CEP Communications...................................... 404 28,481 CEP Communications Warrants "97" (b).................... 704 806 Cie Bancaire S.A........................................ 1,192 140,783 Cie de Saint Gobain..................................... 1,757 248,069 Cie de Suez............................................. 2,317 98,319 Cie Generale des Eaux................................... 2,671 330,362 Colas................................................... 330 47,608 Credit Local de France.................................. 2,503 217,623 Elf Aquitaine S.A....................................... 2,650 240,752 Groupe Danone........................................... 300 41,722 L'Oreal S.A............................................. 200 75,173 Lafarge S.A............................................. 1,000 59,880 LVMH.................................................... 1,130 314,958 Michelin Class B........................................ 3,234 174,244 Pechiney S.A. Class A................................... 3,013 125,998 Peugeot S.A............................................. 2,640 296,566 Rhone-Poulenc Class A................................... 6,600 224,583 SEITA................................................... 1,900 79,308 Societe Generale........................................ 2,061 222,406 Total S.A. Class B...................................... 3,459 280,781 UAP..................................................... 4,309 107,338 Usinor Sacilor.......................................... 9,400 136,515 ----------- 3,966,131 ----------- GERMANY -- 3.91% Allianz AG Holding...................................... 155 278,600 BASF AG................................................. 4,250 162,708 Bayer AG................................................ 5,750 233,007 Bayerische Motoren Werke AG............................. 230 158,497 Commerzbank AG.......................................... 4,550 115,440 Daimler-Benz AG (b)..................................... 2,400 164,298 Deutsche Bank AG........................................ 4,650 216,644 Deutsche Telekom AG (b)................................. 7,750 161,427 Henkel KGaA-Vorzug AG................................... 1,850 91,234 Hochtief AG............................................. 1,250 49,072 Hoechst AG.............................................. 2,000 92,531 M.A.N. AG............................................... 320 77,140 Mannesmann AG........................................... 380 163,283 Metro AG................................................ 1,220 95,393 Muenchener Rueckver AG.................................. 77 186,617 Muenchener Rueckver AG Warrants "98" (b)................ 3 625 Preussag AG............................................. 460 103,874 RWE AG.................................................. 3,100 129,544 Schering AG............................................. 2,000 168,581 Siemens AG.............................................. 1,400 64,881 Thyssen AG.............................................. 700 123,957 Veba AG................................................. 3,600 206,735 Volkswagen AG........................................... 300 124,100 ----------- 3,168,188 ----------- HONG KONG -- 0.75% Cheung Kong Holdings Ltd................................ 6,000 53,330 China Light & Power Co. Ltd............................. 11,000 48,921 Guoco Group Ltd......................................... 9,000 50,382 Hang Seng Bank Ltd...................................... 5,800 70,486 Hong Kong Telecommunications Ltd........................ 16,000 25,753 Hutchison Whampoa Ltd................................... 14,000 109,956 Jardine Matheson Holdings ADR (c)....................... 3,600 23,760 New World Development Co. Ltd........................... 9,000 60,796 Sun Hung Kai Properties Ltd............................. 5,000 61,248 Swire Pacific Ltd. Class A.............................. 7,000 66,743 Wharf (Holdings) Ltd.................................... 8,000 39,923 ----------- 611,298 -----------
- -------------------------------------------------------------------------------- 28 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- ITALY -- 1.45% Assicurazioni Generali.................................. 5,940 $ 112,315 Danieli & Co. Savings (Risp)............................ 8,000 33,410 Edison Spa.............................................. 8,000 50,510 ENI ADR (c)............................................. 2,300 118,738 ENI Spa................................................. 22,000 112,641 Fiat Spa-Priv........................................... 44,000 72,489 INA-Istituto Nazionale de Assicurazioni................. 14,000 18,194 Istituto Mobilaire Italiano Spa......................... 15,000 128,247 Italgas Spa............................................. 9,000 37,498 La Rinascente........................................... 5,000 28,938 La Rinascente Savings (Risp)............................ 6,000 15,311 La Rinascente Warrants "99" (b)......................... 550 242 Mediobanca Spa.......................................... 2,800 15,073 Montedison Spa (b)...................................... 154,560 105,107 SAI-Savings (Risp)...................................... 7,000 24,837 Telecom Italia Spa...................................... 86,000 167,418 Telecom Italia Mobile Spa............................... 92,000 130,996 ----------- 1,171,964 ----------- JAPAN -- 13.77% Amada Co. Ltd........................................... 21,000 162,833 Asahi Glass Co. Ltd..................................... 24,000 225,381 Bank of Tokyo-Mitsubishi Ltd............................ 17,600 326,010 Canon, Inc.............................................. 17,000 374,946 Canon Sales Co., Inc.................................... 6,600 146,705 Citizen Watch Co. Ltd................................... 19,000 135,866 Dai Nippon Printing Co. Ltd............................. 18,000 314,810 Daiichi Pharmaceutical Co. Ltd.......................... 13,000 208,323 Daikin Industries Ltd................................... 20,000 177,478 Daiwa House Industry Co. Ltd............................ 9,000 115,534 Fanuc................................................... 7,900 252,511 Fujitsu................................................. 12,000 111,657 Hitachi Ltd............................................. 39,000 362,884 Honda Motor Co.......................................... 5,000 142,586 Inax.................................................... 25,000 184,802 Isetan.................................................. 6,000 77,539 Ito Yokado Co. Ltd...................................... 7,000 303,955 Kaneka Corp............................................. 9,000 45,981 Keio Teito Electric Railway............................. 23,000 112,156 Kinki Nippon Railway.................................... 23,000 143,267 Kirin Brewery Co. Ltd................................... 21,000 206,255 Kokuyo.................................................. 4,000 98,561 Kuraray Co. Ltd......................................... 17,000 156,716 Kyocera Corp. .......................................... 2,000 124,408 Maeda Road Construction................................. 3,000 34,634 Matsushita Electric Industrial Co....................... 31,000 504,782 Mitsubishi Paper Mills.................................. 21,000 81,959 NGK Insulators.......................................... 32,000 303,265 Nintendo Corp. Ltd...................................... 1,500 107,134 Nippon Denso Co. Ltd.................................... 13,000 312,484 Nippon Meat Packers, Inc................................ 13,000 168,002 Nippon Steel Co......................................... 14,000 41,251 Okumura................................................. 18,000 109,176 Osaka Gas Co............................................ 81,000 221,220 Sankyo Co. Ltd.......................................... 14,000 395,623 Sanwa Bank Ltd. ........................................ 9,000 122,512 Secom................................................... 5,000 301,973 Seino Transportation.................................... 6,000 66,167 Sekisui House Ltd....................................... 38,000 386,319 Shinmaywa Industries Ltd................................ 18,000 132,282 Sony Corp............................................... 6,000 392,349 Sumitomo Bank........................................... 21,000 302,145 Sumitomo Electric Industries............................ 16,000 223,313 Takeda Chemical Industries.............................. 15,000 314,035 TDK Corp................................................ 4,000 260,188 Tokio Marine & Fire Insurance Co........................ 18,000 169,036 Tokyo Electric Power.................................... 8,300 181,632 Tokyo Steel Mfg......................................... 14,500 206,126 Tonen Corp.............................................. 13,000 151,202 Toray Industries, Inc................................... 78,000 480,486 Toshiba Corp............................................ 46,000 288,516 Toyo Suisan Kaisha...................................... 11,000 109,934 Toyota Motor Corp....................................... 5,000 143,448 Yamazaki Baking Co. Ltd................................. 8,000 127,509 ----------- 11,149,866 ----------- MALAYSIA -- 0.54% Hume Industries (Malaysia) Bhd.......................... 7,000 44,070 Kuala Lumpur Kepong Bhd................................. 15,000 38,012 Land & General Holdings Bhd............................. 15,000 35,933 Malayan Banking Bhd..................................... 2,600 28,826 Malaysia International Shipping Bhd (Frgn.)............. 10,000 29,697 Nestle (Malaysia) Bhd................................... 1,000 8,038 Public Bank Bhd (Frgn.)................................. 17,667 37,425 Resorts World Bhd....................................... 4,000 18,215 Sime Darby Bhd.......................................... 15,000 59,097 Telekom Malaysia Bhd.................................... 3,000 26,728 Tenaga Nasional Bhd..................................... 18,000 86,241 YTL Corp. Bhd........................................... 4,000 21,540 ----------- 433,822 ----------- NETHERLANDS -- 3.10% ABN AMRO Holdings NV.................................... 3,219 209,178 Akzo Nobel NV........................................... 500 68,220 DSM NV.................................................. 680 66,990 Hoogovens NV............................................ 900 37,463 ING Groep NV............................................ 8,956 322,058 KLM Royal Dutch Air Lines NV............................ 1,900 53,385 KPN NV.................................................. 5,565 212,021 Philips Electronics NV.................................. 2,850 115,338 Royal Dutch Petroleum Co................................ 3,800 665,445 Royal Dutch Petroleum Co. NY Shares (c)................. 1,200 204,900 Unilever NV............................................. 1,900 335,688 Vendex International NV................................. 3,119 133,257 VNU-Ver Ned Uitgevers................................... 4,000 83,483 ----------- 2,507,426 -----------
- -------------------------------------------------------------------------------- 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- NEW ZEALAND -- 1.62% Brierley Investments Ltd................................ 231,000 $ 213,813 Carter Holt Harvey Ltd.................................. 79,500 180,312 Fletcher Challenge Building............................. 30,750 94,512 Fletcher Challenge Energy............................... 29,550 85,604 Fletcher Challenge Forest Ltd........................... 49,803 83,398 Fletcher Challenge Paper................................ 60,500 124,394 Telecom Corp. of New Zealand Ltd........................ 87,000 443,821 Telecom Corp. of New Zealand Ltd. ADS (c)............... 1,100 89,100 ----------- 1,314,954 ----------- SPAIN -- 1.62% Acerinox S.A. .......................................... 400 57,690 Banco Bilbao-Vizcaya S.A................................ 1,800 97,006 Banco Central Hispanoamericano.......................... 1,700 43,586 Banco Intercontinental Espanol S.A...................... 300 46,427 Banco Popular Espanol S.A............................... 400 78,416 Banco Santander S.A..................................... 1,600 102,218 Cia Sevillana de Electricidad........................... 2,113 23,961 Empresa Nacional de Electridad S.A...................... 2,050 145,624 Fomento de Construcciones y Contratas S.A.......................................... 500 46,512 Gas Natural SDG S.A. ................................... 300 69,652 Iberdrola S.A........................................... 13,000 183,894 Mapfre Corp. ........................................... 900 54,730 Repsol S.A.............................................. 3,300 126,342 Telefonica de Espana.................................... 7,500 173,842 Vallehermosa S.A........................................ 1,200 25,969 Viscofan Envolturas Celulosicas S.A..................... 2,300 33,596 ----------- 1,309,465 ----------- SWITZERLAND -- 0.90% ABB AG (Bearer)......................................... 30 37,201 CS Holdings AG (Reg.)................................... 396 40,552 Nestle S.A. (Reg.)...................................... 213 227,959 Novartis AG (Reg.)...................................... 140 160,219 Roche Holding AG (Gen.)................................. 18 139,622 Schweiz Bankgesellschaft (Bearer)....................... 42 36,692 Societe Generale de Surveillance Holding S.A. (Bearer).. 11 26,953 Zurich Versicherungs (Reg.)............................. 203 56,242 ----------- 725,440 ----------- UNITED KINGDOM -- 10.15% Abbey National PLC...................................... 11,000 144,018 Bank of Scotland........................................ 16,000 84,477 Bass PLC................................................ 6,800 95,547 B.A.T. Industries PLC................................... 35,000 290,219 Booker PLC.............................................. 10,500 71,791 British Energy PLC...................................... 75,000 188,687 British Gas PLC......................................... 71,500 274,718 British Petroleum Co. PLC............................... 33,416 400,615 British Steel PLC....................................... 62,000 170,306 British Telecommunications PLC.......................... 69,700 470,591 Charter PLC............................................. 9,531 120,789 Coats Viyella PLC....................................... 45,000 102,430 FKI PLC................................................. 38,875 134,396 General Electric Co. PLC................................ 71,100 464,833 Glaxo Wellcome PLC...................................... 11,500 186,582 Grand Metropolitan PLC.................................. 46,000 361,355 Guinness PLC............................................ 36,300 284,225 Hanson PLC.............................................. 72,000 100,428 Hillsdown Holdings PLC.................................. 53,000 181,414 House of Fraser PLC..................................... 59,000 154,997 HSBC Holdings PLC....................................... 12,000 268,218 Imperial Chemical Industries PLC........................ 5,000 65,762 Legal & General Group PLC............................... 28,000 178,265 Lloyds TSB Group PLC.................................... 60,630 446,709 Marks & Spencer PLC..................................... 29,500 247,895 Millennium Chemicals, Inc. (b).......................... 500 8,875 Mirror Group PLC........................................ 24,000 88,516 National Power PLC...................................... 19,000 159,011 National Westminster Bank PLC........................... 10,800 126,706 Northern Foods PLC...................................... 32,000 111,997 Peninsular & Oriental Steam Navigation Co............... 29,000 292,829 Reckitt & Colman PLC.................................... 6,175 76,514 Redland PLC............................................. 9,500 59,589 RJB Mining PLC.......................................... 21,000 154,544 Royal & Sun Alliance Insurance Group PLC................ 16,697 127,021 RTZ Corp. PLC........................................... 11,200 179,511 Sainsbury (J.) PLC...................................... 23,000 152,730 Scottish Hydro-Electric PLC............................. 17,200 96,553 Sears PLC............................................... 66,000 107,308 Sedgwick Group PLC...................................... 48,000 108,027 SmithKline Beecham PLC.................................. 13,900 192,573 Smurfit (Jefferson) Group PLC........................... 30,000 89,081 Tesco PLC............................................... 22,000 133,476 Thames Water PLC........................................ 16,000 167,722 Unilever PLC............................................ 6,500 157,578 Vodafone Group PLC...................................... 19,600 82,687 Yorkshire Water PLC..................................... 5,000 60,628 ----------- 8,222,743 ----------- Total Non-U.S. Equities................................. 39,678,850 ----------- Total Equities (Cost $61,753,091)....................... 70,083,822 ----------- FACE AMOUNT VALUE ---------- ----------- Short-Term Investments --12.62% U.S. GOVERNMENT OBLIGATIONS -- 0.39% U.S. Treasury Bills 5.063%, due 05/01/97................ $ 325,000 $ 319,553 ----------- COMMERCIAL PAPER -- 12.23% Burlington Northern Santa Fe 5.650%, due 01/17/97................................... 500,000 498,744 Case Credit Corp. 5.510%, due 01/07/97................................... 500,000 499,541 Cincinnati Bell, Inc. 7.250%, due 01/02/97................................... 2,441,000 2,440,508
- -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- COMMERCIAL PAPER (CONTINUED) CNA Financial Corp. 6.250%, due 01/23/97................................... $ 500,000 $ 498,090 Crown Cork & Seal Co., Inc. 5.520%, due 01/10/97 500,000 499,310 5.580%, due 01/29/97................................... 500,000 497,830 PanEnergy Corp. 6.050%, due 01/17/97................................... 1,000,000 997,311 Rite Aid Corp. 5.650%, due 01/06/97................................... 500,000 499,608 5.600%, due 01/21/97................................... 700,000 697,822 Tyson Foods, Inc. 5.750%, due 01/09/07................................... 750,000 749,042 US West Capital Funding, Inc. 5.600%, due 02/12/97................................... 532,000 528,524 Vastar Resources, Inc. 6.020%, due 01/02/97................................... 500,000 499,916 6.850%, due 01/10/97................................... 1,000,000 998,288 ----------- 9,904,534 ----------- Total Short-Term Investments (Cost $10,224,050)..................................... 10,224,087 ----------- Total Investments (Cost $71,977,141) -- 99.17% (a)....................... 80,307,909 ----------- Cash and other assets, less liabilities --0.83%......... 675,731 ----------- Net Assets -- 100%...................................... $80,983,640 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $71,977,141; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $10,899,783 Gross unrealized depreciation................................ (2,569,015) ----------- Net unrealized appreciation.............................. $ 8,330,768 ===========
(b) Non-income producing security (c) Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Equity Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- --------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar................ 06/04/97 1,100,000 $ 810,230 $(19,958) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar.............. 06/04/97 950,000 753,566 14,604 Belgian Franc.................. 06/04/97 36,800,000 1,170,765 12,324 Dutch Guilder.................. 06/04/97 3,800,000 2,219,550 28,040 French Franc................... 06/04/97 19,500,000 3,786,028 18,331 German Mark.................... 06/04/97 4,400,000 2,883,595 36,500 Hong Kong Dollars.............. 06/04/97 4,400,000 568,746 (130) Japanese Yen................... 06/04/97 500,000,000 4,401,739 150,419 Spanish Peseta................. 06/04/97 48,000,000 368,164 4,397 Swiss Franc.................... 06/04/97 900,000 680,839 27,822 -------- Total...................... $272,349 ========
FUTURES CONTRACTS (NOTE 5) The Global Equity Fund had the following open index futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN ---------- ------------- ---------- ---------- INDEX FUTURES BUY CONTRACTS Topix, 6 contracts.............. March 1997 $ 791,419 $ 760,920 $(30,499) INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 11 con- tracts......................... March 1997 4,128,600 4,094,750 33,850 -------- Total........................ $ 3,351 ========
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $211,098 and $319,553, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $71,977,141) (Note 1)................. $80,307,909 Cash.............................................................. 2,540,769 Foreign currency, at value (Cost $97,461)......................... 95,800 Receivables: Investment securities sold....................................... 265,153 Dividends........................................................ 152,214 Fund shares sold................................................. 113,121 Variation margin (Note 5)........................................ 80,051 Due from advisor................................................. 13,080 Net unrealized appreciation on forward foreign currency contracts. 272,349 Other assets...................................................... 7,401 ----------- TOTAL ASSETS................................................... 83,847,847 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 2,624,845 Fund shares redeemed............................................. 8,461 Accrued expenses................................................. 230,901 ----------- TOTAL LIABILITIES.............................................. 2,864,207 ----------- NET ASSETS......................................................... $80,983,640 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7).......................................... $72,056,258 Accumulated undistributed net investment income................... 204,604 Accumulated net realized gain..................................... 112,758 Net unrealized appreciation....................................... 8,610,020 ----------- NET ASSETS..................................................... $80,983,640 =========== OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $38,631,262 and 3,393,011 shares issued and outstanding) (Note 7)....................................... $ 11.39 =========== SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $42,352,378 and 3,721,883 shares issued and outstanding) (Note 7)....................................... $ 11.38 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $50,249 for foreign taxes withheld)............. $ 623,914 Interest.......................................................... 212,723 ---------- TOTAL INCOME................................................... 836,637 ---------- EXPENSES: Advisory (Note 2)................................................. 276,132 Distribution (Note 6)............................................. 141,145 Accounting........................................................ 71,001 Custodian......................................................... 50,480 Professional...................................................... 38,272 Other............................................................. 126,012 ---------- TOTAL EXPENSES................................................. 703,042 Expenses deferred by Advisor (Note 2).......................... (216,697) ---------- NET EXPENSES................................................... 486,345 ---------- NET INVESTMENT INCOME ......................................... 350,292 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 2,476,667 Futures contracts................................................ (492,032) Foreign currency transactions.................................... 273,229 ---------- Net realized gain.............................................. 2,257,864 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 2,471,472 Futures contracts................................................ (23,546) Forward contracts................................................ 268,593 Translation of other assets and liabilities denominated in for- eign currency................................................... 3,943 ---------- Change in net unrealized appreciation or depreciation.......... 2,720,462 ---------- Net realized and unrealized gain................................... 4,978,326 ---------- Net increase in net assets resulting from operations............... $5,328,618 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 350,292 $ 462,604 Net realized gain............................. 2,257,864 8,259,766 Change in net unrealized appreciation or depreciation................................. 2,720,462 1,258,707 ------------ ----------- Net increase in net assets resulting from op- erations..................................... 5,328,618 9,981,077 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class............................ (176,096) (295,340) SwissKey Fund Class........................... (53,287) (41,698) Distributions from net realized gain: Brinson Fund Class............................ (3,076,894) (1,399,995) SwissKey Fund Class........................... (3,396,000) (1,621,590) ------------ ----------- Total distributions to shareholders........... $ (6,702,277) $(3,358,623) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold................................... 19,387,404 11,563,213 Shares issued in acquisition of SBC World Growth Fund (Note 1)......................... -- 25,670,575 Shares issued on reinvestment of distribu- tions........................................ 6,291,113 3,336,320 Shares redeemed............................... (3,459,300) (7,760,045) ------------ ----------- Net increase in net assets resulting from cap- ital share transactions (Note 7)............. 22,219,217 32,810,063 ------------ ----------- TOTAL INCREASE IN NET ASSETS............... 20,845,558 39,432,517 ------------ ----------- NET ASSETS: Beginning of period........................... 60,138,082 20,705,565 ------------ ----------- End of period (including accumulated undis- tributed net investment income of $204,604 and $90,547, respectively)................... $ 80,983,640 $60,138,082 ============ ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR YEAR JANUARY 28, 1994* DECEMBER 31, 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ----------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 11.57 $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- ------- Income from investment operations: Net investment income. 0.03 0.18 0.18 0.07 Net realized and unrealized gain (loss)............... 0.84 2.29 0.39 (0.54) ------- ------- ------- ------- Total income (loss) from investment op- erations........... 0.87 2.47 0.57 (0.47) ------- ------- ------- ------- Less distributions: Distributions from net investment income.... (0.06) (0.14) (0.04) (0.04) Distributions from and in excess of net re- alized gain.......... (0.99) (0.69) (0.09) -- ------- ------- ------- ------- Total distributions. (1.05) (0.83) (0.13) (0.04) ------- ------- ------- ------- Net asset value, end of period................. $ 11.39 $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= ======= Total return (non- annualized)............ 7.67% 25.66% 6.06% (4.70%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $38,631 $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.62%** 1.77% 2.06% 2.65%** After expense reim- bursement............ 1.00%** 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 0.80%** 0.57% 0.71% 0.24%** After expense reim- bursement............ 1.42%** 1.34% 1.77% 1.89%** Portfolio turnover rate.................. 17% 74% 36% 21% Average commission rate paid per share........ $0.0259 $0.0288 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.57 $ 10.35 ------- ------- Income from investment operations: Net investment gain (loss).................. 0.02 (0.01) Net realized and unrealized gain............ 0.80 1.93 ------- ------- Total income from investment operations... 0.82 1.92 ------- ------- Less distributions: Distributions from net investment income.... (0.02) (0.01) Distributions from net realized gain........ (0.99) (0.69) ------- ------- Total distributions....................... (1.01) (0.70) ------- ------- Net asset value, end of period................ $ 11.38 $ 11.57 ======= ======= Total return (non-annualized)................. 7.23% 19.25% Ratios/Supplemental data Net assets, end of period (in 000s).......... $42,353 $33,012 Ratio of expenses to average net assets: Before expense reimbursement................ 2.38%** 2.53%** After expense reimbursement................. 1.76%** 1.76%** Ratio of net investment income (loss) to av- erage net assets: Before expense reimbursement................ 0.04%** (0.19%)** After expense reimbursement................. 0.66%** 0.58%** Portfolio turnover rate...................... 17% 74% Average commission rate paid per share....... $0.0259 $0.0288
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO The Global Bond Fund is actively managed, providing a fully integrated treatment of the U.S. and other major fixed income markets across the world. This global approach takes full advantage of relationships both within and across markets, based on consistent analysis of macroeconomic and market conditions. Market and currency strategies are developed in a global asset allocation framework, in conjunction with senior fixed income professionals in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo. The SwissKey Global Bond Fund has provided an annualized return of 11.40% since July 31, 1995 (performance inception date). Its benchmark, the Salomon World Government Bond Index, returned 3.72%. For the year ended December 31, 1996, the Fund returned 8.70%, while the benchmark returned 3.63%. In the second half of 1996, the Fund produced a return of 6.76% compared to the 5.18% return of the benchmark. Market/currency allocation and bond management strategies all contributed positively to Fund performance in 1996. Market allocation contributions were broadly derived from European and Canadian bond market overweights against the U.S. The Japanese bond market underweight detracted from Fund performance. The currency allocation strategy added value in nearly every currency. Bond management was strong, particularly in the U.S. market. Bond markets around the world began a period of strength in early 1995 that was grounded on a foundation of poor performance in 1994. The strength the global markets experienced in 1995 was protracted into 1996 for essentially every bond market except for the U.S. In U.S. dollar-hedged terms, the Salomon Brothers Index returned 8.68% in 1996. The U.S. market posted a lackluster return of 2.73% while the non-U.S. portion of the index (hedged) returned 11.82% during the year. The Fund benefited from a U.S. bond market underweight through the middle of October, when the Fund shifted to a neutral stance. The Fund also benefited from an overweight in core European markets during the year. Despite low yields in Japan, the market generated a relatively strong return; consequently, the Fund's underweight in Japan detracted from performance. Currency allocation strategy contributed substantially to the performance of the Global Bond Fund relative to the Salomon Brothers World Government Bond Index. During the year, the Fund maintained significant underweights to the Japanese yen and the core European currencies. The aggregate European currency underweight was similar in magnitude to the yen underweight. The U.S. dollar overweight averaged about 35% during the year. The Japanese yen declined by 11.13%, and the core European currency depreciations ranged from 14.31% for the Swiss franc to 5.93% for the French franc. The Fund maintained neutral or overweight positions to currencies that appreciated over the course of 1996. Bond management was particularly strong in the U.S. due to issue selection in the mortgage-backed and corporate sectors. Security selection contributions were mixed outside the U.S. ------------------------------------------------------------ 38 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 7/31/95* 12/31/96 12/31/96 to 12/31/96 - ------------------------------------------------------------------ SWISSKEY GLOBAL BOND FUND 6.76% 8.70% 11.40% Salomon World Government Bond Index 5.18 3.63 3.72 - ------------------------------------------------------------------
*Performance inception date of the SwissKey Global Bond Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Bond Fund and the Salomon World Government Bond Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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. SWISSKEY GLOBAL BOND FUND VS. SALOMON WORLD GOVERNMENT BOND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] Salomon World SwissKey Global Government Bond Fund Bond Index --------------- ------------- 7/31/95 $10,000 $10,000 9/30/95 10,218 9,871 12/31/95 10,722 10,162 3/31/96 10,701 9,972 6/30/96 10,917 10,013 9/30/96 11,287 10,287 12/31/96 11,654 10,531 7/31/95 = $10,000 Data through 12/31/96 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. ------------------------------------------------------------ 39 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - ------------------------------- U.S. 33.0% 33.0% Japan 18.7 5.2 Australia 1.1 0.0 Austria 0.9 0.0 Belgium 2.7 2.8 Canada 3.3 8.0 Denmark 1.7 6.3 Finland 0.5 0.0 France 7.5 7.9 Germany 9.6 13.4 Italy 6.7 7.0 Netherlands 3.4 8.2 Spain 2.8 0.0 Sweden 1.7 1.9 Switzerland 0.4 0.0 U.K. 6.0 6.3 - ------------------------------- 100.0% 100.0%
CURRENCY ALLOCATION As of December 31, 1996 (Unaudited)
Current Benchmark Strategy - ------------------------------- U.S. 33.0% 57.4% Japan 18.7 8.7 Australia 1.1 1.1 Austria 0.9 0.0 Belgium 2.7 2.8 Canada 3.3 3.2 Denmark 1.7 1.7 Finland 0.5 0.0 France 7.5 1.5 Germany 9.6 5.6 Italy 6.7 7.0 Netherlands 3.4 0.0 Spain 2.8 2.8 Sweden 1.7 1.9 Switzerland 0.4 0.0 U.K. 6.0 6.3 - ------------------------------- 100.0% 100.0%
INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed........................................................... 0.70% CMO.................................................................... 0.41 Consumer............................................................... 0.69 Financial.............................................................. 1.66 Industrial............................................................. 0.81 Telecommunications..................................................... 0.64 ------ 4.91 International Dollar Bonds............................................. 1.83 U.S. Government Agencies............................................... 9.85 U.S. Government Obligations............................................ 11.92 ------ Total U.S. Bonds..................................................... 28.51* ------ NON-U.S. BONDS Foreign Financial Bonds................................................. 23.90 Foreign Government Bonds................................................ 41.78 ------ Total Non-U.S. Bonds................................................. 65.68 ------ SHORT-TERM INVESTMENTS.................................................. 6.01* ------ TOTAL INVESTMENTS.................................................... 100.20 LIABILITIES, LESS CASH AND OTHER ASSETS ................................ (0.20) ------ NET ASSETS........................................................... 100.00% ====== - --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on December 31, 1996 which increased U.S. bond exposure from 28.51% to 32.47% and decreased the Fund's exposure to Short-Term Investments from 6.01% to 2.05%. ------------------------------------------------------------ 40 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ---------- Bonds -- 94.19% U.S. BONDS -- 28.51% U.S. CORPORATE BONDS -- 4.91% Asset Securitization Corp. 96-D3 7.210%, due 10/13/26.................................... $ 140,000 $ 142,805 Capital One Bank 6.830%, due 05/17/99 ................................... 200,000 200,923 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.................................... 125,000 124,375 Chrysler Financial Corp. MTN 6.500%, due 08/21/97.................................... 165,000 165,784 Ford Credit Auto Lease Trust 6.350%, due 10/15/98.................................... 134,247 134,592 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.................................... 65,914 65,986 Ford Motor Co. 7.250%, due 10/01/08.................................... 200,000 201,705 GMAC MTN 6.750%, due 06/10/02.................................... 200,000 200,754 Green Tree Financial 94-2 8.300%, due 05/15/19.................................... 25,000 26,442 Lockheed Martin Corp. 7.700%, due 06/15/08.................................... 125,000 130,854 News America Corp. 7.750%, due 01/20/24.................................... 275,000 262,871 The Money Store 94-A3 5.525%, due 09/15/18.................................... 86,249 84,622 Time Warner Entertainment, Inc. 8.375%, due 03/15/23.................................... 235,000 238,872 Time Warner, Inc. 9.150%, due 02/01/23.................................... 40,000 43,347 ----------- 2,023,932 ----------- INTERNATIONAL DOLLAR BONDS -- 1.83% Korea Development Bank 6.625%, due 11/21/03.................................... 90,000 89,331 Province of Quebec 7.500%, due 07/15/23.................................... 235,000 234,589 Republic of South Africa 9.625%, due 12/15/99.................................... 125,000 132,969 Royal Bank of Scotland 7.375%, due 04/01/06.................................... 300,000 298,987 ----------- 755,876 ----------- U.S. GOVERNMENT AGENCIES -- 9.85% Federal Home Loan Mortgage Corp. 6.520%, due 01/02/02.................................... 300,000 300,885 6.750%, due 05/30/06.................................... 65,000 65,479 7.000%, due 04/15/07.................................... 193,904 190,836 5.800%, due 08/15/19.................................... 90,000 84,067 6.500%, due 05/15/21.................................... 107,708 97,743 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.................................... 113,402 115,564 9.000%, due 05/01/24.................................... 324,175 346,012 9.500%, due 04/01/25.................................... 31,268 33,652 Federal National Mortgage Association 6.500%, due 03/01/03.................................... 455,000 450,168 6.220%, due 03/13/06.................................... 150,000 145,013 6.500%, due 04/25/08.................................... 110,333 105,251 9.000%, due 08/01/21.................................... 31,246 33,256 8.500%, due 07/01/22.................................... 22,762 23,919 7.500%, due 05/01/25.................................... 385,767 385,647 6.500%, due 02/01/26.................................... 78,160 74,569 6.500%, due 03/01/26.................................... 820,000 782,331 7.000%, due 03/01/26.................................... 180,000 176,119 7.500%, due 12/01/26.................................... 299,101 299,119 Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only...................... 116,861 36,012 0.000%, due 07/01/26 principal only..................... 103,393 69,564 Government National Mortgage Association 6.500%, due 03/20/26.................................... 68,926 65,329 Independent National Mortgage Corp. 8.350%, due 06/25/25................................................ 175,000 179,209 ----------- 4,059,744 ----------- U.S. GOVERNMENT OBLIGATIONS-- 11.92% U.S. Treasury Coupon Strips 0.000%, due 05/15/08 principal only..................... 245,000 116,598 U.S. Treasury Notes and Bonds 6.250%, due 10/31/01.................................... 1,660,000 1,661,038 7.000%, due 07/15/06.................................... 940,000 976,719 8.125%, due 05/15/21.................................... 1,860,000 2,157,600 ----------- 4,911,955 ----------- Total U.S. Bonds......................................... 11,751,507 ----------- NON-U.S. BONDS -- 65.68% BELGIUM -- 2.73% Kingdom of Belgium 8.750%, due 06/25/02.............................. BEF 14,000,000 520,386 9.000%, due 03/28/03.................................... 4,000,000 151,251 7.500%, due 07/29/08.................................... 13,000,000 453,298 ----------- 1,124,935 ----------- CANADA -- 7.96% British Columbia 7.750%, due 06/16/03.............................. CAD 1,050,000 835,993 7.250%, due 09/21/05.................................... 1,290,000 981,193 Government of Canada 4.250%, due 12/01/21(b)................................. 1,820,000 1,465,566 ----------- 3,282,752 ----------- DENMARK -- 6.21% City of Copenhagen 6.250%, due 03/15/01.............................. DKR 2,400,000 424,147 Great Belt 7.000%, due 09/02/03.................................... 10,650,000 1,895,692 Kingdom of Denmark 7.000%, due 11/10/24.................................... 1,500,000 241,062 ----------- 2,560,901 -----------
- -------------------------------------------------------------------------------- 41 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ---------- FRANCE -- 7.73% Eurofima 8.625%, due 09/01/99............................ FRF 5,100,000 $ 1,096,897 Government of France (OAT) 8.500%, due 12/26/12................................ 3,100,000 726,714 8.500%, due 04/25/23................................ 2,400,000 563,218 KFW International Finance 7.750%, due 02/17/98................................ 2,600,000 523,568 Kingdom of Finland 9.000%, due 08/13/03................................ 1,200,000 278,147 ----------- 3,188,544 ----------- GERMANY -- 13.23% Bundesrepublik Deutscheland 6.250%, due 01/04/24............................ DEM 800,000 492,687 European Economic Community 6.500%, due 03/10/00................................ 2,650,000 1,833,901 Kingdom of Norway 6.125%, due 05/05/98................................ 1,040,000 698,125 LKB Baden-Wurt Finance 6.500%, due 09/15/08................................ 1,300,000 866,751 Republic of Ireland 7.250%, due 03/18/03................................ 2,200,000 1,562,455 ----------- 5,453,919 ----------- ITALY -- 6.64% Bayerische Landesbank 10.750%, due 03/01/03........................... ITL 1,000,000,000 771,950 European Investment Bank 12.750%, due 02/15/00............................... 150,000,000 115,546 Landesbank Rheinland 8.250%, due 06/02/98................................ 750,000,000 502,532 LKB Baden-Wurt Finance 10.750%, due 04/14/03............................... 950,000,000 734,915 Republic of Italy (BTP) 9.500%, due 02/01/01................................ 850,000,000 613,867 ----------- 2,738,810 ----------- JAPAN -- 5.52% Asian Development Bank 5.000%, 02/05/03................................ JPY 40,000,000 400,620 Government of Japan No.133 7.300%, due 09/20/00................................ 25,000,000 262,019 Government of Japan No.144 6.000%, due 12/20/01................................ 50,000,000 516,628 Republic of Austria 5.000%, due 01/22/01................................ 50,000,000 490,006 World Bank 5.250%, due 03/20/02...................... 60,000,000 604,484 ----------- 2,273,757 ----------- NETHERLANDS -- 7.88% Government of Nederlands 7.500%, due 11/15/99............................... NLG 1,355,000 $ 858,968 International Nederland Verzekeringen 6.250%, due 12/28/05............................................... 1,800,000 1,062,726 Rabobank 6.750%, due 06/25/03................................... 1,400,000 873,149 Republic of Austria 6.250%, due 02/28/24................................... 825,000 453,165 ----------- 3,248,008 ----------- SWEDEN - 1.79% Kingdom of Sweden 6.000%, due 02/09/05................................SWK 5,200,000 738,022 ----------- UNITED KINGDOM -- 5.99% Abbey National 8.750%, due 05/24/04................................GBP 350,000 620,721 British Gas PLC 8.125%, due 03/31/03................................... 545,000 940,901 UK Treasury 7.750%, due 09/08/06................................... 45,000 78,291 9.000%, due 10/13/08................................... 260,000 492,589 8.000%, due 09/27/13................................... 190,000 335,439 ----------- 2,467,941 ----------- Total Non-U.S. Bonds.................................... 27,077,589 ----------- Total Bonds (Cost $37,402,378).......................... 38,829,096 ----------- Short-Term Investments-- 6.01% GOVERNMENT OBLIGATIONS -- 0.06% U.S. Treasury Bills 5.063%, due 05/01/97................ 25,000 24,581 ----------- COMMERCIAL PAPER -- 5.95% Cincinnati Bell, Inc. 7.250%, 01/02/97....................................... 207,000 206,958 CNA Financial Corp. 6.250%, due 01/23/97................................... 500,000 498,090 Crown Cork & Seal Co., 5.520%, due 01/10/97................................... 500,000 499,310 PanEnergy Corp. 6.05%, due 01/17/97.................................... 500,000 498,656 Vastar Resources, Inc. 6.020%, due 01/02/97................................... 500,000 499,916 Whirlpool Financial Corp. 6.000%, due 01/03/97................................... 250,000 249,917 ----------- 2,452,847 ----------- Total Short-Term Investments (Cost $2,477,425)...................................... 2,477,428 ----------- Total Investments (Cost $39,879,803) -- 100.20% (a)...................... 41,306,524 ----------- Liabilities, less cash and other assets -- (0.20%)...... (81,085) ----------- Net Assets -- 100%...................................... $41,225,439 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 42 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $39,879,803; and net unrealized appreciation consisted of: Gross unrealized appreciation................................. $1,660,144 Gross unrealized depreciation................................. (233,423) ---------- Net unrealized appreciation............................... $1,426,721 ==========
(b) Linked to Canada's retail price index. Reset semi-annually. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- --------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar.......... 05/30/97 500,000 $ 396,624 $(10,376) Japanese Yen............... 05/05/97 165,000,000 1,451,551 (35,306) Spanish Peseta............. 05/30/97 138,000,000 1,058,498 216 FORWARD FOREIGN CURRENCY SALE CONTRACTS Canadian Dollar............ 05/30/97 2,900,000 2,135,475 32,084 Danish Kroner.............. 05/30/97 11,300,000 1,930,758 536 Dutch Guilder.............. 05/30/97 5,800,000 3,386,583 7,215 French Franc............... 05/30/97 14,000,000 2,717,348 (14,645) German Mark ............... 05/30/97 5,200,000 3,406,760 842 -------- Total.................. $(19,734) ========
FUTURES CONTRACTS (NOTE 5) The Global Bond Fund had the following open futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE LOSS ---------- -------- -------- ---------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 6 con- tracts................................ March 1997 $645,375 $639,563 $ (5,812) 10 year U.S. Treasury Notes, 5 con- tracts................................ March 1997 554,063 545,625 (8,438) 30 year U.S. Treasury Bonds, 4 con- tracts................................ March 1997 460,000 450,500 (9,500) -------- Total.............................. $(23,750) ========
The market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $24,581. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 43 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $39,879,803) (Note 1)................ $41,306,524 Cash............................................................. 1,186,716 Foreign currency, at value (Cost $79,558)........................ 77,444 Receivables: Investment securities sold...................................... 1,106,341 Interest........................................................ 1,142,553 Fund shares sold................................................ 6,533 Due from advisor................................................ 20,580 Other assets..................................................... 5,655 ----------- TOTAL ASSETS.................................................. 44,852,346 ----------- LIABILITIES: Payables: Investment securities purchased................................. 2,821,281 Fund shares redeemed............................................ 645,334 Variation margin (Note 5)....................................... 12,312 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 19,734 Accrued expenses................................................ 128,246 ----------- TOTAL LIABILITIES............................................. 3,626,907 ----------- NET ASSETS........................................................ $41,225,439 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $41,356,690 Accumulated distributions in excess of net investment income..... (1,448,556) Accumulated distributions in excess of net realized gain......... (63,232) Net unrealized appreciation...................................... 1,380,537 ----------- NET ASSETS.................................................... $41,225,439 =========== OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $37,704,006 and 3,937,187 shares issued and outstanding) (Note 7)....................................... $ 9.58 =========== SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $3,521,433 and 368,181 shares issued and outstanding) (Note 7)........................................... $ 9.56 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 44 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Interest.......................................................... $1,352,589 ---------- TOTAL INCOME................................................... 1,352,589 ---------- EXPENSES: Advisory (Note 2)................................................. 159,408 Accounting........................................................ 62,618 Professional...................................................... 31,464 Transfer agent.................................................... 24,856 Custodian......................................................... 21,192 Registration...................................................... 20,504 Administration.................................................... 18,520 Distribution (Note 6)............................................. 9,380 Other............................................................. 21,839 ---------- TOTAL EXPENSES................................................. 369,781 Expenses deferred and reimbursed by Advisor (Note 2)........... (168,938) ---------- NET EXPENSES................................................... 200,843 ---------- NET INVESTMENT INCOME.......................................... 1,151,746 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 723,433 Futures contracts................................................ 77,372 Foreign currency transactions.................................... (126,037) ---------- Net realized gain............................................... 674,768 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 935,964 Futures contracts................................................ (21,891) Forward contracts................................................ 123,239 Translation of other assets and liabilities denominated in for- eign currency................................................... 12,863 ---------- Change in net unrealized appreciation or depreciation........... 1,050,175 ---------- Net realized and unrealized gain.................................. 1,724,943 ---------- Net increase in net assets resulting from operations.............. $2,876,689 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1996 JUNE (UNAUDITED) 30, 1996 ----------------- ----------- OPERATIONS: Net investment income.......................... $ 1,151,746 $ 2,351,810 Net realized gain.............................. 674,768 4,022,906 Change in net unrealized appreciation or depre- ciation ...................................... 1,050,175 (1,992,544) ----------- ----------- Net increase in net assets resulting from oper- ations........................................ 2,876,689 4,382,172 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income....... (2,204,689) (3,447,154) Distributions in excess of net investment in- come.......................................... (1,615,023) (1,534,232) Distributions from net realized gain........... (769,789) (355,057) ----------- ----------- Total distributions to shareholders*........... (4,589,501) (5,336,443) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................... 4,488,660 14,584,928 Shares issued on reinvestment of distributions. 3,667,961 3,954,345 Shares redeemed................................ (9,937,375) (24,728,515) ----------- ----------- Net (decrease) in net assets resulting from capital share transactions (Note 7)........... (1,780,754) (6,189,242) ----------- ----------- TOTAL (DECREASE) IN NET ASSETS.............. (3,493,566) (7,143,513) ----------- ----------- NET ASSETS: Beginning of period............................ 44,719,005 51,862,518 ----------- ----------- End of period (including accumulated undistrib- uted net investment income of ($1,448,556) and $1,052,943, respectively)..................... $41,225,439 $44,719,005 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net invest- ment income Brinson Fund Class............................ (3,503,032) (4,734,956) SwissKey Fund Class........................... (316,680) (246,430) Distributions from net realized gain Brinson Fund Class............................ (704,236) (338,786) SwissKey Fund Class........................... (65,553) (16,271) ----------- ----------- Total distributions to shareholders............ (4,589,501) (5,336,443) ----------- -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 46 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR YEAR JULY 30, 1993* DECEMBER 31, 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 10.04 $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- ------- Income (loss) from in- vestment operations: Net investment income ..................... 0.93 0.84 0.50 0.45 Net realized and unrealized gain (loss)............... (0.24) 0.31 0.58 (0.52) ------- ------- ------- ------- Total income (loss) from investment op- erations........... 0.69 1.15 1.08 (0.07) ------- ------- ------- ------- Less distributions: Distributions from and in excess of net in- vestment income...... (0.96) (1.40) (0.24) (0.28) Distributions from and in excess of net re- alized gain.......... (0.19) (0.10) -- (0.10) ------- ------- ------- ------- Total distributions. (1.15) (1.50) (0.24) (0.38) ------- ------- ------- ------- Net asset value, end of period................. $ 9.58 $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= ======= Total return (non- annualized)............ 7.03% 11.50% 11.34% (0.79%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $37,704 $41,066 $51,863 $36,849 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.69%** 1.65% 1.43% 1.78%** After expense reim- bursement............ 0.90%** 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 4.66%** 4.98% 5.53% 4.03%** After expense reim- bursement............ 5.45%** 5.73% 6.06% 4.91%** Portfolio turnover rate.................. 107% 184% 199% 189%
* Commencement of investment operations ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 47 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $10.02 $10.56 ------ ------ Income from investment operations: Net investment income....................... 0.91 0.78 Net realized and unrealized gain (loss)..... (0.24) 0.15 ------ ------ Total income from investment operations... 0.67 0.93 ------ ------ Less distributions: Distributions from and in excess of net in- vestment income............................ (0.94) (1.37) Distributions from net realized gain........ (0.19) (0.10) ------ ------ Total distributions....................... (1.13) (1.47) ------ ------ Net asset value, end of period................ $ 9.56 $10.02 ====== ====== Total return (non-annualized)................. 6.76% 9.17% Ratios/Supplemental data Net assets, end of period (in 000s).......... $3,521 $3,653 Ratio of expenses to average net assets: Before expense reimbursement................ 2.18%** 2.14%** After expense reimbursement................. 1.39%** 1.39%** Ratio of net investment income to average net assets: Before expense reimbursement................ 4.17%** 4.49%** After expense reimbursement................. 4.96%** 5.24%** Portfolio turnover rate...................... 107% 184%
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 48 THE SWISSKEY 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 seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Fund Class and SwissKey Fund 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 Trust entered into an Agreement and Plan of Reorganization dated June 16, 1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995, pursuant to the Plan of Reorganization, the Trust acquired all of the net assets of the SBC World Growth Fund of the SwissKey Funds, which totalled $25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund. The SwissKey Fund shares were then distributed to shareholders of the SBC World Growth Fund according to their respective interests, and the SBC World Growth Fund was dissolved. The total net assets of the Global Equity Fund were $47,088,147 immediately after the acquisition. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a "Fund," collectively 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. 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. Investments in affiliated investment companies are valued each day based on the closing net asset value of the fund. U.S. equity securities traded over the counter are priced at the most recent bid price. Fixed income/debt securities are valued by using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. 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 the mean between the bid and the asked forward points added to the current exchange rate. 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, income receipts and expense accruals are translated at the prevailing exchange rate on 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 in the statement 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 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 have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1996. Therefore, no federal income tax provision was required. - -------------------------------------------------------------------------------- 49 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 generally accepted accounting principles. 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 the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Fund Class shares will not incur any of the distribution expenses. H. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles 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, the Funds pay the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates, for the six months ended December 31, 1996, were as follows:
FEES ADVISORY BRINSON CLASS SWISSKEY CLASS ADVISORY DEFERRED AND/OR FEE EXPENSE CAP EXPENSE CAP FEES REIMBURSED -------- ------------- -------------- ---------- --------------- Global Fund............. 0.80% 1.10% 1.75% $2,019,630 $ -- Global Equity Fund...... 0.80 1.00 1.76 276,132 216,697 Global Bond Fund........ 0.75 0.90 1.39 159,408 168,938
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $5,888, $2,208 and $2,208 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. At December 31, 1996, the Global Fund was invested in shares of certain affiliated investment companies also sponsored by Brinson Partners, Inc. These investments are listed in the schedule of investments and represent 9.43% of the Fund's total net assets. At December 31, 1996, net unrealized appreciation on these investments was $5,160,007. 3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $408,770,372 $397,827,575 Global Equity Fund.................................... 21,925,975 10,301,042 Global Bond Fund...................................... 41,276,806 44,423,362
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 - -------------------------------------------------------------------------------- 50 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 the 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 statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the six months ended December 31, 1996, 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. 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 statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6. DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Fund Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey Fund Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 --------------------- ---------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ------------ Sales: Brinson Fund Class................ 4,583,763 $57,951,937 7,972,013 $ 95,544,500 SwissKey Fund Class............... 211,635 2,646,592 1,155,619 13,939,062 --------- ----------- --------- ------------ Total Sales.................... 4,795,398 $60,598,529 9,127,632 $109,483,562 ========= =========== ========= ============ Dividend Reinvestment: Brinson Fund Class................ 4,022,259 $48,025,771 2,632,284 $ 30,918,724 SwissKey Fund Class............... 130,547 1,554,814 20,488 243,591 --------- ----------- --------- ------------ Total Dividend Reinvestment.... 4,152,806 $49,580,585 2,652,772 $ 31,162,315 ========= =========== ========= ============ Redemptions: Brinson Fund Class................ 5,171,939 $64,203,767 5,330,521 $ 63,966,318 SwissKey Fund Class............... 54,093 683,312 24,583 296,145 --------- ----------- --------- ------------ Total Redemptions.............. 5,226,032 $64,887,079 5,355,104 $ 64,262,463 ========= =========== ========= ============
- -------------------------------------------------------------------------------- 51 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL EQUITY FUND ------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Fund Class............... 837,664 $ 9,913,092 285,419 $ 3,205,567 SwissKey Fund Class.............. 808,570 9,474,311 746,285 8,357,646 --------- ----------- --------- ----------- Total Sales................... 1,646,234 $19,387,403 1,031,704 $11,563,213 ========= =========== ========= =========== Shares issued in acquisition of SBC World Growth Fund: Brinson Fund Class............... -- -- -- -- SwissKey Fund Class.............. -- $ -- 2,474,177 $25,670,575 --------- ----------- --------- ----------- Total......................... -- $ -- 2,474,177 $25,670,575 ========= =========== ========= =========== Dividend Reinvestment: Brinson Fund Class............... 288,818 $ 3,237,655 160,063 $ 1,694,631 SwissKey Fund Class.............. 272,630 3,053,458 155,720 1,641,689 --------- ----------- --------- ----------- Total Dividend Reinvestment... 561,448 $ 6,291,113 315,783 $ 3,336,320 ========= =========== ========= =========== Redemptions: Brinson Fund Class............... 77,459 $ 944,496 186,600 $ 2,055,092 SwissKey Fund Class.............. 212,095 2,514,803 523,404 5,704,953 --------- ----------- --------- ----------- Total Redemptions............. 289,554 $ 3,459,299 710,004 $ 7,760,045 ========= =========== ========= =========== GLOBAL BOND FUND ------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Fund Class............... 402,651 $ 4,150,385 1,094,889 $10,985,420 SwissKey Fund Class.............. 32,865 338,275 345,211 3,599,508 --------- ----------- --------- ----------- Total Sales................... 435,516 $ 4,488,660 1,440,100 $14,584,928 ========= =========== ========= =========== Dividend Reinvestment: Brinson Fund Class............... 348,609 $ 3,318,757 374,786 $ 3,722,031 SwissKey Fund Class.............. 36,719 349,204 23,414 232,314 --------- ----------- --------- ----------- Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345 ========= =========== ========= =========== Redemptions: Brinson Fund Class............... 905,614 $ 9,248,017 2,369,683 $24,686,522 SwissKey Fund Class.............. 65,831 689,358 4,197 41,993 --------- ----------- --------- ----------- Total Redemptions............. 971,445 $ 9,937,375 2,373,880 $24,728,515 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- [Logo of SwissKey Funds] 10 East 50th Street . New York, New York 10022 . Tel: (800) SWISSKEY . http://networth.galt.com/swisskey LOGO SWISSKEY U.S. BALANCED FUND SWISSKEY U.S. EQUITY FUND SWISSKEY U.S. BOND FUND SEMI-ANNUAL REPORT DECEMBER 31, 1996 Your Key to Performance ----------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CFA, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their institutional investment management organizations into a single investment management business operating as Brinson Partners, Inc. in North America and SBC Brinson in its other world-wide locations. We are a global investment management organization with over $72 billion in institutional assets under discretionary active management. We are also the investment advisor for SBC Private Banking mutual fund assets which total $47 billion. The firm manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other institutional investors located throughout the world. Our organization employs over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, Inc., an established U.S.-based leader in the investment business located in Chicago, acts as the headquarters of our world-wide investment management process. The firm began managing international securities and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients and has offered fully integrated global portfolios since then. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 U.S. Economic and Market Highlights........................................... 5 U.S. Balanced Fund............................................................ 6 Schedule of Investments...................................................... 9 Financial Statements.........................................................12 Financial Highlights.........................................................15 U.S. Equity Fund..............................................................17 Schedule of Investments......................................................20 Financial Statements.........................................................22 Financial Highlights.........................................................25 U.S. Bond Fund................................................................27 Schedule of Investments......................................................30 Financial Statements.........................................................31 Financial Highlights.........................................................34 The SwissKey Funds--Notes to Financial Statements.............................36 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO February 19, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the December 31, 1996 Semi-Annual Report for the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. This Report presents our current U.S. economic and market outlook, as well as the Funds' recent investment strategies and performance. To summarize this information: U.S. Balanced Fund For the period from July 31, 1995 to December 31, 1996, the Fund has provided an annualized total return of 13.84%. For the second half of 1996, the Fund returned 7.75%. The Fund's market allocation has been characterized by an underweight in the U.S. equity market and an overweight to the U.S. bond market where return and risk characteristics are presently more attractive. U.S. Equity Fund For the period from July 31, 1995 to December 31, 1996, the Fund provided an annualized total return of 27.78%. The Fund returned 12.63% in the second half of 1996. Fund strategy presently maintains a modest overweight in stocks with high book- to-price, earnings variability and financial leverage characteristics. In addition, the Fund is underweighted the foreign earnings exposure embedded in U.S. corporate earnings, particularly relative to the S&P 500. Current industry positions include relative overweights in capital goods, banks, transportation, insurance, healthcare and consumer non-durables issues. The Fund remains underweighted in energy, technology, utility, chemicals and retail/apparel stocks. U.S. Bond Fund For the period from August 31, 1995 to December 31, 1996, the Fund returned 6.39%. For the second half of 1996, the Fund returned 5.19%. Fund strategy currently maintains a duration target of 1.3 times that of the benchmark. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Please visit our website at http://networth.galt.com/swisskey. Sincerely, /s/ Raoul Weil /s/ Raymond Simon Raoul Weil Raymond Simon Managing Director Executive Director PRIVATE LOGO BANKING PRIVATE LOGO BANKING ------------------------------------------------------------- 4 U.S. ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO Real GDP grew 2.5% in 1996, consisting of quarterly growth rates alternating between strong and modest. This was consistent with our view that the economy will continue to produce moderate growth, although with typical fluctuations from period to period. Overall, growth is at a level approximating the economy's long-run potential. While the bond market has been adjusting yields, often by substantial amounts, on the slightest bit of news, inflation has remained consistently moderate. Even though oil prices rose to $25 per barrel last year, there was little impact discernible on intermediate or final goods prices. While consumer price inflation has been running between 2.25% and 3.25% since 1991, other measures of inflation, such as the personal consumption deflator and the core CPI, have shown even less price pressure. The Federal Reserve continues to act as though operating with a de facto inflation target, rather than attempting to satisfy non-inflation aims. With November's election leaving the balance of power generally unchanged, fiscal policy is reasonably likely to remain geared toward deficit control. While any future economic weakness would offset the relatively strong tax revenues at present, lawmakers realize that many voters are increasingly reluctant to pay for programs with benefits which do not clearly exceed the costs. U.S. ENVIRONMENT MAJOR MARKETS One Year Ended December 31, 1996 [BAR CHART APPEARS HERE] Total Return U.S. Cash Equivalents 5.16 U.S. Bonds 3.63 U.S. Equities 21.21 SALOMON U.S. TREASURY BENCHMARK RETURNS One Year Ended December 31, 1996 [BAR CHART APPEARS HERE] Maturity (Years) Total Return - ---------------- ------------ 1 5.68 2 4.80 3 4.21 5 2.43 10 0.07 30 -4.44 TOP TEN INDUSTRY RETURNS RELATIVE TO S&P 500 One Year Ended December 31, 1996 [BAR CHART APPEARS HERE] Banks 9.28 Thrift Institutions 9.57 Apparel, Textiles 10.77 Domestic Petroleum Reserves 11.15 Business Machines 11.35 Aerospace 13.96 Miscellaneous 14.82 Misc. Finance 16.11 Cosmetics 25.93 Oil Service 42.7 Source: BARRA BOTTOM TEN INDUSTRY RETURNS RELATIVE TO S&P 500 One Year Ended December 31, 1996 [BAR CHART APPEARS HERE] Coal & Uranium -40.81 Trucking, Freight -34.51 Iron & Steel -24.98 Telephone, Telegraph -19.9 Electric Utilities -19.17 Precious Metals -17.46 Forest Products -16.63 Pollution Control -16.31 Water Transport -13.76 Media -13.57 Source: BARRA ------------------------------------------------------------ 5 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO The U.S. Balanced Fund is an actively managed portfolio that applies our value- based asset allocation process to U.S. stocks, bonds and cash. This Fund's investment strategy is developed in the context of our global asset allocation process and is based on analysis of long-term economic and market conditions. The SwissKey U.S. Balanced Fund has provided an annualized return of 13.84% since its inception on July 31, 1995. This compares with the corresponding 17.04% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the year ended December 31, 1996, the Fund produced a total return of 10.86% compared to the benchmark return of 14.90%. In the second half of 1996, the Fund returned 7.75% while the benchmark returned 8.25%. Security selection within all the asset classes contributed positively to relative performance, while the equity underweight and bond overweight adversely affected relative performance. Although inflation was relatively stable throughout 1996, the bond market experienced a year of rising yields. Coming out of 1995, yields were relatively low, but they climbed rather strongly through June. The moderately strong economy in the first half of the year, coupled with higher oil prices, caused concern that both real rates and inflation may rise. These fears diminished somewhat in the second half, allowing rates to decline. However, yields failed to drop to levels seen at the start of the year, resulting in aggregate bond market performance that was positive but inferior to cash returns. The equity market turned in another banner year, with broad market indices showing returns of more than 20%. However, there were large divergences in relative performance. Small stock performance was outpaced by the returns to large capitalization stocks by approximately 500 basis points. After a few weeks of strength in January and early February, the equity market was flat until mid-September. However, as interest rates fell from that point to the start of December, equities again produced extremely good returns. The S&P 500 Index rose roughly 100 points in these two and a half months, from about 660 to 760. The equity market appears increasingly willing to extrapolate recent strong earnings growth and low volatility indefinitely into the future. At year-end, equity price gains had driven the market to an overpricing of around 25%. Looking forward, return expectations in stocks appear insufficient compensation for the risks. Therefore, we have maintained a reduced exposure in the allocation to equities, with an offsetting increase in the allocation to bonds. ------------------------------------------------------------ 6 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 7/31/95* 12/31/96 12/31/96 to 12/31/96 - ---------------------------------------------------------------- SWISSKEY U.S. BALANCED FUND 7.75% 10.86% 13.84% - ---------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 8.25 14.90 17.04 - ----------------------------------------------------------------
*Inception date of the SwissKey U.S. Balanced Fund. **An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey U.S. Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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. SWISSKEY U.S. BALANCED FUND VS. U.S. BALANCED MUTUAL FUND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] SwissKey U.S. Balanced Fund U.S. Balanced Mutual Fund Index --------------------------- ------------------------------- 7/31/95 $10,000 $10,000 9/30/95 $10,325 $10,387 12/31/95 $10,841 $10,876 3/31/96 $11,030 $11,203 6/30/96 $11,154 $11,544 9/30/96 $11,412 $11,839 12/31/96 $12,018 $12,496 7/31/95 = $10,000 Data Through 12/31/96 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. ------------------------------------------------------------ 7 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.29% Housing/Paper.......................................................... 1.77 Metals................................................................. 0.23 ----- 2.29 Capital Investment Capital Goods.......................................................... 3.91 Technology............................................................. 2.53 ----- 6.44 Consumer Autos/Durables......................................................... 0.11 Discretionary.......................................................... 2.84 Health: Drugs.......................................................... 3.51 Health: Non-Drugs...................................................... 1.74 Non-Durables........................................................... 4.90 Retail/Apparel......................................................... 1.79 ----- 14.89 Energy.................................................................. 2.16 Financial Banks.................................................................. 4.39 Non-Banks.............................................................. 4.01 ----- 8.40
Services................................................................ 2.78% Transportation.......................................................... 2.70 Utilities............................................................... 1.34 Miscellaneous........................................................... 1.13 ------ Total U.S. Equities.................................................. 42.13* ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 3.16 CMO.................................................................... 0.54 Consumer............................................................... 1.51 Financial.............................................................. 1.65 Industrial............................................................. 0.86 Telecommunications..................................................... 1.62 ------ 9.34 International Dollar Bonds.............................................. 6.04 U.S. Government Agencies................................................ 16.96 U.S. Government Obligations............................................. 21.03 ------ Total U.S. Bonds..................................................... 53.37* ------ SHORT-TERM INVESTMENTS.................................................. 10.20* ------ TOTAL INVESTMENTS.................................................... 105.70 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (5.70) ------ NET ASSETS.............................................................. 100.00% ======
*The Fund held a long position in U.S. Treasury futures on December 31, 1996 which increased U.S. bond exposure from 53.37% to 61.65%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 42.13% to 33.99%. These two adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 10.20% to 10.06%. ASSET ALLOCATION As of December 31, 1996 (Unaudited)
CURRENT BENCHMARK STRATEGY - ------------------------------------ U.S. Equity 65% 35% U.S. Bonds 35 65 Cash Equivalents 0 0 - ------------------------------------ 100% 100%
TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
PERCENT OF NET ASSETS - --------------------------------------------- 1. Chase Manhattan Corp. 2.09% 2. Xerox Corp. 1.63 3. Lockheed Martin Corp. 1.62 4. Burlington Northern Santa Fe 1.61 5. Corning, Inc. 1.52 6. Citicorp 1.46 7. Philip Morris Companies, Inc. 1.45 8. Aon Corp. 1.36 9. Goodyear Tire & Rubber Co. 1.24 10. Enron Corp. 1.12 - ---------------------------------------------
------------------------------------------------------------ 8 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 42.13% Aetna Life & Casualty Co................................... 24,900 $ 1,992,000 Allergan, Inc.............................................. 40,400 1,439,250 Allstate Corp.............................................. 22,300 1,290,613 Alza Corp. (b)............................................. 39,400 1,019,475 Aon Corp................................................... 52,900 3,286,412 Automatic Data Processing, Inc............................. 39,700 1,702,138 Avon Products, Inc......................................... 26,700 1,525,237 Bard (C.R.), Inc........................................... 24,400 683,200 Beckman Instruments, Inc................................... 15,800 606,325 Birmingham Steel Corp...................................... 15,900 302,100 Boston Technology, Inc. (b)................................ 15,800 454,250 Brinker International, Inc. (b)............................ 14,200 227,200 Burlington Northern Santa Fe............................... 45,100 3,895,513 Centerior Energy Co........................................ 33,200 356,900 Chase Manhattan Corp....................................... 56,900 5,078,325 Choice Hotels International, Inc. (b)...................... 25,800 454,725 CIGNA Corp................................................. 19,600 2,677,850 Circuit City Stores, Inc................................... 6,900 207,862 Citicorp................................................... 34,400 3,543,200 CMS Energy Corp............................................ 43,100 1,449,238 Coca-Cola Enterprises, Inc................................. 16,100 780,850 Comerica, Inc.............................................. 10,800 565,650 Comverse Technology, Inc. (b).............................. 7,300 276,031 Corning, Inc............................................... 79,500 3,676,875 CPC International, Inc..................................... 9,700 751,750 CVS Corp................................................... 31,300 1,295,037 Dial Corp.................................................. 38,700 570,825 EMC Corp./Mass. (b)........................................ 53,800 1,782,125 Enron Corp................................................. 62,800 2,708,250 Federal Express Corp. (b).................................. 58,800 2,616,600 Federated Department Stores (b)............................ 23,000 784,875 FileNet Corp. (b).......................................... 6,100 195,200 First American Corp.-Tenn.................................. 2,600 149,825 First Data Corp............................................ 33,258 1,213,917 First of America Bank Corp................................. 5,100 306,638 Foodstar, Inc. (b)......................................... 12,379 307,928 Ford Motor Co.............................................. 23,000 733,125 Forest Laboratories, Inc. (b).............................. 26,800 877,700 Gannett Co., Inc........................................... 26,300 1,969,212 General Instrument Corp. (b)............................... 78,300 1,693,238 Genzyme Corp. (b).......................................... 15,900 345,825 Geon Co.................................................... 5,800 113,825 Goodyear Tire & Rubber Co.................................. 58,400 3,000,300 Harnischfeger Industries, Inc.............................. 17,200 827,750 Health Care and Retirement Corp. (b)....................... 29,150 834,419 Interpublic Group of Companies, Inc........................ 19,600 931,000 James River Corp. of Virginia.............................. 22,700 751,937 Kimberly-Clark Corp........................................ 18,900 1,800,225 Kroger Co. (b)............................................. 16,600 771,900 Lockheed Martin Corp....................................... 42,971 3,931,847 Lyondell Petrochemical Co.................................. 43,100 948,200 Manor Care, Inc............................................ 25,800 696,600 Martin Marietta Materials, Inc............................. 11,936 277,512 Masco Corp................................................. 25,400 914,400 Mattel, Inc................................................ 93,950 2,607,112 Nabisco Holdings Corp. Class A............................. 28,600 1,111,825 National Semiconductor Corp. (b)........................... 15,900 387,563 Nextel Communications, Inc. Class A (b).................... 39,700 518,581 Old Republic International Corp............................ 18,750 501,562
SHARES VALUE ---------- ----------- Peco Energy Co.......................................... 24,500 $ 618,625 Pentair, Inc............................................ 18,500 596,625 Pharmacia & Upjohn, Inc................................. 50,300 1,993,138 Philip Morris Companies, Inc............................ 31,200 3,513,900 Rhone-Poulenc Rorer, Inc................................ 13,400 1,046,875 RJR Nabisco Convertible Preferred "C"................... 128,300 866,025 Schering Plough Corp.................................... 34,600 2,240,350 Seagate Technology, Inc. (b)............................ 10,600 418,700 Timken Co............................................... 16,600 761,525 Tyson Foods, Inc. Class A............................... 47,300 1,620,025 Ultramar Diamond Shamrock Corp.......................... 44,790 1,416,484 US Bancorp.............................................. 24,000 1,078,500 USF&G Corp.............................................. 18,300 382,012 Vencor, Inc. (b)........................................ 20,700 654,637 Viad Corp............................................... 38,700 638,550 Westvaco Corp........................................... 9,450 271,688 Whitman Corp............................................ 1,700 38,887 WMX Technologies, Inc................................... 64,000 2,088,000 Xerox Corp.............................................. 74,900 3,941,613 York International Corp................................. 16,200 905,175 360 Communications Co. (b).............................. 13,700 316,812 ----------- Total U.S. Equities (Cost $80,838,984).................. 102,127,993 ----------- FACE AMOUNT VALUE ---------- ----------- Bonds -- 53.37% U.S. CORPORATE BONDS -- 9.34% AirTouch Communications 7.500%, due 07/15/06............ $2,000,000 $ 2,059,328 American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03................................... 1,280,000 1,300,250 BellSouth Corp. 0.000%, due 12/15/15.................... 3,175,000 704,844 Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,009,232 Chase Manhattan Auto Owner Trust 96C-4A 6.150%, due 03/15/02............................ 1,360,000 1,353,200 Chase Manhattan Credit Card Master Trust 96-4A 6.730%, due 02/15/03........................................... 2,000,000 2,027,700 Chrysler Financial Corp. MTN 6.500%, due 08/21/97....... 1,000,000 1,004,753 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 09/25/98............................................... 2,000,000 2,005,380 Ford Motor Credit Corp. MTN 5.370%, due 09/08/98........ 945,000 933,695 GE Capital Mtg. Services, Inc. 94-9A 6.500%, due 02/25/24............................................... 1,560,557 1,309,432 GMAC MTN 6.750%, due 06/10/02........................... 1,000,000 1,003,768 Lockheed Martin Corp. 7.700%, due 06/15/08.............. 2,000,000 2,093,670 News America Corp. 7.750%, due 01/20/24................. 1,000,000 955,896 Telecommunications, Inc. 9.800%, due 02/01/12........... 2,100,000 2,274,647 Time Warner Entertainment, Inc. 8.375%, due 03/15/23........................................... 1,125,000 1,143,537 Time Warner, Inc. 9.150%, due 02/01/23.................. 425,000 460,563 ----------- 22,639,895 -----------
- -------------------------------------------------------------------------------- 9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- INTERNATIONAL DOLLAR BONDS--6.04% BCH Cayman Islands Ltd. 7.700%, due 07/15/06........... $ 2,100,000 $ 2,161,226 International Bank for Reconstruction & Development 6.375%, due 07/21/05.................................. 1,500,000 1,479,513 LKB 8.125%, due 01/27/00............................... 1,780,000 1,870,527 Petroliam Nasional 7.125%, due 08/15/05................ 1,500,000 1,512,779 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.......................................... 1,735,000 1,763,988 Republic of Italy 6.875%, due 09/27/23................. 1,500,000 1,426,980 S.E. Banken 144-A 6.625%, due 03/29/49................. 2,000,000 1,970,000 Southern Investments UK 6.800%, due 12/01/06........... 930,000 910,310 Swedbank FRN 7.500%, due 11/29/49...................... 1,500,000 1,535,625 ----------- 14,630,948 ----------- U.S. GOVERNMENT AGENCIES--16.96% Federal Home Loan Mortgage Corp. 6.520%, due 01/02/02.. 3,500,000 3,510,329 6.500%, due 05/15/21.................................. 1,192,691 1,082,343 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.................................. 872,323 888,952 9.000%, due 03/01/24.................................. 423,904 452,458 9.500%, due 04/01/25.................................. 1,375,782 1,480,685 Federal National Mortgage Association 6.500%, due 03/01/03.................................. 2,560,000 2,532,813 8.000%, due 12/18/11.................................. 1,000,000 1,033,750 7.500%, due 05/01/25.................................. 1,477,313 1,476,852 6.500%, due 03/01/26.................................. 9,864,563 9,411,414 7.000%, due 03/01/26.................................. 1,000,000 978,438 7.500%, due 12/01/26.................................. 2,632,083 2,632,241 Federal National Mortgage Association Strip 8.000%, due 07/01/24 interest only.................... 1,096,078 337,767 0.000%, due 07/01/26 principal only................... 994,546 669,141 Government National Mortgage Association 11.000%, due 09/15/15................................. 345,360 385,723 8.000%, due 08/15/22.................................. 1,004,798 1,032,610 7.000%, due 06/15/23.................................. 419,966 410,911 7.000%, due 07/15/23.................................. 415,773 406,808 7.000%, due 09/15/23.................................. 95,784 93,718 9.000%, due 07/15/24.................................. 164,420 173,258 8.500%, due 11/15/24.................................. 180,521 186,952 8.500%, due 01/15/25.................................. 374,518 387,860 9.000%, due 05/15/25.................................. 478,039 503,734 7.500%, due 06/15/25.................................. 2,097,195 2,099,607 8.000%, due 02/15/26.................................. 2,329,109 2,393,579 6.500%, due 03/20/26.................................. 1,486,831 1,409,237 8.000%, due 09/15/26.................................. 4,231,054 4,315,675 Independent National Mortgage Corp. 8.350%, due 06/25/25.............................................. 800,000 819,240 ----------- 41,106,095 -----------
FACE AMOUNT VALUE ----------- ------------ U.S. GOVERNMENT OBLIGATIONS--21.03% U.S. Treasury Coupon Strip 0.000%, due 05/15/08 principal only...................................... $ 9,305,000 $ 4,428,343 U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................ 2,105,000 2,089,213 6.250%, due 10/31/01................................ 10,115,000 10,121,322 7.000%, due 07/15/06................................ 15,230,000 15,824,929 8.125%, due 05/15/21................................ 15,965,000 18,519,400 ------------ 50,983,207 ------------ Total U.S. Bonds (Cost $129,757,543)................. 129,360,145 ------------ SHORT-TERM INVESTMENTS--10.20% U.S. GOVERNMENT OBLIGATIONS--0.44% U.S. Treasury Bills 5.063%, due 05/01/97............. 1,085,000 1,066,816 ------------ COMMERCIAL PAPER--9.76% Burlington Northern Santa Fe 5.650%, due 01/17/97.... 1,000,000 997,489 Case Credit Corp. 5.510%, due 01/07/97................................ 1,000,000 999,082 5.600%, due 01/09/97................................ 1,000,000 998,755 Cincinnati Bell, Inc. 7.250%, due 01/02/97........... 5,922,000 5,920,807 CNA Financial Corp. 6.250%, due 01/23/97............. 1,000,000 996,181 Crown Cork & Seal Co., Inc. 5.580%, due 01/29/97................................ 2,500,000 2,489,150 5.580%, due 01/31/97................................ 2,000,000 1,990,700 PanEnergy Corp. 6.050%, due 01/17/97................. 1,500,000 1,495,967 Rite Aid Corp. 5.650%, due 01/06/97................................ 1,000,000 999,215 5.600%, due 01/21/97................................ 2,300,000 2,292,844 Tyson Foods, Inc. 5.750%, due 01/09/97............... 989,000 987,736 US West Capital Funding Inc. 5.600%, due 02/12/97.... 1,500,000 1,490,200 Vastar Resources, Inc. 6.020%, due 01/02/97.......... 1,000,000 999,833 Whirlpool Financial Corp. 6.000%, due 01/03/97....... 1,000,000 999,667 ------------ 23,657,626 ------------ Total Short-Term Investments (Cost $24,724,389)...... 24,724,442 ------------ Total Investments (Cost $235,320,916)--105.70% (a).................... 256,212,580 ------------ Liabilities, less cash and other assets--(5.70%)..... (13,806,437) ------------ Net Assets--100%..................................... $242,406,143 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $235,320,916; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $23,263,277 Gross unrealized depreciation................................ (2,371,613) ----------- Net unrealized appreciation................................ $20,891,664 ===========
(b) Non-income producing security MTN: Medium term note FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE LOSS ---------- ------------- ----------- ---------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 55 contracts...... March 1997 $ 5,916,531 $ 5,862,656 $ (53,875) 10 Year U.S. Treasury Note, 89 contracts...... March 1997 9,861,375 9,712,125 (149,250) 30 Year U.S. Treasury Bond, 40 contracts...... March 1997 4,599,531 4,505,000 (94,531) INDEX FUTURES SALE CON- TRACTS Standard & Poor's 500, 53 contracts............... March 1997 19,689,500 19,729,250 (39,750) --------- Total.................. $(337,406) =========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $1,066,816. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $235,320,916) (Note 1).............. $256,212,580 Cash............................................................ 5,756,041 Receivables: Investment securities sold..................................... 415,655 Dividends...................................................... 181,703 Interest....................................................... 1,700,017 Fund shares sold............................................... 191,981 Variation margin (Note 4)...................................... 380,337 Other assets.................................................... 28,745 ------------ TOTAL ASSETS................................................. 264,867,059 ------------ LIABILITIES: Payables: Investment securities purchased................................ 22,156,538 Fund shares redeemed........................................... 36,974 Investment advisory fees (Note 2).............................. 74,069 Accrued expenses............................................... 193,335 ------------ TOTAL LIABILITIES............................................ 22,460,916 ------------ NET ASSETS....................................................... $242,406,143 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)........................................ $218,436,635 Accumulated distributions in excess of net investment income.... (187) Accumulated net realized gain................................... 3,415,437 Net unrealized appreciation..................................... 20,554,258 ------------ NET ASSETS................................................... $242,406,143 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $240,953,839 and 20,423,505 shares is- sued and outstanding) (Note 6)................................ $ 11.80 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,452,304 and 123,608 shares issued and outstanding) (Note 6)............................................................ $ 11.75 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME Interest.......................................................... $ 4,451,939 Dividends......................................................... 897,064 ----------- TOTAL INCOME................................................... 5,349,003 ----------- EXPENSES: Advisory (Note 2)................................................. 814,540 Administration.................................................... 80,184 Custodian......................................................... 68,520 Distribution (Note 5)............................................. 2,858 Other............................................................. 214,159 ----------- TOTAL EXPENSES................................................. 1,180,261 Expenses deferred by Advisor (Note 2).......................... (246,439) ----------- NET EXPENSES................................................... 933,822 ----------- NET INVESTMENT INCOME ......................................... 4,415,181 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 9,666,826 Futures contracts................................................ (461,484) ----------- Net realized gain.............................................. 9,205,342 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 4,616,972 Futures contracts................................................ (401,550) ----------- Change in net unrealized appreciation or depreciation.......... 4,215,422 ----------- Net realized and unrealized gain.................................. 13,420,764 ----------- Net increase in net assets resulting from operations.............. $17,835,945 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 4,415,181 $ 8,308,870 Net realized gain............................. 9,205,342 8,233,205 Change in net unrealized appreciation or de- preciation................................... 4,215,422 8,676,412 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 17,835,945 25,218,487 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class........................... (5,812,532) (7,711,341) SwissKey Fund Class.......................... (34,116) (9,781) Distributions from net realized gain: Brinson Fund Class........................... (10,324,916) (9,885,505) SwissKey Fund Class.......................... (65,779) (992) ------------ ------------ Total distributions to shareholders........... (16,237,343) (17,607,619) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 19,283,736 81,710,433 Shares issued on reinvestment of distribu- tions........................................ 16,166,850 17,593,608 Shares redeemed............................... (23,251,338) (36,030,444) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)............. 12,199,248 63,273,597 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 13,797,850 70,884,465 ------------ ------------ NET ASSETS: Beginning of period........................... 228,608,293 157,723,828 ------------ ------------ End of period (including accumulated undis- tributed net investment income of ($187) and $1,459,205, respectively).................... $242,406,143 $228,608,293 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR DECEMBER 30, 1994* DECEMBER 31, 1996 ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------- Net asset value, beginning of period.................. $ 11.71 $ 11.23 $ 10.00 -------- -------- -------- Income from investment op- erations: Net investment income..... 0.23 0.44 .23 Net realized and unrealized gain.......... 0.71 1.04 1.16 -------- -------- -------- Total income from in- vestment operations.... 0.94 1.48 1.39 -------- -------- -------- Less distributions: Distributions from net in- vestment income.......... (0.31) (0.43) (0.16) Distributions from net re- alized gain.............. (0.54) (0.57) -- -------- -------- -------- Total distributions..... (0.85) (1.00) (0.16) -------- -------- -------- Net asset value, end of pe- riod....................... $ 11.80 $ 11.71 $ 11.23 ======== ======== ======== Total return (non- annualized)................ 8.02% 13.52% 13.91% Ratios/Supplemental data Net assets, end of period (in 000s)................. $240,954 $227,829 $157,724 Ratio of expenses to aver- age net assets: Before expense reimburse- ment..................... 1.01%** 1.01% 1.06% After expense reimburse- ment..................... 0.80%** 0.80% 0.80% Ratio of net investment in- come to average net as- sets: Before expense reimburse- ment..................... 3.58%** 3.76% 4.36% After expense reimburse- ment..................... 3.79%** 3.97% 4.63% Portfolio turnover rate.... 172% 240% 196% Average commission rate paid per share............ $0.0492 $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.67 $ 11.38 ------- ------- Income from investment operations: Net investment income....................... 0.20 0.42 Net realized and unrealized gain............ 0.70 0.86 ------- ------- Total income from investment operations... 0.90 1.28 ------- ------- Less distributions: Distributions from net investment income.... (0.28) (0.42) Distributions from net realized gain........ (0.54) (0.57) ------- ------- Total distributions....................... (0.82) (0.99) ------- ------- Net asset value, end of period................ $ 11.75 $ 11.67 ======= ======= Total return (non-annualized)................. 7.75% 11.54% Ratios/Supplemental data Net assets, end of period (in 000s).......... $ 1,452 $ 779 Ratio of expenses to average net assets: Before expense reimbursement................ 1.51%** 1.51%** After expense reimbursement................. 1.30%** 1.30%** Ratio of net investment income to average net assets: Before expense reimbursement................ 3.08%** 3.26%** After expense reimbursement................. 3.29%** 3.47%** Portfolio turnover rate...................... 172% 240% Average commission rate paid per share....... $0.0492 $0.0481
*Commencement of SwissKey Fund Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The U.S. Equity Fund is an actively managed portfolio that invests in common stocks of U.S. corporations. The Fund is diversified by issue and industry; it is typically 70% invested in large capitalization stocks, with the remaining 30% in intermediate and small capitalization stocks. Investment strategies emphasize stock selection with attention to the management of factor and industry exposures. For the period July 31, 1995 to December 31, 1996, the SwissKey U.S. Equity Fund provided an annualized return of 27.78% compared to its benchmark, the Wilshire 5000 Index, return of 22.47%. For the year ended December 31, 1996, the Fund returned 24.90%, while the benchmark returned 21.21%. The total return of the SwissKey U.S. Equity Fund was 12.63% for the second six months of 1996, compared to the 9.92% return for the Wilshire 5000 Index. The following paragraphs review the sources of excess returns in the second half of 1996. The strong excess return of the U.S. Equity Fund in 1996 was attributable to a number of favorable industry and individual stock positions. Foremost among these was the sizeable overweighting in commercial banks where lower interest rates, sound credit quality and consolidation combined to produce strong industry performance. In addition, bank stock selection over and above the industry effect added meaningfully to Fund results. In the large capitalization sector, Citicorp and Chase Manhattan both posted total returns in excess of 50%. A package of smaller regional banks also performed well. These included U.S. Bancorp, Comerica, State Street Boston, First of America, Magna Group and First American of Tennessee. Another important industry position last year was the significant Fund underweighting in both telephone and electric utility stocks. In the area of traditional telephone utilities, we believe new technology, intensifying competition and regulatory adjustments will narrow the gap between telephone pricing and cost of service in many regional markets. Electric utilities are also likely to suffer a breakdown in regulatory protection due to the advent of independent power producers, the wheeling of electric power and difficulty earning an adequate return on stranded investments. Insurance and retail are two groups where industry performance was market-like in 1996 but where our collective issue selections added meaningfully to results. The strategy in insurance has been to concentrate on those companies where managements are restructuring and reorienting operations toward core lines of business. Such companies included Cigna, Aon, Allstate, Aetna, USF&G and Old Republic International. Similarly, the emphasis in retail was on those issues where managements were altering the business model with a clear focus on raising bottom line profitability. Our stock holdings here were CVS (formerly Melville), Federated Department Stores and Food Lion. Technology was an industry where an underweight detracted from Fund excess return in 1996. Nevertheless, stock selections such as EMC Corp., Seagate Technology and National Semiconductor more than compensated for the shortfall. In addition, a number of our telecommunications equipment related holdings performed well including Corning, Comverse Technology, Boston Technology and Octel Communications. Other noteworthy individual stock contributors to Fund results last year were Avon Products, Philip Morris, Coca Cola Enterprises and Tyson Foods. ------------------------------------------------------------ 17 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
Annualized 6 months 1 year 7/31/95* ended ended to 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------- SWISSKEY U.S. EQUITY FUND 12.63% 24.90% 27.78% - ------------------------------------------------------- Wilshire 5000 Index 9.92 21.21 22.47 - -------------------------------------------------------
*Performance inception date of the SwissKey U.S. Equity Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey U.S. Equity Fund and the Wilshire 5000 Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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. SWISSKEY U.S. EQUITY FUND VS. WILSHIRE 5000 INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] SwissKey U.S. Equity Fund Wilshire 5000 Index ------------------------- ------------------- 7/31/95 $10,000 $10,000 9/30/95 $10,570 $10,483 12/31/95 $11,335 $10,994 3/31/96 $12,194 $11,612 6/30/96 $12,570 $12,123 9/30/96 $12,966 $12,466 12/31/96 $14,157 $13,326 7/31/95 $10,000 Data through 12/31/96 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. ------------------------------------------------------------ 18 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.65% Housing/Paper.......................................................... 4.04 Metals................................................................. 0.52 ------ 5.21 Capital Investments Capital Goods.......................................................... 8.94 Technology............................................................. 5.77 ------ 14.71 Consumer Autos/Durables......................................................... 0.25 Discretionary.......................................................... 6.49 Health: Drugs.......................................................... 8.02 Health: Non-Drugs...................................................... 3.96 Non-Durables........................................................... 11.18 Retail/Apparel......................................................... 4.09 ------ 33.99 Energy.................................................................. 4.94% Financial Banks.................................................................. 10.03 Non-Banks.............................................................. 9.15 ------ 19.18 Services................................................................ 6.34 Transportation.......................................................... 6.17 Utilities............................................................... 3.07 Miscellaneous........................................................... 2.61 ------ Total U.S. Equities.................................................. 96.22* ------ SHORT-TERM INVESTMENTS.................................................. 3.51* ------ TOTAL INVESTMENTS.................................................... 99.73 CASH AND OTHER ASSETS, LESS LIABILITIES ...................................................... 0.27 ------ NET ASSETS.............................................................. 100.00% ======
*The Fund held a net long position in stock index futures on December 31, 1996 which increased U.S. equity exposure from 96.22% to 100% and reduced exposure to Short-Term investments from 3.51% to -0.27%. - -------------------------------------------------------------------------------- TOP TEN U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - --------------------------------------------- 1. Chase Manhattan Corp. 4.77% 2. Xerox Corp. 3.71 3. Lockheed Martin Corp. 3.70 4. Burlington Northern Santa Fe 3.65 5. Corning, Inc. 3.45 6. Citicorp 3.33 7. Philip Morris Companies, Inc. 3.29 8. Aon Corp. 3.08 9. Goodyear Tire & Rubber Co. 2.81 10. Enron Corp. 2.55 - ---------------------------------------------
- --------------- ------------------------------------------------------------ 19 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 96.22% Aetna Life & Casualty Co................................... 40,300 $ 3,224,000 Allergan, Inc.............................................. 67,300 2,397,563 Allstate Corp.............................................. 37,400 2,164,525 Alza Corp. (b)............................................. 65,600 1,697,400 Aon Corp................................................... 87,900 5,460,787 Automatic Data Processing, Inc............................. 64,100 2,748,288 Avon Products, Inc......................................... 47,700 2,724,862 Bard (C.R.), Inc........................................... 40,700 1,139,600 Beckman Instruments, Inc................................... 26,300 1,009,263 Birmingham Steel Corp...................................... 26,400 501,600 Boston Technology, Inc. (b)................................ 26,200 753,250 Brinker International, Inc. (b)............................ 26,600 425,600 Burlington Northern Santa Fe............................... 75,000 6,478,125 Centerior Energy Co........................................ 55,300 594,475 Chase Manhattan Corp....................................... 94,700 8,451,975 Choice Hotels International, Inc. (b)...................... 42,900 756,113 CIGNA Corp................................................. 32,500 4,440,312 Circuit City Stores, Inc. (b).............................. 11,200 337,400 Citicorp................................................... 57,400 5,912,200 CMS Energy Corp............................................ 71,700 2,410,913 Coca-Cola Enterprises, Inc................................. 35,100 1,702,350 Comerica, Inc.............................................. 18,100 947,987 Comverse Technology, Inc. (b).............................. 12,200 461,313 Corning, Inc............................................... 132,200 6,114,250 CPC International, Inc. ................................... 16,200 1,255,500 CVS Corp. ................................................. 51,900 2,147,363 Dial Corp.................................................. 64,400 949,900 EMC Corp./Mass. (b)........................................ 94,500 3,130,312 Enron Corp................................................. 104,800 4,519,500 Federal Express Corp. (b).................................. 97,600 4,343,200 Federated Department Stores (b)............................ 38,300 1,306,988 FileNet Corp. (b).......................................... 15,600 499,200 First American Corp.-Tenn. ................................ 4,700 270,836 First Data Corp............................................ 56,230 2,052,395 First of America Bank Corp................................. 8,400 505,050 Footstar, Inc. (b)......................................... 14,925 371,259 Ford Motor Co.............................................. 34,800 1,109,250 Forest Laboratories, Inc. (b).............................. 44,600 1,460,650 Gannett Co., Inc........................................... 43,800 3,279,525 General Instrument Corp. (b)............................... 130,200 2,815,575 Genzyme Corp. (b).......................................... 26,500 576,375 Geon Co. .................................................. 9,700 190,363 Goodyear Tire & Rubber Co.................................. 96,900 4,978,237 Harnischfeger Industries, Inc. ............................ 28,900 1,390,813 Health Care and Retirement Corp. (b)....................... 48,550 1,389,744 Interpublic Group of Companies, Inc........................ 32,600 1,548,500 James River Corp. of Virginia.............................. 37,700 1,248,812 Kimberly-Clark Corp........................................ 31,600 3,009,900 Kroger Co. (b)............................................. 27,600 1,283,400 Lockheed Martin Corp....................................... 71,627 6,553,871 Lyondell Petrochemical Co.................................. 71,700 1,577,400 Manor Care, Inc. .......................................... 42,900 1,158,300 Martin Marietta Materials, Inc. ........................... 19,157 445,400 Masco Corp. ............................................... 41,400 1,490,400 Mattel, Inc................................................ 156,875 4,353,281 Nabisco Holdings Corp. Class A............................. 47,500 1,846,562
SHARES VALUE ---------- ------------ National Semiconductor Corp. (b)........................ 25,900 $ 631,313 Nextel Communications, Inc. Class A (b)................. 66,000 862,125 Old Republic International Corp......................... 30,850 825,237 Peco Energy Co. ........................................ 41,900 1,057,975 Pentair, Inc............................................ 34,700 1,119,075 Pharmacia & Upjohn, Inc. ............................... 83,500 3,308,688 Philip Morris Companies, Inc............................ 51,800 5,833,975 Rhone-Poulene Rorer, Inc. .............................. 22,100 1,726,562 RJR Nabisco Convertible Preferred "C"................... 213,600 1,441,800 Schering Plough Corp.................................... 57,500 3,723,125 Seagate Technology, Inc. (b)............................ 17,600 695,200 Timken Co............................................... 27,600 1,266,150 Tyson Foods, Inc. Class A............................... 78,600 2,692,050 Ultramar Diamond Shamrock Corp. ........................ 74,718 2,362,957 US Bancorp.............................................. 39,900 1,793,006 USF&G Corp.............................................. 30,500 636,688 Vencor, Inc. (b)........................................ 34,300 1,084,737 Viad Corp. ............................................. 64,400 1,062,600 Westvaco Corp........................................... 15,700 451,375 Whitman Corp............................................ 3,300 75,488 WMX Technologies, Inc................................... 107,000 3,490,875 Xerox Corp. ............................................ 125,000 6,578,125 York International Corp................................. 27,000 1,508,625 360 Communications Co. (b).............................. 22,733 525,701 ------------ Total U.S. Equities (Cost $144,329,405)................. 170,665,464 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 3.51% U.S. GOVERNMENT OBLIGATIONS -- 0.17% U.S. Treasury Bills 5.063%, due 05/01/97................ $ 300,000 $ 294,972 ------------ COMMERCIAL PAPER -- 3.34% Cincinnati Bell, Inc. 7.250%, due 01/02/97.............. 2,430,000 2,429,511 CNA Financial Corp. 6.250%, due 01/23/97................ 500,000 498,090 Crown Cork & Seal Co., Inc. 5.580%, due 01/29/97........ 500,000 497,830 Tyson Foods, Inc. 5.750%, due 01/09/97.................. 261,000 260,667 Vastar Resources, Inc. 6.850%, due 01/10/97............. 1,500,000 1,497,431 Whirlpool Financial Corp. 6.000%, due 01/03/97.......... 750,000 749,750 ------------ 5,933,279 ------------ Total Short-Term Investments (Cost $6,228,216)...................................... 6,228,251 ------------ Total Investments (Cost $150,557,621) -- 99.73% (a)...................... 176,893,715 ------------ Cash and other assets, less liabilities -- 0.27%........ 472,135 ------------ Net Assets -- 100%...................................... $177,365,850 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 20 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $150,557,621; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $28,243,273 Gross unrealized depreciation................................ (1,907,179) ----------- Net unrealized appreciation................................ $26,336,094 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of December 31, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN/(LOSS) ---------- ---------- ---------- ----------- INDEX FUTURES BUY CONTRACTS Standard & Poors 500, 18 contracts.................. March 1997 $6,785,075 $6,700,500 $(84,575) INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 1 contract................... March 1997 377,600 377,250 5,350 -------- $(79,225) ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1996 was $294,972. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $150,557,621) (Note 1) .............. $176,893,715 Cash............................................................. 3,238,167 Receivables: Investment securities sold...................................... 711,094 Dividends....................................................... 306,932 Fund shares sold................................................ 309,665 Other assets..................................................... 24,831 ------------ TOTAL ASSETS.................................................. 181,484,404 ------------ LIABILITIES: Payables: Investment securities purchased................................. 2,707,175 Fund shares redeemed............................................ 1,074,412 Variation margin (Note 4)....................................... 175,550 Investment advisory fees (Note 2)............................... 36,162 Accrued expenses................................................ 125,255 ------------ TOTAL LIABILITIES............................................. 4,118,554 ------------ NET ASSETS........................................................ $177,365,850 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $147,729,146 Accumulated undistributed net investment income.................. 4,145 Accumulated net realized gain.................................... 3,375,690 Net unrealized appreciation...................................... 26,256,869 ------------ NET ASSETS.................................................... $177,365,850 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $166,642,358 and 11,008,767 shares is- sued and outstanding) (Note 6)................................. $ 15.14 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $10,723,492 and 709,464 shares issued and outstanding) (Note 6)...................................... $ 15.11 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Dividends......................................................... $ 1,360,510 Interest.......................................................... 153,130 ----------- TOTAL INCOME................................................... 1,513,640 ----------- EXPENSES: Advisory (Note 2)................................................. 530,359 Administration.................................................... 48,142 Custodian......................................................... 47,719 Accounting........................................................ 41,800 Registration...................................................... 40,734 Distribution (Note 5)............................................. 19,756 Other............................................................. 83,749 ----------- TOTAL EXPENSES................................................. 812,259 Expenses deferred by Advisor (Note 2).......................... (186,334) ----------- NET EXPENSES................................................... 625,925 ----------- NET INVESTMENT INCOME.......................................... 887,715 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments...................................................... 9,682,760 Futures contracts................................................ 377,715 ----------- Net realized gain ............................................. 10,060,475 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 8,716,058 Futures contracts ............................................... (76,450) ----------- Change in net unrealized appreciation or depreciation.......... 8,639,608 ----------- Net realized and unrealized gain ................................. 18,700,083 ----------- Net increase in net assets resulting from operations.............. $19,587,798 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 887,715 $ 1,333,171 Net realized gain ............................ 10,060,475 7,826,393 Change in net unrealized appreciation or de- preciation .................................. 8,639,608 13,357,238 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 19,587,798 22,516,802 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class.......................... (1,048,487) (1,233,245) SwissKey Fund Class......................... (51,089) (17,809) Distributions from net realized gain: Brinson Fund Class.......................... (12,393,320) (1,764,213) SwissKey Fund Class......................... (838,501) (2,611) ------------ ------------ Total distributions to shareholders........... (14,331,397) (3,017,878) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 36,689,740 71,976,805 Shares issued on reinvestment of distribu- tions........................................ 13,560,021 2,944,272 Shares redeemed............................... (9,869,057) (5,264,717) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)............. 40,380,704 69,656,360 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 45,637,105 89,155,284 ------------ ------------ NET ASSETS: Beginning of period........................... 131,728,745 42,573,461 ------------ ------------ End of period (including accumulated undis- tributed net investment income of $4,145 and $216,006, respectively)...................... $177,365,850 $131,728,745 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR YEAR FEBRUARY 22, 1994* DECEMBER 31, 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 14.59 $ 11.53 $ 9.65 $10.00 -------- -------- ------- ------ Income from investment operations: Net investment income. 0.08 0.17 0.16 0.05 Net realized and unrealized gain (loss)............... 1.80 3.31 1.89 (0.36) -------- -------- ------- ------ Total income (loss) from investment operations......... 1.88 3.48 2.05 (0.31) -------- -------- ------- ------ Less distributions: Distributions from net investment income.... (0.10) (0.17) (0.14) (0.04) Distributions from net realized gain........ (1.23) (0.25) (0.03) -- -------- -------- ------- ------ Total distributions. (1.33) (0.42) (0.17) (0.04) -------- -------- ------- ------ Net asset value, end of period................. 15.14 $ 14.59 $ 11.53 $ 9.65 ======== ======== ======= ====== Total return (non- annualized)............ 12.96% 30.57% 21.45% (3.10%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $166,642 $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.04%** 1.14% 1.70% 5.40% ** After expense reim- bursement............ 0.80%** 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reim- bursement............ 0.95%** 1.13% 1.09% (2.82%)** After expense reim- bursement............ 1.19%** 1.47% 1.99% 1.78% ** Portfolio turnover rate.................. 25% 36% 33% 9% Average commission rate paid per share........ $ 0.0445 $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 14.58 $ 11.94 ------- ------- Income from investment operations: Net investment income....................... 0.04 0.10 Net realized and unrealized gain............ 1.79 2.92 ------- ------- Total income from investment operations... 1.83 3.02 ------- ------- Less distributions: Distributions from net investment income.... (0.07) (0.13) Distributions from net realized gain........ (1.23) (0.25) ------- ------- Total distributions....................... (1.30) (0.38) ------- ------- Net asset value, end of period................ $ 15.11 $ 14.58 ======= ======= Total return (non-annualized)................. 12.63% 25.70% Ratios/Supplemental data Net assets, end of period (in 000s).......... $10,724 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement................ 1.56%** 1.66%** After expense reimbursement................. 1.32%** 1.32%** Ratio of net investment income to average net assets: Before expense reimbursement................ 0.43%** 0.61%** After expense reimbursement................. 0.67%** 0.95%** Portfolio turnover rate...................... 25% 36% Average commission rate paid per share....... $0.0445 $0.0457
*Commencement of SwissKey Fund Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar- denominated investment-grade fixed income securities. Our goal for the Fund is to achieve a total return superior to that of an unmanaged market index. Macroeconomic and monetary analysis are the key elements in our strategy. We develop expectations about the returns on U.S. bonds based on the divergence of current market yields from our estimates of equilibrium yields. Relative value analysis serves as the basis of both our sector and individual security selection. The SwissKey U.S. Bond Fund produced an annualized return of 6.39% since its inception on August 31, 1995 compared to the Salomon Brothers Broad Investment Grade (BIG) Bond Index return of 6.78%. In 1996, U.S. fixed income markets proved disappointing to investors by underperforming both cash and most riskier asset classes. For the year ended December 31, 1996, the Fund produced a total return of 3.15% compared to the Benchmark return of 3.63%. In the second half of 1996, the Fund returned 5.19% compared to the Benchmark return of 4.94%. The underlying economic fundamentals that influence bond prices and yields were unusually well behaved in 1996. The pace of real economic activity fluctuated around a stable path with alternating periods of above- and below-trend growth. Inflation rates were stable. Treasury deficits continued to decline. Federal Reserve interest rate policies were steady. The overnight funds target rate was cut from 5.50% to 5.25% at the end of January 1996 and remained unchanged at the 5.25% level through the balance of the year. In 1996, U.S. interest rates were more volatile than the underlying economic fundamentals. Investor expectations shifted in reaction to fluctuations in economic data that were often statistical noise. During 1996, sentiment shifted from optimism that a slow-growth economy would prompt further Federal Reserve easing, to pessimism that an economy near full employment would overheat, resulting in either an up-tick in inflation or Fed tightening or both. Interest rates, which were at their lows for the year at the beginning of 1996, rose fairly steadily in the first half of 1996 and moved irregularly lower in the second half. Year over year, Treasury yields rose 35 basis points for one- year maturities, while yields in the three-to-ten year range were up approximately 80 basis points. Thirty-year Treasury bond yields, which were below 6.00% at the beginning of 1996, rose to a high of 7.20% by mid-year and fell to 6.65% by year-end. As a result of these shifts, the yield curve steepened from cash to intermediate maturities while modestly flattening from intermediate to long maturities. Our investment strategies in early 1997 involve overweights in the ten-year and longer segments of the yield curve and corresponding underweights in intermediate maturities. This results in a Fund duration that is 1.3 times the duration of the benchmark. Intermediate and long-term U.S. interest rates are well above our equilibrium estimates. If market forces bring yields back in line with our estimates of value, U.S. bonds will deliver total returns well in excess of current yield levels as bond prices appreciate. ------------------------------------------------------------ 27 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 8/31/95* 12/31/96 12/31/96 to 12/31/96 - ---------------------------------------------------------------------------- SWISSKEY U.S. BOND FUND 5.19% 3.15% 6.39% - ---------------------------------------------------------------------------- Salomon Brothers Broad Investment Grade (BIG) Bond Index 4.94 3.63 6.78 - ----------------------------------------------------------------------------
*Inception date of the SwissKey U.S. Bond Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey U.S. Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if you had invested $10,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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. SWISSKEY U.S. BOND FUND VS. SALOMON BROTHERS BIG BOND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] SwissKey U.S. Bond Fund Salomon Brothers BIG Bond Index ----------------------- ------------------------------- 8/31/95 $10,000 $10,000 9/30/95 $10,080 $10,094 12/31/95 $10,529 $10,532 3/31/96 $10,284 $10,350 6/30/96 $10,324 $10,400 9/30/96 $10,491 $10,594 12/31/96 $10,861 $10,914 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. ------------------------------------------------------------ 28 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percentage of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-backed........................................................... 4.18% CMO.................................................................... 2.61 Financial.............................................................. 12.76 Industrial............................................................. 1.67 Telecommunications..................................................... 2.55 ------ Total U.S. Corporate Bonds........................................... 23.77 U.S. Government Agencies................................................ 27.83 U.S. Government Obligations............................................. 39.67 International Dollar Bonds.............................................. 4.43 ------ Total U.S. Bonds..................................................... 95.70 ------ SHORT-TERM INVESTMENTS.................................................. 7.10 ------ TOTAL INVESTMENTS.................................................... 102.80 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (2.80) ------ NET ASSETS.............................................................. 100.00% ======
------------------------------------------------------------ 29 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ---------- Bonds -- 95.70% U.S. CORPORATE BONDS -- 23.77% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03.................................... $ 100,000 $ 101,582 Capital One Bank 6.830%, due 05/17/99.................... 185,000 185,854 Citicorp Mortgage Securities 5.750%, due 06/25/09........ 89,877 76,116 Countrywide Funding FRN 6.650%, due 12/01/03............. 250,000 239,688 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02................................................ 100,000 100,269 GMAC MTN 7.450%, due 06/05/97............................ 250,000 251,980 Green Tree Financial 94-2 8.300%, due 05/15/19........... 160,000 169,229 Lehman Brothers Holdings 7.250%, due 04/15/03............ 225,000 226,363 Lockheed Martin Corp. 7.700%, due 06/15/08............... 150,000 157,025 News America Corp. 7.750%, due 01/20/24.................. 250,000 238,974 Premier Auto Trust 96-4A, 6.400%, due 10/06/01........... 190,000 190,912 Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 292,949 ---------- 2,230,941 ---------- INTERNATIONAL DOLLAR BONDS -- 4.43% Hanson PLC Notes 6.750%, due 09/15/05.................... 100,000 97,934 Republic of Italy 6.875%, due 09/27/23................... 250,000 237,830 Royal Bank of Scotland 7.375%, due 04/01/06.............. 80,000 79,730 ---------- 415,494 ---------- U.S. GOVERNMENT AGENCIES -- 27.83% Federal Home Loan Mortgage Corp. 6.750%, due 05/30/06.................................... 150,000 151,106 5.800%, due 08/15/19.................................... 330,000 308,246 6.500%, due 05/15/21.................................... 86,167 78,194 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03.................................... 111,475 108,828 8.000%, due 11/01/22.................................... 72,660 74,627 Federal National Mortgage Association 6.500%, due 03/01/03.................................... 250,000 247,345 8.000%, due 12/18/11.................................... 100,000 103,375 7.500%, due 05/01/25.................................... 210,419 210,353 6.500%, due 02/01/26.................................... 131,483 125,494 6.500%, due 03/01/26.................................... 59,456 56,725 Federal National Mortgage Association Strip 8.000%, due 07/01/24 interest only...................... 104,772 32,287 0.000%, due 07/01/26 principal only..................... 93,546 62,938
FACE AMOUNT VALUE ---------- ---------- Government National Mortgage Association 9.000%, due 12/15/17................................... $ 68,304 $ 73,159 7.500%, due 12/15/22................................... 409,733 411,979 7.500%, due 06/15/25................................... 132,176 132,328 6.500%, due 03/20/26................................... 118,159 111,992 6.000%, due 11/20/26................................... 199,775 199,935 Independent National Mortgage Corp. 8.350%, due 06/25/25............................................... 120,000 122,886 ---------- 2,611,797 ---------- U.S. GOVERNMENT OBLIGATIONS -- 39.67% U.S. Treasury Coupon Strip 0.000%, due 05/15/08 principal only............................ 285,000 135,634 U.S. Treasury Notes and Bonds 6.250%, due 10/31/01................................... 595,000 595,372 6.500%, due 05/15/05................................... 530,000 533,810 7.000%, due 07/15/06................................... 535,000 555,899 8.125%, due 05/15/21................................... 1,640,000 1,902,400 ---------- 3,723,115 ---------- Total U.S. Bonds (Cost $9,003,871)...................... 8,981,347 ---------- Short-Term Investments -- 7.10% COMMERCIAL PAPER -- 7.10% Cincinnati Bell, 7.250%, due 01/02/97................... 491,000 490,901 Duracell, Inc. 6.750%, due 01/02/97..................... 176,000 175,967 ---------- Total Short-Term Investments (Cost $666,868)........................................ 666,868 ---------- Total Investments (Cost $9,670,739) -- 102.80%(a)........................ 9,648,215 ---------- Liabilities, less cash and other assets --(2.80%) (a)... (263,154) ---------- Net Assets -- 100%...................................... $9,385,061 ==========
(a) Aggregate cost for federal income tax purposes was $9,670,739; and net unrealized depreciation consisted of: Gross unrealized ap- preciation.......... $ 59,916 Gross unrealized de- preciation.......... (82,440) -------- Net unrealized de- preciation......... $(22,524) ========
FRN:Floating rate note--The rate disclosed is that in effect at December 31, 1996. MTN: Medium Term Note See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $9,670,739) (Note 1)................. $ 9,648,215 Cash............................................................. 272,993 Receivables: Investment securities sold...................................... 351,190 Interest........................................................ 99,507 Fund shares sold................................................ 52,466 Due from Advisor (Note 2)....................................... 14,375 Other assets..................................................... 10,208 ----------- TOTAL ASSETS.................................................. 10,448,954 ----------- LIABILITIES: Payables: Investment securities purchased................................. 968,564 Accrued expenses................................................ 95,329 ----------- TOTAL LIABILITIES............................................. 1,063,893 ----------- NET ASSETS........................................................ $ 9,385,061 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $ 9,330,105 Accumulated undistributed net investment income.................. 19,834 Accumulated net realized gain.................................... 57,646 Net unrealized depreciation ..................................... (22,524) ----------- NET ASSETS.................................................... $ 9,385,061 =========== OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $8,891,698 and 882,581 shares issued and outstanding) (Note 6)...................................... $ 10.07 =========== SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $493,363 and 49,046 shares issued and outstanding) (Note 6).......................................... $ 10.06 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Interest............................................................ $ 312,360 --------- TOTAL INCOME..................................................... 312,360 --------- EXPENSES: Registration........................................................ 26,797 Professional........................................................ 24,656 Advisory (Note 2)................................................... 23,187 Accounting.......................................................... 22,986 Transfer Agent...................................................... 20,802 Printing............................................................ 17,664 Custodian........................................................... 10,086 Distribution (Note 5)............................................... 1,089 Other............................................................... 9,634 --------- TOTAL EXPENSES................................................... 156,901 Expenses deferred and reimbursed by Advisor (Note 2)............. (128,202) --------- NET EXPENSES..................................................... 28,699 --------- NET INVESTMENT INCOME ........................................... 283,661 --------- NET REALIZED AND UNREALIZED GAIN: Net realized gain................................................... 89,999 Change in net unrealized appreciation or depreciation............... 123,739 --------- Net realized and unrealized gain.................................... 213,738 --------- Net increase in net assets resulting from operations................ $ 497,399 =========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED AUGUST 31, 1995* DECEMBER 31, 1996 THROUGH (UNAUDITED) JUNE 30, 1996 OPERATIONS: ----------------- ---------------- Net investment income...................... $ 283,661 $ 456,231 Net realized gain/(loss)................... 89,999 (11,035) Change in net unrealized appreciation or depreciation.............................. 123,739 (146,263) ---------- ----------- Net increase in net assets resulting from operations................................ 497,399 298,933 ---------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income... (353,857) (363,467) Distributions from net realized gain....... (713) -- Distributions in excess of net realized gain...................................... -- (23,339) ---------- ----------- Total distributions to shareholders**...... (354,570) (386,806) ---------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold................................ 864,572 10,200,031 Shares issued on reinvestment of distribu- tions..................................... 344,994 386,807 Shares redeemed............................ (1,649,868) (867,431) ---------- ----------- Net increase (decrease) in net assets re- sulting from capital share transactions (Note 6).................................. (440,302) 9,719,407 ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS. (297,473) 9,631,534 ---------- ----------- NET ASSETS: Beginning of period........................ 9,682,534 51,000 ---------- ----------- End of period (including accumulated undis- tributed net investment income of $19,834 and $90,190, respective- ly)....................................... $9,385,061 $ 9,682,534 ========== =========== * Commencement of investment operations **Distributions By Class: Distributions from net investment income: Brinson Fund Class........................ (335,801) (350,335) SwissKey Fund Class....................... (18,056) (13,132) Distributions from and in excess of net re- alized gain: Brinson Fund Class........................ (675) (23,071) SwissKey Fund Class....................... (38) (268) ---------- ----------- Total distributions to shareholders........ (354,570) (386,806) ---------- -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED AUGUST 31, 1995* DECEMBER 31, 1996 THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period........ $ 9.93 $10.00 ------ ------ Income from investment operations: Net investment income..................... 0.32 0.50 Net realized and unrealized gain (loss)... 0.22 (0.14) ------ ------ Total income from investment operations. 0.54 0.36 ------ ------ Less distributions: Distributions from net investment income.. (0.40) (0.40) Distributions in excess of net realized gain..................................... -- (0.03) ------ ------ Total distributions..................... (0.40) (0.43) ------ ------ Net asset value, end of period.............. $10.07 $ 9.93 ====== ====== Total return (non-annualized)............... 5.42% 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)........ $8,892 $9,047 Ratio of expenses to average net assets: Before expense reimbursement.............. 3.35%** 3.63%** After expense reimbursement............... 0.60%** 0.60%** Ratio of net investment income to average net assets: Before expense reimbursement.............. 3.37%** 3.00%** After expense reimbursement............... 6.12%** 6.03%** Portfolio turnover rate.................... 265% 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED AUGUST 31, 1995* DECEMBER 31, 1996 THROUGH JUNE 30, SWISSKEY FUND CLASS (UNAUDITED) 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period........ $ 9.92 $10.00 ------ ------ Income from investment operations: Net investment income..................... 0.30 0.46 Net realized and unrealized gain (loss)... 0.22 (0.13) ------ ------ Total income from investment operations. 0.52 0.33 ------ ------ Less distributions: Distributions from net investment income.. (0.38) (0.38) Distributions in excess of net realized gain..................................... -- (0.03) ------ ------ Total distributions..................... (0.38) (0.41) ------ ------ Net asset value, end of period.............. $10.06 $ 9.92 ====== ====== Total return (non-annualized)............... 5.19% 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)........ $ 493 $ 636 Ratio of expenses to average net assets: Before expense reimbursement.............. 3.82%** 4.10%** After expense reimbursement............... 1.07%** 1.07%** Ratio of net investment income to average net assets: Before expense reimbursement.............. 2.90%** 2.53%** After expense reimbursement............... 5.65%** 5.56%** Portfolio turnover rate.................... 265% 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 THE SWISSKEY 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 seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Fund Class and SwissKey Fund 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 following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively 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. Securities for which the most recent bid price or 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. U.S. equity securities, traded over-the-counter, are valued at the most recent bid price. Debt securities are valued at the most recent bid price by using market quotations or independent services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.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. C.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D.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 have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1996, therefore, no federal income tax provision was required. E.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 generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by the Funds will be borne on a pro rata basis by each of the classes, except that the Brinson Fund Class will not incur any of the distribution expenses. G.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles 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. - -------------------------------------------------------------------------------- 36 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 the Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1996, were as follows:
BRINSON SWISSKEY CLASS CLASS ADVISORY EXPENSE EXPENSE ADVISORY FEES DEFERRED FEE CAP CAP FEES AND/OR REIMBURSED -------- ------- -------- -------- ----------------- U.S. Balanced Fund......... 0.70% 0.80% 1.30% $814,540 $246,439 U.S. Equity Fund........... 0.70 0.80 1.32 530,359 186,334 U.S. Bond Fund............. 0.50 0.60 1.07 23,187 128,202
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 were $3,680, $2,576 and $1,656 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $383,484,882 $384,396,868 U.S. Equity Fund...................................... 63,102,416 37,150,734 U.S. Bond Fund........................................ 23,975,970 24,362,303
4.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. 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 statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Fund Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey Fund Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. - -------------------------------------------------------------------------------- 37 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. BALANCED FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 ---------------------- --------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ----------- Sales: Brinson Class.................... 1,510,640 $ 18,264,307 6,944,846 $80,934,038 SwissKey Class................... 83,085 1,019,429 67,290 776,395 --------- ------------ --------- ----------- Total Sales.................... 1,593,725 $ 19,283,736 7,012,136 $81,710,433 ========= ============ ========= =========== Dividend Reinvestment: Brinson Class.................... 1,371,436 $ 16,128,084 1,540,774 $17,588,758 SwissKey Class................... 3,308 38,766 422 4,850 --------- ------------ --------- ----------- Total Dividend Reinvestment.... 1,374,744 $ 16,166,850 1,541,196 $17,593,608 ========= ============ ========= =========== Redemptions: Brinson Class.................... 1,910,824 $ 22,882,958 3,073,501 $36,019,481 SwissKey Class................... 29,540 368,380 957 10,963 --------- ------------ --------- ----------- Total Redemptions.............. 1,940,364 $ 23,251,338 3,074,458 $36,030,444 ========= ============ ========= =========== U.S. EQUITY FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 ---------------------- --------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ----------- Sales: Brinson Class.................... 2,041,391 $ 30,854,921 5,125,613 $66,685,850 SwissKey Class................... 381,237 5,834,819 375,655 5,290,955 --------- ------------ --------- ----------- Total Sales.................... 2,422,628 $ 36,689,740 5,501,268 $71,976,805 ========= ============ ========= =========== Dividend Reinvestment: Brinson Class.................... 876,492 $ 13,191,199 222,497 $ 2,935,334 SwissKey Class................... 24,539 368,822 644 8,938 --------- ------------ --------- ----------- Total Dividend Reinvestment.... 901,031 $ 13,560,021 223,141 $ 2,944,272 ========= ============ ========= =========== Redemptions: Brinson Class.................... 568,938 $ 8,826,760 380,602 $ 5,174,675 SwissKey Class................... 65,737 1,042,297 6,874 90,042 --------- ------------ --------- ----------- Total Redemptions.............. 634,675 $ 9,869,057 387,476 $ 5,264,717 ========= ============ ========= =========== U.S. BOND FUND -------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 ---------------------- --------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ----------- Sales: Brinson Class.................... 69,080 $ 707,725 953,454 $ 9,550,552 SwissKey Class................... 15,038 156,847 63,717 649,479 --------- ------------ --------- ----------- Total Sales.................... 84,118 $ 864,572 1,017,171 $10,200,031 ========= ============ ========= =========== Dividend Reinvestment: Brinson Class.................... 33,381 $ 336,476 37,309 $ 373,407 SwissKey Class................... 846 8,518 1,362 13,400 --------- ------------ --------- ----------- Total Dividend Reinvestment.... 34,227 $ 344,994 38,671 $ 386,807 ========= ============ ========= =========== Redemptions: Brinson Class.................... 131,050 $ 1,335,859 84,593 $ 856,547 SwissKey Class................... 30,962 314,009 1,055 10,884 --------- ------------ --------- ----------- Total Redemptions.............. 162,012 $ 1,649,868 85,648 $ 867,431 ========= ============ ========= ===========
- -------------------------------------------------------------------------------- 38 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- 39 LOGO 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY . http//networth.galt.com.swisskey LOGO SWISSKEY NON-U.S. EQUITY FUND SEMI-ANNUAL REPORT DECEMBER 31, 1996 Your Key to Performance ----------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CFA, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUND'S ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their institutional investment management organizations into a single investment management business operating as Brinson Partners, Inc. in North America and SBC Brinson in its other world-wide locations. We are a global investment management organization with over $72 billion in institutional assets under discretionary active management. We are also the investment advisor for SBC Private Banking mutual fund assets which total $47 billion. The firm manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other institutional investors located throughout the world. Our organization employs over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, Inc., an established U.S.-based leader in the investment business located in Chicago, acts as the headquarters of our world-wide investment management process. The firm began managing international securities and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients and has offered fully integrated global portfolios since then. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Non-U.S. Equity Fund.......................................................... 6 Schedule of Investments....................................................... 9 Financial Statements..........................................................14 Financial Highlights..........................................................17 Notes to Financial Statements.................................................19 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO February 19, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the December 31, 1996 Semi-Annual Report for the Non-U.S. Equity Fund. This Report presents our current global economic and market outlook, as well as the Fund's recent investment strategies and performance. To summarize this information: For the period from July 31, 1995 (inception date of the Fund) to December 31, 1996, the Fund provided an annualized total return of 14.66%. In the second half of 1996, the Fund returned 4.85%. Market Strategy The Fund continues to hold a 5.00% strategic cash position reflecting our view that, with very few exceptions, non-U.S. equity markets are modestly attractive. The Japanese equity market, which is the largest component of the index, is notably more overpriced than most of the other non-U.S. markets. Given our valuation analyses and fundamental considerations, we are underweight in Japan by 6.50%. Currency Strategy Currency strategy continues to emphasize those currencies that offer the highest expected cash returns in U.S. dollar terms. We continue to have limited exposure to the overvalued DM-bloc currencies and maintain an underweight in the yen. Offsetting these underweights is an overweight in the U.S. dollar. Our position is near neutral in the British pound, and in the Australian and Canadian dollars. We look forward to the challenges ahead and, as always, welcome your thoughts and comments. Please visit our web-site at http://networth.galt.com/swisskey Sincerely, /s/ Raoul Weil /s/ Raymond Simon Raoul Weil Raymond Simon Managing Director Executive Director PRIVATE LOGO BANKING PRIVATE LOGO BANKING ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO A weaker yen is helping Japan recover from its recent recession. Prices at the consumer level appear to have stopped falling, and the economy has started showing real growth, although the expansion has been neither strong nor consis- tent. The weaker yen and incipient recovery may, however, reduce the pressure to address structural reform. The lack of unequivocal public support for re- formist candidates in the most recent election also may delay deregulation. In pursuit of monetary union, the core European countries are trying to meet the Maastricht criteria. This has produced restrictive fiscal policies at a time of weak economic growth, thus exacerbating structural weaknesses in labor markets. The peripheral European economies have benefited from the drive to EMU, as bond yields and borrowing costs have dropped considerably. The U.S. economy remains among the most productive of the developed countries, due in large part to its flexible labor market. Increases in oil prices to the $25 per barrel range have not flowed through to higher consumer price inflation. Central banks have been acting more responsi- bly since the last major bout of inflation around 1980. Increases in the rela- tive prices of inputs are no longer being accommodated and turned into general price increases. NON-U.S. EQUITY ENVIRONMENT MAJOR MARKETS
Total Return in 6 months 1 year U.S. Dollar ended ended Hedged Terms 12/31/96 12/31/96 - --------------------------------------- Japan -9.23% 0.06% U.K. 12.70 15.18 Germany 11.32 25.10 France 11.21 30.73 Canada 18.79 30.20 Netherlands 17.64 41.40 Australia 7.71 7.71 - ---------------------------------------
MAJOR CURRENCIES
Percent Change 6 months 1 year Relative to ended ended U.S. Dollars 12/31/96 12/31/96 - ---------------------------------- Yen -5.50% -11.13% Pound 10.14 -10.22 Deutschemark -1.23 -7.12 Canadian Dollar -0.36 -0.50 - ----------------------------------
------------------------------------------------------------ 5 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Non-U.S. Equity Fund invests in the common stocks of companies headquartered outside the U.S. We believe that in a non-U.S. investment program the country allocation decision is the most important. Country assessments are developed by the non-U.S. strategy team in Chicago working with our investment teams in Basel, Frankfurt, London, Paris, Singapore, Sydney and Tokyo. Currency strategies are separately developed and coordinated with market allocations. Our industry strategies and individual security selections are determined by fundamental research. Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has earned an annualized return of 14.66% versus 6.60% for the benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. For the year ended December 31, 1996, the Fund returned 11.81% while the benchmark returned 7.11%. For the second half of 1996, the SwissKey Non-U.S. Equity Fund returned 4.85% compared to the 2.19% return of the benchmark. During 1996 the majority of the developed markets earned double-digit returns, continuing 1995's strong performance. The best performing markets in dollar- hedged terms were Spain, rising 46.76%; Finland, gaining 44.95%; the Netherlands, increasing 41.39%; Sweden, up 39.86% and Hong Kong, adding 33.02%. The majority of other markets also earned double-digit returns. In sharp contrast, Japan was the weakest market, gaining 0.06% in dollar-hedged terms, followed by Singapore, growing 1.42%. The three other markets with single digit returns were Italy, rising 4.23%; New Zealand, adding 5.08%; and Australia, up 7.71%. Since inception, market allocation has added to returns, but detracted somewhat from 1996 performance. Strategic cash, overweights in several Anglo-Saxon markets and underweights of Sweden, Switzerland and Hong Kong combined to reduce returns. Value was added from the strategy of underweighting Japan and Singapore, while overweighting Finland, the Netherlands, Spain and France. Currency management has added solidly to returns since inception and was the greatest positive contributor to 1996 performance, helped by both the strength of the U.S. dollar and other dollar-bloc currencies and the weakness of the yen and the DM-bloc currencies. The current U.S. dollar overweight is driven by an underweighted exposure to the Japanese yen and minimal positions in the DM-bloc currencies. During 1996, stock selection was strongly positive, largely due to excellent Japan stock selection, combined with good results in Canada, Germany and Italy. Positive stock selection from Japan resulted from the portfolio's exposure to high-quality defensive issues and exporters, and underexposure to financials and real estate. A negative contribution came from France and Malaysia, where outperforming momentum and small stocks were avoided. ------------------------------------------------------------ 6 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 7/31/95* 12/31/96 12/31/96 to 12/31/96 - ------------------------------------------------------------------ SWISSKEY NON-U.S. EQUITY FUND 4.85% 11.81% 14.66% MSCI Non-U.S. Equity (Free) Index** 2.19 7.11 6.60 - ------------------------------------------------------------------
*Inception date of the SwissKey Non-U.S. Equity Fund **Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey Non- U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1996. 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. SWISSKEY NON-U.S. EQUITY FUND VS. MSCI NON-U.S. EQUITY (FREE) INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] SwissKey Non-U.S. Equity Fund MSCI Non-U.S. Equity (Free) Index ----------------------------- --------------------------------- 7/31/95 $10,000 $10,000 9/30/95 $10,302 $ 9,817 12/31/95 $10,858 $10,220 3/31/96 $11,158 $10,538 6/30/96 $11,578 $10,713 9/30/96 $11,630 $10,727 12/31/96 $12,140 $10,947 7/31/95 $10,000 Data Through 12/31/96 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. ------------------------------------------------------------- 7 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NON-U.S. EQUITIES Airlines................................................................. 0.26% Appliances & Household Durables.......................................... 2.12 Automobiles.............................................................. 2.83 Banking.................................................................. 10.80 Beverages & Tobacco...................................................... 2.28 Broadcasting & Publishing................................................ 1.37 Building Materials....................................................... 1.14 Business & Public Service................................................ 3.21 Chemicals................................................................ 3.88 Construction............................................................. 1.88 Data Processing.......................................................... 1.00 Electric Components...................................................... 1.23 Electronics.............................................................. 4.09 Energy................................................................... 8.08 Financial Services....................................................... 1.44 Food & House Products.................................................... 4.61 Forest Products.......................................................... 1.77 Gold Mining.............................................................. 0.10 Health & Personal Care................................................... 3.99 Industrial Components.................................................... 2.15 Insurance................................................................ 4.09 Leisure & Tourism........................................................ 0.61 - --------------------------------------------------------------------------------
Machinery & Engineering................................................ 1.38% Merchandising.......................................................... 4.16 Metals-Steel........................................................... 1.94 Miscellaneous Materials................................................ 1.15 Multi-Industry......................................................... 4.28 Non-Ferrous Metals..................................................... 2.16 Real Estate............................................................ 0.76 Recreation............................................................. 0.54 Shipping............................................................... 0.77 Telecommunications..................................................... 4.99 Textiles & Apparel..................................................... 0.23 Transportation......................................................... 0.83 Utilities.............................................................. 5.89 ------ Total Non-U.S. Equities.............................................. 92.01* ------ SHORT-TERM INVESTMENTS................................................. 6.43* ------ TOTAL INVESTMENTS.................................................... 98.44 CASH AND OTHER ASSETS, LESS LIABILITIES...................................................... 1.56 ------ NET ASSETS........................................................... 100.00% ======
MARKET AND CURRENCY STRATEGY As of December 31, 1996 (Unaudited)
Portfolio ----------------- Market Currency Strategy Strategy Index - --------------------------------------- U.S. Dollar 0.0% 35.5% 0.0% Japan 24.2 20.7 30.7 Australia 4.9 2.9 2.8 Belgium 3.2 1.2 1.1 Canada 2.9 3.9 4.5 Finland 1.5 1.5 0.6 France 9.6 1.1 6.6 Germany 8.3 3.8 7.8 Hong Kong 1.4 0.4 3.6 Italy 3.3 3.3 2.9 Malaysia 1.3 1.3 2.5 Netherlands 6.1 0.6 4.5 New Zealand 3.3 3.3 0.4 Spain 3.6 2.1 2.2 Sweden 0.0 0.0 2.4 Switzerland 1.6 0.1 5.4 U.K. 19.8 18.3 18.2 Cash Reserves 5.0 0.0 0.0 Other Markets 0.0 0.0 3.8 - --------------------------------------- 100.0% 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of December 31, 1996 (Unaudited)
Percent of Net Assets - ----------------------- 1. Royal Dutch Petroleum Co. 1.73% 2. British Telecommunications PLC 1.13 3. General Electric Co. PLC 1.12 4. Broken Hill Proprietary Co. Ltd. 1.07 5. Lloyds TSB Group PLC 1.07 6. Matsushita Electric Industrial Co. 1.05 7. British Petroleum Co. PLC 1.05 8. Toray Industries, Inc. 1.03 9. Telecom Corp. of New Zealand Ltd. 0.95 10. Grand Metropolitan PLC 0.87 - ---------------------------------------------
*The Fund held a long position in Topix futures on December 31, 1996 which increased Japanese equity exposure from 23.34% to 25.03% and decreased the Fund's exposure to Short-Term Investments from 6.43% to 4.74% ------------------------------------------------------------ 8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ Non-U.S. Equities -- 92.01% AUSTRALIA -- 4.76% Amcor Ltd................................................. 85,700 $ 550,685 Boral Ltd. ............................................... 120,000 341,223 Broken Hill Proprietary Co. Ltd. ......................... 192,270 2,736,679 CRA Ltd. ................................................. 66,210 1,038,640 David Jones Ltd. ......................................... 316,600 440,071 Lend Lease Corp. Ltd. .................................... 21,578 418,192 M.I.M. Holdings Ltd. ..................................... 271,976 380,205 National Australia Bank Ltd. ............................. 110,448 1,298,356 News Corp. Ltd. .......................................... 231,257 1,219,656 News Corp. Ltd. Preferred................................. 60,000 266,878 Pacific Dunlop Ltd. ...................................... 152,700 388,118 Qantas Airways Ltd. ...................................... 203,161 338,871 Santos Ltd................................................ 128,900 522,152 WMC Ltd. ................................................. 100,700 634,274 Westpac Bank Corp. Ltd. .................................. 209,851 1,193,434 Woolworth's Ltd. ......................................... 163,000 392,287 ------------ 12,159,721 ------------ BELGIUM -- 3.18% Delhaize-Le Lion S.A. .................................... 8,100 480,678 Electrabel S.A. .......................................... 6,265 1,481,218 Fortis AG................................................. 5,700 913,378 Fortis AG Strip (b)....................................... 90 45 General de Banque S.A..................................... 1,300 465,536 Groupe Bruxelles Lambert S.A. ............................ 3,530 453,968 Kredietbank NV............................................ 2,410 789,057 Petrofina S.A. ........................................... 3,275 1,041,336 Societe Generale de Belgique.............................. 5,828 456,853 Solvay S.A. Class A....................................... 1,235 755,242 Tractebel................................................. 1,650 767,484 Tractebel Warrants "99" (b)............................... 1,350 19,550 Union Miniere Group S.A. (b).............................. 7,080 479,214 ------------ 8,103,559 ------------ CANADA -- 2.66% Alcan Aluminium Ltd. ..................................... 14,500 489,293 Bank of Montreal.......................................... 13,100 416,723 Barrick Gold Corp. ....................................... 8,800 252,006 BCE, Inc. ................................................ 8,200 390,676 Canadian National Railway Co. ............................ 10,000 380,125 Canadian Pacific Ltd. .................................... 33,100 870,608 Hudson's Bay Co. ......................................... 13,500 225,558 Imperial Oil Ltd. ........................................ 11,900 560,010 Moore Corp. Ltd. ......................................... 13,000 269,371 Noranda, Inc. ............................................ 15,100 336,572 Northern Telecom Ltd. .................................... 5,000 310,813 NOVA Corp. ............................................... 22,700 201,229 Royal Bank of Canada...................................... 15,000 526,412 Seagram Co. Ltd. ......................................... 12,700 502,681 Thomson Corp. ............................................ 32,400 715,088 TransCanada Pipelines Ltd. ............................... 19,700 344,959 ------------ 6,792,124 ------------ FINLAND -- 1.44% Merita Ltd. Class A (b)................................... 127,400 395,275 Nokia Ab Class A.......................................... 30,200 1,748,180
SHARES VALUE ------- ---------- Outokumpu OY Class A........................................ 20,800 $ 354,263 Pohjola Insurance Group Class B............................. 8,100 181,894 Sampo Insurance Co. Ltd. Class A............................ 3,500 275,656 UPM-Kymmene Corp. (b)....................................... 34,000 711,868 ---------- 3,667,136 ---------- FRANCE -- 9.43% Accor S.A. ................................................. 6,395 808,186 Alcatel Alsthom............................................. 8,725 699,517 AXA S.A. ................................................... 3,900 247,562 Banque Nationale de Paris................................... 31,930 1,233,298 CEP Communications.......................................... 2,300 162,146 CEP Communications Warrants "97" (b)........................ 4,400 5,036 Cie Bancaire S.A. .......................................... 7,588 896,192 Cie de Saint Gobain......................................... 10,913 1,540,797 Cie de Suez................................................. 13,844 587,452 Cie Generale des Eaux....................................... 15,864 1,962,135 Colas....................................................... 1,977 285,216 Credit Local de France...................................... 14,550 1,265,047 Elf Aquitaine S.A. ......................................... 15,634 1,420,343 GAN-Groupe des Assurances Nationales (b).................... 880 17,774 Groupe Danone............................................... 2,200 305,961 L'Oreal S.A. ............................................... 400 150,345 Lafarge S.A. ............................................... 7,600 455,091 LVMH........................................................ 6,915 1,927,373 Michelin Class B............................................ 18,350 988,677 Pechiney S.A. Class A (b)................................... 15,993 668,798 Peugeot S.A. ............................................... 15,580 1,750,191 Rhone-Poulenc Class A....................................... 36,500 1,242,012 Sanofi...................................................... 1 99 SEITA....................................................... 12,500 521,765 Societe Generale............................................ 12,640 1,364,003 Total S.A. Class B.......................................... 22,895 1,858,482 UAP-Union des Assurances de Paris........................... 26,884 669,682 Usinor Sacilor.............................................. 71,900 1,044,194 ---------- 24,077,374 ---------- GERMANY -- 7.53% Allianz AG Holding.......................................... 908 1,632,055 BASF AG..................................................... 25,780 986,970 Bayer AG.................................................... 34,990 1,417,900 Bayerische Motoren Werke AG................................. 1,300 895,854 Commerzbank AG.............................................. 27,540 698,731 Daimler-Benz AG (b)......................................... 14,650 1,002,904 Deutsche Bank AG............................................ 26,367 1,228,441 Deutsche Telekom AG (b)..................................... 43,600 908,157 Henkel KGaA-Vorzug AG....................................... 11,550 569,593 Hochtief AG................................................. 7,400 290,507 Hoechst AG.................................................. 11,680 540,383 M.A.N. AG................................................... 1,840 443,553 Mannesmann AG............................................... 2,457 1,055,756 Metro AG.................................................... 7,958 622,243 Muenchener Rueckver AG...................................... 462 1,119,700 Muenchener Rueckver AG Warrants "98" (b).................... 12 2,500 Preussag AG................................................. 2,969 670,438 RWE AG...................................................... 19,000 793,978 Schering AG................................................. 12,192 1,027,669 Siemens AG.................................................. 9,200 426,360 Thyssen AG.................................................. 4,700 832,282
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ GERMANY (CONTINUED) Veba AG................................................. 21,988 $ 1,262,694 Volkswagen AG........................................... 1,900 785,965 ------------ 19,214,633 ------------ HONG KONG -- 1.52% Cheung Kong Holdings Ltd. .............................. 38,000 337,755 China Light & Power Co. Ltd. ........................... 78,000 346,895 Guoco Group Ltd. ....................................... 48,000 268,704 Hang Seng Bank Ltd. .................................... 31,500 382,811 Hong Kong Telecommunications Ltd. ...................... 135,200 217,616 Hutchison Whampoa Ltd. ................................. 85,000 667,591 Jardine Matheson Holdings ADR (c)....................... 31,200 205,920 New World Development Co. Ltd. ......................... 53,000 358,020 Sun Hung Kai Properties Ltd. ........................... 28,000 342,991 Swire Pacific Ltd. Class A ............................. 44,000 419,527 Wharf (Holdings) Ltd. .................................. 68,000 339,345 ------------ 3,887,175 ------------ ITALY -- 2.98% Assicurazioni Generali.................................. 41,250 779,965 Danieli & Co. Savings (Risp)............................ 73,000 304,867 Edison Spa.............................................. 46,000 290,431 Eni Spa................................................. 40,000 204,801 Eni ADR (c)............................................. 22,100 1,140,913 Fiat Spa-Priv........................................... 324,000 533,785 INA-Istituto Nazionale de Assicurazioni................. 136,000 176,742 Istituto Mobilaire Italiano Spa......................... 99,000 846,432 Italgas Spa............................................. 61,000 254,150 La Rinascente........................................... 35,000 202,565 La Rinascente Savings (Risp)............................ 46,000 117,382 La Rinascente Warrants "99" (b)......................... 2,800 1,232 Mediobanca Spa.......................................... 21,000 113,045 Montedison Spa (b)...................................... 1,060,380 721,100 SAI-Savings (Risp)...................................... 47,000 166,764 Telecom Italia Spa...................................... 502,000 977,258 Telecom Italia Mobile Spa............................... 538,000 766,044 ------------ 7,597,476 ------------ JAPAN -- 23.34% Amada Co. Ltd. ......................................... 106,000 821,918 Asahi Glass Co. Ltd. ................................... 125,000 1,173,861 Bank of Tokyo-Mitsubishi Ltd. .......................... 95,000 1,759,714 Canon, Inc.............................................. 90,000 1,985,009 Canon Sales Co., Inc. .................................. 35,200 782,424 Citizen Watch Co. Ltd. ................................. 96,000 686,482 Dai Nippon Printing Co. Ltd. ........................... 95,000 1,661,497 Daiichi Pharmaceutical Co. Ltd.......................... 68,000 1,089,687 Daikin Industries Ltd................................... 104,000 922,891 Daiwa House Industry Co. Ltd............................ 52,000 667,528 Fanuc................................................... 42,100 1,345,662 Fujitsu................................................. 61,000 567,589 Hitachi Ltd............................................. 204,000 1,898,165 Honda Motor Co.......................................... 27,000 769,966 Inax.................................................... 132,000 975,756 Isetan.................................................. 36,000 465,237 Ito-Yokado Co. Ltd...................................... 38,000 1,650,039 Kaneka Corp............................................. 52,000 265,667 Keio Teito Electric Railway............................. 118,000 575,411
SHARES VALUE ------- ------------ Kinki Nippon Railway...................................... 119,000 $ 741,251 Kirin Brewery Co. Ltd..................................... 113,000 1,109,848 Kokuyo.................................................... 22,000 542,087 Kuraray Co. Ltd........................................... 92,000 848,109 Kyocera Corp. ............................................ 9,000 559,835 Maeda Road Construction................................... 24,000 277,074 Matsushita Electric Industrial Co. ....................... 165,000 2,686,741 Mitsubishi Paper Mills.................................... 129,000 503,463 NGK Insulators............................................ 169,000 1,601,620 Nintendo Corp. Ltd........................................ 9,500 678,513 Nippon Denso Co. Ltd...................................... 71,000 1,706,643 Nippon Meat Packers, Inc.................................. 67,000 865,857 Nippon Steel Co........................................... 83,000 244,559 Okumura................................................... 109,000 661,118 Orix Corp................................................. 2,000 83,053 Osaka Gas Co.............................................. 426,000 1,163,453 Sankyo Co. Ltd. .......................................... 76,000 2,147,670 Sanwa Bank Ltd. .......................................... 51,000 694,236 Secom..................................................... 24,000 1,449,470 Seino Transportation ..................................... 37,000 408,030 Sekisui House Ltd. ....................................... 200,000 2,033,256 Shinmaywa Industries Ltd. ................................ 96,000 705,505 Sony Corp................................................. 31,600 2,066,374 Sumitomo Bank............................................. 110,000 1,582,666 Sumitomo Electric Industries.............................. 85,000 1,186,353 Takeda Chemical Industries................................ 77,000 1,612,044 TDK Corp.................................................. 19,000 1,235,892 Tokio Marine & Fire Insurance Co.......................... 94,000 882,743 Tokyo Electric Power...................................... 45,500 995,692 Tokyo Steel Mfg........................................... 76,700 1,090,333 Tonen Corp................................................ 75,000 872,319 Toray Industries, Inc..................................... 425,000 2,618,032 Toshiba Corp.............................................. 243,000 1,524,115 Toyo Suisan Kaisha........................................ 57,000 569,656 Toyota Motor Corp......................................... 27,000 774,619 Yamazaki Baking Co. Ltd. ................................. 50,000 796,933 ------------ 59,583,665 ------------ MALAYSIA -- 1.25% Hume Industries (Malaysia) Bhd............................ 48,000 302,198 Kuala Lumpur Kepong Bhd................................... 109,000 276,222 Land & General Holdings Bhd............................... 108,500 259,919 Malayan Banking Bhd....................................... 21,000 232,825 Malaysia International Shipping Bhd (Frgn.)............... 63,000 187,092 Nestle (Malaysia) Bhd..................................... 9,000 72,342 Public Bank Bhd (Frgn.)................................... 102,000 216,076 Resorts World Bhd......................................... 39,000 177,589 Sime Darby Bhd............................................ 101,000 397,921 Telekom Malaysia Bhd...................................... 34,000 302,910 Tenaga Nasional Bhd....................................... 120,000 574,936 YTL Corp. Bhd............................................. 34,000 183,092 ------------ 3,183,122 ------------
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ NETHERLANDS -- 5.99% ABN AMRO Holdings NV.................................... 19,560 $ 1,271,055 Akzo Nobel NV........................................... 2,500 341,100 DSM NV.................................................. 4,850 477,794 Hoogovens NV............................................ 7,100 295,542 ING Groep NV............................................ 52,834 1,899,910 KLM Royal Dutch Air Lines NV............................ 11,400 320,310 KPN NV.................................................. 33,797 1,287,635 Philips Electronics NV.................................. 16,700 675,840 Royal Dutch Petroleum Co................................ 25,230 4,418,204 Royal Dutch Petroleum Co. NY Shares (c)................. 5,200 887,900 Unilever NV............................................. 11,440 2,021,197 Vendex International NV................................. 19,450 830,985 VNU-Ver Ned Uitgevers................................... 27,100 565,595 ------------ 15,293,067 ------------ NEW ZEALAND -- 3.04% Brierley Investments Ltd................................ 1,395,600 1,291,766 Carter Holt Harvey Ltd.................................. 481,600 1,092,303 Fletcher Challenge Building............................. 156,550 481,165 Fletcher Challenge Energy............................... 156,550 453,512 Fletcher Challenge Forest Ltd........................... 317,445 531,580 Fletcher Challenge Paper................................ 313,100 643,765 Telecom Corp. of New Zealand Ltd........................ 474,200 2,419,079 Telecom Corp. of New Zealand Ltd. ADS (c)............... 10,500 850,500 ------------ 7,763,670 ------------ SPAIN -- 3.50% Acerinox S.A. .......................................... 2,500 360,561 Banco Bilbao-Vizcaya S. A............................... 12,500 673,650 Banco Central Hispanoamericano.......................... 11,430 293,054 Banco Intercontinental Espanol S.A...................... 2,091 323,597 Banco Popular Espanol S.A............................... 2,880 564,597 Banco Santander S.A..................................... 11,500 734,692 Cia Sevillana de Electricidad........................... 20,403 231,362 Empresa Nacional de Electridad S.A...................... 15,200 1,079,746 Fomento de Construcciones y Contratas S.A............... 4,300 400,000 Gas Natural SDG S.A. ................................... 1,500 348,261 Iberdrola S.A........................................... 80,600 1,140,142 Mapfre Corp. ........................................... 5,800 352,704 Repsol S.A.............................................. 6,200 237,371 Repsol S.A. ADR (c)..................................... 15,500 590,937 Telefonica de Espana.................................... 52,700 1,221,530 Vallehermosa S.A........................................ 7,700 166,638 Viscofan Envolturas Celulosicas S.A..................... 15,300 223,487 ------------ 8,942,329 ------------ SWITZERLAND -- 1.79% ABB AG (Bearer)......................................... 210 260,408 CS Holdings AG (Reg.)................................... 2,678 274,242 Nestle S.A. (Reg.)...................................... 1,251 1,338,860 Novartis AG (Reg.)...................................... 957 1,092,635 Roche Holding AG (Gen.)................................. 99 767,919 Schweiz Bankgesellschaft (Bearer)....................... 270 235,875
SHARES VALUE ------- ------------ Societe Generale de Surveillance Holding S.A. (Bearer)..... 75 $ 183,772 Zurich Versicherungs (Reg.)................................ 1,491 413,087 ------------ 4,566,798 ------------ UNITED KINGDOM -- 19.60% Abbey National PLC......................................... 63,000 824,833 Bank of Scotland........................................... 104,000 549,101 Bass PLC................................................... 39,500 555,015 B.A.T. Industries PLC...................................... 222,000 1,840,818 Booker PLC................................................. 50,500 345,281 British Energy PLC......................................... 479,000 1,205,083 British Gas PLC............................................ 451,300 1,733,987 British Petroleum Co. PLC.................................. 223,252 2,676,502 British Steel PLC.......................................... 379,000 1,041,066 British Telecommunications PLC............................. 428,200 2,891,065 Charter PLC................................................ 57,171 724,544 Coats Viyella PLC.......................................... 261,100 594,323 FKI PLC.................................................... 213,625 738,529 General Electric Co. PLC................................... 436,700 2,855,030 Glaxo Wellcome PLC......................................... 67,500 1,095,157 Grand Metropolitan PLC..................................... 282,700 2,220,765 Guinness PLC............................................... 224,200 1,755,460 Hanson PLC................................................. 451,500 629,766 Hillsdown Holdings PLC..................................... 321,900 1,101,831 House of Fraser PLC........................................ 360,800 947,849 HSBC Holdings PLC.......................................... 72,000 1,609,310 Imperial Chemical Industries PLC........................... 24,000 315,660 Legal & General Group PLC.................................. 159,000 1,012,288 Lloyds TSB Group PLC....................................... 370,185 2,727,446 Marks & Spencer PLC........................................ 184,900 1,553,755 Millennium Chemicals, Inc. (b)............................. 3,707 65,799 Mirror Group PLC........................................... 153,600 566,504 National Power PLC......................................... 106,500 891,297 National Westminster Bank PLC.............................. 64,500 756,713 Northern Foods PLC......................................... 144,000 503,988 Peninsular & Oriental Steam Navigation Co.................. 177,700 1,794,335 Reckitt & Colman PLC....................................... 34,746 430,534 Redland PLC................................................ 57,600 361,294 RJB Mining PLC............................................. 131,000 964,060 Royal & Sun Alliance Insurance Group PLC................... 106,149 807,517 RTZ Corp. PLC.............................................. 70,800 1,134,763 Sainsbury (J.) PLC......................................... 147,000 976,142 Scottish Hydro-Electric PLC................................ 116,800 655,663 Sears PLC.................................................. 437,700 711,646 Sedgwick Group PLC......................................... 294,000 661,664 SmithKline Beecham PLC..................................... 84,800 1,174,835 Smurfit (Jefferson) Group PLC.............................. 156,000 463,221 Tesco PLC.................................................. 126,900 769,913 Thames Water PLC........................................... 84,600 886,830 Unilever PLC............................................... 40,200 974,556 Vodafone Group PLC......................................... 118,500 499,919 Yorkshire Water PLC........................................ 36,000 436,522 ------------ 50,032,179 ------------ Total Non-U.S. Equities (Cost $215,959,551)....................................... 234,864,028 ------------
- -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ------------ Short-Term Investments -- 6.43% COMMERCIAL PAPER -- 6.43% Burlington Northern Santa Fe 5.650%, due 01/17/97................................ $ 1,500,000 $ 1,496,233 Case Credit Corp. 5.510%, due 01/07/97................................ 1,000,000 999,082 Cincinnati Bell, Inc. 7.250%, due 01/02/97................................ 3,032,000 3,031,389 Crown Cork & Seal Co., Inc. 5.520%, due 01/10/97................................ 2,000,000 1,997,240 5.580%, due 01/29/97................................ 1,000,000 995,660 5.580%, due 01/31/97................................ 1,000,000 995,350 CSX Corp. 5.520%, due 01/15/97....................... 1,500,000 1,496,780 Rite Aid Corp. 5.650%, due 01/06/97................................ 1,500,000 1,498,823 5.600%, due 01/21/97................................ 1,000,000 996,889 Tyson Foods, Inc. 5.750%, due 01/09/97................................ 900,000 898,850 Vastar Resources, Inc. 6.020%, due 01/02/97................................ 1,000,000 999,833 Whirlpool Financial Corp. 6.000%, due 01/03/97................................ 1,000,000 999,667 ------------ Total Short-Term Investments (Cost $16,405,796).................................. 16,405,796 ------------ Total Investments (Cost $232,365,347) -- 98.44% (a)................... 251,269,824 ------------ Cash and other assets, less liabilities -- 1.56%........................... 3,994,983 ------------ Net Assets -- 100%................................... $255,264,807 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1996 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $232,365,347; net unrealized appreciation consisted of: Gross unrealized appreciation............................... $ 31,057,745 Gross unrealized depreciation............................... (12,153,268) ------------ Net unrealized appreciation............................... $ 18,904,477 ============
(b) Non-income producing security (c) Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Non-U.S. Equity Fund had the following open forward foreign currency contracts as of December 31, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------ ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar......... 02/20/97 3,200,000 $ 2,342,279 $ (60,845) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 02/20/97 5,750,000 4,564,330 (122,570) Belgian Franc........... 02/20/97 135,000,000 4,264,267 202,899 British Pound........... 02/20/97 2,150,000 3,675,500 (363,834) Dutch Guilder........... 02/20/97 23,500,000 13,629,905 584,762 French Franc............ 02/20/97 113,000,000 21,799,221 576,855 German Mark............. 02/20/97 16,400,000 10,675,842 439,372 Hong Kong Dollars....... 02/20/97 17,600,000 2,275,681 (6) Japanese Yen............ 02/20/97 505,000,000 4,381,039 294,604 Spanish Peseta.......... 02/20/97 420,000,000 3,224,988 72,233 Swiss Franc............. 02/20/97 5,700,000 4,266,553 387,268 ---------- Total................. $2,010,738 ========== FUTURES CONTRACTS (NOTE 5) The Non-U.S. Equity Fund had the following open index futures contracts as of December 31, 1996: SETTLEMENT CURRENT UNREALIZED DATE COST VALUE LOSS ---------- ------------ ----------- ---------- INDEX FUTURES BUY CON- TRACTS Topix, 34 contracts..... March 1997 $ 4,484,708 $ 4,311,881 $ (172,827) ==========
The segregated cash pledged to cover margin requirements for the open positions at December 31, 1996 was $1,068,007. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 (UNAUDITED) ASSETS: Investments, at value (Cost $232,365,347) (Note 1)............... $251,269,824 Cash............................................................. 6,576,841 Foreign currency, at value (Cost $796,042)....................... 805,150 Receivables: Investment securities sold...................................... 528,733 Dividends....................................................... 640,537 Fund shares sold................................................ 120,851 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 2,010,738 Other assets..................................................... 50,759 ------------ TOTAL ASSETS.................................................. 262,003,433 ------------ LIABILITIES: Payables: Investment securities purchased................................. 5,090,839 Fund shares redeemed............................................ 1,093,192 Variation margin (Note 5)....................................... 172,827 Investment advisory fees (Note 2)............................... 160,210 Accrued expenses................................................ 221,558 ------------ TOTAL LIABILITIES............................................. 6,738,626 ------------ NET ASSETS........................................................ $255,264,807 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $233,253,507 Accumulated undistributed net investment income.................. 199,582 Accumulated net realized gain.................................... 1,042,476 Net unrealized appreciation...................................... 20,769,242 ------------ NET ASSETS.................................................... $255,264,807 ============ OFFERING PRICE PER SHARE: Brinson Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $253,355,869 and 22,855,725 shares is- sued and outstanding) (Note 7)................................. $ 11.09 ============ SwissKey Fund Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,908,938 and 173,185 shares issued and outstanding) (Note 7)...................................... $ 11.02 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $295,617 for foreign taxes withheld)........... $ 2,331,420 Interest......................................................... 507,549 ----------- TOTAL INCOME.................................................. 2,838,969 ----------- EXPENSES: Advisory (Note 2)................................................ 933,582 Administration................................................... 72,871 Accounting....................................................... 70,594 Custodian........................................................ 45,674 Distribution (Note 6)............................................ 6,504 Other............................................................ 147,475 ----------- TOTAL EXPENSES................................................ 1,276,700 Expenses deferred by Advisor (Note 2)......................... (103,191) ----------- NET EXPENSES.................................................. 1,173,509 ----------- NET INVESTMENT INCOME ........................................ 1,665,460 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 5,365,490 Futures contracts............................................... (541,034) Foreign currency transactions................................... 878,088 ----------- Net realized gain............................................. 5,702,544 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ............................... 5,665,728 Futures contracts .............................................. (192,976) Forward contracts............................................... (54,807) Translation of other assets and liabilities denominated in for- eign currency.................................................. 15,312 ----------- Change in net unrealized appreciation or depreciation......... 5,433,257 ----------- Net realized and unrealized gain.................................. 11,135,801 ----------- Net increase in net assets resulting from operations.............. $12,801,261 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1996 ENDED (UNAUDITED) JUNE 30, 1996 ----------------- ------------- OPERATIONS: Net investment income......................... $ 1,665,460 $ 3,265,964 Net realized gain............................. 5,702,544 22,260,813 Change in net unrealized appreciation or de- preciation .................................. 5,433,257 10,918,989 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 12,801,261 36,445,766 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Fund Class........................... (2,168,905) (3,057,609) SwissKey Fund Class.......................... (10,222) (8,629) Distributions from net realized gain: Brinson Fund Class........................... (12,209,010) (8,632,717) SwissKey Fund Class.......................... (94,152) (14,731) ------------ ------------ Total distributions to shareholders.......... (14,482,289) (11,713,686) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 49,366,958 86,752,018 Shares issued on reinvestment of distribu- tions........................................ 14,118,771 10,473,903 Shares redeemed............................... (20,168,223) (56,648,208) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 7)............. 43,317,506 40,577,713 ------------ ------------ TOTAL INCREASE IN NET ASSETS................ 41,636,478 65,309,793 ------------ ------------ NET ASSETS: Beginning of period........................... 213,628,329 148,318,536 ------------ ------------ End of period (including accumulated undis- tributed net investment income of $199,582 and $785,599, respectively).................. $255,264,807 $213,628,329 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED DECEMBER 31, YEAR YEAR AUGUST 31, 1993* 1996 ENDED ENDED THROUGH BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 11.17 $ 9.68 $ 9.69 $ 10.00 -------- -------- -------- ------- Income from investment operations: Net investment income. 0.07 0.18 0.15 0.10 Net realized and unrealized gain (loss)............... 0.51 2.05 (0.16) (0.34) -------- -------- -------- ------- Total income (loss) from investment operations......... 0.58 2.23 (0.01) (0.24) -------- -------- -------- ------- Less distributions: Distributions from net investment income.... (0.10) (0.18) -- (0.07) Distributions from net realized gain........ (0.56) (0.56) -- -- -------- -------- -------- ------- Total distributions. (0.66) (0.74) -- (0.07) -------- -------- -------- ------- Net asset value, end of period................. $ 11.09 $ 11.17 $ 9.68 $ 9.69 ======== ======== ======== ======= Total return (non- annualized)............ 5.37% 23.64% (0.10%) (2.45%) Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $253,356 $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.08%** 1.20% 1.23% 1.60%** After expense reim- bursement............ 1.00%** 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 1.35%** 1.67% 1.93% 1.28%** After expense reim- bursement............ 1.43%** 1.87% 2.16% 1.88%** Portfolio turnover rate.................. 12% 20% 14% 12% Average commission rate paid per share........ $ 0.0224 $ 0.0219 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED JULY 31, 1995* DECEMBER 31, 1996 THROUGH SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.12 $ 10.26 ------- ------- Income from investment operations: Net investment income....................... 0.02 0.12 Net realized and unrealized gain............ 0.50 1.45 ------- ------- Total income from investment operations... 0.52 1.57 ------- ------- Less distributions: Distributions from net investment income.... (0.06) (0.15) Distributions from net realized gain........ (0.56) (0.56) ------- ------- Total distributions....................... (0.62) (0.71) ------- ------- Net asset value, end of period................ $ 11.02 $ 11.12 ======= ======= Total return (non-annualized)................. 4.85% 15.78% Ratios/Supplemental data Net assets, end of period (in 000s).......... $ 1,909 $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement................ 1.92%** 2.04%** After expense reimbursement................. 1.84%** 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement................ 0.51%** 0.83%** After expense reimbursement................. 0.59%** 1.03%** Portfolio turnover rate...................... 12% 20% Average commission rate paid per share....... $0.0224 $0.0219
* Commencement of SwissKey Fund Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 NON-U.S. EQUITY FUND -- 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 seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. The Fund has two classes of shares outstanding, Brinson Fund Class and SwissKey Fund Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share of the Fund represents an identical interest in the investments of the Fund and has the same rights. The following is a summary of significant accounting policies consistently followed by the Non-U.S. Equity Fund (the "Fund") in the preparation of its 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. 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 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 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, income receipts and expense accruals are translated at the prevailing exchange rate on 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 statement 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 amortization of premiums and 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 Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1996, therefore, no federal income tax provision was required. F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its 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 generally accepted accounting principles. 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 the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Fund Class shares will not incur any of the distribution expenses of the SwissKey Fund Class. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles 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. - -------------------------------------------------------------------------------- 19 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00% and 1.84% of the average daily net assets of the Brinson Fund Class and SwissKey Fund Class, respectively. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1996, were as follows:
ADVISORY ADVISORY FEES FEE FEES DEFERRED -------- -------- -------- Non-U.S. Equity Fund................................. 0.80% $933,582 $103,191
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees' fees paid to unaffiliated trustees were $3,496. 3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ----------- ----------- Non-U.S. Equity Fund.................................... $54,054,840 $24,504,265
4.FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages 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 the 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 Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the six months ended December 31, 1996, was the Fund's custodian. 5.FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund 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 Fund enters into such contracts to hedge a portion of its portfolio. 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 Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, 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 Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Fund Class of shares. Annual fees under the Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the SwissKey Fund Class. - -------------------------------------------------------------------------------- 20 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
SIX MONTHS ENDED DECEMBER 31, 1996 PERIOD ENDED (UNAUDITED) JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Fund Class............ 4,323,938 $48,513,082 8,044,119 $85,398,213 SwissKey Fund Class........... 77,339 853,876 125,829 1,353,805 --------- ----------- --------- ----------- Total Sales................ 4,401,277 $49,366,958 8,169,948 $86,752,018 ========= =========== ========= =========== Dividend Reinvestment: Brinson Fund Class............ 1,296,079 $14,049,499 998,992 $10,452,496 SwissKey Fund Class........... 6,426 69,272 2,042 21,407 --------- ----------- --------- ----------- Total Dividend Reinvest- ment...................... 1,302,505 $14,118,771 1,001,034 $10,473,903 ========= =========== ========= =========== Redemptions: Brinson Fund Class............ 1,774,371 $19,898,922 5,347,882 $56,492,091 SwissKey Fund Class........... 24,099 269,301 14,352 156,117 --------- ----------- --------- ----------- Total Redemptions.......... 1,798,470 $20,168,223 5,362,234 $56,648,208 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 21 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- LOGO 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY . http://networth.galt.com.swisskey -----END PRIVACY-ENHANCED MESSAGE-----