-----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, LCKyuYGjoKc8k4tK01wNQyHh8qh/rqx7Y3FOJzkYDQaYj43a5faIw8+eqZMkdh/t uYjOd0oo0g1x+bBMqfORTA== 0000950131-97-005488.txt : 19970912 0000950131-97-005488.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950131-97-005488 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970910 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: SEC FILE NUMBER: 811-06637 FILM NUMBER: 97677921 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 ANNUAL REPORTS ------------------------- The Brinson Funds Brinson Global Fund Brinson Global Equity Fund Brinson Global Bond Fund Annual Report June 30, 1997 [LOGO OF THE BRINSON FUNDS] Global Institutional Asset Management ------------------------- Trustees and Officers - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Debra L. Nichols Chairman of the Board Secretary E. Thomas McFarlan Carolyn M. Burke, CPA President Treasurer Thomas J. Digenan, CFA, CPA Catherine E. Macrae Vice President Assistant Secretary - -------------------------------------------------------------------------------- 1 The Funds' Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Brinson Partners is the global institutional asset management division of Swiss Bank Corporation. Brinson Partners continues as the name used within North America, while SBC Brinson is the name used outside North America. We are a global investment management organization with over $75 billion in institutional assets under discretionary active management. We are also the investment manager for SBC Private Banking mutual fund assets which total $50 billion. In addition, we act as an investment advisor to SBC Private Banking. The division manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other 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. 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 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 OF THE BRINSON FUNDS] Shareholder Letter.................................................... 4 Global Economic and Market Highlights................................. 6 Global Fund........................................................... 7 Schedule of Investments............................................ 11 Financial Statements............................................... 19 Financial Highlights............................................... 22 Global Equity Fund.................................................... 24 Schedule of Investments............................................ 28 Financial Statements............................................... 34 Financial Highlights............................................... 37 Global Bond Fund...................................................... 39 Schedule of Investments............................................ 42 Financial Statements............................................... 45 Financial Highlights............................................... 48 The Brinson Funds--Notes to Financial Statements...................... 50 Report of Independent Auditors........................................ 54 - -------------------------------------------------------------------------------- 3 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] August 20, 1997 Dear Shareholder: We are very pleased to present the Annual Report for The Brinson Funds for the fiscal year ended June 30, 1997. The Brinson Funds consist of seven funds divided into three distinct classifications: Global Funds, International Funds and Domestic Funds. Within this Report, we'll focus on current global economic outlook as well as our current strategies and performance updates for our three Global Funds. Before we begin the review of the global funds, I would like to discuss a few improvements and achievements we have accomplished or put into place during the last fiscal year. As you may know, Brinson Partners, Inc. is an established, U.S.-based leader in the investment management business, managing portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. Our portfolio management capabilities are accessed through separately managed portfolios, collective funds and, of course, The Brinson Mutual Funds. Brinson Partners, Inc. has been in place over 16 years under the same investment philosophy and senior management. International and global activities originated in the mid-1970s. We've historically managed our portfolios out of our headquarters in Chicago with offices in Tokyo and London. We have since expanded our investment analysis and trading capabilities to include Basel, Frankfurt, Paris, Singapore and Sydney. Our investment management team encompasses over 255 portfolio management and research personnel in 8 locations worldwide. We feel that this additional worldwide investment management expertise will provide additional investment performance opportunities for our clients. We're also happy to say that the Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund have all received 5-star ratings from Morningstar in their respective classifications for the period ending June 30, 1997. The Brinson Global Fund, the Brinson Global Equity Fund and the Brinson Global Bond Fund are all actively managed funds that provide integrated asset management across and within security markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. This philosophy offers the greatest potential for achieving enhanced, long-term returns while controlling risk. Brinson Global Fund Since its performance inception on August 31, 1992, the Brinson Global Fund has produced an annualized total return of 12.10%, compared to the return of 13.82% of its benchmark, the GSMI Mutual Fund Index. The Brinson Global Fund achieved this performance with a volatility of 4.89%, well below the benchmark volatility of 6.29%. For the first half of 1997, the Brinson Global Fund returned 8.87%. - -------------------------------------------------------------------------------- 4 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Brinson Global Equity Fund The Brinson Global Equity Fund has provided an annualized return of 13.49% since its performance inception on January 31, 1994. This is compared to a 14.31% return for the benchmark, the MSCI World Equity (Free) Index. This performance was achieved with volatility of 7.79%, well below the 9.14% volatility of the benchmark. For the first half of 1997, the Brinson Global Equity Fund returned 12.62%. Brinson Global Bond Fund The Brinson Global Bond Fund has provided an annualized return of 7.48% since its performance inception on July 31, 1993. Over the same period, the return of the Fund's benchmark, the Salomon World Government Bond Index, was 6.91%. This performance was achieved with volatility of 4.21%, below the 5.41% volatility of the benchmark. For the first half of 1997, the Brinson Global Bond Fund returned 0.63%. Each of our Funds employ the same value-oriented investment philosophy applied across the global spectrum. Each Fund also uses the resources of the entire worldwide research team. All of our analysts apply the same value philosophy to their work. 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 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 talent and flexibility to customize portfolios to meet unique requirements. The Reports that follow highlight the investment characteristics in the respective Funds. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /s/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. - -------------------------------------------------------------------------------- 5 Global Economic and Market Highlights - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Fiscal restraint in continental Europe, caused by the drive to monetary union (EMU), has amplified the economic slowdown, resulting in persistently high unemployment. These economies are hindered by more structurally rigid labor markets than in the U.S. and Asia. As yet, governments seem unwilling to take hard measures necessary to free up wages and encourage labor mobility and flexibility. Apart from some temporary yen strengthening in the second quarter, a weaker currency has aided the Japanese economy. Export-oriented industries in particular have recovered significantly from the prolonged recession brought on by the bursting of the "bubble" at the start of the 1990s. The hike in the consumption tax from 3% to 5% at the start of April had caused a spurt in spending in the first quarter. However, now that it is in place, there has been some softening in demand, particularly for big ticket items, which is likely to adversely affect domestically-oriented firms. The currency turmoil in Southeast Asia is drawing attention to some of the weaknesses of those economies. In Thailand, which was the initial casualty, the crisis was precipitated by a bad bank loan problem. These problems in the banking system prevented the central bank from increasing rates sufficiently to maintain the peg to a strengthening U.S. dollar. Global Environment
6 months 1 year 3 years Annualized Major Markets ended ended ended 8/31/92* Total Return in U.S. Dollars 6/30/97 6/30/97 6/30/97 to 6/30/97 - ------------------------------------------------------------------------------ U.S. Equity 17.65% 29.32% 26.74% 19.33% Non-U.S. Equities (currency unhedged) 11.21 13.64 9.79 12.71 Non-U.S. Equities (currency hedged) 17.76 22.77 14.62 14.94 U.S. Bonds 3.06 8.15 8.52 6.76 Non-U.S. Bonds (currency unhedged) -3.12 2.16 7.22 7.01 Non-U.S. Bonds (currency hedged) 4.67 13.02 11.97 9.76 U.S. Cash Equivalents 2.52 5.14 5.17 4.35 - ------------------------------------------------------------------------------
6 months 1 year 3 years Annualized Major Currencies ended ended ended 8/31/92* Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97 to 6/30/97 - -------------------------------------------------------------------------------- Yen 1.43% -4.15% -4.83% 1.55% Pound -2.75 7.11 2.54 -3.55 Deutschemark -11.56 -12.65 -2.98 -4.33 Canadian Dollar -0.65 -1.01 0.05 -2.90 - -------------------------------------------------------------------------------- *Inception date of the Brinson Global Fund
Global Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] 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 12.10% since its inception on August 31, 1992. This compares with the corresponding 13.82% return of its benchmark, the GSMI Mutual Fund Index. Fund performance over this period was achieved with an annualized volatility of 4.89%, well below the benchmark volatility of 6.29%. For the year ended June 30, 1997, the Fund returned 18.79%, while the benchmark returned 18.00%. For the first half of 1997, the Brinson Global Fund returned 8.87% compared to the 10.69% return of the benchmark. A substantial positive contribution to performance came from the active overweight of the U.S. dollar relative to the yen, deutschemark and DM-related currencies. These currencies moved from a substantially overvalued status to levels that were closer to our long-term equilibriums. The Fund's market strategy centers on reducing the risk of exposure to the overpriced equity markets; the relatively attractive bond markets are the primary overweights. Consequently, market allocation made a substantial negative contribution to Fund performance. Numerous equity markets provided double-digit returns in dollar-hedged terms. Bond markets, especially outside the U.S., provided positive returns. However, bond markets rallies failed to match the torrid pace of world equity markets. The strategy for emerging markets equities is neutral to the normal policy exposure of 3.0%. The emerging markets debt strategy mirrors the developed bond market overweight, with a 3.0% exposure relative to the 2.0% normal policy. A small underweight is carried in the U.S. high yield bond market. Global Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Total Return
6 months 1 year 3 years 8/31/92* ended ended ended to 6/30/97 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------- Brinson Global Fund 8.87% 18.79% 15.87% 12.10% GSMI Mutual Fund Index (currency unhedged)** 10.69 18.00 17.08 13.82 GSMI Mutual Fund Index (currency hedged)** 12.82 21.04 18.61 14.56 - --------------------------------------------------------------------
* 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. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Fund and the GSMI Mutual Fund Index (currency unhedged and hedged) if you had invested $1,000,000 on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through June 30, 1997. 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 GSMI Mutual Index Global Fund (currency unhedged) (currency hedged) - --------------------------------------------------------------- 8/31/92 $1,000,000 $1,000,000 $1,000,000 12/31/92 $1,032,925 $1,030,818 $1,056,148 6/30/93 $1,107,567 $1,119,367 $1,128,641 12/31/93 $1,148,054 $1,179,875 $1,197,875 6/30/94 $1,116,140 $1,164,880 $1,155,979 12/31/94 $1,126,372 $1,196,684 $1,186,936 6/30/95 $1,256,423 $1,364,746 $1,323,275 12/31/95 $1,398,239 $1,500,881 $1,487,721 6/30/96 $1,462,269 $1,584,244 $1,593,741 12/31/96 $1,595,424 $1,688,876 $1,709,915 6/30/97 $1,736,975 $1,869,379 $1,929,059
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. - -------------------------------------------------------------------------------- 8 Global Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Asset Allocation As of June 30, 1997
Current Benchmark Strategy - ------------------------------------------------------------- U.S. Equity 40.0% 23.0% Non-U.S. Equities 22.0 17.0 Japan Equities 6.5 4.0 Other Equities 15.5 13.0 Emerging Markets Equities 3.0 3.0 Dollar Bonds 21.0 33.5 U.S. Bonds 19.0 29.5 International $ Bonds 2.0 4.0 High Yield Bonds 3.0 2.5 Non-U.S. Bonds 9.0 18.0 Japan Bonds 2.7 0.0 Other Bonds 6.3 18.0 Emerging Markets Debt 2.0 3.0 Cash Equivalents 0.0 0.0 - ------------------------------------------------------------- 100.0% 100.0%
Currency Allocation As of June 30, 1997
Current Benchmark Strategy - ------------------------------------------------------------- U.S. 66.0% 69.5% Japan 9.6 9.6 U.K. 4.7 1.4 Continental Europe 13.0 13.0 Canada 1.4 1.4 Emerging Markets 3.0 3.0 Other 2.3 2.1 - ------------------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of June 30, 1997
Percent of Net Assets - ------------------------------------------------------------- 1. Xerox Corp. 1.36% 2. Chase Manhattan Corp. 1.17 3. Lockheed Martin Corp. 1.08 4 Philip Morris Companies, Inc. 1.07 5. Aon Corp. 0.89 6 CIGNA Corp. 0.88 7. Goodyear Tire & Rubber Co. 0.80 8 Burlington Northern Santa Fe 0.80 9. Federal Express Corp. 0.74 10. Citicorp 0.73 - -------------------------------------------------------------
Top Ten Non-U.S. Equity Holdings As of June 30, 1997
Percent of Net Assets - ------------------------------------------------------------- 1. Telecom Corp. of New Zealand Ltd. 0.24% 2. Glaxo Wellcome PLC 0.23 3. Royal Dutch Petroleum Co. 0.23 4. General Electric Co. PLC 0.20 5. Matsushita Electric Industrial Co. 0.19 6. British Telecommunications PLC 0.19 7. Toray Industries, Inc. 0.19 8. Lloyds TSB Group PLC 0.18 9. Broken Hill Proprietary Co. Ltd. 0.18 10. British Petroleum Co. PLC 0.17 - -------------------------------------------------------------
9 Global Fund - ----------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Industry Diversification As a Percent of Net Assets As of June 30, 1997 - -----------------------------------------------------------------------------
U.S. EQUITIES Basic Industries Chemicals............................. 0.59% Housing/Paper........................ 1.20 Metals............................... 0.16 ------ 1.95 Capital Investment Capital Goods........................ 1.99 Technology........................... 2.68 ------ 4.67 Consumer Autos/Durables....................... 0.83 Discretionary........................ 1.24 Health: Drugs........................ 1.94 Health: Non-Drugs.................... 0.96 Non-Durables......................... 2.66 Retail/Apparel....................... 1.16 ------ 8.79 Energy................................. 1.14 Financial Banks................................ 1.97 Non-Banks............................ 2.06 ------ 4.03 Post Venture........................... 1.18 Transportation......................... 1.51 Utilities.............................. 1.65 Services/Miscellaneous................. 2.18 ------ Total U.S. Equities.................. 27.10* ------ NON-U.S. EQUITIES Aerospace & Military................... 0.03% Airlines............................... 0.11 Appliances & Household Durables........ 0.42 Automobiles............................ 0.46 Banking................................ 2.11 Beverages & Tobacco.................... 0.31 Broadcasting & Publishing.............. 0.27 Building Materials..................... 0.32 Business & Public Service.............. 0.70 Chemicals.............................. 0.72 Construction........................... 0.28 Data Processing........................ 0.19 Electric Components.................... 0.25 Electronics............................ 0.73 Energy................................. 1.28 Financial Services..................... 0.24 Food & House Products.................. 0.66 Forest Products........................ 0.37 Gold Mining............................ 0.02 Health & Personal Care................. 0.97 Industrial Components.................. 0.34 Insurance.............................. 0.85 Leisure & Tourism...................... 0.11 Machinery & Engineering................ 0.18 Merchandising.......................... 0.75 Metals--Steel.......................... 0.35 Miscellaneous Materials................ 0.12 Multi-Industry......................... 0.88 Non-Ferrous Metals..................... 0.40 Real Estate............................ 0.16 Recreation............................. 0.15 Shipping............................... 0.09 Telecommunications..................... 1.09 Textiles and Apparel................... 0.04 Transportation......................... 0.16 Utilities.............................. 0.86 Wholesale & International Trade........ 0.05 ------ Total Non-U.S. Equities.............. 17.02 ------ EMERGING MARKETS EQUITIES.............. 2.71 ------ U.S. BONDS Corporate Bonds Asset-Backed......................... 0.80 CMO.................................. 0.75 Consumer............................. 0.82 Financial............................ 1.64 Industrial........................... 0.61 Telecommunications................... 0.02 Transportation....................... 0.31 ------ 4.95 U.S. Government Agencies............... 7.31 U.S. Government Obligations............ 10.83 International Dollar Bonds............. 3.57 ------ Total U.S. Bonds..................... 26.66* ------ HIGH YIELD BONDS....................... 2.18 ------ NON-U.S. BONDS Foreign Government Bonds............... 17.22 ------ EMERGING MARKETS DEBT.................. 3.32 ------ SHORT-TERM INVESTMENTS................. 4.37* ------ TOTAL INVESTMENTS.................... 100.58 LIABILITIES, LESS CASH AND OTHER ASSETS............................ (0.58) ------ NET ASSETS...................... 100.00% ======
- -------------------------------------------------------------------------------- * The Fund held a long position in U.S. Treasury futures on June 30, 1997 which increased U.S. bond exposure from 26.66% to 31.76%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 27.10% to 22.38%. These adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 4.37% to 3.99%. - -------------------------------------------------------------------------------- 10 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------ Equities -- 46.83% U.S. EQUITIES -- 27.10% Aetna Life & Casualty Co............................. 20,800 $ 2,129,400 Allergan, Inc........................................ 53,800 1,711,512 Alza Corp. (b)....................................... 52,500 1,522,500 Aon Corp............................................. 105,499 5,459,547 Automatic Data Processing, Inc....................... 51,300 2,411,100 Beckman Instruments, Inc............................. 15,200 733,400 Birmingham Steel Corp................................ 21,100 327,050 Boston Technology, Inc. (b).......................... 20,100 594,206 Brinson Post-Venture Fund (b)........................ 423,765 7,248,708 Browning-Ferris Industries, Inc...................... 39,800 1,323,350 Burlington Northern Santa Fe......................... 54,400 4,889,200 Centerior Energy Co.................................. 45,200 505,675 Champion Enterprises, Inc. (b)....................... 26,000 390,000 Champion International Corp.......................... 1,600 88,400 Chase Manhattan Corp................................. 73,800 7,163,212 CIGNA Corp........................................... 30,400 5,396,000 Circuit City Stores, Inc............................. 77,600 2,759,650 Citicorp............................................. 36,900 4,448,756 CMS Energy Corp...................................... 57,900 2,040,975 Coca-Cola Enterprises, Inc........................... 42,300 972,900 Comerica, Inc........................................ 14,500 986,000 Comverse Technology, Inc. (b)........................ 9,700 504,400 Corning, Inc......................................... 67,200 3,738,000 Covance, Inc......................................... 26,472 511,240 CPC International, Inc............................... 23,000 2,123,187 CVS Corp............................................. 33,400 1,711,750 Dial Corp............................................ 31,900 498,437 Eastman Chemical Co.................................. 36,300 2,305,050 EMC Corp./Mass. (b).................................. 99,900 3,896,100 Enron Corp........................................... 101,300 4,134,306 Entergy Corp......................................... 6,000 164,250 Federal Express Corp. (b)............................ 78,100 4,510,275 Federated Department Stores (b)...................... 29,100 1,011,225 FileNet Corp. (b).................................... 10,900 158,050 First American Corp.-Tenn............................ 13,700 525,737 First Bank System, Inc............................... 10,700 913,512 First Data Corp...................................... 87,230 3,832,668 First of America Bank Corp........................... 10,150 464,362 First Security Corp.................................. 17,250 471,141 Fleetwood Enterprises, Inc........................... 11,300 336,881 Food Lion, Inc. Class A.............................. 83,800 599,694 Forest Laboratories, Inc. (b)........................ 24,100 998,644 Gannett Co., Inc..................................... 34,900 3,446,375 General Instrument Corp. (b)......................... 119,800 2,995,000 Genzyme Corp. (b).................................... 21,200 588,300 Geon Co.............................................. 14,900 301,725 Goodyear Tire & Rubber Co............................ 77,500 4,906,719 Harnischfeger Industries, Inc........................ 34,900 1,448,350 Health Care and Retirement Corp. (b)................. 35,400 1,181,475 Hibernia Corp. Class A............................... 29,300 408,369 Informix Corp. (b)................................... 28,100 252,900 Interpublic Group of Companies, Inc.................. 22,900 1,404,056 James River Corp. of Virginia........................ 42,900 1,587,300 Kroger Co. (b)....................................... 28,600 829,400 Lockheed Martin Corp................................. 64,120 6,640,428 Lyondell Petrochemical Co............................ 57,400 1,252,038
SHARES VALUE ------------ ------------ Manor Care, Inc...................................... 46,798 $ 1,526,785 Martin Marietta Materials, Inc....................... 15,300 495,338 Masco Corp........................................... 61,300 2,559,275 Mattel, Inc.......................................... 76,024 2,575,313 Nabisco Holdings Corp. Class A....................... 53,600 2,137,300 National Service Industries Inc...................... 10,300 501,481 Nextel Communications, Inc. Class A (b).............. 80,100 1,516,894 Octel Communications Corp. (b)....................... 17,300 405,469 Old Republic International Corp...................... 18,896 572,785 Peco Energy Co....................................... 130,300 2,736,300 Pentair, Inc......................................... 27,696 910,506 Pharmacia & Upjohn, Inc.............................. 66,900 2,324,775 Philip Morris Companies, Inc......................... 148,200 6,576,375 Raytheon Co.......................................... 20,300 1,035,300 Regions Financial Corp............................... 13,600 430,100 Reynolds & Reynolds Co. Class A...................... 18,800 296,100 Schering Plough Corp................................. 92,100 4,409,288 Seagate Technology, Inc. (b)......................... 21,900 770,606 Timken Co............................................ 36,300 1,290,919 Trinity Industries, Inc.............................. 9,700 307,975 Tyson Foods, Inc. Class A............................ 107,100 2,048,288 UCAR International, Inc. (b)......................... 1,600 73,200 Ultramar Diamond Shamrock Corp....................... 59,808 1,951,236 US Bancorp........................................... 32,000 2,052,000 Vencor, Inc. (b)..................................... 27,400 1,157,650 Viad Corp............................................ 51,600 993,300 Westvaco Corp........................................ 12,598 396,050 Witco Corp........................................... 5,200 197,275 Xerox Corp........................................... 106,000 8,360,750 York International Corp.............................. 32,700 1,504,200 360 Communications Co. (b)........................... 15,566 266,568 ------------ Total U.S. Equities.................................. 166,132,286 ------------ NON-U.S. EQUITIES -- 17.02% AUSTRALIA -- 0.92% Amcor Ltd............................................ 33,770 222,644 Boral Ltd............................................ 59,240 185,075 Brambles Industries Ltd.............................. 8,590 168,555 Broken Hill Proprietary Co. Ltd...................... 74,200 1,083,070 Coca-Cola Amatil Ltd................................. 11,270 145,228 CSR Ltd.............................................. 42,930 164,997 David Jones Ltd...................................... 147,010 203,758 Lend Lease Corp. Ltd................................. 9,596 201,301 M.I.M. Holdings Ltd.................................. 106,287 156,075 National Australia Bank Ltd.......................... 51,467 731,464 News Corp. Ltd....................................... 107,030 509,185 News Corp. Ltd. Preferred............................ 27,670 108,212 Pacific Dunlop Ltd................................... 70,210 206,197 Qantas Airways Ltd................................... 69,435 161,264 Rio Tinto Ltd........................................ 28,145 476,126 Santos Ltd........................................... 16,610 69,314 Westpac Banking Corp. Ltd............................ 77,408 462,212 WMC Ltd.............................................. 46,840 293,022 Woolworth's Ltd...................................... 30,790 100,345 ------------ 5,648,044 ------------
- -------------------------------------------------------------------------------- 11 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- BELGIUM -- 0.64% Delhaize-Le Lion S.A.................................... 4,670 $ 245,516 Electrabel S.A.......................................... 2,730 585,488 Fortis AG............................................... 216 48 Fortis AG Strip (b)..................................... 2,643 546,244 General de Banque S.A................................... 670 258,122 Groupe Bruxelles Lambert S.A............................ 1,670 280,114 Kredietbank NV.......................................... 1,000 403,338 Kredietbank VVPR........................................ 25 9,875 Petrofina S.A........................................... 1,425 540,073 Societe Generale de Belgique............................ 2,533 236,742 Solvay S.A. Class A..................................... 457 269,497 Tractebel............................................... 675 281,641 Tractebel Warrants "99" (b)............................. 605 6,496 Union Miniere Group S.A. (b)............................ 2,955 277,006 ---------- 3,940,200 ---------- CANADA -- 0.59% Alcan Aluminium Ltd..................................... 7,250 247,517 Bank of Montreal........................................ 6,390 249,653 Barrick Gold Corp....................................... 4,200 91,483 BCE, Inc................................................ 7,250 201,798 Canadian National Railway Co............................ 5,150 224,724 Canadian Pacific Ltd.................................... 15,650 445,814 Hudson's Bay Co......................................... 6,300 141,563 Imperial Oil Ltd........................................ 5,720 293,339 MacMillan Bloedel Ltd................................... 9,440 129,667 Moore Corp. Ltd......................................... 6,110 120,464 Noranda, Inc............................................ 7,440 160,438 Northern Telecom Ltd.................................... 2,290 206,575 NOVA Corp............................................... 9,920 84,848 Royal Bank of Canada.................................... 7,350 333,243 Seagram Co. Ltd......................................... 6,490 261,086 Thomson Corp............................................ 8,970 206,760 TransCanada Pipelines Ltd............................... 10,020 201,547 ---------- 3,600,519 ---------- FINLAND -- 0.13% Merita Ltd. Class A..................................... 25,950 86,430 Nokia Ab Class A........................................ 5,250 392,067 Outokumpu Class A....................................... 4,480 88,838 Pohjola Insurance Group Class B......................... 1,050 31,131 Sampo Insurance Co. Ltd. Class A........................ 480 46,667 UPM-Kymmene Corp........................................ 6,870 158,716 ---------- 803,849 ---------- FRANCE -- 1.24% Accor S.A............................................... 2,092 313,568 Alcatel Alsthom......................................... 2,932 367,561 AXA UAP................................................. 5,258 327,338 AXA UAP Rights (b)...................................... 4,328 16,808 Banque Nationale de Paris............................... 9,920 409,236 Cie Bancaire S.A........................................ 2,038 260,347 Cie de Saint Gobain..................................... 3,090 451,053 Cie de Suez............................................. 37,900 93,282 Cie Generale des Eaux................................... 1,844 236,507 Cie Generale des Eaux Warrants "01" (b)................. 4,224 2,533
SHARES VALUE ----------- ---------- Colas.................................................... 814 $ 107,452 Dexia France............................................. 3,399 331,158 Elf Aquitaine S.A........................................ 4,594 496,098 Groupe Danone............................................ 2,000 330,778 Lafarge S.A.............................................. 2,480 154,393 Lagardere S.C.A.......................................... 6,600 191,896 LVMH..................................................... 1,099 295,762 Michelin Class B......................................... 6,570 394,917 Pechiney S.A. Class A.................................... 6,664 262,769 Peugeot S.A.............................................. 3,580 346,353 Rhone-Poulenc Class A.................................... 8,544 349,269 SEITA.................................................... 6,010 190,404 Societe Generale......................................... 3,334 372,526 Suez Lyonnaise des Eaux S.A.............................. 3,130 315,612 Thomson CSF.............................................. 6,900 177,936 Total S.A. Class B....................................... 3,986 403,284 Usinor Sacilor........................................... 23,380 422,122 ---------- 7,620,962 ---------- GERMANY -- 1.63% Allianz AG Holding....................................... 4,160 889,246 BASF AG.................................................. 11,480 423,929 Bayer AG................................................. 15,290 589,629 Bayerische Motoren Werke AG.............................. 590 486,870 Commerzbank AG........................................... 12,840 366,941 Daimler-Benz AG.......................................... 5,850 476,366 Deutsche Bank AG......................................... 12,311 723,428 Deutsche Telekom AG...................................... 25,380 624,086 Henkel KGaA-Vorzug AG.................................... 4,540 255,841 Hochtief AG.............................................. 3,500 156,663 Hoechst AG............................................... 4,710 199,741 M.A.N. AG................................................ 750 233,703 Mannesmann AG............................................ 897 400,989 Metro AG................................................. 3,420 372,891 Muenchener Rueckver AG................................... 211 598,152 Muenchener Rueckver AG Warrants "98" (b)................. 2 717 Preussag AG.............................................. 1,122 330,303 RWE AG................................................... 8,870 381,757 Schering AG.............................................. 4,805 515,078 Siemens AG............................................... 5,650 338,657 Thyssen AG............................................... 2,240 539,240 Veba AG.................................................. 10,339 584,409 Volkswagen AG............................................ 710 538,632 ---------- 10,027,268 ---------- HONG KONG -- 0.21% Cheung Kong Holdings Ltd................................. 14,000 138,242 China Light & Power Co. Ltd.............................. 26,500 150,162 Guoco Group Ltd.......................................... 14,000 73,729 Hang Seng Bank Ltd....................................... 9,700 138,351 Hong Kong Telecommunications Ltd......................... 41,200 98,383 Hutchison Whampoa Ltd.................................... 26,000 224,853 Jardine Matheson Holdings ADR (c)........................ 9,200 65,320 New World Development Co. Ltd............................ 16,000 95,414 Sun Hung Kai Properties Ltd.............................. 7,000 84,255 Swire Pacific Ltd. Class A............................... 13,500 121,542 Wharf (Holdings) Ltd..................................... 21,000 91,077 ---------- 1,281,328 ----------
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- ITALY -- 0.64% Assicurazioni Generali.................................. 21,080 $ 382,822 Banca Commerciale Italiana.............................. 55,000 113,782 Credito Italiano Spa.................................... 141,000 257,720 Danieli & Co. Savings (Risp)............................ 36,000 125,889 Edison Spa.............................................. 22,200 110,315 ENI ADR (c)............................................. 7,600 432,250 ENI Spa................................................. 31,000 175,360 Fiat Spa-Priv........................................... 156,000 287,887 INA-Istituto Nazionale delle Assicurazioni.............. 87,000 132,430 Istituto Mobilaire Italiano Spa......................... 22,500 202,321 Italgas Spa............................................. 30,300 97,943 La Rinascente Spa....................................... 18,000 99,918 La Rinascente Spa Rights (b)............................ 45,200 2,019 La Rinascente Spa RNC................................... 27,200 66,102 La Rinascente Spa RNC Rights (b)........................ 45,200 7,358 La Rinascente Spa Warrants "99" (b)..................... 1,400 691 Mediobanca Spa.......................................... 11,000 66,718 Montedison Spa (b)...................................... 357,700 235,874 SAI-Savings (Risp)...................................... 24,500 75,451 Telecom Italia Mobile Spa............................... 60,000 193,946 Telecom Italia Mobile Spa RNC........................... 169,500 302,839 Telecom Italia Spa...................................... 48,000 143,591 Telecom Italia Spa RNC.................................. 194,500 384,656 ---------- 3,897,882 ---------- JAPAN -- 4.16% Amada Co. Ltd........................................... 40,000 353,054 Asahi Glass Co. Ltd..................................... 48,000 478,196 Bank of Tokyo-Mitsubishi, Ltd........................... 44,000 884,383 Canon, Inc.............................................. 31,000 845,233 Canon Sales Co., Inc.................................... 13,100 305,663 Citizen Watch Co. Ltd................................... 36,000 278,109 Dai Nippon Printing Co. Ltd............................. 36,000 814,821 Daiichi Pharmaceutical Co. Ltd.......................... 26,000 458,971 Daikin Industries Ltd................................... 39,000 354,453 Daiwa House Industry Co. Ltd............................ 20,000 244,691 Fanuc................................................... 15,900 611,378 Fujitsu................................................. 24,000 333,479 Hitachi Ltd............................................. 77,000 861,313 Honda Motor Co.......................................... 10,000 301,494 Inax.................................................... 37,000 277,427 Isetan.................................................. 13,000 161,321 Ito Yokado Co. Ltd...................................... 15,000 871,712 Kaneka Corp............................................. 40,000 250,983 Keio Teito Electric Railway............................. 45,000 214,323 Kinki Nippon Railway.................................... 45,000 275,277 Kirin Brewery Co. Ltd................................... 43,000 447,173 Kokuyo.................................................. 13,000 352,180 Kuraray Co. Ltd......................................... 46,000 458,271 Kyocera Corp............................................ 5,000 397,623 Maeda Road Construction................................. 8,000 68,863 Marui Co. Ltd........................................... 20,000 372,280 Matsushita Electric Industrial Co....................... 58,000 1,170,847 Mitsubishi Paper Mills.................................. 49,000 191,838 NGK Insulators.......................................... 64,000 704,710 Nintendo Corp. Ltd...................................... 3,900 327,187 Nippon Denso Co. Ltd.................................... 19,000 454,951 Nippon Meat Packers, Inc................................ 25,000 323,342 Nippon Steel Co......................................... 27,000 86,359 Okumura................................................. 40,000 212,182
SHARES VALUE ----------- ---------- Osaka Gas Co........................................... 76,000 $ 218,509 Sankyo Co. Ltd......................................... 29,000 975,706 Sanwa Bank Ltd......................................... 19,000 282,269 Secom.................................................. 10,000 734,947 Seino Transportation................................... 27,000 292,581 Sekisui House Ltd...................................... 75,000 760,290 Shinmaywa Industries Ltd............................... 17,000 119,890 Sony Corp.............................................. 9,200 803,181 Sumitomo Bank.......................................... 42,000 690,029 Sumitomo Electric Industries........................... 32,000 536,922 Sumitomo Trust & Banking............................... 22,000 236,476 Takeda Chemical Industries............................. 23,000 647,208 TDK Corp............................................... 7,000 514,463 Tokio Marine & Fire Insurance Co....................... 36,000 471,904 Tokyo Electric Power................................... 9,900 208,503 Tokyo Steel Mfg........................................ 29,000 324,390 Tonen Corp............................................. 29,000 349,733 Toray Industries, Inc.................................. 161,000 1,149,498 Toshiba Corp........................................... 93,000 598,978 Toyo Suisan Kaisha..................................... 22,000 224,941 Toyota Motor Corp...................................... 10,000 295,377 Yamazaki Baking Co. Ltd................................ 19,000 335,402 ----------- 25,515,284 ----------- MALAYSIA -- 0.32% Hume Industries (Malaysia) Bhd......................... 20,000 91,917 Kuala Lumpur Kepong Bhd................................ 57,500 142,383 Land & General Holdings Bhd............................ 73,000 83,875 Malayan Banking Bhd.................................... 26,000 272,979 Malaysia International Shipping Bhd (Frgn.)............ 32,000 83,043 Nestle (Malaysia) Bhd.................................. 9,000 67,393 New Straits Times Press Bhd............................ 6,000 35,182 Perusahaan Otomobil Nasional Bhd....................... 12,000 56,101 Public Bank Bhd (Frgn.)................................ 72,000 112,393 Resorts World Bhd...................................... 30,000 90,333 Rothmans of Pall Mall Bhd.............................. 4,000 39,303 Sime Darby Bhd......................................... 62,000 206,339 Telekom Malaysia Bhd................................... 42,000 196,355 Tenaga Nasional Bhd.................................... 61,000 297,266 UMW Holdings Bhd....................................... 9,000 42,433 United Engineers Ltd................................... 15,000 108,162 YTL Corp. Bhd.......................................... 17,000 52,536 ----------- 1,977,993 ----------- NETHERLANDS -- 1.07% ABN AMRO Holdings NV................................... 27,047 505,242 Akzo Nobel NV.......................................... 860 118,073 DSM NV................................................. 1,610 160,482 Elsevier NV............................................ 23,880 399,767 Heineken NV............................................ 850 145,332 Hoogovens NV........................................... 2,860 159,692 ING Groep NV........................................... 18,760 866,524 KLM Royal Dutch Air Lines NV........................... 8,840 272,964 KPN NV................................................. 14,409 566,270 Philips Electronics NV................................. 8,450 606,375 Royal Dutch Petroleum Co............................... 26,120 1,361,125 Royal Dutch Petroleum Co. NY Shares (c)................ 13,600 739,500 Unilever NV............................................ 3,000 632,675 ----------- 6,534,021 -----------
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ---------- ---------- NEW ZEALAND -- 0.66% Brierley Investments Ltd................................. 677,530 $ 661,292 Carter Holt Harvey Ltd................................... 234,110 604,570 Fletcher Challenge Building.............................. 80,886 242,873 Fletcher Challenge Energy................................ 88,821 267,904 Fletcher Challenge Forest Ltd............................ 153,913 223,250 Fletcher Challenge Paper................................. 159,786 386,641 Telecom Corp. of New Zealand Ltd......................... 293,830 1,493,686 Telecom Corp. of New Zealand Ltd. ADS (c)................ 3,800 154,850 ---------- 4,035,066 ---------- SINGAPORE -- 0.30% City Developments Ltd.................................... 18,000 176,248 DBS Land Ltd............................................. 27,000 85,355 Development Bank of Singapore Ltd........................ 16,000 201,427 Fraser & Neave Ltd....................................... 3,000 21,401 Hotel Properties Ltd..................................... 42,000 71,381 Keppel Corp. Ltd. (b).................................... 10,000 44,412 Oversea-Chinese Banking Corp. Ltd........................ 32,000 331,235 Singapore Airlines Ltd. (Frgn.).......................... 24,000 214,855 Singapore Press Holdings Ltd. (Frgn.).................... 10,000 201,427 Singapore Telecommunications, Ltd........................ 92,000 169,870 United Overseas Bank Ltd. (Frgn.)........................ 24,000 246,748 Wing Tai Holdings Ltd.................................... 22,000 63,393 ---------- 1,827,752 ---------- SPAIN -- 0.44% Acerinox S.A............................................. 570 107,008 Banco Bilbao-Vizcaya S.A................................. 3,240 263,703 Banco Central Hispanoamericano........................... 3,920 143,665 Banco Popular Espanol S.A................................ 750 184,096 Banco Santander S.A...................................... 7,980 246,340 Empresa Nacional de Electridad S.A....................... 4,960 417,184 Fomento de Construcciones y Contratas S.A................ 1,100 140,538 Gas Natural SDG S.A...................................... 860 188,233 Iberdrola S.A............................................ 16,410 207,538 Mapfre Corp.............................................. 1,430 76,230 Repsol S.A............................................... 3,910 165,631 Repsol S.A. ADR (c)...................................... 1,000 42,438 Telefonica de Espana..................................... 11,640 337,162 Vallehermosa S.A......................................... 2,670 72,164 Viscofan Envolturas Celulosicas S.A...................... 3,910 91,589 ---------- 2,683,519 ---------- SWITZERLAND -- 0.45% ABB AG (Bearer).......................................... 105 159,167 Alusuisse-Lonza Holding AG (Reg.)........................ 120 124,453 Ciba Specialty Chemicals AG (Reg.)....................... 358 33,150 CS Holdings AG (Reg.).................................... 1,023 131,568 Nestle S.A. (Reg.)....................................... 395 521,826 Novartis AG (Reg.)....................................... 478 765,246 Roche Holding AG (Gen.).................................. 56 507,223 Swiss Reinsurance Co. (Reg.)............................. 90 127,478 UBS (Bearer)............................................. 106 121,421 Zurich Versicherungs (Reg.).............................. 609 242,698 ---------- 2,734,230 ----------
SHARES VALUE ---------- ---------- UNITED KINGDOM -- 3.62% Abbey National PLC...................................... 25,620 $ 349,645 Bass PLC................................................ 15,070 183,845 B.A.T. Industries PLC................................... 93,484 836,276 BG PLC.................................................. 191,380 700,734 Booker PLC.............................................. 18,220 82,784 British Energy PLC...................................... 163,630 398,965 British Petroleum Co. PLC............................... 85,794 1,066,624 British Steel PLC....................................... 208,470 518,703 British Telecommunications PLC.......................... 155,980 1,157,811 BTR PLC................................................. 53,420 182,705 Centrica PLC............................................ 196,430 238,652 Charter PLC............................................. 28,846 382,869 Coats Viyella PLC....................................... 112,860 236,671 FKI PLC................................................. 128,500 363,568 General Electric Co. PLC................................ 202,550 1,210,210 Glaxo Wellcome PLC...................................... 67,600 1,397,903 Grand Metropolitan PLC.................................. 52,740 507,343 Guinness PLC............................................ 66,410 649,897 Hanson PLC.............................................. 52,102 258,407 Hillsdown Holdings PLC.................................. 138,520 390,765 House of Fraser PLC..................................... 143,400 380,666 HSBC Holdings PLC....................................... 30,050 924,481 Imperial Chemical Industries PLC........................ 11,450 158,930 Inchcape PLC............................................ 46,470 218,873 Legal & General Group PLC............................... 64,400 436,229 Lloyds TSB Group PLC.................................... 108,409 1,113,229 Marks & Spencer PLC..................................... 78,040 646,816 Mirror Group PLC........................................ 69,450 217,302 National Westminster Bank PLC........................... 27,380 367,968 Northern Foods PLC...................................... 82,040 271,714 Peninsular & Oriental Steam Navigation Co............... 50,040 498,026 Reckitt & Colman PLC.................................... 14,938 223,007 Redland PLC............................................. 27,860 157,650 Reuters Holdings PLC.................................... 30,530 321,636 Rio Tinto PLC........................................... 27,580 480,361 RJB Mining PLC.......................................... 56,570 338,940 Royal & Sun Alliance Insurance Group PLC................ 74,839 553,025 Sainsbury (J.) PLC...................................... 63,920 387,233 Scottish Hydro-Electric PLC............................. 29,480 203,615 Sears PLC............................................... 170,480 192,937 Sedgwick Group PLC...................................... 125,360 256,624 SmithKline Beecham PLC.................................. 37,590 691,616 Smurfit (Jefferson) Group PLC........................... 112,647 324,339 Tesco PLC............................................... 52,140 321,943 Thames Water PLC........................................ 35,210 404,342 Unilever PLC............................................ 8,010 229,162 Vodafone Group PLC...................................... 47,090 229,631 Williams PLC............................................ 62,010 335,412 Yorkshire Water PLC..................................... 29,190 190,924 ----------- 22,191,008 ----------- Total Non-U.S. Equities................................. 104,318,925 ----------- EMERGING MARKETS EQUITIES -- 2.71% Brinson Emerging Markets Equity Fund (b)................ 1,353,286 16,597,643 ----------- Total Equities (Cost $229,910,786)...................... 287,048,854 -----------
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------------- ------------ Bonds -- 49.38% U.S. BONDS -- 26.66% U.S. CORPORATE BONDS -- 4.95% Aetna Services Inc. 6.970%, due 08/15/36........... $ 265,000 $ 267,630 Bell Atlantic Corp. 8.000%, due 10/15/29........... 98,000 106,064 BellSouth Savings & Employee ESOP 9.125%, due 07/01/03.......................................... 289,556 301,553 Capital One Bank 6.830%, due 05/17/99.............. 1,946,000 1,953,877 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.......................................... 1,000,000 992,430 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03.......................................... 1,050,000 1,060,006 Chemical Master Credit Card Trust 95-2A 6.230%, due 06/15/03.......................................... 1,430,000 1,420,977 Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,009,480 Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,197 4.220%, due 03/02/99.............................. 2,385 2,363 Comcast Cable Communications 144-A 8.500%, due 05/01/27.......................................... 1,720,000 1,854,435 Continental Airlines, Inc. Pass Thru 144-A 7.461%, due 04/01/15...................................... 1,850,000 1,871,514 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 06/20/29.............................. 1,465,000 1,486,975 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02...................................... 132,000 132,286 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00.......................................... 600,000 600,000 Eastman Chemical Co. 7.600%, due 02/01/27.......... 252,000 249,750 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.......................................... 96,130 96,141 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09.............................. 1,637,884 1,546,212 GMAC 9.625%, due 12/15/01.......................... 331,000 366,251 Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,250,000 1,256,020 Lockheed Martin Corp. 7.700%, due 06/15/08......... 148,000 154,654 MBNA Global Capital Securities FRN 6.659%, due 02/01/27.......................................... 1,100,000 1,086,996 News America Holdings 7.750%, due 01/20/24......... 1,877,000 1,780,928 Premier Auto Trust 96-3A 6.500%, due 03/06/00........................ 215,000 216,408 96-4A 6.400%, due 10/06/01........................ 455,000 455,801 Residential Funding Mortgage Security Insurance 8.500%, due 06/25/26...................................... 1,440,000 1,477,087 Salomon, Inc. 6.500%, due 03/01/00.............................. 2,520,000 2,504,051 6.750%, due 02/15/03.............................. 550,000 538,981 Standard Credit Card Trust 95-1A 8.250%, due 01/07/07.......................................... 500,000 537,285
FACE AMOUNT VALUE ---------- ----------- Thrift Financial Corp. 11.250%, due 01/01/16.......................................... $ 97,862 $ 105,732 Time Warner, Inc. 9.150%, due 02/01/23................. 1,815,000 2,003,154 Time Warner Entertainment, Inc. 8.375%, due 03/15/23... 1,206,000 1,236,095 WMX Technologies, Inc. 7.000%, due 10/15/06............ 1,500,000 1,485,904 ----------- 30,322,237 ----------- INTERNATIONAL DOLLAR BONDS -- 3.57% Abbey National PLC 7.350%, due 10/29/49................ 250,000 249,461 ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01........ 250,000 248,289 AT&T Corp. 8.250%, due 01/11/00........................ 645,000 669,300 Banque Paribas, Sub. Notes 6.875%, due 03/01/09........ 175,000 165,923 Bayerische Landesbank 6.850%, due 07/19/01............. 212,000 213,530 BBV International 7.000%, due 12/01/25................. 2,200,000 2,025,525 Credit Suisse-London 144-A 7.900%, due 05/01/07........ 2,600,000 2,672,805 Den Danske Bank 144-A 7.400%, due 06/15/10............. 2,050,000 2,065,640 DR Investments 144-A 7.450%, due 05/15/07.............. 320,000 323,218 Empresa Nacional Electric 7.875%, due 02/01/27......... 316,000 318,691 Hanson PLC Notes 6.750%, due 09/15/05.................. 290,000 282,680 International Telecom Satellite 8.125%, due 02/28/05... 335,000 354,934 Japanese Development Bank 8.375%, due 02/15/01......... 970,000 1,022,854 LKB Baden-Wuerttemberg Finance 8.125%, due 01/27/00.... 350,000 362,913 Pan Pacific Industry 144-A 0.000%, due 04/28/07........ 2,130,000 938,789 Petroliam Nasional 7.125%, due 08/15/05................ 420,000 419,825 Province of Quebec 7.500%, due 07/15/23................ 175,000 172,144 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.......................................... 1,910,000 1,996,897 Repsol International Finance 7.000%, due 08/01/05...... 735,000 737,634 Republic of Italy 6.875%, due 09/27/23................. 150,000 141,102 Republic of South Africa 9.625%, due 12/15/99.......... 1,079,000 1,140,233 Royal Bank of Scotland 7.375%, due 04/29/49............ 690,000 687,669 Skandinaviska Enskilda Banken 144-A 6.625%, due 03/29/49.............................................. 500,000 494,900 Soc Quimica & Minera de Ser 144-A 7.700%, due 09/15/06. 1,500,000 1,526,395 Southern Investments UK 6.800%, due 12/01/06........... 1,625,000 1,587,462 Swedbank FRN 7.773%, due 10/29/49...................... 270,000 274,725 Telstra Corp. Ltd. 6.500%, due 11/28/05................ 350,000 336,639 Usinor Sacilor 7.250%, due 08/01/06.................... 470,000 467,805 ----------- 21,897,982 -----------
- -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ---------- U.S. GOVERNMENT AGENCIES -- 7.31% Federal Home Loan Mortgage Corp. 7.000%, due 03/15/10................................... $ 885,000 $ 881,316 5.800%, due 08/15/19................................... 2,399,000 2,256,931 7.500%, due 01/15/23................................... 749,116 715,683 7.238%, due 05/01/26................................... 396,144 408,013 Federal Home Loan Mortgage Corp. Gold 8.000%, due 11/01/22................................... 159,672 163,315 8.000%, due 05/01/23................................... 1,672,660 1,710,818 9.000%, due 03/01/24................................... 1,232,440 1,313,128 9.000%, due 04/01/25................................... 1,959,533 2,068,531 9.500%, due 04/01/25................................... 55,514 59,452 Federal National Mortgage Association 5.000%, due 06/01/01................................... 1,534,205 1,465,626 6.500%, due 12/01/03 Balloon TBA....................... 2,520,000 2,486,925 6.220%, due 03/13/06................................... 1,700,000 1,643,732 8.000%, due 02/25/07................................... 1,635,000 1,682,049 6.500%, due 04/25/08................................... 113,544 108,826 6.500%, due 05/25/08................................... 1,040,147 1,022,069 6.500%, due 01/01/11................................... 905,405 886,731 9.000%, due 08/01/21................................... 319,738 339,549 8.000%, due 05/01/22................................... 136,316 139,256 8.500%, due 07/01/22................................... 769,021 809,264 6.500%, due 12/25/23................................... 2,330,000 2,232,546 9.000%, due 01/01/25................................... 1,113,176 1,172,313 9.000%, due 02/01/25................................... 2,066 2,176 6.500%, due 04/01/26................................... 1,606,732 1,536,944 6.500%, due 12/01/26 TBA............................... 6,135,000 5,868,526 7.500%, due 12/01/26 TBA............................... 4,035,000 4,043,837 6.070%, due 08/01/29 TBA............................... 1,430,000 1,413,019 Federal National Mortgage Association Strips 0.000%, due 04/01/27 principal only................................ 3,991,910 2,646,616 Government National Mortgage Association 10.000%, due 09/15/00.................................. 3,695 3,918 10.000%, due 05/15/01.................................. 6,787 7,196 9.000%, due 11/15/04................................... 23,281 24,365 11.000%, due 09/15/15.................................. 221,706 246,233 8.500%, due 05/15/21................................... 56,468 58,638 8.000%, due 08/15/22................................... 557,885 569,914 8.000%, due 11/15/22................................... 467,835 481,314 8.000%, due 12/15/22................................... 1,613,507 1,659,993 7.500%, due 11/15/24................................... 2,628,494 2,646,736 ---------- 44,775,498 ---------- U.S. GOVERNMENT OBLIGATIONS -- 10.83% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................... 172,000 170,925 7.750%, due 11/30/99................................... 215,000 222,458 6.625%, due 07/31/01................................... 9,570,000 9,665,700 6.250%, due 10/31/01................................... 7,910,000 7,875,394 7.000%, due 07/15/06................................... 4,615,000 4,747,681 8.125%, due 05/15/21................................... 1,500,000 1,716,095 6.000%, due 02/15/26................................... 12,628,000 11,298,120
FACE AMOUNT VALUE ---------- ----------- U.S. Treasury Principal Strips 0.000%, due 02/15/03 .................................. $ 225,000 $ 157,441 0.000%, due 05/15/03 .................................. 1,960,000 1,348,539 0.000%, due 08/15/03 .................................. 6,280,000 4,249,550 0.000%, due 11/15/04................................... 28,467,000 17,637,584 0.000%, due 05/15/08 .................................. 15,095,000 7,319,113 ----------- 66,408,600 ----------- Total U.S. Bonds........................................ 163,404,317 ----------- SHARES ---------- HIGH YIELD BONDS -- 2.18% Brinson High Yield Fund (b)............................. 1,016,353 13,327,440 ----------- FACE AMOUNT ---------- NON-U.S. BONDS -- 17.22% AUSTRALIA -- 1.37% Government of Australia 12.000%, due 11/15/01.............................. AUD 4,150,000 3,780,537 9.000%, due 09/15/04................................... 4,020,000 3,374,817 6.750%, due 11/15/06................................... 1,700,000 1,253,590 ----------- 8,408,944 ----------- BELGIUM -- 0.76% Kingdom of Belgium 5.000%, due 03/28/01............................... BEF 65,000,000 1,849,652 8.750%, due 06/25/02................................... 32,000,000 1,047,855 9.000%, due 03/28/03................................... 7,000,000 233,853 8.500%, due 10/01/07................................... 46,000,000 1,545,958 ----------- 4,677,318 ----------- CANADA -- 2.54% Government of Canada 7.500%, due 09/01/00............................... CAD 3,380,000 2,601,958 7.250%, due 06/01/03................................... 4,840,000 3,733,143 8.750%, due 12/01/05................................... 600,000 505,477 7.000%, due 12/01/06................................... 2,570,000 1,954,139 4.250%, due 12/01/21 (d)............................... 6,060,000 4,717,606 9.000%, due 06/01/25................................... 1,510,000 1,377,705 4.250%, due 12/01/26 (d)............................... 1,000,000 733,859 ----------- 15,623,887 ----------- DENMARK -- 1.98% Kingdom of Denmark 9.000%, due 11/15/98............................... DKK 3,200,000 514,600 9.000%, due 11/15/00................................... 14,600,000 2,505,959 8.000%, due 05/15/03................................... 8,700,000 1,485,010 7.000%, due 12/15/04................................... 16,900,000 2,730,986 8.000%, due 03/15/06................................... 19,000,000 3,224,788 7.000%, due 11/10/24................................... 11,300,000 1,685,448 ----------- 12,146,791 -----------
- -------------------------------------------------------------------------------- 16 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------- ---------- FRANCE -- 0.72% Government of France (OAT) 9.500%, due 01/25/01... FRF 8,300,000 $1,656,890 7.500%, due 04/25/05................................. 11,300,000 2,192,443 8.500%, due 12/26/12................................. 2,500,000 533,810 ---------- 4,383,143 ---------- GERMANY -- 4.23% Bundesrepublik Deutscheland 7.000%, due 09/20/99............................. DEM 7,000,000 4,300,987 8.500%, due 08/21/00................................. 2,180,000 1,413,385 9.000%, due 01/22/01................................. 5,500,000 3,649,202 8.375%, due 05/21/01................................. 1,580,000 1,037,617 6.750%, due 04/22/03................................. 4,900,000 3,068,616 6.750%, due 07/15/04................................. 6,300,000 3,938,133 6.875%, due 05/12/05................................. 800,000 501,320 6.000%, due 01/05/06................................. 1,350,000 798,720 6.250%, due 04/26/06................................. 2,500,000 1,501,635 6.250%, due 01/04/24................................. 2,900,000 1,619,081 Treuhandanstalt 7.750%, due 10/01/02................................. 4,500,000 2,934,839 6.250%, due 03/04/04................................. 1,900,000 1,157,707 ---------- 25,921,242 ---------- ITALY -- 1.67% Republic of Italy (BTP) 9.500%, due 12/01/97............................. ITL 900,000,000 531,590 9.500%, due 12/01/99................................. 3,900,000,000 2,449,104 10.500%, due 04/01/00................................ 995,000,000 645,478 12.000%, due 09/01/02................................ 1,700,000,000 1,233,911 9.000%, due 10/01/03................................. 5,100,000,000 3,349,844 8.500%, due 04/01/04................................. 3,100,000,000 1,996,280 ---------- 10,206,207 ---------- NETHERLANDS -- 1.11% Government of Netherlands 6.250%, due 07/15/98............................. NLG 1,400,000 734,834 8.500%, due 03/15/01................................. 2,100,000 1,221,865 8.750%, due 09/15/01................................. 700,000 415,184 6.500%, due 04/15/03................................. 200,000 110,141 7.250%, due 10/01/04................................. 2,400,000 1,371,306 8.250%, due 02/15/07................................. 4,815,000 2,937,954 ---------- 6,791,284 ---------- SPAIN -- 0.43% Kingdom of Spain 6.750%, due 04/15/00............................. ESP 145,000,000 1,026,890 7.900%, due 02/28/02................................. 100,000,000 744,815 10.000%, due 02/28/05................................ 100,000,000 839,443 ---------- 2,611,148 ---------- SWEDEN -- 0.55% Kingdom of Sweden 10.250%, due 05/05/03............................ SEK 12,300,000 1,919,350 6.000%, due 02/09/05................................. 11,500,000 1,456,819 ---------- 3,376,169 ----------
FACE AMOUNT VALUE --------- ------------ UNITED KINGDOM -- 1.86% UK Treasury 8.000%, due 06/10/03............................ GBP 2,490,000 $ 4,318,960 8.500%, due 12/07/05................................ 2,570,000 4,656,882 8.500%, due 07/16/07................................ 1,200,000 2,191,271 8.750%, due 08/25/17................................ 130,000 252,533 ------------ 11,419,646 ------------ Total Non-U.S. Bonds................................. 105,565,779 ------------ EMERGING MARKETS DEBT -- 3.32% SHARES ----------- Brinson Emerging Markets Debt Fund (b)............................................ 1,066,734 20,369,079 ------------ Total Bonds (Cost $296,423,259)...................... 302,666,615 ------------ Short-Term Investments-- 4.37% U.S. GOVERNMENT OBLIGATIONS -- 0.25% FACE AMOUNT ----------- U.S. Treasury Bill 5.360%, due 11/13/97.............. $ 1,550,000 1,520,065 ------------ COMMERCIAL PAPER -- 4.12% American Stores Co. 5.830%, due 07/23/97............. 1,000,000 996,437 Crown Cork & Seal Co. 5.800%, due 07/09/97................................ 1,500,000 1,498,067 5.770%, due 07/15/97................................ 1,800,000 1,795,961 CSX Corp. 5.800%, due 07/22/97....................... 2,000,000 1,993,233 Enron Oil & Gas 6.520%, due 07/01/97................. 6,467,000 6,467,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................ 1,500,000 1,497,592 5.850%, due 08/11/97................................ 3,000,000 2,980,012 Norfolk Southern Corp. 5.770%, due 07/10/97................................ 1,064,000 1,062,465 5.780%, due 07/18/97................................ 1,500,000 1,495,906 Occidental Petroleum 5.800%, due 08/13/97............ 1,750,000 1,737,876 Sundstrand Corp. 5.800%, due 07/09/97................ 1,000,000 998,711 Tenneco, Inc. 5.780%, due 07/17/97................................ 1,750,000 1,745,504 5.800%, due 07/23/97................................ 1,000,000 996,456 ------------ 25,265,220 ------------ Total Short-Term Investments (Cost $26,784,066).................................. 26,785,285 ------------ Total Investments (Cost $553,118,111) -- 100.58% (a).................. 616,500,754 ------------ Liabilities, less cash and other assets-- (0.58%).... (3,529,952) ------------ Net Assets -- 100%................................... $612,970,802 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 17 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $553,326,762; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $75,361,347 Gross unrealized depreciation................................ (12,187,355) ----------- Net unrealized appreciation............................... $63,173,992 ===========
(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 June 30, 1997. MTN: Medium term note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144-A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $13,744,593 or 2.24% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Fund had the following open forward foreign currency contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE LOCAL CURRENCY VALUE GAIN/(LOSS) ---------- -------------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Belgian Franc............... 08/05/97 90,000,000 $ 2,509,676 $ (58,084) British Pound............... 08/05/97 7,800,000 12,967,150 348,700 Canadian Dollar............. 08/05/97 1,400,000 1,017,094 (30,810) Danish Kroner............... 08/05/97 4,400,000 665,009 (25,957) Dutch Guilder............... 08/05/97 28,900,000 14,788,206 (632,819) French Franc................ 08/05/97 132,000,000 22,537,866 (836,060) German Mark................. 08/05/97 25,900,000 14,902,615 (669,163) Italian Lira................ 08/05/97 11,500,000,000 6,751,065 (130,539) Japanese Yen................ 08/05/97 3,680,000,000 32,331,212 1,874,554 Swiss Franc................. 08/05/97 10,800,000 7,440,527 (114,033) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar........... 08/05/97 18,500,000 13,865,052 544,409 Belgian Franc............... 08/05/97 250,000,000 6,971,323 480,242 British Pound............... 08/05/97 20,300,000 33,747,839 (1,135,639) Canadian Dollar............. 08/05/97 16,500,000 11,987,185 349,975 Danish Kroner............... 08/05/97 71,000,000 10,730,830 693,696 Dutch Guilder............... 08/05/97 38,000,000 19,444,700 1,376,647 French Franc................ 08/05/97 132,000,000 22,537,866 1,463,443 German Mark................. 08/05/97 57,800,000 33,257,574 2,231,938 Italian Lira................ 08/05/97 20,150,000,000 11,829,040 329,829 Swiss Franc................. 08/05/97 2,200,000 1,515,663 57,563 ---------- Total...................... $6,117,892 ==========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of June 30, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) -------------- ----------- ----------- ----------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 60 contracts.............. September 1997 $ 6,301,388 $ 6,353,438 $ 52,050 10 year U.S. Treasury Notes, 157 contracts...... September 1997 16,795,490 16,936,375 140,885 30 year U.S. Treasury Bonds, 72 contracts....... September 1997 7,847,977 7,996,500 148,523 INDEX FUTURES SALE CON- TRACTS Standard & Poor's 500, 65 contracts................. September 1997 28,298,725 28,933,125 (634,400) --------- Total..................... $(292,942) =========
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $1,520,065. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $506,645,477)....................... $558,957,884 Affiliated issuers (Cost $46,472,634).......................... 57,542,870 Cash........................................................... 1,054,556 Foreign currency, at value (Cost $1,121,492).................... 1,135,377 Receivables: Investment securities sold..................................... 8,894,189 Dividends...................................................... 1,213,182 Interest....................................................... 5,013,738 Fund shares sold............................................... 129,728 Variation margin (Note 5)...................................... 106,656 Net unrealized appreciation on forward foreign currency con- tracts......................................................... 6,117,892 Other assets.................................................... 16,660 ------------ TOTAL ASSETS................................................. 640,182,732 ------------ LIABILITIES: Payables: Investment securities purchased................................ 24,097,873 Fund shares redeemed........................................... 2,558,669 Investment advisory fees (Note 2).............................. 371,662 Accrued expenses............................................... 183,726 ------------ TOTAL LIABILITIES............................................ 27,211,930 ------------ NET ASSETS....................................................... $612,970,802 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)........................................ $514,920,224 Accumulated distribution in excess of net investment income..... (964,704) Accumulated net realized gain................................... 29,814,069 Net unrealized appreciation..................................... 69,201,213 ------------ NET ASSETS................................................... $612,970,802 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $586,667,003 and 44,671,292 shares is- sued and outstanding) (Note 7)................................ $ 13.13 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 76 shares issued and outstanding) (Note 7)......... $ 13.13 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $26,302,799 and 2,015,597 shares is- sued and outstanding) (Note 7)................................ $ 13.05 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Interest (net of $8,019 for foreign taxes withheld).............. $16,746,503 Dividends (net of $386,201 for foreign taxes withheld)........... 4,910,912 ----------- TOTAL INCOME.................................................. 21,657,415 ----------- EXPENSES: Advisory (Note 2)................................................ 4,294,925 Administration................................................... 340,936 Custodian........................................................ 135,269 Distribution (Note 6)............................................ 122,983 Other............................................................ 568,542 ----------- TOTAL EXPENSES................................................ 5,462,655 ----------- NET INVESTMENT INCOME ........................................ 16,194,760 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 39,756,574 Futures contracts............................................... (4,286,707) Foreign currency transactions................................... 7,798,176 ----------- Net realized gain............................................. 43,268,043 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 29,265,335 Futures contracts............................................... (366,385) Forward contracts............................................... 6,780,244 Translation of other assets and liabilities denominated in for- eign currency.................................................. 77,694 ----------- Change in net unrealized appreciation or depreciation......... 35,756,888 ----------- Net realized and unrealized gain................................. 79,024,931 ----------- Net increase in net assets resulting from operations............. $95,219,691 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1997 JUNE 30, 1996 ------------- ------------- OPERATIONS: Net investment income........................... $ 16,194,760 $ 15,718,942 Net realized gain............................... 43,268,043 33,576,934 Change in net unrealized appreciation or depre- ciation........................................ 35,756,888 13,188,606 ------------- ------------- Net increase in net assets resulting from opera- tions.......................................... 95,219,691 62,484,482 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income........ (24,660,333) (20,214,114) Distributions in excess of net investment in- come........................................... -- (1,430,745) Distributions from net realized gain............ (26,428,094) (10,937,826) ------------- ------------- Total distributions to shareholders*............ (51,088,427) (32,582,685) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................... 192,297,100 109,483,562 Shares issued on reinvestment of distributions.. 49,580,585 31,162,315 Shares redeemed................................. (145,001,283) (64,262,463) ------------- ------------- Net increase in net assets resulting from capi- tal share transactions (Note 7)................ 96,876,402 76,383,414 ------------- ------------- TOTAL INCREASE IN NET ASSETS................. 141,007,666 106,285,211 ------------- ------------- NET ASSETS: Beginning of year............................... 471,963,136 365,677,925 ------------- ------------- End of year (including accumulated undistributed net investment income of ($964,704) and $9,848,069, respectively)....... $ 612,970,802 $471,963,136 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net invest- ment income: Brinson Class I................................. $ (23,918,105) $ (21,444,413) SwissKey Class.................................. (742,228) (200,446) Distributions from net realized gain: Brinson Class I................................. (25,579,684) (10,892,522) SwissKey Class.................................. (848,410) (45,304) ------------- ------------- Total distributions to shareholders............. $ (51,088,427) $ (32,582,685) ============= =============
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.
YEAR ENDED JUNE 30, AUGUST 31, 1992* -------------------------------------- THROUGH BRINSON CLASS I 1997 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. 0.38 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... 1.79 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- -------- Total income from investment operations......... 2.17 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................. $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== ======== Total return (non- annualized)............ 18.79% 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $586,667 $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.99% 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............ 3.03% 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.................. 150% 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0326 $ 0.0291 N/A N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 12.18 $ 11.60 ------- ------- Income from investment operations: Net investment income........................... 0.34 0.39 Net realized and unrealized gain................ 1.75 1.10 ------- ------- Total income from investment operations....... 2.09 1.49 ------- ------- Less distributions: Distributions from and in excess of net invest- ment 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.................... $ 13.05 $ 12.18 ======= ======= Total return (non-annualized)..................... 18.13% 13.24% Ratios/Supplemental data Net assets, end of period (in 000s).............. $26,303 $14,030 Ratio of expenses to average net assets.......... 1.64% 1.69%** Ratio of net investment income to average net as- sets............................................ 2.38% 3.04%** Portfolio turnover rate.......................... 150% 142% Average commission rate paid per share........... $0.0326 $0.0291
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] 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 13.49% since January 31, 1994 (performance inception date), compared to the 14.31% return of its benchmark, the MSCI World Equity (Free) Index. The Fund performance over this period was achieved with a volatility of 7.79% vs. the benchmark of 9.14%. For the year ended June 30, 1997, the Fund returned 21.26%, while the benchmark returned 22.64%. For the first half of 1997, the Brinson Global Equity Fund returned 12.62%, lagging the index's unhedged return of 15.51%. Most major global equity markets have experienced extraordinarily strong performance year-to-date, led by stellar results in Switzerland (45%), the Netherlands (38%) and Spain (36%). The U.S. market responded vigorously to positive corporate earnings surprises, rising 21%. While very good, this return did not make the U.S. a standout performer. Nonetheless, the U.S. market's continued strength has extended its fundamental overvaluation, leading to a decision to increase the scale of the underweight from -10% to -15%. Japan's comparatively low 10.34% hedged return made it a relative underperformer. Due to this underperformance and subsequently improved attractiveness, the Japan underweight was reduced from -10% to -2.5%, in two stages. Given the extreme overvaluations of many equity markets, the cash allocation within the Global Equity Fund was increased from 15% to 20% earlier in the year. In the first half of the year, this risk hedge and the Switzerland underweight detracted from Fund performance. The Fund's defensive U.S. dollar overweight, underweight of the Japanese yen and the core European currencies contributed strongly to Fund performance. As these currencies returned to fair value, the underweight positions in the yen and European currencies were gradually removed. At the current time, the Fund is largely currency neutral. Stock selection detracted from returns due to negative U.S. stock selection. Stock selection in Japan had a significant beneficial impact on performance. - -------------------------------------------------------------------------------- 24 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS]
Total Return 6 months 1 year 3 years 1/31/94* ended ended ended to 6/30/97 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------------------- Brinson Global Equity Fund 12.62% 21.26% 17.34% 13.49% MSCI World Equity (Free) Index (currency unhedged) 15.51 22.64 17.48 14.31 MSCI World Equity (Free) Index (currency hedged) 19.22 28.04 20.38 15.17 - --------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Equity Fund and the MSCI World Equity (Free) Index (currency unhedged and hedged) if you had invested $1,000,000 on January 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 1997. 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 Global MSCI World Equity (Free) MSCI World Equity (Free) Equity Fund Index (currency unhedged) Index (currency hedged) -------------- ------------------------- ------------------------ 1/31/94 $1,000,000 $1,000,000 $1,000,000 6/30/94 $ 953,025 $ 974,101 $ 928,758 12/31/94 $ 956,520 $ 989,551 $ 943,274 6/30/95 $1,010,802 $1,082,851 $ 977,009 12/31/95 $1,166,324 $1,200,236 $1,146,472 6/30/96 $1,270,202 $1,287,765 $1,265,328 12/31/96 $1,367,688 $1,367,286 $1,358,885 6/30/97 $1,540,253 $1,579,321 $1,620,127
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. ================================================================================ 25 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Market Allocation As of June 30, 1997
Current Benchmark Strategy - ----------------------------------------------------------------- U.S. 45.5% 30.4% Japan 17.3 14.8 Australia 1.4 2.5 Belgium 0.6 1.6 Canada 2.5 1.5 France 3.5 2.3 Germany 4.4 4.5 Hong Kong 2.0 0.8 Italy 1.6 1.7 Malaysia 1.1 1.5 Netherlands 2.6 2.9 New Zealand 0.2 1.7 Spain 1.2 1.1 Sweden 1.3 0.0 Switzerland 3.4 1.3 U.K. 9.4 9.8 Other Markets 2.0 1.6 Cash Reserves 0.0 20.0 - ----------------------------------------------------------------- 100.0% 100.0%
Currency Allocation As of June 30, 1997 Current Benchmark Strategy - ----------------------------------------------------------------- U.S. 45.5% 49.9% Japan 17.3 17.3 Australia 1.4 1.4 Belgium 0.6 0.6 Canada 2.5 2.5 France 3.5 3.5 Germany 4.4 4.4 Hong Kong 2.0 0.0 Italy 1.6 1.6 Malaysia 1.1 1.1 Netherlands 2.6 2.6 New Zealand 0.2 1.7 Spain 1.2 1.2 Sweden 1.3 1.3 Switzerland 3.4 3.4 U.K. 9.4 5.4 Other Markets 2.0 2.1 - ----------------------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of June 30, 1997 Percent of Net Assets - ----------------------------------------------------------------- 1. Xerox Corp. 2.22% 2. Chase Manhattan Corp. 1.89 3. Lockheed Martin Corp. 1.77 4. Philip Morris Companies, Inc. 1.75 5. Aon Corp. 1.45 6. CIGNA Corp. 1.44 7. Burlington Northern Santa Fe 1.31 8. Goodyear Tire & Rubber Co. 1.30 9. Federal Express Corp. 1.20 10. Citicorp 1.19 - -----------------------------------------------------------------
Top Ten Non-U.S. Equity Holdings As of June 30, 1997 Percent of Net Assets - ----------------------------------------------------------------- 1. Royal Dutch Petroleum Co. 0.74% 2. Glaxo Wellcome PLC 0.67 3. Telecom Corp of New Zealand Ltd. 0.64 4. Matsushita Electric Industrial Co. 0.63 5. Toray Industries, Inc. 0.60 6. General Electric Co. PLC 0.58 7. British Telecommunications PLC 0.53 8. British Petroleum Co. PLC 0.53 9. Lloyds TSB Group PLC 0.51 10. Sankyo Co. Ltd. 0.49 - -----------------------------------------------------------------
- -------------------------------------------------------------------------------- 26 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Industry Diversification
As a Percent of Net Assets As of June 30, 1997 - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................. 0.95% Housing/Paper......................................................... 1.96 Metals................................................................ 0.26 ------ 3.17 Capital Investments Capital Goods......................................................... 3.23 Technology............................................................ 4.35 ------ 7.58 Consumer Autos/Durables........................................................ 1.36 Discretionary......................................................... 2.02 Health: Drugs......................................................... 3.16 Health: Non-Drugs..................................................... 1.56 Non-Durables.......................................................... 4.33 Retail/Apparel........................................................ 1.89 ------ 14.32 Energy................................................................. 1.85 Financial Banks................................................................. 3.20 Non-Banks............................................................. 3.35 ------ 6.55 Transportation......................................................... 2.45 Utilities.............................................................. 2.68 Services/Miscellaneous................................................. 3.54 ------ Total U.S. Equities............................................ 42.14* ------ NON-U.S. EQUITIES Aerospace & Military................................................... 0.07% Airlines............................................................... 0.28 Appliances & Household Durables........................................ 1.29 Automobiles............................................................ 1.35 Banking................................................................ 5.87 Beverages & Tobacco.................................................... 0.92 Broadcasting & Publishing.............................................. 0.76 Building Materials..................................................... 0.92 Business & Public Service.............................................. 2.06 Chemicals.............................................................. 2.14 Construction........................................................... 0.88 Data Processing........................................................ 0.62 Electric Components.................................................... 0.80 Electronics............................................................ 2.09 Energy................................................................. 3.54 Financial Services..................................................... 0.70 Food & House Products.................................................. 1.88 Forest Products........................................................ 0.96 Gold Mining............................................................ 0.03 Health & Personal Care................................................. 2.92 Industrial Components.................................................. 1.06 Insurance.............................................................. 2.40 Leisure & Tourism...................................................... 0.30 Machinery & Engineering................................................ 0.58 Merchandising.......................................................... 2.27 Metals-Steel........................................................... 1.02 Miscellaneous Materials................................................ 0.36 Multi-Industry......................................................... 2.37 Non-Ferrous Metal...................................................... 1.03 Real Estate............................................................ 0.42 Recreation............................................................. 0.44 Shipping............................................................... 0.25 Telecommunications..................................................... 3.04 Textiles & Apparel..................................................... 0.11 Transportation......................................................... 0.50 Utilities.............................................................. 2.40 Wholesale & International Trade........................................ 0.15 ------ Total Non-U.S. Equities........................................ 48.78 SHORT-TERM INVESTMENTS................................................. 8.38* ------ TOTAL INVESTMENTS.............................................. 99.30 CASH AND OTHER ASSETS, LESS LIABILITIES.......................................................... 0.70 ------ NET ASSETS..................................................... 100.00% ======
- -------------------------------------------------------------------------------- * The Fund held a short position in stock index futures on June 30, 1997 which reduced U.S. equity exposure from 42.14% to 28.35%. This adjustment results in an increase in the Fund's exposure to Short-Term Investments from 8.38% to 22.17%. - -------------------------------------------------------------------------------- 27 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE -------- ----------- Equities -- 90.92% U.S. EQUITIES -- 42.14% Aetna Life & Casualty Co................................... 6,000 $ 614,250 Allergan, Inc.............................................. 15,700 499,456 Alza Corp. (b)............................................. 15,300 443,700 Aon Corp................................................... 30,750 1,591,312 Automatic Data Processing, Inc............................. 15,000 705,000 Beckman Instruments, Inc................................... 4,500 217,125 Birmingham Steel Corp...................................... 6,100 94,550 Boston Technology, Inc. (b)................................ 5,800 171,463 Browning-Ferris Industries, Inc............................ 11,600 385,700 Burlington Northern Santa Fe............................... 16,000 1,438,000 Centerior Energy Co........................................ 14,900 166,694 Champion Enterprises, Inc. (b)............................. 7,200 108,000 Champion International Corp................................ 400 22,100 Chase Manhattan Corp....................................... 21,400 2,077,137 CIGNA Corp................................................. 8,900 1,579,750 Circuit City Stores, Inc................................... 22,600 803,712 Citicorp................................................... 10,800 1,302,075 CMS Energy Corp............................................ 16,700 588,675 Coca-Cola Enterprises, Inc................................. 12,300 282,900 Comerica, Inc.............................................. 4,200 285,600 Comverse Technology, Inc. (b).............................. 2,800 145,600 Corning, Inc............................................... 19,600 1,090,250 Covance, Inc............................................... 7,700 148,706 CPC International, Inc..................................... 6,700 618,494 CVS Corp................................................... 9,700 497,125 Dial Corp.................................................. 9,200 143,750 Eastman Chemical Co........................................ 10,400 660,400 EMC Corp./Mass. (b)........................................ 29,100 1,134,900 Enron Corp................................................. 29,400 1,199,887 Entergy Corp............................................... 1,800 49,275 Federal Express Corp. (b).................................. 22,800 1,316,700 Federated Department Stores (b)............................ 8,800 305,800 FileNet Corp. (b).......................................... 3,000 43,500 First American Corp.-Tenn.................................. 4,000 153,500 First Bank System, Inc..................................... 2,400 204,900 First Data Corp............................................ 25,404 1,116,188 First of America Bank Corp................................. 3,000 137,250 First Security Corp........................................ 5,100 139,294 Fleetwood Enterprises, Inc................................. 2,300 68,569 Food Lion, Inc. Class A.................................... 28,100 201,091 Forest Laboratories, Inc. (b).............................. 7,000 290,062 Gannett Co., Inc........................................... 10,300 1,017,125 General Instrument Corp. (b)............................... 34,900 872,500 Genzyme Corp. (b).......................................... 6,200 172,050 Geon Co.................................................... 4,200 85,050 Goodyear Tire & Rubber Co.................................. 22,600 1,430,862 Harnischfeger Industries, Inc.............................. 10,200 423,300 Health Care and Retirement Corp. (b)....................... 11,050 368,794 Hibernia Corp. Class A..................................... 8,500 118,469 Informix Corp. (b)......................................... 8,200 73,800 Interpublic Group of Companies, Inc........................ 6,700 410,794 James River Corp. of Virginia.............................. 12,100 447,700 Kroger Co. (b)............................................. 8,400 243,600 Lockheed Martin Corp....................................... 18,751 1,941,900 Lyondell Petrochemical Co.................................. 16,700 364,269
SHARES VALUE -------- ----------- Manor Care, Inc............................................ 13,600 $ 443,700 Martin Marietta Materials, Inc............................. 4,535 146,821 Masco Corp................................................. 17,900 747,325 Mattel, Inc................................................ 22,450 760,494 Nabisco Holdings Corp. Class A............................. 15,600 622,050 National Service Industries Inc............................ 3,000 146,063 Nextel Communications, Inc. Class A (b).................... 23,300 441,244 Octel Communications Corp. (b)............................. 4,500 105,469 Old Republic International Corp............................ 5,550 168,234 Peco Energy Co............................................. 38,100 800,100 Pentair, Inc............................................... 8,100 266,288 Pharmacia & Upjohn, Inc.................................... 19,500 677,625 Philip Morris Companies, Inc............................... 43,200 1,917,000 Raytheon Co................................................ 5,300 270,300 Regions Financial Corp..................................... 4,000 126,500 Reynolds & Reynolds Co. Class A............................ 5,500 86,625 Schering Plough Corp....................................... 26,800 1,283,050 Seagate Technology, Inc. (b)............................... 7,100 249,831 Timken Co.................................................. 10,600 376,963 Trinity Industries, Inc.................................... 2,600 82,550 Tyson Foods, Inc. Class A.................................. 31,100 594,787 UCAR International, Inc. (b)............................... 400 18,300 Ultramar Diamond Shamrock Corp............................. 17,452 569,371 US Bancorp................................................. 9,300 596,362 Vencor, Inc. (b)........................................... 8,000 338,000 Viad Corp.................................................. 15,000 288,750 Westvaco Corp.............................................. 3,650 114,747 Witco Corp................................................. 1,000 37,938 Xerox Corp................................................. 30,900 2,437,237 York International Corp.................................... 9,500 437,000 360 Communications Co. (b)................................. 4,533 77,628 ----------- Total U.S. Equities........................................ 46,241,005 ----------- NON-U.S. EQUITIES -- 48.78% AUSTRALIA -- 2.49% Amcor Ltd.................................................. 16,100 106,146 Boral Ltd.................................................. 28,800 89,976 Brambles Industries Ltd.................................... 4,000 78,489 Broken Hill Proprietary Co. Ltd............................ 34,450 502,854 Coca-Cola Amatil Ltd....................................... 7,000 90,204 CSR Ltd.................................................... 20,000 76,868 David Jones Ltd............................................ 71,000 98,407 Lend Lease Corp. Ltd....................................... 4,197 88,043 M.I.M. Holdings Ltd........................................ 51,829 76,107 National Australia Bank Ltd................................ 24,475 347,846 News Corp. Ltd............................................. 50,536 240,421 News Corp. Ltd. Preferred.................................. 13,000 50,841 Pacific Dunlop Ltd......................................... 33,600 98,678 Qantas Airways Ltd......................................... 35,664 82,830 Rio Tinto Ltd.............................................. 13,563 229,444 Santos Ltd................................................. 8,000 33,384 Westpac Banking Corp. Ltd.................................. 41,945 250,458 WMC Ltd.................................................... 21,700 135,751 Woolworth's Ltd............................................ 16,000 52,144 ----------- 2,728,891 -----------
- -------------------------------------------------------------------------------- 28 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------ ---------- BELGIUM -- 1.59% Delhaize-Le Lion S.A.......................................... 2,200 $ 115,661 Electrabel S.A................................................ 1,150 246,634 Fortis AG..................................................... 88 20 Fortis AG Strip (b)........................................... 1,168 241,397 General de Banque S.A......................................... 300 115,577 Groupe Bruxelles Lambert S.A.................................. 730 122,445 Kredietbank NV................................................ 465 187,552 Kredietbank VVPR.............................................. 11 4,345 Petrofina S.A................................................. 610 231,189 Societe Generale de Belgique.................................. 1,140 106,548 Solvay S.A. Class A........................................... 215 126,787 Tractebel..................................................... 300 125,174 Tractebel Warrants "99" (b)................................... 200 2,147 Union Miniere Group S.A. (b).................................. 1,302 122,051 ---------- 1,747,527 ---------- CANADA -- 1.36% Alcan Aluminium Ltd........................................... 2,900 99,007 Bank of Montreal.............................................. 2,700 105,487 Barrick Gold Corp............................................. 1,600 34,851 BCE, Inc...................................................... 3,200 89,069 Canadian National Railway Co.................................. 2,000 87,272 Canadian Pacific Ltd.......................................... 6,700 190,860 Hudson's Bay Co............................................... 3,400 76,399 Imperial Oil Ltd.............................................. 2,400 123,079 MacMillan Bloedel Ltd......................................... 4,100 56,317 Moore Corp. Ltd............................................... 2,200 43,375 Noranda, Inc.................................................. 2,600 56,067 Northern Telecom Ltd.......................................... 1,000 90,207 NOVA Corp..................................................... 4,300 36,779 Royal Bank of Canada.......................................... 3,000 136,018 Seagram Co. Ltd............................................... 2,600 104,595 Thomson Corp.................................................. 3,900 89,896 TransCanada Pipelines Ltd..................................... 3,400 68,389 ---------- 1,487,667 ---------- FINLAND -- 0.32% Merita Ltd. Class A........................................... 11,700 38,968 Nokia Ab Class A.............................................. 2,300 171,763 Outokumpu Class A............................................. 2,000 39,660 Pohjola Insurance Group Class B............................... 500 14,824 Sampo Insurance Co. Ltd. Class A.............................. 200 19,445 The Rauma Group............................................... 83 1,901 UPM-Kymmene Corp.............................................. 3,000 69,308 ---------- 355,869 ---------- FRANCE -- 3.29% Accor S.A..................................................... 977 146,442 Alcatel Alsthom............................................... 1,261 158,082 AXA UAP....................................................... 2,722 169,458 AXA UAP Rights (b)............................................ 1,722 6,687 Banque Nationale de Paris..................................... 4,780 197,192 Cie Bancaire S.A.............................................. 1,003 128,130 Cie de Saint Gobain........................................... 1,357 198,084
SHARES VALUE ------ ---------- Cie de Suez................................................... 24,340 $ 59,907 Cie Generale des Eaux......................................... 971 124,539 Cie Generale des Eaux Warrants "01" (b)....................... 1,771 1,062 Colas......................................................... 330 43,561 Dexia France.................................................. 1,403 136,692 Elf Aquitaine S.A............................................. 2,150 232,175 Groupe Danone................................................. 900 148,850 Lafarge S.A................................................... 1,500 93,382 Lagardere S.C.A............................................... 3,000 87,225 LVMH.......................................................... 530 142,633 Michelin Class B.............................................. 2,934 176,360 Pechiney S.A. Class A......................................... 3,013 118,806 Peugeot S.A................................................... 1,790 173,177 Rhone-Poulenc Class A......................................... 3,800 155,340 SEITA......................................................... 3,200 101,380 Societe Generale.............................................. 1,571 175,537 Suez Lyonnaise des Eaux S.A................................... 1,500 151,252 Thomson CSF................................................... 3,100 79,942 Total S.A. Class B............................................ 1,759 177,967 Usinor Sacilor................................................ 12,400 223,880 ---------- 3,607,742 ---------- GERMANY -- 4.80% Allianz AG Holding............................................ 2,150 459,586 BASF AG....................................................... 5,800 214,180 Bayer AG...................................................... 7,950 306,576 Bayerische Motoren Werke AG................................... 280 231,057 Commerzbank AG................................................ 6,050 172,897 Daimler-Benz AG............................................... 3,200 260,576 Deutsche Bank AG.............................................. 6,150 361,391 Deutsche Telekom AG........................................... 15,300 376,222 Henkel KGaA-Vorzug AG......................................... 2,550 143,699 Hochtief AG................................................... 1,750 78,331 Hoechst AG.................................................... 2,600 110,260 M.A.N. AG..................................................... 420 130,873 Mannesmann AG................................................. 530 236,928 Metro AG...................................................... 1,870 203,891 Muenchener Rueckver AG........................................ 112 317,503 Muenchener Rueckver AG Warrants "98" (b)...................... 3 1,076 Preussag AG................................................... 660 194,296 RWE AG........................................................ 4,700 202,284 Schering AG................................................... 2,550 273,350 Siemens AG.................................................... 2,600 155,842 Thyssen AG.................................................... 950 228,696 Veba AG....................................................... 5,350 302,407 Volkswagen AG................................................. 400 303,455 ---------- 5,265,376 ---------- HONG KONG -- 0.59% Cheung Kong Holdings Ltd...................................... 6,000 59,247 China Light & Power Co. Ltd................................... 11,000 62,331 Guoco Group Ltd............................................... 9,000 47,397 Hang Seng Bank Ltd............................................ 5,800 82,726 Hong Kong Telecommunications Ltd.............................. 16,000 38,207
- -------------------------------------------------------------------------------- 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- HONG KONG (CONTINUED) Hutchison Whampoa Ltd....................................... 14,000 $ 121,074 Jardine Matheson Holdings ADR (c)........................... 3,600 25,560 New World Development Co. Ltd............................... 9,000 53,670 Sun Hung Kai Properties Ltd................................. 5,000 60,182 Swire Pacific Ltd. Class A.................................. 7,000 63,022 Wharf (Holdings) Ltd........................................ 8,000 34,696 ----------- 648,112 ----------- ITALY -- 1.66% Assicurazioni Generali...................................... 9,540 173,251 Banca Commerciale Italiana.................................. 26,000 53,788 Credito Italiano Spa........................................ 67,000 122,463 Danieli & Co. Savings (Risp)................................ 13,400 46,859 Edison Spa.................................................. 8,000 39,753 ENI ADR (c)................................................. 2,300 130,812 ENI Spa..................................................... 33,000 186,674 Fiat Spa-Priv............................................... 73,000 134,716 INA-Istituto Nazionale delle Assicurazioni.................. 33,000 50,232 Istituto Mobilaire Italiano Spa............................. 10,500 94,417 Italgas Spa................................................. 16,000 51,719 La Rinascente Spa........................................... 8,000 44,408 La Rinascente Spa Rights (b)................................ 23,000 1,027 La Rinascente Spa RNC....................................... 15,000 36,453 La Rinascente Spa RNC Rights (b)............................ 23,000 3,744 La Rinascente Spa Warrants "99" (b)......................... 550 272 Mediobanca Spa.............................................. 2,800 16,983 Montedison Spa (b).......................................... 175,560 115,767 SAI-Savings (Risp).......................................... 13,000 40,035 Telecom Italia Mobile Spa................................... 28,000 90,508 Telecom Italia Mobile Spa RNC............................... 79,000 141,146 Telecom Italia Spa.......................................... 20,000 59,830 Telecom Italia Spa RNC...................................... 96,000 189,856 ----------- 1,824,713 ----------- JAPAN -- 13.53% Amada Co. Ltd............................................... 25,000 220,659 Asahi Glass Co. Ltd......................................... 27,000 268,985 Bank of Tokyo-Mitsubishi, Ltd............................... 25,000 502,491 Canon, Inc.................................................. 18,000 490,780 Canon Sales Co., Inc........................................ 7,600 177,331 Citizen Watch Co. Ltd....................................... 23,000 177,681 Dai Nippon Printing Co. Ltd................................. 21,000 475,312 Daiichi Pharmaceutical Co. Ltd.............................. 16,000 282,443 Daikin Industries Ltd....................................... 23,000 209,036 Daiwa House Industry Co. Ltd................................ 11,000 134,580 Fanuc....................................................... 8,900 342,218 Fujitsu..................................................... 14,000 194,529 Hitachi Ltd................................................. 44,000 492,179 Honda Motor Co.............................................. 6,000 180,897 Inax........................................................ 24,000 179,953 Isetan...................................................... 9,000 111,684 Ito Yokado Co. Ltd.......................................... 9,000 523,027 Kaneka Corp................................................. 21,000 131,766 Keio Teito Electric Railway................................. 28,000 133,357 Kinki Nippon Railway........................................ 27,000 165,166
SHARES VALUE ------- ----------- Kirin Brewery Co. Ltd........................................ 26,000 $ 270,384 Kokuyo....................................................... 7,000 189,636 Kuraray Co. Ltd.............................................. 28,000 278,948 Kyocera Corp................................................. 3,000 238,574 Maeda Road Construction...................................... 5,000 43,039 Marui Co. Ltd................................................ 12,000 223,368 Matsushita Electric Industrial Co............................ 34,000 686,358 Mitsubishi Paper Mills....................................... 27,000 105,707 NGK Insulators............................................... 37,000 407,411 Nintendo Corp. Ltd........................................... 1,900 159,399 Nippon Denso Co. Ltd......................................... 11,000 263,392 Nippon Meat Packers, Inc..................................... 15,000 194,005 Nippon Steel Co.............................................. 19,000 60,771 Okumura...................................................... 25,000 132,614 Osaka Gas Co................................................. 48,000 138,006 Sankyo Co. Ltd............................................... 16,000 538,320 Sanwa Bank Ltd............................................... 11,000 163,419 Secom........................................................ 5,000 367,474 Seino Transportation......................................... 15,000 162,545 Sekisui House Ltd............................................ 44,000 446,037 Shinmaywa Industries Ltd..................................... 14,000 98,733 Sony Corp.................................................... 5,000 436,511 Sumitomo Bank................................................ 24,000 394,302 Sumitomo Electric Industries................................. 19,000 318,797 Sumitomo Trust & Banking..................................... 14,000 150,485 Takeda Chemical Industries................................... 14,000 393,953 TDK Corp..................................................... 4,000 293,979 Tokio Marine & Fire Insurance Co............................. 21,000 275,277 Tokyo Electric Power......................................... 6,300 132,684 Tokyo Steel Mfg.............................................. 16,500 184,567 Tonen Corp................................................... 17,000 205,016 Toray Industries, Inc........................................ 92,000 656,856 Toshiba Corp................................................. 53,000 341,353 Toyo Suisan Kaisha........................................... 11,000 112,470 Toyota Motor Corp............................................ 6,000 177,226 Yamazaki Baking Co. Ltd...................................... 12,000 211,833 ----------- 14,847,523 ----------- MALAYSIA -- 0.85% Hume Industries (Malaysia) Bhd............................... 11,000 50,555 Kuala Lumpur Kepong Bhd...................................... 30,000 74,287 Land & General Holdings Bhd.................................. 24,000 27,575 Malayan Banking Bhd.......................................... 11,600 121,791 Malaysia International Shipping Bhd (Frgn.).................. 10,000 25,951 Nestle (Malaysia) Bhd........................................ 3,000 22,464 New Straits Times Press Bhd.................................. 7,000 41,046 Perusahaan Otomobil Nasional Bhd............................. 5,000 23,376 Public Bank Bhd (Frgn.)...................................... 27,664 43,184 Resorts World Bhd............................................ 14,000 42,155 Rothmans of Pall Mall Bhd.................................... 2,000 19,651 Sime Darby Bhd............................................... 29,000 96,514 Telekom Malaysia Bhd......................................... 18,500 86,490 Tenaga Nasional Bhd.......................................... 29,000 141,323 UMW Holdings Bhd............................................. 6,000 28,288
- -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ---------- MALAYSIA (CONTINUED) United Engineers Ltd......................................... 8,000 $ 57,686 YTL Corp. Bhd................................................ 8,000 24,723 YTL Power International Bhd (b).............................. 800 1,008 ---------- 928,067 ---------- NETHERLANDS -- 3.09% ABN AMRO Holdings NV......................................... 15,119 282,425 Akzo Nobel NV................................................ 400 54,918 DSM NV....................................................... 880 87,717 Elsevier NV.................................................. 11,900 199,214 Heineken NV.................................................. 500 85,490 Hoogovens NV................................................. 1,448 80,868 ING Groep NV................................................. 10,106 466,796 KLM Royal Dutch Air Lines NV................................. 4,600 142,041 KPN NV....................................................... 7,965 313,022 Philips Electronics NV....................................... 4,050 290,629 Royal Dutch Petroleum Co..................................... 15,600 812,923 Royal Dutch Petroleum Co. NY Shares (c)...................... 4,800 261,000 Unilever NV.................................................. 1,500 316,337 ---------- 3,393,380 ---------- NEW ZEALAND -- 1.74% Brierley Investments Ltd..................................... 320,000 312,330 Carter Holt Harvey Ltd....................................... 110,500 285,357 Fletcher Challenge Building.................................. 38,220 114,762 Fletcher Challenge Energy.................................... 42,172 127,200 Fletcher Challenge Forest Ltd................................ 65,803 95,447 Fletcher Challenge Paper..................................... 75,400 182,449 Telecom Corp. of New Zealand Ltd............................. 138,000 701,524 Telecom Corp. of New Zealand Ltd. ADS (c).................... 2,200 89,650 ---------- 1,908,719 ---------- SINGAPORE -- 0.72% City Developments Ltd........................................ 7,000 68,541 DBS Land Ltd................................................. 9,000 28,452 Development Bank of Singapore Ltd............................ 8,000 100,713 Fraser & Neave Ltd........................................... 2,000 14,268 Hotel Properties Ltd......................................... 19,000 32,291 Keppel Corp. Ltd. (b)........................................ 3,750 16,654 Oversea-Chinese Banking Corp. Ltd............................ 14,600 151,126 Singapore Airlines Ltd. (Frgn.).............................. 9,000 80,571 Singapore Press Holdings Ltd. (Frgn.)........................ 5,000 100,713 Singapore Telecommunications, Ltd............................ 38,000 70,164 United Overseas Bank Ltd. (Frgn.)............................ 9,000 92,530 Wing Tai Holdings Ltd........................................ 11,000 31,697 ---------- 787,720 ---------- SPAIN -- 1.15% Acerinox S.A................................................. 300 56,320 Banco Bilbao-Vizcaya S.A..................................... 1,500 122,085 Banco Central Hispanoamericano............................... 1,700 62,304 Banco Popular Espanol S.A.................................... 400 98,184
SHARES VALUE ------- ---------- Banco Santander S.A.......................................... 3,600 $ 111,131 Empresa Nacional de Electridad S.A........................... 2,350 197,658 Fomento de Construcciones y Contratas S.A.................... 500 63,881 Gas Natural SDG S.A.......................................... 400 87,550 Iberdrola S.A................................................ 7,700 97,382 Mapfre Corp.................................................. 700 37,316 Repsol S.A................................................... 2,300 97,430 Telefonica de Espana......................................... 5,400 156,415 Vallehermosa S.A............................................. 1,200 32,434 Viscofan Envolturas Celulosicas S.A.......................... 2,000 46,848 ---------- 1,266,938 ---------- SWITZERLAND -- 1.24% ABB AG (Bearer).............................................. 55 83,373 Alusuisse-Lonza Holding AG (Reg.)............................ 35 36,299 Ciba Specialty Chemicals AG (Reg.)........................... 160 14,816 CS Holdings AG (Reg.)........................................ 646 83,082 Nestle S.A. (Reg.)........................................... 200 264,216 Novartis AG (Reg.)........................................... 251 400,761 Roche Holding AG (Gen.)...................................... 26 235,496 Swiss Reinsurance Co. (Reg.)................................. 60 84,985 UBS (Bearer)................................................. 42 48,110 Zurich Versicherungs (Reg.).................................. 273 108,796 ---------- 1,359,934 ---------- UNITED KINGDOM -- 10.36% Abbey National PLC........................................... 13,000 177,415 Bass PLC..................................................... 8,800 107,355 B.A.T. Industries PLC........................................ 49,000 438,337 BG PLC....................................................... 100,500 367,979 Booker PLC................................................... 10,500 47,707 British Energy PLC........................................... 89,000 217,001 British Petroleum Co. PLC.................................... 46,807 581,923 British Steel PLC............................................ 113,000 281,160 British Telecommunications PLC............................... 78,700 584,176 BTR PLC...................................................... 24,000 82,084 Centrica PLC................................................. 93,500 113,597 Charter PLC.................................................. 13,902 184,519 Coats Viyella PLC............................................ 55,000 115,337 FKI PLC...................................................... 58,875 166,577 General Electric Co. PLC..................................... 106,100 633,934 Glaxo Wellcome PLC........................................... 35,500 734,106 Grand Metropolitan PLC....................................... 25,000 240,493 Guinness PLC................................................. 33,300 325,878 Hanson PLC................................................... 25,000 123,991 Hillsdown Holdings PLC....................................... 72,000 203,112 House of Fraser PLC.......................................... 79,000 209,711 HSBC Holdings PLC............................................ 15,000 461,471 Imperial Chemical Industries PLC............................. 5,000 69,402 Inchcape PLC................................................. 24,000 113,040 Legal & General Group PLC.................................... 35,000 237,081 Lloyds TSB Group PLC......................................... 54,630 560,984 Marks & Spencer PLC.......................................... 41,500 343,963 Mirror Group PLC............................................. 36,000 112,640
- -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ---------- ----------- UNITED KINGDOM (CONTINUED) National Westminster Bank PLC............................ 13,800 $ 185,462 Northern Foods PLC....................................... 38,000 125,855 Peninsular & Oriental Steam Navigation Co................ 25,000 248,814 Reckitt & Colman PLC..................................... 8,175 122,043 Redland PLC.............................................. 13,500 76,392 Reuters Holdings PLC..................................... 16,000 168,561 Rio Tinto PLC............................................ 14,700 256,030 RJB Mining PLC........................................... 30,000 179,745 Royal & Sun Alliance Insurance Group PLC................. 37,697 278,563 Sainsbury (J.) PLC....................................... 30,000 181,743 Scottish Hydro-Electric PLC.............................. 18,200 125,705 Sears PLC................................................ 91,000 102,987 Sedgwick Group PLC....................................... 60,000 122,826 SmithKline Beecham PLC................................... 18,900 347,740 Smurfit (Jefferson) Group PLC............................ 54,000 155,480 Tesco PLC................................................ 27,000 166,714 Thames Water PLC......................................... 18,000 206,707 Unilever PLC............................................. 3,500 100,133 Vodafone Group PLC....................................... 23,600 115,084 Williams PLC............................................. 32,000 173,088 Yorkshire Water PLC...................................... 15,000 98,111 ----------- 11,372,756 ----------- Total Non-U.S. Equities.................................. 53,530,934 ----------- Total Equities (Cost $82,959,665)........................ 99,771,939 ----------- FACE AMOUNT ---------- Short-Term Investments -- 8.38% U.S. GOVERNMENT OBLIGATIONS -- 0.65% U.S. Treasury Bills 5.375%, due 11/13/97................. $ 720,000 706,095 ----------- COMMERCIAL PAPER -- 7.73% American Stores Co. 5.830%, due 07/23/97.................................... 500,000 498,218 Case Credit Corp. 5.760%, due 07/21/97.................................... 500,000 498,390 Enron Oil & Gas 6.520%, due 07/01/97.................................... 2,001,000 2,001,000 Hughes Electronics Corp. 5.780%, due 07/11/97.................................... 500,000 499,197 5.850%, due 08/11/97.................................... 500,000 496,669 Marriott Corp. 5.770%, due 07/08/97.................................... 500,000 499,439 Norfolk Southern Corp. 5.770%, due 07/10/97.................................... 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97.................................... 500,000 496,536
FACE AMOUNT VALUE ---------- ------------ Tenneco, Inc. 5.780%, due 07/17/97.................................. $ 500,000 $ 498,716 5.800%, due 07/23/97.................................. 500,000 498,228 Textron Financial Corp. 6.400%, due 07/01/97.................................. 2,000,000 2,000,000 ------------ 8,485,672 ------------ Total Short-Term Investments (Cost $9,191,159)..................................... 9,191,767 ------------ Total Investments (Cost $92,150,824) -- 99.30% (a)...................... 108,963,706 ------------ Cash and other assets, less liabilities -- 0.70%.................................. 771,142 ------------ Net Assets -- 100%..................................... $109,734,848 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $92,209,751; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,850,801 Gross unrealized depreciation................................ (2,096,846) ----------- Net unrealized appreciation................................ $16,753,955 ===========
(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 June 30, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ---------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar.............................. 12/03/97 1,400,000 $1,024,021 $ (4,257) Japanese Yen................................. 12/03/97 380,000,000 3,399,543 39,981 Swedish Krona................................ 12/03/97 9,900,000 1,288,522 (3,990) Swiss Franc.................................. 12/03/97 3,200,000 2,237,371 (78,449) FORWARD FOREIGN CURRENCY SALES CONTRACTS Australian Dollar............................ 12/03/97 3,200,000 2,403,485 44,515 Belgian Franc................................ 12/03/97 36,800,000 1,035,047 24,555 British Pounds............................... 12/03/97 1,850,000 3,064,233 (46,328) Hong Kong Dollar............................. 12/03/97 4,400,000 566,988 44 Japanese Yen................................. 12/03/97 80,000,000 715,693 22,655 -------- Total.................................... $ (1,274) ========
FUTURES CONTRACTS (NOTE 5) The Global Equity Fund had the following open index futures contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE PROCEEDS VALUE LOSS -------------- ----------- ----------- ---------- INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 34 contracts...... September 1997 $14,830,760 $15,134,250 $(303,490)
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $706,095. See accompanying notes to the financial statements. - -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $92,150,824) (Note 1)................ $108,963,706 Foreign currency, at value (Cost $205,638)....................... 203,894 Receivables: Investment securities sold...................................... 713,846 Dividends....................................................... 511,404 Interest........................................................ 20,000 Fund shares sold................................................ 77,238 Variation margin (Note 5)....................................... 112,402 Other assets..................................................... 24,096 ------------ TOTAL ASSETS.................................................. 110,626,586 ------------ LIABILITIES: Payables: Investment securities purchased................................. 643,775 Fund shares redeemed............................................ 7,788 Due to custodian bank........................................... 26,595 Investment advisory fees (Note 2)............................... 101,236 Accrued expenses................................................ 111,070 Net unrealized depreciation on forward foreign currency con- tracts.......................................................... 1,274 ------------ TOTAL LIABILITIES............................................. 891,738 ------------ NET ASSETS........................................................ $109,734,848 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $ 89,355,851 Accumulated undistributed net investment income.................. 336,561 Accumulated net realized gain.................................... 3,533,361 Net unrealized appreciation...................................... 16,509,075 ------------ NET ASSETS.................................................... $109,734,848 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $48,053,593 and 3,765,449 shares issued and outstanding) (Note 7)...................................... $ 12.76 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 78 shares issued and outstanding) (Note 7).......... $ 12.76 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $61,680,255 and 4,845,038 shares issued and outstanding) (Note 7)...................................... $ 12.73 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Dividends (net of $136,196 for foreign taxes withheld)........... $ 1,593,631 Interest......................................................... 498,155 ----------- TOTAL INCOME.................................................. 2,091,786 ----------- EXPENSES: Advisory (Note 2)................................................ 641,075 Distribution (Note 6)............................................ 324,716 Accounting....................................................... 92,251 Custodian........................................................ 85,485 Other............................................................ 183,508 ----------- TOTAL EXPENSES................................................ 1,327,035 Expenses waived by Advisor (Note 2)........................... (195,511) ----------- NET EXPENSES.................................................. 1,131,524 ----------- NET INVESTMENT INCOME ........................................ 960,262 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 5,245,255 Futures contracts............................................... (1,943,047) Foreign currency transactions................................... 1,930,570 ----------- Net realized gain............................................. 5,232,778 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 10,953,503 Futures contracts............................................... (330,387) Forward contracts............................................... (5,030) Translation of other assets and liabilities denominated in for- eign currency.................................................. 1,431 ----------- Change in net unrealized appreciation or depreciation......... 10,619,517 ----------- Net realized and unrealized gain.................................. 15,852,295 ----------- Net increase in net assets resulting from operations.............. $16,812,557 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 960,262 $ 462,604 Net realized gain................................. 5,232,778 8,259,766 Change in net unrealized appreciation or depreciation..................................... 10,619,517 1,258,707 ------------ ----------- Net increase in net assets resulting from opera- tions............................................ 16,812,557 9,981,077 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................... (425,929) (295,340) SwissKey Class.................................... (253,945) (41,698) Distributions from net realized gain: Brinson Class I................................... (3,076,886) (1,399,995) SwissKey Class.................................... (3,396,000) (1,621,590) ------------ ----------- Total distributions to shareholders............... (7,152,760) (3,358,623) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 42,520,630 11,563,213 Shares issued in acquisition of SBC World Growth Fund (Note 1).................................... -- 25,670,575 Shares issued on reinvestment of distributions.... 6,711,937 3,336,320 Shares redeemed................................... (9,295,598) (7,760,045) ------------ ----------- Net increase in net assets resulting from capital share transactions (Note 7)...................... 39,936,969 32,810,063 ------------ ----------- TOTAL INCREASE IN NET ASSETS................... 49,596,766 39,432,517 ------------ ----------- NET ASSETS: Beginning of year................................. 60,138,082 20,705,565 ------------ ----------- End of year (including accumulated undistributed net investment income of $336,561 and $90,547, respectively).................................... $109,734,848 $60,138,082 ============ ===========
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.
YEAR ENDED JUNE 30, JANUARY 28, 1994* ------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $ 11.57 $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- ------- Income from investment opera- tions: Net investment income....... 0.16 0.18 0.18 0.07 Net realized and unrealized gain (loss)................ 2.14 2.29 0.39 (0.54) ------- ------- ------- ------- Total income (loss) from investment operations.... 2.30 2.47 0.57 (0.47) ------- ------- ------- ------- Less distributions: Distributions from net in- vestment income............ (0.12) (0.14) (0.04) (0.04) Distributions from and in excess of net realized gain.............. (0.99) (0.69) (0.09) -- ------- ------- ------- ------- Total distributions....... (1.11) (0.83) (0.13) (0.04) ------- ------- ------- ------- Net asset value, end of peri- od........................... $ 12.76 $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= ======= Total return (non-annualized). 21.26% 25.66% 6.06% (4.70)% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $48,054 $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 1.25% 1.77% 2.06% 2.65%** After expense reimbursement. 1.00% 1.00% 1.00% 1.00%** Ratio of net investment in- come to average net assets: Before expense reimburse- ment....................... 1.35% 0.57% 0.71% 0.24%** After expense reimbursement. 1.60% 1.34% 1.77% 1.89%** Portfolio turnover rate...... 32% 74% 36% 21% Average commission rate paid per share................... $0.0246 $0.0288 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 11.57 $ 10.35 ------- ------- Income from investment operations: Net investment gain (loss)...................... 0.08 (0.01) Net realized and unrealized gain................ 2.13 1.93 ------- ------- Total income from investment operations....... 2.21 1.92 ------- ------- Less distributions: Distributions from net investment income........ (0.06) (0.01) Distributions from net realized gain............ (0.99) (0.69) ------- ------- Total distributions........................... (1.05) (0.70) ------- ------- Net asset value, end of period.................... $ 12.73 $ 11.57 ======= ======= Total return (non-annualized)..................... 20.34% 19.25% Ratios/Supplemental data Net assets, end of period (in 000s).............. $61,680 $33,012 Ratio of expenses to average net assets: Before expense reimbursement.................... 2.00% 2.53%** After expense reimbursement..................... 1.75% 1.76%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement.................... 0.60% (0.19)%** After expense reimbursement..................... 0.85% 0.58%** Portfolio turnover rate.......................... 32% 74% Average commission rate paid per share........... $0.0246 $0.0288
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 38 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] 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 7.48% since July 31, 1993 (performance inception date). Its benchmark, the Salomon World Government Bond Index, returned 6.91%. This performance was achieved with volatility of 4.21%, below the 5.41% volatility of the benchmark. For the year ended June 30, 1997, the Fund returned 7.71%, while the benchmark returned 3.89%. During the first half of 1997, the Fund returned 0.63%, compared to the index return of -1.23% on an unhedged basis. The negative index return reflected weakness of other currencies relative to the U.S. dollar. On a dollar-hedged basis the index returned 4.02%, ranging from 6.77% in Switzerland to 2.59% in U.S. Treasuries. This unremarkable performance reflected a period without major macroeconomic surprises, although U.S. GDP and job growth were somewhat faster than initially expected. Market allocation made a minor negative contribution to performance. The Fund moved to overweight U.S. bonds in February, and this hampered performance, as did underweighting of Japan. However, the Fund benefited from being overweight in Denmark and from a well-timed allocation to Australian bonds. The deutschemark and related European currencies fell against the U.S. dollar (the DM by 11.6%) during the period. The gap in short-term interest rates between the U.S. and Germany widened slightly, and there was growing concern that European Monetary Union might bias the participants towards depreciation. The Japanese yen depreciated in the first quarter but recovered sharply in the first half of May, and ended the period 1.4% higher against the dollar. Currency allocation was the dominant contributor to relative performance during the first half of 1997. The Fund started the year with a substantial defensive overweight in U.S. dollars. This position was sharply reduced in February and again in March, in response to market developments. Bond management made a small positive contribution to performance. The Fund benefited from issue selection in the U.S. The short duration strategy in Japan detracted from performance in the first quarter; however, duration was then reduced further, and bond prices fell thereafter. Holdings of Canadian Real Return Bonds hurt relative performance. The range of durations at June 30, 1997 was from 0.5 times the market index in Japan to 1.3 times in Denmark and the U.S. ================================================================================ 39 Global Bond Fund
- --------------------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Total Return 6 months 1 year 3 years 7/31/93* ended ended ended to 6/30/97 6/30/97 6/30/97 6/30/97 - --------------------------------------------------------------------------------------------- Brinson Global Bond Fund 0.63% 7.71% 10.16% 7.48% Salomon World Government Bond Index (currency unhedged) -1.23 3.89 7.39 6.91 Salomon World Government Bond Index (currency hedged) 4.02 11.17 10.51 7.88 - ---------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Bond Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund and the Salomon World Government Bond Index (currency unhedged and hedged) if you had invested $1,000,000 on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 1997. 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 $1,326,556 ====== Brinson Global Bond Fund $1,299,088 ______ Salomon World Gov't Bond Index (currency unhedged) $1,345,820 ______ Salomon World Gov't Bond Index (currency hedged)
Solomon World Gov't Solomon World Gov't Brinson Global Bond Index Bond Index Bond Fund (currency unhedged) (currency hedged) 7/31/93 $1,000,000 $1,000,000 $1,000,000 12/31/93 $1,038,591 $1,041,929 $1,049,630 6/30/94 $ 992,146 $1,048,832 $ 997,225 12/31/94 $1,002,396 $1,066,185 $1,010,266 6/30/95 $1,104,638 $1,245,919 $1,111,263 12/31/95 $1,206,119 $1,269,184 $1,190,433 6/30/96 $1,231,653 $1,250,502 $1,210,592 12/31/96 $1,318,299 $1,315,287 $1,293,783 6/30/97 $1,326,556 $1,299,088 $1,345,820
[GRAPH APPEARS HERE] 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. ================================================================================ 40 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Asset Allocation As of June 30, 1997 Current Benchmark Strategy - ---------------------------------------------- U.S. 33.4% 39.4% Japan 19.7 6.2 Australia 1.0 4.3 Austria 0.9 0.0 Belgium 2.5 2.5 Canada 3.4 8.3 Denmark 1.6 6.3 Finland 0.5 0.0 France 7.0 2.2 Germany 9.0 13.2 Ireland 0.4 0.0 Italy 6.5 5.3 Netherlands 3.2 3.2 Spain 2.8 1.3 Sweden 1.5 1.5 Switzerland 0.4 0.0 U.K. 6.2 6.3 - ---------------------------------------------- 100.0% 100.0% Currency Allocation As of June 30, 1997 Current Benchmark Strategy - ---------------------------------------------- U.S. 33.4% 36.9% Japan 19.7 19.7 Australia 1.0 1.0 Austria 0.9 0.9 Belgium 2.5 2.5 Canada 3.4 3.4 Denmark 1.6 1.6 Finland 0.5 0.5 France 7.0 7.0 Germany 9.0 9.0 Ireland 0.4 0.4 Italy 6.5 6.5 Netherlands 3.2 3.2 Spain 2.8 2.8 Sweden 1.5 1.5 Switzerland 0.4 0.4 U.K. 6.2 2.7 - ---------------------------------------------- 100.0% 100.0% Industry Diversification As a Percent of Net Assets As of June 30, 1997 - ---------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed......................... 2.04 CMO.................................. 0.54 Consumer............................. 0.95 Financial............................ 2.21 Industrial........................... 0.22 Transportation....................... 0.36 ------ 6.32 International Dollar Bonds........... 2.47 U.S. Government Agencies............. 13.15 U.S. Government Obligations.......... 14.45 ------ Total U.S. Bonds.............. 36.39 ------ NON-U.S. BONDS Foreign Financial Bonds............... 13.99 Foreign Government Bonds.............. 42.16 ------ Total Non-U.S. Bonds.......... 56.15 ------ SHORT-TERM INVESTMENTS................ 11.28* ------ TOTAL INVESTMENTS............. 103.82 LIABILITIES, LESS CASH AND OTHER ASSETS.............................. (3.82) ------ NET ASSETS.................... 100.00% ====== - -------------------------------------------------------------------------------- *The Fund held a long position in U.S. Treasury futures on June 30, 1997 which increased U.S. bond exposure from 36.39% to 38.06% and decreased the Fund's exposure to Short-Term Investments from 11.28% to 9.61%. - -------------------------------------------------------------------------------- 41 GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------- ---------- Bonds -- 92.54% U.S. BONDS -- 36.39% U.S. CORPORATE BONDS -- 6.32% Capital One Bank 6.830%, due 05/17/99 ..................................... $200,000 $ 200,809 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02...................................... 125,000 124,054 Chrysler Financial Corp. MTN 6.500%, due 08/21/97...................................... 165,000 165,197 Continental Airlines, Inc. Pass Thru 144-A 7.461%, due 04/01/15.................................................. 210,000 212,442 Countrywide Capital, Inc. 8.000%, due 12/15/26...................................... 250,000 245,545 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00...................................... 375,000 375,000 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03.................................................. 240,000 237,530 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00...................................... 50,468 50,474 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09...................................... 332,540 313,928 Lockheed Martin Corp. 7.700%, due 06/15/08...................................... 125,000 130,620 Metlife Funding 6.850%, due 05/20/08...................................... 225,000 225,598 News America Holdings 7.750%, due 01/20/24...................................... 275,000 260,924 Salomon, Inc. 6.500%, due 03/01/00...................................... 300,000 298,101 Sears Roebuck Acceptance MTN 95-5A 6.050%, due 01/16/08.... 225,000 218,635 The Money Store 94-A3 5.525%, due 09/15/18...................................... 76,492 74,927 Time Warner, Inc. 9.150%, due 02/01/23...................................... 265,000 292,471 World Omni Automobile Lease Securitization Trust 6.850%, due 06/25/03...................................... 255,000 257,864 ---------- 3,684,119 ---------- INTERNATIONAL DOLLAR BONDS -- 2.47% DR Investments 144-A 7.450%, due 05/15/07...................................... 455,000 459,576 Pan Pacific Industry 144-A 0.000%, due 04/28/07...................................... 715,000 315,133 Province of Quebec 7.500%, due 07/15/23...................................... 235,000 231,165 Republic of South Africa 9.625%, due 12/15/99...................................... 125,000 132,094 Royal Bank of Scotland 7.375%, due 04/29/49...................................... 300,000 298,987 ---------- 1,436,955 ---------- U.S. GOVERNMENT AGENCIES -- 13.15% Federal Home Loan Mortgage Corp. 7.000%, due 04/15/07...................................... 200,790 196,692 5.800%, due 08/15/19...................................... 90,000 84,670 7.500%, due 01/15/23...................................... 75,101 71,749 6.500%, due 02/15/24...................................... 375,000 351,621 7.238%, due 05/01/26...................................... 68,899 70,963 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23...................................... 104,207 106,584 9.000%, due 03/01/24...................................... 305,522 325,524
FACE AMOUNT VALUE ---------- ---------- 9.000%, due 04/01/25.................................. $ 264,905 $ 279,641 9.500%, due 04/01/25.................................. 29,129 31,195 Federal National Mortgage Association 6.500%, due 12/01/03 Balloon TBA...................... 585,000 577,322 7.875%, due 02/24/05.................................. 500,000 533,645 6.220%, due 03/13/06.................................. 150,000 145,035 6.500%, due 04/25/08.................................. 104,799 100,445 9.000%, due 08/01/21.................................. 28,233 29,982 8.500%, due 07/01/22.................................. 21,708 22,844 7.500%, due 05/01/25.................................. 4,193 4,202 6.500%, due 03/01/26.................................. 77,040 73,693 6.500%, due 12/01/26 TBA.............................. 1,000,000 956,565 7.000%, due 12/01/26 TBA.............................. 1,150,000 1,127,003 7.500%, due 12/01/26 TBA.............................. 825,000 826,807 6.070%, due 08/01/29 TBA.............................. 205,000 202,566 Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only.................... 1,031 335 0.000%, due 07/01/26 principal only................... 569 380 0.000%, due 04/01/27 principal only................... 520,231 344,911 Government National Mortgage Association 7.000%, due 08/15/23.................................. 803 788 7.500%, due 08/15/23.................................. 113,659 113,943 7.000%, due 08/15/24.................................. 530,741 523,863 7.000%, due 07/15/25.................................. 73,437 72,159 Tennessee Valley Authority 6.375%, due 06/15/05.................................. 500,000 489,184 ---------- 7,664,311 ---------- U.S. GOVERNMENT OBLIGATIONS-- 14.45% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01.................................. 1,020,000 1,030,200 6.250%, due 10/31/01.................................. 1,120,000 1,115,100 7.000%, due 07/15/06.................................. 760,000 781,850 8.125%, due 05/15/21.................................. 1,315,000 1,504,443 6.000%, due 02/15/26.................................. 1,980,000 1,771,482 U.S. Treasury Principal Strips 0.000%, due 08/15/03.................................. 1,440,000 974,419 0.000%, due 11/15/04.................................. 2,000,000 1,239,160 ---------- 8,416,654 ---------- Total U.S. Bonds....................................... 21,202,039 ---------- NON-U.S. BONDS -- 56.15% AUSTRALIA -- 3.92% Government of Australia 9.500%, due 08/15/03...............................AUD 1,400,000 1,195,185 9.000%, due 09/15/04.................................. 1,300,000 1,091,359 ---------- 2,286,544 ---------- BELGIUM -- 2.26% Kingdom of Belgium 10.000%, due 08/02/00............................. BEF 23,000,000 749,051 7.500%, due 07/29/08.................................. 18,000,000 565,736 ---------- 1,314,787 ---------- CANADA -- 7.71% British Columbia 7.750%, due 06/16/03.............................. CAD 1,250,000 979,396 7.250%, due 09/21/05.................................. 1,640,000 1,241,351 Government of Canada 4.250%, due 12/01/21 (b).............................. 1,820,000 1,416,839 Province of Ontario 7.500%, due 01/19/06.................................. 1,100,000 855,331 ---------- 4,492,917 ----------
- -------------------------------------------------------------------------------- 42 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------- ----------- DENMARK -- 5.74% City of Copenhagen 6.250%, due 03/15/01............................ DKK 2,400,000 $ 380,955 Great Belt 7.000%, due 09/02/03...................... 10,650,000 1,730,643 Kingdom of Denmark 7.000%, due 12/15/04................................ 3,500,000 565,589 7.000%, due 11/15/07................................ 1,400,000 221,802 7.000%, due 11/10/24................................ 3,000,000 447,464 ----------- 3,346,453 ----------- FRANCE -- 2.19% Government of France (OAT) 7.500%, due 04/25/05............................ FRF 1,200,000 232,826 8.500%, due 04/25/23................................ 1,600,000 343,819 KFW International Finance 7.750%, due 02/17/98................................ 2,600,000 454,479 Republic of Finland 9.000%, due 08/13/03................................ 1,200,000 246,551 ----------- 1,277,675 ----------- GERMANY -- 12.87% Bundesrepublik Deutscheland 6.500%, due 03/15/00............................ DEM 2,000,000 1,225,295 6.875%, due 05/12/05................................ 800,000 501,320 6.250%, due 01/04/24................................ 800,000 446,643 European Economic Community 6.500%, due 03/10/00................................ 1,910,000 1,166,650 International Bank for Reconstruction & Development 7.125%, due 04/12/05................................ 650,000 411,612 Kingdom of Norway 6.125%, due 05/05/98................................ 1,040,000 610,536 LKB Baden-Wuerttemberg Finance 6.500%, due 09/15/08.. 1,300,000 781,820 Republic of Ireland 7.250%, due 03/18/03................................ 2,900,000 1,848,904 Treuhandanstalt 7.125%, due 01/29/03................. 800,000 508,849 ----------- 7,501,629 ----------- ITALY -- 5.15% Bayerische Landesbank 10.750%, due 03/01/03........................... ITL 250,000,000 174,846 Landesbank Rheinland-Pfalz Girozentrale 8.250%, due 06/02/98............................................ 750,000,000 447,124 LKB Baden-Wuerttemberg Finance 10.750%, due 04/14/03. 1,450,000,000 1,016,236 Republic of Italy (BTP) 7.750%, due 09/15/01................................ 1,500,000,000 928,739 9.000%, due 10/01/03................................ 350,000,000 229,891 9.500%, due 02/01/06................................ 300,000,000 205,936 ----------- 3,002,772 ----------- JAPAN -- 4.48% Government of Japan No.161 4.700%, due 09/22/03............................ JPY 45,000,000 453,068 Government of Japan No.129 6.400%, due 03/20/00................................ 25,000,000 248,951 Republic of Austria 5.000%, due 01/22/01................................ 130,000,000 1,270,974 International Bank for Reconstruction & Development 4.500%, due 06/20/00................................ 40,000,000 382,111 4.750%, due 12/20/04................................ 25,000,000 255,478 ----------- 2,610,582 -----------
FACE AMOUNT VALUE --------- ----------- NETHERLANDS -- 3.05% Government of Netherlands 7.500%, due 11/15/99............................. NLG 1,000,000 $ 552,799 5.750%, due 09/15/02................................. 500,000 266,805 International Nederland Verzekeringen 6.250%, due 12/28/05............................................. 1,800,000 955,914 ----------- 1,775,518 ----------- SPAIN -- 1.28% Kingdom of Spain 7.900%, due 02/28/02............................. ESP 100,000,000 744,815 ----------- SWEDEN -- 1.50% Kingdom of Sweden 6.000%, due 02/09/05............................. SEK 6,900,000 874,092 ----------- UNITED KINGDOM -- 6.00% Abbey National 8.750%, due 05/24/04............................. GBP 350,000 616,002 British Gas PLC 8.125%, due 03/31/03.................. 545,000 927,457 UK Treasury 7.750%, due 09/08/06................................. 555,000 961,216 9.000%, due 10/13/08................................. 340,000 647,031 8.000%, due 09/27/13................................. 190,000 341,220 ----------- 3,492,926 ----------- Total Non-U.S. Bonds.................................. 32,720,710 ----------- Total Bonds (Cost $54,127,041)........................ 53,922,749 ----------- Short-Term Investments -- 11.28% U.S. GOVERNMENT OBLIGATIONS -- 0.04% U.S. Treasury Bills 5.361%, due 11/13/97.............. $ 25,000 24,517 ----------- COMMERCIAL PAPER -- 11.24% American Stores Co. 5.830%, due 07/23/97................................. 500,000 498,219 Case Credit Corp. 5.760%, due 07/21/97................ 500,000 498,400 Crown Cork & Seal Co. 5.770%, due 07/15/97................................. 500,000 498,878 Enron Oil & Gas 6.520%, due 07/01/97.................. 2,063,000 2,063,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................. 500,000 499,197 5.850%, due 08/11/97................................. 500,000 496,669 Norfolk Southern Corp. 5.770%, due 07/10/97................................. 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97................................. 500,000 496,536 Sundstrand Corp. 5.850%, due 07/15/97................. 500,000 498,862 Tenneco, Inc. 5.800%, due 07/23/97.................... 500,000 498,228 ----------- 6,547,268 ----------- Total Short-Term Investments (Cost $6,571,765).................................... 6,571,785 ----------- Total Investments (Cost $60,698,806) -- 103.82 (a)..................... 60,494,534 ----------- Liabilities, less cash and other assets -- (3.82%).... (2,226,520) ----------- Net Assets -- 100%.................................... $58,268,014 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 43 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $60,723,855; and net unrealized depreciation consisted of: Gross unrealized appreciation............................... $ 1,618,080 Gross unrealized depreciation............................... (1,847,401) ----------- Net unrealized depreciation............................. $ (229,321) ===========
(b)Linked to Canada's retail price index. Reset semi-annually. FRN: Floating Rate Note--The rate disclosed is that in effect at June 30, 1997. MTN: Medium term note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $987,151 or 1.69% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of June 30, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS French Franc............ 11/28/97 16,600,000 $2,856,602 $(51,481) Italian Lira............ 11/28/97 2,340,000,000 1,370,595 (20,400) Japanese Yen............ 11/28/97 930,000,000 8,313,616 46,950 Spanish Peseta.......... 11/28/97 230,000,000 1,568,085 (41,432) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 11/28/97 2,900,000 2,177,978 66,622 British Pound........... 11/28/97 940,000 1,557,194 (19,354) Canadian Dollar......... 11/28/97 3,700,000 2,705,549 27,096 Danish Kroner........... 11/28/97 16,800,000 2,556,813 64,092 German Mark............. 11/28/97 3,900,000 2,263,533 55,167 Italian Lira............ 11/28/97 1,100,000,000 644,297 5,879 Japanese Yen............ 11/28/97 45,000,000 402,272 (3,406) Spanish Peseta.......... 11/28/97 100,000,000 681,776 7,546 -------- Total............... $137,279 ========
FUTURES CONTRACTS (NOTE 5) The Global Bond Fund had the following open futures contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN -------------- -------- -------- ---------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 3 con- tracts............................ September 1997 $315,077 $317,672 $ 2,595 10 year U.S. Treasury Notes, 3 con- tracts............................ September 1997 321,022 323,625 2,603 30 year U.S. Treasury Bonds, 3 con- tracts............................ September 1997 326,366 333,187 6,821 ------- Total.......................... $12,019 =======
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $24,517. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 44 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $60,698,806) (Note 1)................ $60,494,534 Cash............................................................. 244,951 Foreign currency, at value (Cost $1,097,578)..................... 1,108,021 Receivables: Investment securities sold...................................... 671,484 Interest........................................................ 1,218,865 Fund shares sold................................................ 30,035 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 137,279 Other assets..................................................... 43,409 ----------- TOTAL ASSETS.................................................. 63,948,578 ----------- LIABILITIES: Payables: Investment securities purchased................................. 4,692,855 Fund shares redeemed............................................ 880,477 Investment advisory fees (Note 2)............................... 43,424 Accrued expenses................................................ 60,339 Variation margin (Note 5)....................................... 3,469 ----------- TOTAL LIABILITIES............................................. 5,680,564 ----------- NET ASSETS........................................................ $58,268,014 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $57,507,385 Accumulated undistributed net investment income.................. 489,146 Accumulated net realized gain.................................... 322,580 Net unrealized depreciation...................................... (51,097) ----------- NET ASSETS.................................................... $58,268,014 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $54,157,066 and 5,616,633 shares issued and outstanding) (Note 7).............................................................. $ 9.64 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 104 shares issued and outstanding) (Note 7).......... $ 9.64 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $4,109,948 and 427,815 shares issued and outstanding) (Note 7).. $ 9.61 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Interest (net of $5,999 for foreign taxes withheld)............... $2,856,724 ---------- TOTAL INCOME................................................... 2,856,724 ---------- EXPENSES: Advisory (Note 2)................................................. 344,152 Accounting........................................................ 89,764 Professional...................................................... 33,901 Transfer agent.................................................... 33,614 Custodian......................................................... 32,064 Distribution (Note 6)............................................. 18,598 Other............................................................. 72,791 ---------- TOTAL EXPENSES................................................. 624,884 Expenses waived by Advisor (Note 2)............................ (194,924) ---------- NET EXPENSES................................................... 429,960 ---------- NET INVESTMENT INCOME.......................................... 2,426,764 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments...................................................... 1,109,544 Futures contracts................................................ 31,621 Foreign currency transactions.................................... 582,099 ---------- Net realized gain............................................... 1,723,264 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. (682,472) Futures contracts................................................ 13,878 Forward contracts................................................ 280,252 Translation of other assets and liabilities denominated in for- eign currency................................................... 6,883 ---------- Change in net unrealized appreciation or depreciation........... (381,459) ---------- Net realized and unrealized gain.................................. 1,341,805 ---------- Net increase in net assets resulting from operations.............. $3,768,569 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 46 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE JUNE 30, 1997 30, 1996 ----------- ----------- OPERATIONS: Net investment income............................... $ 2,426,764 $ 2,351,810 Net realized gain................................... 1,723,264 4,022,906 Change in net unrealized appreciation or deprecia- tion .............................................. (381,459) (1,992,544) ----------- ----------- Net increase in net assets resulting from opera- tions.............................................. 3,768,569 4,382,172 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income............ (3,479,707) (3,447,154) Distributions in excess of net investment income.... (340,005) (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......................................... 23,164,253 14,584,928 Shares issued on reinvestment of distributions...... 3,667,961 3,954,345 Shares redeemed..................................... (12,462,273) (24,728,515) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 7)................ 14,369,941 (6,189,242) ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS.......... 13,549,009 (7,143,513) ----------- ----------- NET ASSETS: Beginning of year................................... 44,719,005 51,862,518 ----------- ----------- End of year (including accumulated undistributed net investment income of $489,146 and $1,052,943, re- spectively)........................................ $58,268,014 $44,719,005 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income Brinson Class I.................................... $(3,503,032) $(4,734,956) SwissKey Class..................................... (316,680) (246,430) Distributions from net realized gain Brinson Class I.................................... (704,236) (338,786) SwissKey Class..................................... (65,553) (16,271) ----------- ----------- Total distributions to shareholders................. $(4,589,501) $(5,336,443) =========== ===========
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.
YEAR ENDED JUNE 30, JULY 30, 1993* ------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period. $ 10.04 $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- ------- Income (loss) from investment opera- tions: Net investment income ............. 0.67 0.84 0.50 0.45 Net realized and unrealized gain (loss)............................ 0.08 0.31 0.58 (0.52) ------- ------- ------- ------- Total income (loss) from invest- ment operations................. 0.75 1.15 1.08 (0.07) ------- ------- ------- ------- Less distributions: Distributions from and in excess of net investment income............. (0.96) (1.40) (0.24) (0.28) Distributions from net realized gain.............................. (0.19) (0.10) -- (0.10) ------- ------- ------- ------- Total distributions.............. (1.15) (1.50) (0.24) (0.38) ------- ------- ------- ------- Net asset value, end of period....... $ 9.64 $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= ======= Total return (non-annualized)........ 7.71% 11.50% 11.34% (0.79)% Ratios/Supplemental data Net assets, end of period (in 000s). $54,157 $41,066 $51,863 $36,849 Ratio of expenses to average net as- sets: Before expense reimbursement....... 1.32% 1.65% 1.43% 1.78%** After expense reimbursement........ 0.90% 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reimbursement....... 4.90% 4.98% 5.53% 4.03%** After expense reimbursement........ 5.32% 5.73% 6.06% 4.91%** Portfolio turnover rate............. 235% 184% 199% 189%
* Commencement of investment operations ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 48 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $10.02 $10.56 ------ ------ Income from investment operations: Net investment income........................... 0.62 0.78 Net realized and unrealized gain................ 0.10 0.15 ------ ------ Total income from investment operations....... 0.72 0.93 ------ ------ Less distributions: Distributions from and in excess of net invest- ment 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.................... $ 9.61 $10.02 ====== ====== Total return (non-annualized)..................... 7.20% 9.17% Ratios/Supplemental data Net assets, end of period (in 000s).............. $4,110 $3,653 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.81% 2.14%** After expense reimbursement..................... 1.39% 1.39%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 4.41% 4.49%** After expense reimbursement..................... 4.83% 5.24%** Portfolio turnover rate.......................... 235% 184%
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 49 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. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey 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 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. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate 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 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 year ended June 30, 1997. Therefore, no federal income tax provision was required. - -------------------------------------------------------------------------------- 50 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. Amounts equal to 8.05% and 16.09% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Global Fund and the Global Equity Fund, respectively. G. INCOME AND EXPENSE ALLOCATION: 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 Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey 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. 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 that 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 year ended June 30, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED -------- --------------- --------------- -------------- ---------- -------- Global Fund............. 0.80% 1.10% 1.35% 1.75% $4,294,925 $ -- Global Equity Fund...... 0.80 1.00 1.25 1.76 641,075 195,511 Global Bond Fund........ 0.75 0.90 1.15 1.39 344,152 194,924
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 for the year ended June 30, 1997, were $11,680, $4,380 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. The Brinson Global Fund invests in shares of certain affiliated investment companies also sponsored by Brinson Partners, Inc. These investments represented 9.39% of the Fund's total net assets at June 30, 1997. Activity for the year ended June 30, 1997 was as follows:
NET NET SALES REALIZED UNREALIZED AFFILIATES PURCHASES PROCEEDS GAINS GAINS VALUE - ---------- ---------- ---------- -------- ----------- ----------- Brinson Post-Venture Fund................... $ -- $ -- $ -- $ 1,248,708 $ 7,248,708 Brinson High Yield Fund. -- 639,104 87,104 1,879,440 13,327,440 Brinson Emerging Markets Equity Fund............ 5,400,000 787,001 101,635 1,883,009 16,597,643 Brinson Emerging Markets Debt Fund.............. -- 970,548 280,548 6,059,079 20,369,079 ---------- ---------- -------- ----------- ----------- $5,400,000 $2,396,653 $469,287 $11,070,236 $57,542,870 ========== ========== ======== =========== ===========
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $854,084,076 $764,571,276 Global Equity Fund.................................... 54,289,814 22,588,116 Global Bond Fund...................................... 112,551,785 98,638,852
- -------------------------------------------------------------------------------- 51 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4.FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to 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 year ended June 30, 1997, 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 as amended for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class and, effective June 30, 1997, the Brinson Class N Shares. Annual fees under the SwissKey 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 Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the Global Fund, Global Equity Fund and Global Bond Fund. 7.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND ---------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- ---------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ------------ Sales: Brinson Class I................ 14,513,488 $180,787,534 7,972,013 $ 95,544,500 Brinson Class N................ 76 1,000 -- -- SwissKey Class................. 932,414 11,508,566 1,155,619 13,939,062 ---------- ------------ --------- ------------ Total Sales................. 15,445,978 $192,297,100 9,127,632 $109,483,562 ========== ============ ========= ============ Dividend Reinvestment: Brinson Class I................ 4,022,259 $ 48,025,771 2,632,284 $ 30,918,724 Brinson Class N................ -- -- -- -- SwissKey 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 Class I................ 11,346,380 $142,532,012 5,330,521 $ 63,966,318 Brinson Class N................ -- -- -- -- SwissKey Class................. 198,888 2,469,271 24,583 296,145 ---------- ------------ --------- ------------ Total Redemptions........... 11,545,268 $145,001,283 5,355,104 $ 64,262,463 ========== ============ ========= ============
- -------------------------------------------------------------------------------- 52 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL EQUITY FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class I.................. 1,338,623 $15,816,109 285,419 $ 3,205,567 Brinson Class N.................. 78 1,000 -- -- SwissKey Class................... 2,271,465 26,703,521 746,285 8,357,646 --------- ----------- --------- ----------- Total Sales................... 3,610,166 $42,520,630 1,031,704 $11,563,213 ========= =========== ========= =========== Shares issued in acquisition of SBC World Growth Fund: Brinson Class I.................. -- -- -- -- Brinson Class N.................. -- -- -- -- SwissKey Class................... -- -- 2,474,177 $25,670,575 --------- ----------- --------- ----------- Total......................... -- -- 2,474,177 $25,670,575 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I.................. 308,273 $ 3,485,504 160,063 $ 1,694,631 Brinson Class N.................. -- -- -- -- SwissKey Class................... 286,226 3,226,433 155,720 1,641,689 --------- ----------- --------- ----------- Total Dividend Reinvestment... 594,499 $ 6,711,937 315,783 $ 3,336,320 ========= =========== ========= =========== Redemptions: Brinson Class I.................. 225,435 $ 2,683,391 186,600 $ 2,055,092 Brinson Class N.................. -- -- -- -- SwissKey Class................... 565,431 6,612,207 523,404 5,704,953 --------- ----------- --------- ----------- Total Redemptions............. 790,866 $ 9,295,598 710,004 $ 7,760,045 ========= =========== ========= =========== GLOBAL BOND FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class I.................. 2,335,856 $22,155,311 1,094,889 $10,985,420 Brinson Class N.................. 104 1,000 -- -- SwissKey Class................... 103,968 1,007,942 345,211 3,599,508 --------- ----------- --------- ----------- Total Sales................... 2,439,928 $23,164,253 1,440,100 $14,584,928 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I.................. 348,609 $ 3,318,757 374,786 $ 3,722,031 Brinson Class N.................. -- -- -- -- SwissKey Class................... 36,719 349,204 23,414 232,314 --------- ----------- --------- ----------- Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345 ========= =========== ========= =========== Redemptions: Brinson Class I.................. 1,159,373 $11,665,371 2,369,683 $24,686,522 Brinson Class N.................. -- -- -- -- SwissKey Class................... 77,300 796,902 4,197 41,993 --------- ----------- --------- ----------- Total Redemptions............. 1,236,673 $12,462,273 2,373,880 $24,728,515 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 53 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- Global Fund Global Equity Fund Global Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund as of June 30, 1997, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30, 1997, the results of their operations for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 8, 1997 - -------------------------------------------------------------------------------- 54 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris Singapore . Sydney . Tokyo . Zurich 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 ANNUAL REPORT JUNE 30, 1997 [LOGO OF THE BRINSON FUNDS] GLOBAL INSTITUTIONAL ASSET MANAGEMENT ------------------------------ Trustees and Officers - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Debra L. Nichols Chairman of the Board Secretary E. Thomas McFarlan Carolyn M. Burke, CPA President Treasurer Thomas J. Digenan, CFA, CPA Catherine E. Macrae Vice President Assistant Secretary - -------------------------------------------------------------------------------- 1 The Funds' Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Brinson Partners is the global institutional asset management division of Swiss Bank Corporation. Brinson Partners continues as the name used within North America, while SBC Brinson is the name used outside North America. We are a global investment management organization with over $75 billion in institutional assets under discretionary active management. We are also the investment manager for SBC Private Banking mutual fund assets which total $50 billion. In addition, we act as an investment advisor to SBC Private Banking. The division manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other 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. 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 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 OF THE BRINSON FUNDS] Shareholder Letter..................................................... 4 U.S. Economic and Market Highlights.................................... 6 U.S. Balanced Fund..................................................... 7 Schedule of Investments...........................................10 Financial Statements..............................................14 Financial Highlights..............................................17 U.S. Equity Fund.......................................................19 Schedule of Investments...........................................22 Financial Statements..............................................24 Financial Highlights..............................................27 U.S. Bond Fund.........................................................29 Schedule of Investments...........................................31 Financial Statements..............................................33 Financial Highlights..............................................36 The Brinson Funds--Notes to Financial Statements.......................38 Report of Independent Auditors.........................................41 - ------------------------------------------------------------------------------- 3 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] August 20, 1997 Dear Shareholder: We are very pleased to present the Annual Report for The Brinson Funds for the fiscal year ended June 30, 1997. The Brinson Funds consists of seven funds divided into three distinct classifications: Global Funds, International Funds and Domestic Funds. Within this Report, we'll focus on current domestic economic outlook as well as our current strategies and performance updates for our three Domestic Funds. Before we begin the review of the domestic funds, I would like to discuss a few improvements and achievements we have accomplished or put into place during the last fiscal year. As you may know, Brinson Partners, Inc. is an established, U.S.-based leader in the investment management business, managing portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. Our portfolio management capabilities are accessed through separately managed portfolios, collective funds and, of course, The Brinson Mutual Funds. Brinson Partners, Inc. has been in place over 16 years under the same investment philosophy and senior management. International and global activities originated in the mid-1970s. We've historically managed our portfolios out of our headquarters in Chicago with offices in Tokyo and London. We have since expanded our investment analysis and trading capabilities to include Basel, Frankfurt, Paris, Singapore and Sydney. Our investment management team encompasses over 255 portfolio management and research personnel in 8 locations worldwide. We feel that this additional worldwide investment management expertise will provide additional investment performance opportunities for our clients. Brinson U.S. Balanced Fund Since its performance inception on December 31, 1994, the Brinson U.S. Balanced Fund has produced an annualized total return of 17.41 %, compared to the return of 22.84% of its benchmark, the U.S. Balanced Mutual Fund Index. The Brinson U.S. Balanced Fund achieved this performance with a volatility of 4.73% well below the benchmark volatility of 6.91%. For the first half of 1997, the Brinson U.S. Balanced Fund returned 6.92%. - -------------------------------------------------------------------------------- 4 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Brinson U.S. Equity Fund The Brinson U.S. Equity Fund has provided an annualized return of 23.61% since its performance inception on February 28, 1994. This is compared to a 21.78% return for the benchmark, the Wilshire 5000 Index. The Brinson U.S. Equity Fund achieved this performance with a volatility of 10.40% compared to the benchmark volatility of 10.35%. For the first half of 1997, the Brinson U.S. Equity Fund returned 16.74%. Brinson U.S. Bond Fund The Brinson U.S. Bond Fund has provided an annualized return of 6.58% since its performance inception on August 31, 1995. This is compared to a 6.62% return for the benchmark, the Salomon Brothers BIG Bond Index. For the first half of 1997, the Brinson U.S. Bond Fund returned 2.87%. Each of our Funds employ the same value-oriented investment philosophy applied across the U.S. spectrum. Each Fund also uses the resources of the entire worldwide research team. All of our analysts apply the same value philosophy to their work. 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 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 talent and the flexibility to customize portfolios to meet unique requirements. The Reports that follow highlight investment characteristics of the respective funds. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /s/ Gary P. Brinson - -------------------------------------- Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. - -------------------------------------------------------------------------------- 5 U.S. Economic and Market Highlights - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] The inflation outlook in the U.S. remains good. While consumer price inflation has generally been running at 3.0% or less since 1991, other measures of inflation, such as the personal consumption deflator, the producer price index and the core CPI, indicate even lower price pressures. Second quarter real GDP growth of 2.2% annualized was dramatically slower than the almost 5% growth in the first quarter. Personal consumption, particularly of durable goods, was lackluster, while non-residential fixed investment and federal government expenditures showed strength. The continued healthy economy has again brought unemployment back down to 4.8%. Strong growth has led to an increase in the government's tax revenues and consequently to a shrinkage in the budget deficit. Congress and the President have taken advantage of this in the recent budget. However, the agreement on an array of tax cuts demonstrates the potential for renewed fiscal irresponsibility in the future. U.S. Environment Major Markets Six Months Ended June 30, 1997 [GRAPH APPEARS HERE]
U.S. Cash Equivalents U.S. Bonds U.S. Equities - -------------------------------------------------------------------------------- Total Return 2.52 2.87 17.65
Salomon U.S. Treasury Benchmark Returns Six Months Ended June 30, 1997 [GRAPH APPEARS HERE]
Maturity (Years) U.S. Cash Equivalents - ---------------------------------------------- 1 2.99 2 2.86 3 2.70 5 2.20 10 2.51 30 -0.74
Top Ten Industry Returns Relative to S&P 500 Six Months Ended June 30, 1997 [GRAPH APPEARS HERE]
Industry Returns - ---------------------------------- Real Property 13.55 Miscellaneous Finance 11.64 Media 7.62 Oil Service 7.59 Life Insurance 5.93 Leisure, Luxury 3.76 Thrift Institutions 3.72 Retail 3.63 Aerospace 3.53 Tire & Rubber 3.12
Source: BARRA Bottom Ten Industry Returns Relative to S&P 500 Six Months Ended June 30, 1997 [GRAPH APPEARS HERE]
Industry Returns - ------------------------------------------ Containers -9.93 Motor Vehicles -10.01 Pollution Control -10.18 Aluminum -10.49 Electric Utilities -12.26 Domestic Petroleum Reserves -16.09 Tobacco -16.59 Foreign Petroleum Reserves -24.18 Precious Metals -24.96 Coal & Uranium -38.32
Source: BARRA - -------------------------------------------------------------------------------- 6 U.S. Balanced Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] 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 17.41% since its performance inception on December 31, 1994. This compares with the corresponding 22.84% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the year ended June 30, 1997, the Fund produced a total return of 15.50% compared to the benchmark return of 21.71%. In the first half of 1997, the Fund returned 6.92% while the benchmark returned 12.43%. Bond management in conventional bonds provided the primary positive contribution to performance in the first half of the year. The underweight in the equity market and offsetting overweights in bonds and cash were the main reasons for the Fund's underperformance. Security selection in the U.S. equity segment of the Fund was essentially neutral. The first six months of the year saw bond prices fall and then recover, as strong economic news led to inflation fears and increases in real interest rates. Real GDP growth was substantially above average and the unemployment rate fell to 4.8%, the lowest figure in almost 25 years. However, yields started to come back down when none of this news had any impact on inflation. Despite the apparent tightness on the real side of the economy, consumer and producer price inflation remained quiescent. Because the bond portion of the Fund maintained duration longer than the benchmark, the fall in yields benefited performance. Equities continue to appear greatly overpriced according to our assessment of fundamental value. The Fund therefore remains overweighted bonds and underweighted equities. - -------------------------------------------------------------------------------- 7 U.S. Balanced Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Total Return
6 months 1 year Annualized ended ended 12/31/94* 6/30/97 6/30/97 to 6/30/97 - -------------------------------------------------------------------------------- Brinson U.S. Balanced Fund 6.92% 15.50% 17.41% - -------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 12.43 21.71 22.84 - --------------------------------------------------------------------------------
* 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 $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested $1,000,000 on December 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Balanced Fund vs. U.S. Balanced Mutual Fund Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Brinson U.S. U.S. Balanced Mutual Balanced Fund Fund Index - -------------------------------------------------------------------------------- 12/31/94 $1,000,000 $1,000,000 3/31/95 1,064,000 1,074,390 6/30/95 1,139,086 1,160,041 9/30/95 1,192,845 1,236,361 12/31/95 1,254,813 1,294,523 3/31/96 1,276,616 1,333,439 6/30/96 1,293,124 1,374,034 9/30/96 1,324,045 1,409,152 12/31/96 1,396,859 1,487,401 3/31/97 1,394,492 1,491,506 6/30/97 1,493,510 1,672,330
12/31/94 = $1,000,000 Data through 6/30/97 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. - -------------------------------------------------------------------------------- 8
U.S. Balanced Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Industry Diversification As a Percent of Net Assets As of June 30, 1997 - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals...................................................... 0.86% Housing/Paper.................................................. 1.76 Metals......................................................... 0.24 ------ 2.86 Capital Investment Capital Goods.................................................. 2.91 Technology..................................................... 3.92 ------ 6.83 Consumer Autos/Durables................................................. 1.22 Discretionary.................................................. 1.82 Health: Drugs.................................................. 2.85 Health: Non-Drugs.............................................. 1.41 Non-Durables................................................... 3.91 Retail/Apparel................................................. 1.71 ------ 12.92 Energy........................................................... 1.67 Financial Banks.......................................................... 2.89 Non-Banks...................................................... 3.02 ------ 5.91 Transportation................................................... 2.21% Utilities........................................................ 2.42 Miscellaneous.................................................... 3.17 ------ Total U.S. Equities............................................ 37.99* ------ U.S. BONDS Corporate Bonds Asset-Backed................................................... 1.89 CMO............................................................ 0.42 Consumer....................................................... 1.63 Financial...................................................... 1.35 Industrial..................................................... 2.32 Telecommunications............................................. 0.57 ------ 8.18 International Dollar Bonds....................................... 7.59 Mortgage-Backed Securities....................................... 2.25 U.S. Government Agencies......................................... 16.93 U.S. Government Obligations...................................... 21.05 ------ Total U.S. Bonds............................................... 56.00* ------ SHORT-TERM INVESTMENTS........................................... 12.44* ------ TOTAL INVESTMENTS.............................................. 106.43 LIABILITIES, LESS CASH AND OTHER ASSETS............................................... (6.43) ------ NET ASSETS....................................................... 100.00% ======
* The Fund held a long position in U.S. Treasury futures on June 30, 1997 which increased U.S. bond exposure from 56.00% to 61.62%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 37.99 to 28.13%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 12.44% to 16.68%.
Asset Allocation As of June 30, 1997 Current Benchmark Strategy - ------------------------------------------------------------------------- U.S. Equity 65% 30% U.S. Bonds 35 65 Cash Equivalents 0 5 - ------------------------------------------------------------------------- 100% 100% Top Ten U.S. Equity Holdings As of June 30, 1997 Percent of Net Assets - ------------------------------------------------------------------------- 1. Xerox Corp. 2.00% 2. Chase Manhattan Corp. 1.71 3. Lockheed Martin Corp. 1.59 4. Philip Morris Companies, Inc. 1.57 5. Aon Corp. 1.32 6. CIGNA Corp. 1.29 7. Burlington Northern Santa Fe 1.18 8. Goodyear Tire & Rubber Co. 1.17 9. Federal Express Corp. 1.08 10. Citicorp 1.06 - -------------------------------------------------------------------------
9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------ ------------ U.S. Equities -- 37.99% Aetna Life & Casualty Co................................... 14,100 $ 1,443,487 Allergan, Inc.............................................. 36,600 1,164,337 Alza Corp. (b)............................................. 35,700 1,035,300 Aon Corp................................................... 72,600 3,757,050 Automatic Data Processing, Inc............................. 34,900 1,640,300 Beckman Instruments, Inc................................... 10,500 506,625 Birmingham Steel Corp...................................... 14,400 223,200 Boston Technology, Inc. (b)................................ 13,900 410,919 Browning-Ferris Industries, Inc............................ 27,100 901,075 Burlington Northern Santa Fe............................... 37,400 3,361,325 Centerior Energy Co........................................ 30,600 342,338 Champion Enterprises, Inc. (b)............................. 16,800 252,000 Champion International Corp................................ 1,200 66,300 Chase Manhattan Corp....................................... 50,100 4,862,831 CIGNA Corp................................................. 20,700 3,674,250 Circuit City Stores, Inc................................... 52,800 1,877,700 Citicorp................................................... 25,100 3,026,119 CMS Energy Corp............................................ 39,500 1,392,375 Coca-Cola Enterprises, Inc................................. 28,800 662,400 Comerica, Inc.............................................. 9,800 666,400 Comverse Technology, Inc. (b).............................. 6,600 343,200 Corning, Inc............................................... 45,900 2,553,187 Covance, Inc............................................... 17,975 347,142 CPC International, Inc..................................... 15,600 1,440,075 CVS Corp................................................... 22,700 1,163,375 Dial Corp.................................................. 22,500 351,562 Eastman Chemical Co........................................ 24,400 1,549,400 EMC Corp./Mass. (b)........................................ 67,900 2,648,100 Enron Corp................................................. 68,700 2,803,819 Entergy Corp............................................... 4,000 109,500 Federal Express Corp. (b).................................. 53,100 3,066,525 Federated Department Stores (b)............................ 20,400 708,900 FileNet Corp. (b).......................................... 7,300 105,850 First American Corp.-Tenn.................................. 9,400 360,725 First Bank System, Inc..................................... 7,600 648,850 First Data Corp............................................ 59,257 2,603,604 First of America Bank Corp................................. 6,900 315,675 First Security Corp........................................ 11,950 326,384 Fleetwood Enterprises, Inc................................. 6,700 199,744 Food Lion, Inc. Class A.................................... 66,100 473,028 Forest Laboratories, Inc. (b).............................. 16,400 679,575 Gannett Co., Inc........................................... 23,300 2,300,875 General Instrument Corp. (b)............................... 81,500 2,037,500 Genzyme Corp. (b).......................................... 14,400 399,600 Geon Co.................................................... 9,800 198,450 Goodyear Tire & Rubber Co.................................. 52,700 3,336,569 Harnischfeger Industries, Inc.............................. 23,800 987,700 Health Care and Retirement Corp. (b)....................... 24,450 816,019 Hibernia Corp. Class A..................................... 19,900 277,356 Informix Corp. (b)......................................... 19,100 171,900 Interpublic Group of Companies, Inc........................ 15,500 950,344 James River Corp. of Virginia.............................. 28,200 1,043,400 Kroger Co. (b)............................................. 19,500 565,500 Lockheed Martin Corp....................................... 43,671 4,522,678 Lyondell Petrochemical Co.................................. 39,100 852,869 Manor Care, Inc............................................ 31,800 1,037,475 Martin Marietta Materials, Inc............................. 10,436 337,866 Masco Corp................................................. 41,700 1,740,975 Mattel, Inc................................................ 52,750 1,786,906
SHARES VALUE ---------- ----------- Nabisco Holdings Corp. Class A.......................... 36,400 $ 1,451,450 National Service Industries Inc......................... 7,000 340,813 Nextel Communications, Inc. Class A (b)................. 54,500 1,032,094 Octel Communications Corp. (b).......................... 10,800 253,125 Old Republic International Corp......................... 12,850 389,516 Peco Energy Co.......................................... 89,100 1,871,100 Pentair, Inc............................................ 18,900 621,337 Pharmacia & Upjohn, Inc................................. 45,500 1,581,125 Philip Morris Companies, Inc............................ 100,800 4,473,000 Raytheon Co............................................. 12,700 647,700 Regions Financial Corp.................................. 9,200 290,950 Reynolds & Reynolds Co. Class A......................... 12,900 203,175 Schering Plough Corp.................................... 62,600 2,996,975 Seagate Technology, Inc. (b)............................ 15,000 527,812 Timken Co............................................... 24,800 881,950 Trinity Industries, Inc................................. 6,600 209,550 Tyson Foods, Inc. Class A............................... 72,500 1,386,562 UCAR International, Inc. (b)............................ 700 32,025 Ultramar Diamond Shamrock Corp.......................... 40,590 1,324,249 US Bancorp.............................................. 21,800 1,397,925 Vencor, Inc. (b)........................................ 18,700 790,075 Viad Corp............................................... 35,000 673,750 Westvaco Corp........................................... 8,550 268,791 Witco Corp.............................................. 3,300 125,194 Xerox Corp.............................................. 72,100 5,686,888 York International Corp................................. 22,200 1,021,200 360 Communications Co. (b).............................. 10,600 181,525 ----------- Total U.S. Equities (Cost $81,714,881).................. 108,088,389 ----------- FACE AMOUNT VALUE ---------- ----------- Bonds -- 56.00% U.S. CORPORATE BONDS -- 8.18% AirTouch Communications 7.500%, due 07/15/06................................... $2,000,000 $ 2,032,738 Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,008,096 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02............................ 1,360,000 1,349,705 Chase Manhattan Credit Card Master Trust 96-4A 6.730%, due 02/15/03........................................... 2,000,000 2,019,060 Chrysler Financial Corp. MTN 6.500%, due 08/21/97................................... 1,000,000 1,001,192 Comcast Cable Communications 144-A 8.500%, due 05/01/27. 2,000,000 2,156,320 CSX Transportation, Inc. 144-A 6.950%, due 05/01/27................................... 1,600,000 1,614,099 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02............................................... 2,000,000 2,004,340 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00................................... 840,000 840,000 Eastman Chemical Co. 7.600%, due 02/01/27................................... 2,380,000 2,358,749 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09.................... 1,270,601 1,199,485 Lockheed Martin Corp. 7.700%, due 06/15/08................................... 2,000,000 2,089,916 News America Holdings 7.750%, due 01/20/24................................... 1,000,000 948,816 Time Warner, Inc. 9.150%, due 02/01/23.................. 1,500,000 1,655,499 ----------- 23,278,015 -----------
- -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- INTERNATIONAL DOLLAR BONDS -- 7.59% Bangkok Bank 144-A 8.250%, due 03/15/16.................................. $ 3,700,000 $ 3,699,260 Credit Suisse-London 144-A 7.900%, due 05/01/07.................................. 2,170,000 2,230,764 Den Danske Bank 144-A 7.400%, due 06/15/10.................................. 1,400,000 1,410,681 Empresa Nacional Electric 7.875%, due 02/01/27.................................. 2,335,000 2,354,885 International Bank for Reconstruction & Development 6.375%, due 07/21/05.................................. 1,500,000 1,470,171 LKB Baden-Wuerttemberg Finance 8.125%, due 01/27/00.................................. 1,780,000 1,845,673 Montell Finance Co. 144-A 8.100%, due 03/15/27.................................. 1,610,000 1,653,879 Petroliam Nasional 7.125%, due 08/15/05.................................. 1,500,000 1,499,376 Province of Quebec 7.500%, due 07/15/23.................................. 750,000 737,760 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.......................................... 1,735,000 1,813,936 Skandinaviska Enskilda Banken 144-A 6.625%, due 03/29/49.............................................. 2,000,000 1,979,600 Southern Investments UK 6.800%, due 12/01/06.................................. 930,000 908,517 ----------- 21,604,502 ----------- MORTGAGE-BACKED SECURITIES -- 2.25% Independent National Mortgage Corp. 7.145%, due 02/25/26.................................. 1,876,156 1,879,552 7.000%, due 03/25/26.................................. 1,344,251 1,340,299 Morgan Stanley Capital, Inc. 6.830%, due 10/15/06.................................. 1,250,000 1,253,665 Vanderbilt Mortgage Finance 6.975%, due 08/07/11.................................. 1,925,000 1,930,414 ----------- 6,403,930 ----------- U.S. GOVERNMENT AGENCIES -- 16.93% Federal Home Loan Mortgage Corp. 7.500%, due 01/15/23.................................. 1,023,663 977,977 0.000%, due 04/15/27 principal only................... 2,497,000 1,482,049 Federal Home Loan Mortgage Corp. Gold 6.500%, due 12/01/03 TBA.............................. 2,180,000 2,152,070 8.000%, due 05/01/23.................................. 795,363 813,508 9.000%, due 03/01/24.................................. 399,511 425,667 9.000%, due 04/01/25.................................. 1,201,673 1,268,516 9.500%, due 04/01/25.................................. 1,281,693 1,372,614 Federal National Mortgage Association 6.500%, due 05/25/08.................................. 1,705,842 1,676,194 6.500%, due 08/25/08.................................. 1,945,894 1,906,781 8.000%, due 12/18/11.................................. 1,000,000 1,043,071 6.500%, due 12/25/23.................................. 2,000,000 1,916,348 6.500%, due 04/01/26.................................. 586,130 560,672 6.500%, due 05/01/26.................................. 2,064,982 1,975,290 6.500%, due 12/01/26 TBA.............................. 8,000,000 7,652,520 7.500%, due 12/01/26 TBA.............................. 5,595,000 5,607,253
FACE AMOUNT VALUE ---------- ----------- Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only..................... $ 9,671 $ 3,139 0.000%, due 07/01/26 principal only.................... 5,478 3,660 0.000%, due 04/01/27 principal only.................... 4,270,755 2,831,489 Government National Mortgage Association 11.000%, due 09/15/15.................................. 312,435 346,999 8.000%, due 08/15/22................................... 993,405 1,014,826 8.000%, due 11/15/22................................... 2,207,891 2,271,500 7.500%, due 08/15/23................................... 1,079,758 1,082,461 7.500%, due 09/15/23................................... 1,115,920 1,118,713 7.000%, due 12/15/23................................... 1,354,532 1,338,224 9.000%, due 07/15/24................................... 136,907 144,565 8.500%, due 11/15/24................................... 173,216 179,874 8.500%, due 01/15/25................................... 309,204 321,089 9.000%, due 05/15/25................................... 389,027 410,788 7.500%, due 06/15/25................................... 2,026,365 2,035,889 8.000%, due 09/15/26................................... 4,149,445 4,238,919 ----------- 48,172,665 ----------- U.S. GOVERNMENT OBLIGATIONS-- 21.05% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01................................... 3,635,000 3,671,350 6.250%, due 10/31/01................................... 12,860,000 12,803,738 7.000%, due 07/15/06................................... 8,230,000 8,466,613 8.125%, due 05/15/21................................... 14,420,000 16,497,388 U.S. Treasury Principal Strips 0.000%, due 08/15/03................................... 7,230,000 4,892,396 0.000%, due 11/15/04................................... 15,985,000 9,903,986 0.000%, due 05/15/08................................... 5,245,000 2,543,143 0.000%, due 02/15/19................................... 4,900,000 1,095,248 ----------- 59,873,862 ----------- Total U.S. Bonds (Cost $157,642,385).................... 159,332,974 ----------- Short-Term Investments--12.44% U.S. GOVERNMENT OBLIGATIONS-- 0.48% U.S. Treasury Bill 5.360%, due 11/13/97................. 1,400,000 1,372,962 ----------- COMMERCIAL PAPER -- 11.96% American Stores Co. 5.830%, due 07/23/97................................... 1,000,000 996,437 Case Credit Corp. 5.760%, due 07/21/97.................. 1,000,000 996,800 Crown Cork & Seal Co. 5.800%, due 07/09/97................................... 1,500,000 1,498,067 5.770%, due 07/15/97................................... 1,700,000 1,696,185 CSX Corp. 5.780%, due 07/09/97................................... 2,500,000 2,496,789 5.800%, due 07/22/97................................... 1,000,000 996,617 Cummins Engine Company, Inc. 6.500%, due 07/01/97................................... 500,000 500,000 Enron Oil & Gas 6.520%, due 07/01/97.................... 7,176,000 7,176,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................... 1,500,000 1,497,592 5.850%, due 08/11/97................................... 2,500,000 2,483,344
- -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ------------ Marriott Corp. 5.770%, due 07/08/97.................... $1,000,000 $ 998,878 Norfolk Southern Corp. 5.770%, due 07/10/97.................................. 1,000,000 998,558 5.780%, due 07/18/97.................................. 1,500,000 1,495,906 Occidental Petroleum 5.800%, due 08/13/97.................................. 1,750,000 1,737,876 Sundstrand Corp. 5.800%, due 07/09/97.................................. 1,200,000 1,198,453 5.850%, due 07/15/97.................................. 1,000,000 997,725 Tenneco, Inc. 5.780%, due 07/17/97.................................. 1,750,000 1,745,504 5.800%, due 07/23/97.................................. 1,000,000 996,455 Textron Financial Corp. 6.400%, due 07/01/97.................................. 3,500,000 3,500,000 ------------ 34,007,186 ------------ Total Short-Term Investments (Cost $35,379,046).................................... 35,380,148 ------------ Total Investments (Cost $274,736,312)--106.43% (a)...................... 302,801,511 ------------ Liabilities, less cash and other assets-- (6.43%)...................................... (18,291,697) ------------ Net Assets--100%....................................... $284,509,814 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $274,855,422; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $29,429,449 Gross unrealized depreciation................................ (1,483,360) ----------- Net unrealized appreciation................................ $27,946,089 ===========
(b) Non-income producing security FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1997. MTN: Medium term note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144-A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $16,558,539 or 5.82% of net assets. FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of June 30, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) -------------- ----------- ----------- ----------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 55 contracts..... September 1997 $ 5,776,272 $ 5,823,985 $ 47,713 10 Year U.S. Treasury Note, 49 contracts..... September 1997 5,243,368 5,285,875 42,507 30 Year U.S. Treasury Bond, 44 contracts..... September 1997 4,797,455 4,886,750 89,295 INDEX FUTURES SALE CON- TRACTS Standard & Poor's 500, 63 contracts........... September 1997 26,671,770 28,042,875 (1,371,105) ----------- Total................. $(1,191,590) ===========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $1,372,962. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $274,736,312) (Note 1)............... $302,801,511 Receivables: Investment securities sold...................................... 8,232,355 Dividends....................................................... 232,210 Interest........................................................ 1,792,937 Fund shares sold................................................ 806,039 Variation margin (Note 4)....................................... 154,131 Other assets..................................................... 42,136 ------------ TOTAL ASSETS.................................................. 314,061,319 ------------ LIABILITIES: Payables: Investment securities purchased................................. 27,505,092 Fund shares redeemed............................................ 194,098 Due to custodian bank........................................... 1,596,904 Investment advisory fees (Note 2)............................... 203,965 Accrued expenses................................................ 51,446 ------------ TOTAL LIABILITIES............................................. 29,551,505 ------------ NET ASSETS........................................................ $284,509,814 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $244,115,671 Accumulated undistributed net investment income.................. 3,271,123 Accumulated net realized gain.................................... 10,249,411 Net unrealized appreciation...................................... 26,873,609 ------------ NET ASSETS.................................................... $284,509,814 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $282,859,904 and 22,583,464 shares is- sued and outstanding) (Note 6)................................. $ 12.53 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 80 shares issued and outstanding) (Note 6).......... $ 12.53 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,648,910 and 132,351 shares issued and outstanding) (Note 6). $ 12.46 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME Interest.......................................................... $10,015,932 Dividends......................................................... 1,832,510 ----------- TOTAL INCOME................................................... 11,848,442 ----------- EXPENSES: Advisory (Note 2)................................................. 1,775,454 Administration.................................................... 131,904 Custodian......................................................... 79,580 Distribution (Note 5)............................................. 6,675 Other............................................................. 260,939 ----------- TOTAL EXPENSES................................................. 2,254,552 Expenses waived by Advisor (Note 2)............................ (215,473) ----------- NET EXPENSES................................................... 2,039,079 ----------- NET INVESTMENT INCOME ......................................... 9,809,363 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 19,028,392 Futures contracts................................................ (2,961,151) ----------- Net realized gain.............................................. 16,067,241 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 11,790,507 Futures contracts................................................ (1,255,734) ----------- Change in net unrealized appreciation or depreciation.......... 10,534,773 ----------- Net realized and unrealized gain.................................. 26,602,014 ----------- Net increase in net assets resulting from operations.............. $36,411,377 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 9,809,363 $ 8,308,870 Net realized gain................................. 16,067,241 8,233,205 Change in net unrealized appreciation or deprecia- tion............................................. 10,534,773 8,676,412 ------------ ------------ Net increase in net assets resulting from opera- tions............................................ 36,411,377 25,218,487 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.................................. (7,953,731) (7,711,341) SwissKey Class................................... (43,714) (9,781) Distributions from net realized gain: Brinson Class I.................................. (10,324,917) (9,885,505) SwissKey Class................................... (65,778) (992) ------------ ------------ Total distributions to shareholders................ (18,388,140) (17,607,619) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 80,528,530 81,710,433 Shares issued on reinvestment of distributions.... 18,312,423 17,593,608 Shares redeemed................................... (60,962,669) (36,030,444) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 6)...................... 37,878,284 63,273,597 ------------ ------------ TOTAL INCREASE IN NET ASSETS................... 55,901,521 70,884,465 ------------ ------------ NET ASSETS: Beginning of year................................. 228,608,293 157,723,828 ------------ ------------ End of year (including accumulated undistributed net investment income of $3,271,123 and $1,459,205, respectively)........................ $284,509,814 $228,608,293 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR DECEMBER 30, 1994* ENDED ENDED THROUGH BRINSON CLASS I JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 11.71 $ 11.23 $ 10.00 -------- -------- -------- Income from investment opera- tions: Net investment income......... 0.47 0.44 0.23 Net realized and unrealized gain......................... 1.29 1.04 1.16 -------- -------- -------- Total income from investment operations................. 1.76 1.48 1.39 -------- -------- -------- Less distributions: Distributions from net invest- ment income.................. (0.40) (0.43) (0.16) Distributions from net real- ized gain.................... (0.54) (0.57) -- -------- -------- -------- Total distributions......... (0.94) (1.00) (0.16) -------- -------- -------- Net asset value, end of period.. $ 12.53 $ 11.71 $ 11.23 ======== ======== ======== Total return (non-annualized)... 15.50% 13.52% 13.91% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $282,860 $227,829 $157,724 Ratio of expenses to average net assets: Before expense reimbursement.. 0.88% 1.01% 1.06%** After expense reimbursement... 0.80% 0.80% 0.80%** Ratio of net investment income to average net assets: Before expense reimbursement.. 3.78% 3.76% 4.36%** After expense reimbursement... 3.86% 3.97% 4.63%** Portfolio turnover rate........ 329% 240% 196% Average commission rate paid per share..................... $0.0441 $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 11.67 $ 11.38 ------- ------- Income from investment operations: Net investment income........................... 0.38 0.42 Net realized and unrealized gain................ 1.31 0.86 ------- ------- Total income from investment operations....... 1.69 1.28 ------- ------- Less distributions: Distributions from net investment income........ (0.36) (0.42) Distributions from net realized gain............ (0.54) (0.57) ------- ------- Total distributions........................... (0.90) (0.99) ------- ------- Net asset value, end of period.................... $ 12.46 $ 11.67 ======= ======= Total return (non-annualized)..................... 14.99% 11.54% Ratios/Supplemental data Net assets, end of period (in 000s).............. $ 1,649 $ 779 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.38% 1.51%** After expense reimbursement..................... 1.30% 1.30%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 3.28% 3.26%** After expense reimbursement..................... 3.36% 3.47%** Portfolio turnover rate.......................... 329% 240% Average commission rate paid per share........... $0.0441 $0.0481
*Commencement of SwissKey Class **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] 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 June 30, 1997, the Brinson U.S. Equity Fund provided an annualized return of 23.61% compared to its benchmark, the Wilshire 5000 Index, return of 21.78%. This performance was achieved at an annualized volatility of 10.40%, only slightly above the index volatility of 10.35%. For the year ended June 30, 1997, the Fund returned 31.87%, while the benchmark returned 29.32%. The total return of the Brinson U.S. Equity Fund was 16.74% for the first six months of 1997, compared to the 17.65% return for the Wilshire 5000 Index. The following paragraphs review the sources of returns in the first half of 1997. Market exposure (average beta of 0.99) detracted modestly from Fund relative performance in the strong equity market environment which characterized the first half of 1997. Conversely, other broad factor positions added to results. The most significant of these was a higher than benchmark exposure to the strongly performing traditional value measures of earnings-price, book-price, and yield coupled with an underweighting in growth issues. Also positive was an underweighting in stocks ranked high in price and earnings momentum. Some offset to the favorable contribution of these factors was the underweight in foreign income. Large, multinational issues have been among the best market performers so far this year. Industry weightings had a fairly neutral influence upon performance in the first half. On the positive side, the Fund's low exposure to telephone and electric utilities continued to benefit results. We strongly believe that a combination of new technology, intensifying competition and the easing of regulatory barriers will meaningfully pressure future profitability of the traditional telephone and electric utilities. Another positive was the underweighting in several of the basic industries, particularly chemicals. Chemical product pricing is suffering as rapid capacity growth outstrips demand, particularly in many developing countries. In addition, the underweight in autos and overweight in health care contributed favorably to results. Offsetting these gains were several adverse industry positions including the Fund overweighting in pollution control stocks. Waste stream volume growth has been lackluster and landfill tipping fees continue under pressure. Consumer industry weightings were also a negative due to an underweight in beverages and an overweight in tobacco. Finally, the underweighting in the miscellaneous finance group, which includes brokerage and investment management firms, detracted from performance. The stock specific influence upon the Fund's active return was negative for the first six months. Among large capitalization issues, the best performers were Xerox, Schering Plough, Corning, Gannett and CIGNA while the worst were Pharmacia & Upjohn, Chase Manhattan, Burlington Northern Santa Fe, Enron and Rhone Poulenc Rorer. In the intermediate capitalization segment of the Fund, the strongest contributors were Timken, U.S. Bancorp, Nextel Communications, Coca-Cola Enterprises and Interpublic Group, while the weakest were Tyson Foods, Allergan, York International, Harnischfeger and Informix. - -------------------------------------------------------------------------------- 19 U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Total Return
6 months 1 year 3 years 2/28/94* ended ended ended to 6/30/97 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- Brinson U.S. Equity Fund 16.74% 31.87% 27.85% 23.61% - -------------------------------------------------------------------------------- Wilshire 5000 Index 17.65 29.32 26.74 21.78 - --------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Equity Fund and the Wilshire 5000 Index if you had invested $1,000,000 on February 28, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Equity Fund vs. Wilshire 5000 Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Brinson U.S. Equity Fund Wilshire 5000 Index - -------------------------------------------------------------------------------- 2/28/94 $1,000,000 $1,000,000 3/31/94 942,943 954,720 6/30/94 970,003 947,285 9/30/94 1,019,258 998,766 12/31/94 983,676 991,086 3/31/95 1,076,245 1,080,584 6/30/95 1,178,023 1,181,470 9/30/95 1,289,389 1,289,453 12/31/95 1,382,887 1,352,348 3/31/96 1,489,979 1,428,320 6/30/96 1,538,200 1,491,254 9/30/96 1,588,806 1,533,447 12/31/96 1,737,594 1,639,211 3/31/97 1,751,366 1,649,815 6/30/97 2,028,487 1,928,453
2/28/94 = $1,000,000 Data through 6/30/97 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. - -------------------------------------------------------------------------------- 20 U.S. Equity Fund - ------------------------------------------------------------------------------ [LOGO OF THE BRINSON FUNDS] Industry Diversification As a Percent of Net Assets As of June 30, 1997 - ------------------------------------------------------------------------------
U.S. EQUITIES Basic Industries Chemicals........................... 2.13% Housing/Paper....................... 4.38 Metals.............................. 0.59 ------ 7.10 Capital Investments Capital Goods....................... 7.24 Technology.......................... 9.75 ------ 16.99 Consumer Autos/Durables...................... 3.04 Discretionary....................... 4.52 Health: Drugs....................... 7.08 Health: Non-Drugs................... 3.50 Non-Durables........................ 9.70 Retail/Apparel...................... 4.24 ------ 32.08 Energy................................ 4.14% Financial Banks............................... 7.17 Non-Banks........................... 7.50 ------ 14.67 Transportation........................ 5.49 Utilities............................. 6.00 Services/Miscellaneous................ 7.93 ------ Total U.S. Equities............. 94.40* ------ SHORT-TERM INVESTMENTS................ 6.76* ------ TOTAL INVESTMENTS............... 101.16 ------ LIABILITIES, LESS CASH AND OTHER ASSETS.................... (1.16) ------ NET ASSETS............................ 100.00% ======
* The Fund held a long position in stock index futures on June 30, 1997 which increased U.S. equity exposure from 94.40% to 99.65% and reduced exposure to Short-Term Investments from 6.76% to 1.51%. - -------------------------------------------------------------------------------- Top Ten U.S. Equity Holdings As of June 30, 1997
Percent of Net Assets - -------------------------------------------------------------------------------- 1. Xerox Corp. 4.98% 2. Chase Manhattan Corp. 4.22 3. Lockheed Martin Corp. 3.96 4. Philip Morris Companies, Inc. 3.92 5. Aon Corp. 3.26 6. CIGNA Corp. 3.21 7. Goodyear Tire & Rubber Co. 2.93 8. Burlington Northern Santa Fe 2.92 9. Federal Express Corp. 2.69 10. Citicorp 2.65 - --------------------------------------------------------------------------------
21 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 94.40% Aetna Life & Casualty Co.................................. 46,000 $ 4,709,250 Allergan, Inc............................................. 119,700 3,807,956 Alza Corp. (b)............................................ 116,700 3,384,300 Aon Corp.................................................. 234,650 12,143,137 Automatic Data Processing, Inc............................ 114,000 5,358,000 Beckman Instruments, Inc.................................. 34,000 1,640,500 Birmingham Steel Corp..................................... 46,800 725,400 Boston Technology, Inc. (b)............................... 43,600 1,288,925 Browning-Ferris Industries, Inc........................... 88,500 2,942,625 Burlington Northern Santa Fe.............................. 121,200 10,892,850 Centerior Energy Co....................................... 110,500 1,236,219 Champion Enterprises, Inc. (b)............................ 55,100 826,500 Champion International Corp............................... 4,000 221,000 Chase Manhattan Corp...................................... 162,200 15,743,537 CIGNA Corp................................................ 67,500 11,981,250 Circuit City Stores, Inc.................................. 172,600 6,138,087 Citicorp.................................................. 82,000 9,886,125 CMS Energy Corp........................................... 128,100 4,515,525 Coca-Cola Enterprises, Inc................................ 94,200 2,166,600 Comerica, Inc............................................. 32,100 2,182,800 Comverse Technology, Inc. (b)............................. 21,600 1,123,200 Corning, Inc.............................................. 149,200 8,299,250 Covance, Inc.............................................. 58,750 1,134,609 CPC International, Inc.................................... 51,100 4,717,169 CVS Corp.................................................. 74,200 3,802,750 Dial Corp................................................. 67,700 1,057,813 Eastman Chemical Co....................................... 79,000 5,016,500 EMC Corp./Mass. (b)....................................... 222,100 8,661,900 Enron Corp................................................ 225,300 9,195,056 Entergy Corp.............................................. 13,400 366,825 Federal Express Corp. (b)................................. 173,700 10,031,175 Federated Department Stores (b)........................... 66,200 2,300,450 FileNet Corp. (b)......................................... 23,800 345,100 First American Corp.-Tenn................................. 30,600 1,174,275 First Bank System, Inc.................................... 23,700 2,023,388 First Data Corp........................................... 193,830 8,516,406 First of America Bank Corp................................ 22,450 1,027,088 First Security Corp....................................... 38,600 1,054,263 Fleetwood Enterprises, Inc................................ 23,000 685,688 Food Lion, Inc. Class A................................... 213,800 1,530,006 Forest Laboratories, Inc. (b)............................. 43,700 1,810,819 Gannett Co., Inc.......................................... 76,500 7,554,375 General Instrument Corp. (b).............................. 266,200 6,655,000 Genzyme Corp. (b)......................................... 47,200 1,309,800 Geon Co................................................... 32,300 654,075 Goodyear Tire & Rubber Co................................. 172,400 10,915,075 Harnischfeger Industries, Inc............................. 77,400 3,212,100 Health Care and Retirement Corp. (b)...................... 73,950 2,468,081 Hibernia Corp. Class A.................................... 64,900 904,544 Informix Corp. (b)........................................ 62,400 561,600 Interpublic Group of Companies, Inc....................... 50,700 3,108,544 James River Corp. of Virginia............................. 92,100 3,407,700 Kroger Co. (b)............................................ 63,700 1,847,300 Lockheed Martin Corp...................................... 142,626 14,770,705 Lyondell Petrochemical Co................................. 127,700 2,785,456 Manor Care, Inc........................................... 104,000 3,393,000 Martin Marietta Materials, Inc............................ 34,257 1,109,070 Masco Corp................................................ 136,100 5,682,175 Mattel, Inc............................................... 169,275 5,734,191 Nabisco Holdings Corp. Class A............................ 119,000 4,745,125 National Service Industries Inc........................... 22,800 1,110,075 Nextel Communications, Inc. Class A (b)................... 178,000 3,370,875 Octel Communications Corp. (b)............................ 38,700 907,031 Old Republic International Corp........................... 42,050 1,274,641 Peco Energy Co............................................ 271,500 5,701,500 Pentair, Inc.............................................. 61,800 2,031,675
SHARES VALUE ---------- ------------ Pharmacia & Upjohn, Inc.................... 148,700 $ 5,167,325 Philip Morris Companies, Inc.................... 329,600 14,626,000 Raytheon Co............. 41,400 2,111,400 Regions Financial Corp.. 30,000 948,750 Reynolds & Reynolds Co. Class A................ 41,800 658,350 Schering Plough Corp.... 204,900 9,809,587 Seagate Technology, Inc. (b).................... 56,100 1,974,019 Timken Co............... 79,300 2,820,106 Trinity Industries, Inc.................... 25,200 800,100 Tyson Foods, Inc. Class A...................... 237,700 4,546,012 UCAR International, Inc. (b).................... 2,900 132,675 Ultramar Diamond Shamrock Corp.......... 132,918 4,336,450 US Bancorp.............. 71,100 4,559,287 Vencor, Inc. (b)........ 61,100 2,581,475 Viad Corp............... 114,500 2,204,125 Westvaco Corp........... 27,900 877,106 Witco Corp.............. 14,300 542,506 Xerox Corp.............. 235,700 18,590,838 York International Corp................... 72,800 3,348,800 360 Communications Co. (b).................... 34,633 593,090 ------------ Total U.S. Equities (Cost $293,837,346).... 352,106,030 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 6.76% U.S. GOVERNMENT OBLIGATIONS -- 0.19% U.S. Treasury Bill 5.368%, due 11/13/97... $ 710,000 $ 696,288 ------------ COMMERCIAL PAPER -- 6.57% Case Credit Corp. 6.250%, due 07/07/97... 1,000,000 998,958 5.760%, due 07/21/97... 500,000 498,400 Crown Cork & Seal Co. 5.800%, due 07/09/97... 500,000 499,356 5.770%, due 07/15/97... 500,000 498,878 CSX Corp. 5.780%, due 07/09/97............... 500,000 499,358 Cummins Engine Company, Inc. 6.500%, due 07/01/97............... 2,500,000 2,500,000 Enron Oil & Gas 6.520%, due 07/01/97........... 5,524,000 5,524,000 Hughes Electronics Corp. 5.780%, due 07/11/97... 500,000 499,197 5.850%, due 08/11/97... 500,000 496,669 Marriott Corp. 5.770%, due 07/08/97........... 500,000 499,439 Norfolk Southern Corp. 5.770%, due 07/10/97........... 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97........... 500,000 496,536 Sundstrand Corp. 5.800%, due 07/09/97... 500,000 499,356 5.850%, due 07/15/97... 500,000 498,862 Tenneco, Inc. 5.780%, due 07/17/97........... 500,000 498,716 Textron Financial Corp. 6.400%, due 07/01/97........... 9,500,000 9,500,000 ------------ 24,507,004 ------------ Total Short-Term Investments (Cost $25,202,710)..... 25,203,292 ------------ Total Investments (Cost $319,040,056) -- 101.16% (a)............ 377,309,322 ------------ Liabilities, less cash and other assets-- (1.16%)................ (4,319,862) ------------ Net Assets -- 100%...... $372,989,460 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 22 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $319,163,004; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $60,885,827 Gross unrealized depreciation................................ (2,739,509) ----------- Net unrealized appreciation................................ $58,146,318 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN -------------- ----------- ----------- ---------- INDEX FUTURES BUY CON- TRACTS Standard & Poor's 500, 44 contracts........... September 1997 $19,350,765 $19,585,500 $234,735 ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $696,288. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $319,040,056) (Note 1) .............. $377,309,322 Cash............................................................. 423,747 Receivables: Investment securities sold...................................... 1,645,118 Dividends....................................................... 555,543 Fund shares sold................................................ 1,181,693 Other assets..................................................... 39,163 ------------ TOTAL ASSETS.................................................. 381,154,586 ------------ LIABILITIES: Payables: Investment securities purchased................................. 6,850,007 Fund shares redeemed............................................ 885,591 Investment advisory fees (Note 2)............................... 224,739 Variation margin (Note 4)....................................... 147,926 Accrued expenses................................................ 56,863 ------------ TOTAL LIABILITIES............................................. 8,165,126 ------------ NET ASSETS........................................................ $372,989,460 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $298,910,691 Accumulated undistributed net investment income.................. 679,544 Accumulated net realized gain.................................... 14,895,224 Net unrealized appreciation...................................... 58,504,001 ------------ NET ASSETS.................................................... $372,989,460 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $337,949,448 and 19,159,533 shares is- sued and outstanding) (Note 6)................................. $ 17.64 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 57 shares issued and outstanding) (Note 6).......... $ 17.64 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $35,039,012 and 1,992,413 shares issued and outstanding) (Note 6)...................................... $ 17.59 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Dividends......................................................... $ 3,429,477 Interest.......................................................... 545,249 ----------- TOTAL INCOME................................................... 3,974,726 ----------- EXPENSES: Advisory (Note 2)................................................. 1,423,666 Administration.................................................... 89,029 Distribution (Note 5)............................................. 73,831 Custodian......................................................... 72,024 Other............................................................. 236,863 ----------- TOTAL EXPENSES................................................. 1,895,413 Expenses waived by Advisor (Note 2)............................ (189,305) ----------- NET EXPENSES................................................... 1,706,108 ----------- NET INVESTMENT INCOME.......................................... 2,268,618 ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments...................................................... 19,441,498 Futures contracts................................................ 2,138,520 ----------- Net realized gain ............................................. 21,580,018 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 40,649,230 Futures contracts ............................................... 237,510 ----------- Change in net unrealized appreciation or depreciation.......... 40,886,740 ----------- Net realized and unrealized gain ................................. 62,466,758 ----------- Net increase in net assets resulting from operations.............. $64,735,376 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 2,268,618 $ 1,333,171 Net realized gain ................................ 21,580,018 7,826,393 Change in net unrealized appreciation or deprecia- tion ............................................ 40,886,740 13,357,238 ------------ ------------ Net increase in net assets resulting from opera- tions............................................ 64,735,376 22,516,802 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................. (1,717,943) (1,233,245) SwissKey Class.................................. (87,137) (17,809) Distributions from net realized gain: Brinson Class I................................. (12,393,329) (1,764,213) SwissKey Class.................................. (838,501) (2,611) ------------ ------------ Total distributions to shareholders............... (15,036,910) (3,017,878) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 212,394,882 71,976,805 Shares issued on reinvestment of distributions.... 14,138,565 2,944,272 Shares redeemed................................... (34,971,198) (5,264,717) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 6)...................... 191,562,249 69,656,360 ------------ ------------ TOTAL INCREASE IN NET ASSETS................... 241,260,715 89,155,284 ------------ ------------ NET ASSETS: Beginning of year................................. 131,728,745 42,573,461 ------------ ------------ End of year (including accumulated undistributed net investment income of $679,544 and $216,006, respectively).................................... $372,989,460 $131,728,745 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR ENDED JUNE 30, FEBRUARY 22, 1994* --------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period........................ $ 14.59 $ 11.53 $ 9.65 $10.00 -------- -------- ------- ------ Income from investment opera- tions: Net investment income........ 0.15 0.17 0.16 0.05 Net realized and unrealized gain (loss)................. 4.27 3.31 1.89 (0.36) -------- -------- ------- ------ Total income (loss) from investment operations..... 4.42 3.48 2.05 (0.31) -------- -------- ------- ------ Less distributions: Distributions from net in- vestment income............. (0.14) (0.17) (0.14) (0.04) Distributions from net real- ized gain................... (1.23) (0.25) (0.03) -- -------- -------- ------- ------ Total distributions........ (1.37) (0.42) (0.17) (0.04) -------- -------- ------- ------ Net asset value, end of period. $ 17.64 $ 14.59 $ 11.53 $ 9.65 ======== ======== ======= ====== Total return (non-annualized).. 31.87% 30.57% 21.45% (3.10)% Ratios/Supplemental data Net assets, end of period (in 000s)........................ $337,949 $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reimbursement. 0.89% 1.14% 1.70% 5.40% ** After expense reimbursement.. 0.80% 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reimbursement. 1.06% 1.13% 1.09% (2.82)%** After expense reimbursement.. 1.15% 1.47% 1.99% 1.78% ** Portfolio turnover rate....... 43% 36% 33% 9% Average commission rate paid per share.................... $ 0.0422 $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 27 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 14.58 $ 11.94 ------- ------- Income from investment operations: Net investment income........................... 0.11 0.10 Net realized and unrealized gain................ 4.22 2.92 ------- ------- Total income from investment operations....... 4.33 3.02 ------- ------- Less distributions: Distributions from net investment income........ (0.09) (0.13) Distributions from net realized gain............ (1.23) (0.25) ------- ------- Total distributions........................... (1.32) (0.38) ------- ------- Net asset value, end of period.................... $ 17.59 $ 14.58 ======= ======= Total return (non-annualized)..................... 31.28% 25.70% Ratios/Supplemental data Net assets, end of period (in 000s).............. $35,039 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.41% 1.66%** After expense reimbursement..................... 1.32% 1.32%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 0.54% 0.61%** After expense reimbursement..................... 0.63% 0.95%** Portfolio turnover rate.......................... 43% 36% Average commission rate paid per share........... $0.0422 $0.0457
*Commencement of SwissKey Class **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 28 U.S. Bond Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] 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 6.58% since its inception on August 31, 1995 compared to the Salomon Brothers Broad Investment Grade (BIG) Bond Index return of 6.62%. For the year ended June 30, 1997, the Fund produced a total return of 8.45% compared to the Benchmark return of 8.15%. In the first half of 1997, the Fund returned 2.87% compared to the Benchmark return of 3.06%. The first quarter of 1997 in the U.S. was characterized by unusually strong rates of real economic growth, heightened fears of inflation, rising market interest rates and a 25 basis point hike in the Federal Reserve's overnight funds target rate. In the second quarter, economic activity slowed, Fed policy held steady and market interest rates declined. Over the full semi-annual period there was a net increase in yields on U.S. fixed income securities of about 10 to 20 basis points. Industry Diversification As a Percent of Net Assets As of June 30, 1997 - --------------------------------------------------------------------------------
U.S. BONDS Corporate Bonds Asset-Backed............................ 3.84% CMO..................................... 2.60 Consumer................................ 2.18 Financial............................... 8.22 Industrial.............................. 3.93 Telecommunications...................... 0.40 Transportation.......................... 1.48 ------ Total U.S. Corporate Bonds............ 22.65 U.S. Government Agencies.................. 28.68 U.S. Government Obligations............... 37.26 International Dollar Bonds................ 6.05 ------ Total U.S. Bonds...................... 94.64 ------ SHORT-TERM INVESTMENTS.................... 14.42 ------ TOTAL INVESTMENTS..................... 109.06 LIABILITIES, LESS CASH AND OTHER ASSETS........................ (9.06) ------ NET ASSETS................................ 100.00% ======
- -------------------------------------------------------------------------------- 29 U.S. Bond Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Total Return
6 months 1 year Annualized ended ended 8/31/95* 6/30/97 6/30/97 to 6/30/97 - -------------------------------------------------------------------------------- Brinson U.S. Bond Fund 2.87% 8.45% 6.58% - -------------------------------------------------------------------------------- Salomon Brothers Broad Investment Grade (BIG) Bond Index 3.06 8.15 6.62 - --------------------------------------------------------------------------------
* 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 $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if you had invested $1,000,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Bond Fund vs. Salomon Brothers BIG Bond Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Brinson U.S. Salomon Brothers BIG Bond Fund Bond Index - -------------------------------------------------------------------------------- 8/31/95 $1,000,000 $1,000,000 9/30/95 1,009,000 1,009,400 12/31/95 1,054,932 1,053,220 3/31/96 1,031,398 1,034,956 6/30/96 1,035,997 1,040,029 9/30/96 1,054,776 1,059,391 12/31/96 1,092,169 1,091,411 3/31/97 1,081,323 1,085,686 6/30/97 1,123,558 1,124,790
8/31/95 = $1,000,000 Data through 6/30/97 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. - -------------------------------------------------------------------------------- 30 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------- --------- Bonds -- 94.64% U.S. CORPORATE BONDS -- 22.65% Aetna Services Inc. 6.970%, due 08/15/36.................... $235,000 $ 237,332 BellSouth Savings & Employee ESOP 9.125%, due 07/01/03....................................... 88,949 92,634 Capital One Bank 6.830%, due 05/17/99....................... 359,000 360,453 Chase Mortgage Finance Corp. 93-J1 Class 1A5 6.625%, due 08/25/09................................................... 70,026 66,997 Ches Pot Tel MD 8.000%, due 10/15/29........................ 87,000 94,158 Citicorp Mortgage Securities, Inc. 94-9 Class A8 5.750%, due 06/25/09................................................... 91,612 77,402 Comcast Cable Communications 144-A 8.500%, due 05/01/27....................................... 300,000 323,448 Countrywide Funding Corp. FRN 6.360%, due 12/01/03....................................... 250,000 238,799 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 06/20/29................................................... 245,000 248,675 CSX Transportation, Inc. 144-A 6.950%, due 05/01/27....................................... 350,000 353,084 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02................................................... 218,000 218,473 Eastman Chemical Co. 7.600%, due 02/01/27................... 223,000 221,009 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03................................................... 155,000 153,405 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09............................................... 178,678 168,678 GMAC 9.625%, due 12/15/01................................... 294,000 325,311 Hanson Overseas BV 6.750%, due 09/15/05..................... 100,000 97,476 Interamer Development Bank 6.800%, due 10/15/25....................................... 100,000 95,100 Lehman Brothers Holdings 7.250%, due 04/15/03....................................... 225,000 226,083 Lockheed Martin Corp. 7.700%, due 06/15/08.................. 282,000 294,678 MBNA Global Capital Securities FRN 6.659%, due 02/01/27....................................... 90,000 88,936 News America Holdings 7.750%, due 01/20/24.................. 358,000 339,676 Premier Auto Trust 96-3A 6.500%, due 03/06/00................................. 190,000 191,244 96-4A 6.400%, due 10/06/01................................. 350,000 350,616 Salomon, Inc. 6.750%, due 02/15/03.......................... 300,000 293,990 Thrift Financial Corp. 11.250%, due 01/01/16................ 54,270 58,634 Time Warner, Inc. 9.150%, due 02/01/23...................... 75,000 82,775 Time Warner Entertainment, Inc. 8.375%, due 03/15/23....................................... 94,000 96,346 --------- 5,395,412 --------- INTERNATIONAL DOLLAR BONDS -- 6.05% Bayerische Landesbank 6.850%, due 07/19/01.................. 188,000 189,357 Empresa Nacional Electric 7.875%, due 02/01/27....................................... 394,000 397,355
FACE AMOUNT VALUE -------- --------- Province of Quebec 7.500%, due 07/15/23....................................... $200,000 $ 196,736 Repsol International Finance 7.000%, due 08/01/05....................................... 200,000 200,717 Republic of South Africa 9.625%, due 12/15/99............... 71,000 75,029 Royal Bank of Scotland 7.375%, due 04/29/49................. 80,000 79,730 Skandinaviska Enskilda Banken 144-A 6.625%, due 03/29/49....................................... 305,000 301,889 --------- 1,440,813 --------- U.S. GOVERNMENT AGENCIES -- 28.68% Federal Home Loan Mortgage Corp. 5.800%, due 08/15/19....................................... 661,000 621,856 7.500%, due 01/15/23....................................... 139,328 133,110 7.238%, due 05/01/26....................................... 51,187 52,721 0.000%, due 04/15/27 principal only........................ 300,000 178,060 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03....................................... 108,489 105,302 6.500%, due 12/01/03 TBA................................... 300,000 296,156 8.000%, due 11/01/22....................................... 212,105 216,944 9.000%, due 03/01/24....................................... 172,791 184,104 9.000%, due 04/01/25....................................... 410,527 433,362 9.500%, due 04/01/25....................................... 53,394 57,182 Federal National Mortgage Association 6.500%, due 12/01/03 TBA................................... 800,000 759,500 6.500%, due 12/01/03 Balloon TBA........................... 200,000 197,375 6.500%, due 04/25/08....................................... 105,383 101,005 6.500%, due 05/25/08....................................... 132,160 129,863 8.000%, due 12/18/11....................................... 100,000 104,307 9.000%, due 08/01/21....................................... 33,735 35,825 8.500%, due 07/01/22....................................... 25,508 26,843 8.500%, due 12/01/25....................................... 334,233 346,558 6.500%, due 02/01/26....................................... 128,409 122,831 6.500%, due 04/01/26....................................... 423,606 405,207 7.500%, due 12/01/26 TBA................................... 460,000 461,007 6.070%, due 08/01/29 TBA................................... 530,000 523,706 Federal National Mortgage Association Strips 7.500%, due 05/01/23 interest only......................... 188,272 63,317 0.000%, due 07/01/26 principal only........................ 185,521 123,958 0.000%, due 04/01/27 principal only........................ 458,215 303,795 Government National Mortgage Association 10.000%, due 09/15/00...................................... 3,212 3,406 10.000%, due 05/15/01...................................... 6,249 6,626 9.000%, due 11/15/04....................................... 20,543 21,500 9.000%, due 12/15/17....................................... 64,649 69,391 8.000%, due 08/15/22....................................... 89,260 91,185 7.500%, due 12/15/22....................................... 397,800 401,475 7.500%, due 06/15/25....................................... 128,896 129,501 7.000%, due 07/15/25....................................... 127,437 125,219 --------- 6,832,197 ---------
- -------------------------------------------------------------------------------- 31 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE --------- ----------- U.S. GOVERNMENT OBLIGATIONS-- 37.26% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................... $ 153,000 $ 152,044 6.250%, due 10/31/01................................... 525,000 522,703 7.000%, due 07/15/06................................... 940,000 967,025 8.125%, due 05/15/21................................... 1,370,000 1,567,366 6.000%, due 02/15/26................................... 1,812,000 1,621,175 U.S. Treasury Principal Strips 0.000%, due 05/15/03................................... 1,915,000 1,317,577 0.000%, due 08/15/03................................... 1,305,000 883,067 0.000%, due 11/15/04................................... 2,153,000 1,333,956 0.000%, due 05/15/08................................... 1,055,000 511,538 ----------- 8,876,451 ----------- Total U.S. Bonds (Cost $22,347,621)..................... 22,544,873 ----------- Short-Term Investments-- 14.42% COMMERCIAL PAPER -- 14.42% American Stores Co. 5.830%, due 07/23/97................ 500,000 498,219 Case Credit Corp. 5.760%, due 07/21/97.................. 250,000 249,200 Crown Cork & Seal Co. 5.770%, due 07/15/97................................... 500,000 498,878 CSX Corp. 5.780%, due 07/09/97.......................... 500,000 499,358 Enron Oil & Gas 6.520%, due 07/01/97.................... 143,000 143,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................... 500,000 499,197 Norfolk Southern Corp. 5.770%, due 07/10/97................................... 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97............... 250,000 248,268 Sundstrand Corp. 5.800%, due 07/09/97................... 300,000 299,613 ----------- Total Short-Term Investments (Cost $3,435,012)...................................... 3,435,012 ----------- Total Investments (Cost $25,782,633) -- 109.06% (a)...................... 25,979,885 ----------- Liabilities, less cash and other assets -- (9.06%)...................................... (2,159,180) ----------- Net Assets -- 100%...................................... $23,820,705 ===========
(a) Aggregate cost for federal income tax purposes was $25,786,476; and net unrealized appreciation consisted of: Gross unrealized ap- preciation........... $219,233 Gross unrealized de- preciation........... (25,824) -------- Net unrealized ap- preciation........... $193,409 ========
FRN: Floating rate note---The rate disclosed is that in effect at June 30, 1997. MTN: Medium Term Note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144-A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $978,421 or 4.11% of net assets. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $25,782,633) (Note 1)................ $25,979,885 Cash............................................................. 46,542 Receivables: Investment securities sold...................................... 980,757 Interest........................................................ 250,445 Fund shares sold................................................ 1,025 Other assets..................................................... 28,677 ----------- TOTAL ASSETS.................................................. 27,287,331 ----------- LIABILITIES: Payables: Investment securities purchased................................. 3,358,346 Fund shares redeemed............................................ 29,387 Investment advisory fees (Note 2)............................... 29,369 Accrued expenses................................................ 49,524 ----------- TOTAL LIABILITIES............................................. 3,466,626 ----------- NET ASSETS........................................................ $23,820,705 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $23,420,309 Accumulated undistributed net investment income.................. 271,841 Accumulated net realized loss.................................... (68,697) Net unrealized appreciation...................................... 197,252 ----------- NET ASSETS.................................................... $23,820,705 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $22,420,622 and 2,189,278 shares issued and outstanding) (Note 6)...................................... $ 10.24 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 98 shares issued and outstanding) (Note 6).......... $ 10.24 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,399,083 and 136,949 shares issued and outstanding) (Note 6). $ 10.22 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Interest........................................................... $ 921,854 ---------- TOTAL INCOME.................................................... 921,854 ---------- EXPENSES: Advisory (Note 2).................................................. 67,835 Accounting......................................................... 38,182 Registration....................................................... 37,673 Transfer Agent..................................................... 35,540 Professional....................................................... 33,928 Distribution (Note 5).............................................. 4,104 Other.............................................................. 10,538 ---------- TOTAL EXPENSES.................................................. 227,800 Expenses waived and reimbursed by Advisor (Note 2).............. (142,178) ---------- NET EXPENSES.................................................... 85,622 ---------- NET INVESTMENT INCOME .......................................... 836,232 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss.................................................. (36,166) Change in net unrealized appreciation or depreciation.............. 343,515 ---------- Net realized and unrealized gain................................... 307,349 ---------- Net increase in net assets resulting from operations............... $1,143,581 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31, 1995* JUNE 30, THROUGH 1997 JUNE 30, 1996 OPERATIONS: ----------- ---------------- Net investment income........................... $ 836,232 $ 456,231 Net realized loss............................... (36,166) (11,035) Change in net unrealized appreciation or depre- ciation........................................ 343,515 (146,263) ----------- ----------- Net increase in net assets resulting from opera- tions.......................................... 1,143,581 298,933 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................ (598,393) (350,335) SwissKey Class................................. (31,712) (13,132) Distributions in excess of net realized gain: Brinson Class I................................ (675) (23,071) SwissKey Class................................. (39) (268) ----------- ----------- Total distributions to shareholders............. (630,819) (386,806) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................... 16,583,813 10,200,031 Shares issued on reinvestment of distributions.. 461,917 386,807 Shares redeemed................................. (3,420,321) (867,431) ----------- ----------- Net increase in net assets resulting from capi- tal share transactions (Note 6)................ 13,625,409 9,719,407 ----------- ----------- TOTAL INCREASE IN NET ASSETS................. 14,138,171 9,631,534 ----------- ----------- NET ASSETS: Beginning of period............................. 9,682,534 51,000 ----------- ----------- End of period (including accumulated undistrib- uted net investment income of $271,841 and $90,190, respectively).. $23,820,705 $ 9,682,534 =========== ===========
*Commencement of investment operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
AUGUST 31, 1995* YEAR ENDED THROUGH BRINSON CLASS I JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period............ $ 9.93 $10.00 ------- ------ Income from investment operations: Net investment income......................... 0.51*** 0.50 Net realized and unrealized gain (loss)....... 0.32 (0.14) ------- ------ Total income from investment operations..... 0.83 0.36 ------- ------ Less distributions: Distributions from net investment income...... (0.52) (0.40) Distributions in excess of net realized gain.. -- (0.03) ------- ------ Total distributions......................... (0.52) (0.43) ------- ------ Net asset value, end of period.................. $ 10.24 $ 9.93 ======= ====== Total return (non-annualized)................... 8.45% 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)............ $22,421 $9,047 Ratio of expenses to average net assets: Before expense reimbursement.................. 1.65% 3.63%** After expense reimbursement................... 0.60% 0.60%** Ratio of net investment income to average net assets: Before expense reimbursement.................. 5.14% 3.00%** After expense reimbursement................... 6.19% 6.03%** Portfolio turnover rate........................ 410% 363%
*Commencement of investment operations **Annualized ***The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
AUGUST 31, 1995* YEAR ENDED THROUGH JUNE 30, SWISSKEY CLASS JUNE 30, 1997 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period............ $ 9.92 $10.00 ------ ------ Income from investment operations: Net investment income......................... 0.46*** 0.46 Net realized and unrealized gain (loss)....... 0.32 (0.13) ------ ------ Total income from investment operations..... 0.78 0.33 ------ ------ Less distributions: Distributions from net investment income...... (0.48) (0.38) Distributions in excess of net realized gain.. -- (0.03) ------ ------ Total distributions......................... (0.48) (0.41) ------ ------ Net asset value, end of period.................. $10.22 $ 9.92 ====== ====== Total return (non-annualized)................... 7.91% 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)............ $1,399 $ 636 Ratio of expenses to average net assets: Before expense reimbursement.................. 2.12% 4.10%** After expense reimbursement................... 1.07% 1.07%** Ratio of net investment income to average net assets: Before expense reimbursement.................. 4.67% 2.53%** After expense reimbursement................... 5.72% 5.56%** Portfolio turnover rate........................ 410% 363%
*Commencement of investment operations **Annualized ***The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 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. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey 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. 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 year ended June 30, 1997, 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. Amounts equal to 15.05% and 38.95% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the U.S. Balanced Fund and the U.S. Equity Fund, respectively. 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 Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. 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. - -------------------------------------------------------------------------------- 38 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 that 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 year ended June 30, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES WAIVED FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES AND/OR REIMBURSED -------- --------------- --------------- -------------- ---------- ----------------- U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,775,454 $215,473 U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,423,666 189,305 U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 67,835 142,178
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1997, were $7,300, $4,998 and $3,828 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $809,073,589 $785,163,972 U.S. Equity Fund...................................... 226,474,872 84,130,110 U.S. Bond Fund........................................ 66,672,483 53,682,174
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 PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares and, effective June 30, 1997, the Brinson Class N shares. Annual fees under the SwissKey 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 Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. - -------------------------------------------------------------------------------- 39 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. BALANCED FUND --------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I................. 6,578,157 $ 78,728,712 6,944,846 $80,934,038 Brinson Class N................. 80 1,000 -- -- SwissKey Class.................. 148,317 1,798,818 67,290 776,395 ---------- ------------ --------- ----------- Total Sales................... 6,726,554 $ 80,528,530 7,012,136 $81,710,433 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I................. 1,541,262 $ 18,266,191 1,540,774 $17,588,758 Brinson Class N................. -- -- -- -- SwissKey Class.................. 3,904 46,232 422 4,850 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 1,545,166 $ 18,312,423 1,541,196 $17,593,608 ========== ============ ========= =========== Redemptions: Brinson Class I................. 4,988,208 $ 59,912,281 3,073,501 $36,019,481 Brinson Class N................. -- -- -- -- SwissKey Class.................. 86,625 1,050,388 957 10,963 ---------- ------------ --------- ----------- Total Redemptions............. 5,074,833 $ 60,962,669 3,074,458 $36,030,444 ========== ============ ========= =========== U.S. EQUITY FUND --------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I................. 11,551,336 $183,660,431 5,125,613 $66,685,850 Brinson Class N................. 57 1,000 -- -- SwissKey Class.................. 1,834,556 28,733,451 375,655 5,290,955 ---------- ------------ --------- ----------- Total Sales................... 13,385,949 $212,394,882 5,501,268 $71,976,805 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I................. 907,559 $ 13,745,444 222,497 $ 2,935,334 Brinson Class N................. -- -- -- -- SwissKey Class.................. 25,905 393,121 644 8,938 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 933,464 $ 14,138,565 223,141 $ 2,944,272 ========== ============ ========= =========== Redemptions: Brinson Class I................. 1,959,184 $ 31,250,336 380,602 $ 5,174,675 Brinson Class N................. -- -- -- -- SwissKey Class.................. 237,473 3,720,862 6,874 90,042 ---------- ------------ --------- ----------- Total Redemptions............. 2,196,657 $ 34,971,198 387,476 $ 5,264,717 ========== ============ ========= =========== U.S. BOND FUND --------------------------------------------- YEAR ENDED PERIOD ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I................. 1,521,821 $ 15,371,166 953,454 $ 9,550,552 Brinson Class N................. 98 1,000 -- -- SwissKey Class.................. 119,951 1,211,647 63,717 649,479 ---------- ------------ --------- ----------- Total Sales................... 1,641,870 $ 16,583,813 1,017,171 $10,200,031 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I................. 44,351 $ 449,362 37,309 $ 373,407 Brinson Class N................. -- -- -- -- SwissKey Class.................. 1,239 12,555 1,362 13,400 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 45,590 $ 461,917 38,671 $ 386,807 ========== ============ ========= =========== Redemptions: Brinson Class I................. 288,064 $ 2,929,252 84,593 $ 856,547 Brinson Class N................. -- -- -- -- SwissKey Class.................. 48,365 491,069 1,055 10,884 ---------- ------------ --------- ----------- Total Redemptions............. 336,429 $ 3,420,321 85,648 $ 867,431 ========== ============ ========= ===========
- -------------------------------------------------------------------------------- 40 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund as of June 30, 1997, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund at June 30, 1997, the results of their operations for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 8, 1997 - -------------------------------------------------------------------------------- 41 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 - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris Singapore . Sydney . Tokyo . Zurich 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 ---------------------- THE BRINSON FUNDS BRINSON NON-U.S. EQUITY FUND ANNUAL REPORT JUNE 30, 1997 [LOGO OF THE BRINSON FUNDS] GLOBAL INSTITUTIONAL ASSET MANAGEMENT ---------------------- Trustees and Officers - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS]
Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Debra L. Nichols Chairman of the Board Secretary E. Thomas McFarlan Carolyn M. Burke, CPA President Treasurer Thomas J. Digenan, CFA, CPA Catherine E. Macrae Vice President Assistant Secretary
================================================================================ 1 The Fund's Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Brinson Partners is the global institutional asset management division of Swiss Bank Corporation. Brinson Partners continues as the name used within North America, while SBC Brinson is the name used outside North America. We are a global investment management organization with over $75 billion in institutional assets under discretionary active management. We are also the investment manager for SBC Private Banking mutual fund assets which total $50 billion. In addition, we act as an investment advisor to SBC Private Banking. The division manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other 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. 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 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 OF THE BRINSON FUNDS]
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 Report of Independent Auditors...............................................22
================================================================================ 3 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] August 20, 1997 Dear Shareholder: We are very pleased to present the Annual Report for the Brinson Non-U.S. Equity Fund for the fiscal year ended June 30, 1997. Within this Report, we will focus on the current international economic outlook as well as our current strategy and performance update. Before we begin the review of the Fund, I would like to discuss a few improvements put into place during the last fiscal year. As you may know, Brinson Partners, Inc. is an established, U.S.-based leader in the investment management business, managing portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. Our portfolio management capabilities are accessed through separately managed portfolios, collective funds and, of course, The Brinson Mutual Funds. Brinson Partners, Inc. has been in place over 16 years under the same investment philosophy and senior management. International and global activities originated in the mid-1970s. We've historically managed our portfolios out of our headquarters in Chicago with offices in Tokyo and London. We have since expanded our investment analysis and trading capabilities to include Basel, Frankfurt, Paris, Singapore and Sydney. Our investment management team encompasses over 255 portfolio management and research personnel in 8 locations worldwide. We feel that this additional worldwide investment management expertise will provide additional investment performance opportunities for our clients. Brinson Non-U.S. Equity Fund Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund has produced an annualized total return of 10.16% versus 9.47% for its benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. This return was achieved at an annualized volatility of 10.10%, below the benchmark volatility of 12.13%. For the first half of 1997, the Brinson Non-U.S. Equity Fund returned 14.14%. Our international funds employ the same value-oriented investment philosophy within and across the international spectrum, as do our other funds. Each fund uses the resources of the entire worldwide organization. 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 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 talent and the flexibility to customize portfolios to meet unique requirements. The report that follows highlights the investment characteristics of the Brinson Non-U.S. Equity Fund. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /s/ Gary P. Brinson Gary P. Brinson President and Chief Investment Officer Brinson Partners, Inc. - -------------------------------------------------------------------------------- 4 Global Economic and Market Highlights - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Fiscal restraint in continental Europe, caused by the drive to monetary union (EMU), has amplified the economic slowdown, resulting in persistently high unemployment. These economies are hindered by more structurally rigid labor markets than in the U.S. and Asia. As yet, governments seem unwilling to take the hard measures necessary to free up wages and encourage labor mobility and flexibility. Apart from some temporary yen strengthening in the second quarter, a weaker currency has aided the Japanese economy. Export-oriented industries in particular have recovered significantly from the prolonged recession brought on by the bursting of the "bubble" at the start of the 1990s. The hike in the consumption tax from 3% to 5% at the start of April had caused a spurt in spending in the first quarter. However, now that it is in place, there has been some softening in demand, particularly for big ticket items, which is likely to adversely affect domestically-oriented firms. The currency turmoil in Southeast Asia is drawing attention to some of the weaknesses of those economies. In Thailand, which was the initial casualty, the crisis was precipitated by a bad bank loan problem. These problems in the banking system prevented the central bank from increasing rates sufficiently to maintain the peg to a strengthening U.S. dollar.
Non-U.S. Equity Environment 6 months 1 year 3 years Annualized Major Markets ended ended ended 8/31/93* Total Return in U.S. Dollar Hedged Terms 6/30/97 6/30/97 6/30/97 to 6/30/97 - -------------------------------------------------------------------------------- Japan 10.34% 0.16% 4.88% 4.00% U.K. 12.04 26.27 18.58 13.13 Germany 33.62 48.75 23.49 18.47 France 24.72 38.71 19.05 11.05 Canada 13.72 35.08 22.36 17.08 Netherlands 37.77 62.07 36.24 27.85 Australia 12.64 21.32 11.28 9.61 - -------------------------------------------------------------------------------- 6 months 1 year 3 years Annualized Major Currencies ended ended ended 8/31/93* Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97 to 6/30/97 - -------------------------------------------------------------------------------- Yen 1.43% -4.15% -4.83% -2.29% Pound -2.75 7.11 2.54 2.97 Deutschemark -11.56 -12.65 -2.98 -0.98 Canadian Dollar -0.65 -1.01 0.05 -1.13 - --------------------------------------------------------------------------------
*Inception date of the Non-U.S. Equity Fund - -------------------------------------------------------------------------------- 5 Non-U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] 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 10.16% versus 9.47% for the benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. This return was achieved at an annualized volatility of 10.10%, below the benchmark volatility of 12.13%. For the year ended June 30, 1997, the Fund returned 20.27% while the benchmark returned 13.64%. For the first half of 1997, the Brinson Non-U.S. Equity Fund returned 14.14% outperforming the 11.21% return of the benchmark. In the first half of the year, the best performing markets in dollar-hedged terms were Switzerland, the Netherlands and Spain, followed by Germany, Finland and Sweden, each growing over 30%. In aggregate, the non-U.S. markets were very strong, gaining 17.76% in dollar-hedged terms. At the opposite end of the spectrum, Malaysia experienced a steep decline, down 12.34%, followed by Singapore's loss of 3.79%; notably, these were the only markets to decline. Japan's 10.34% hedged increase was relatively subdued, the fourth weakest in the year-to-date period. Market allocation had a somewhat negative impact on returns. The value added from underweighting Japan and Southeast Asia, as from overweighting continental Europe, was offset by holding strategic cash, underweighting Switzerland and overweighting New Zealand. Currency management had a highly significant positive impact on performance, accounting for an important portion of the value added by the Fund. Defensive strategies that focused on holding the U.S. dollar, while maintaining minimal exposure to the core European currencies and the yen, continued to prove highly successful for the first half of the year. This was a period when the DM-bloc currencies fell considerably: the Belgian franc, the Dutch guilder, the French franc and the DM, all losing over 12%. Overall stock selection was very beneficial. In particular, Japanese stock selection added substantial value, while stock selection in several other markets (the Netherlands, Germany, France and Finland) also made a positive contribution. - -------------------------------------------------------------------------------- 6 Non-U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Total Return
6 months 1 year 3 years 8/31/93* ended ended ended to 6/30/97 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- Brinson Non-U.S. Equity Fund 14.14% 20.27% 14.10% 10.16% MSCI Non-U.S. Equity (Free) Index (currency unhedged)** 11.21 13.64 9.79 9.47 MSCI Non-U.S. Equity (Free) Index (currency hedged)** 17.76 22.77 14.62 11.53 - --------------------------------------------------------------------------------
* 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. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Non-U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index (currency unhedged and hedged) if you had invested $1,000,000 on August 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 1997. 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 Non-U.S. Equity Fund vs. MSCI Non-U.S. Equity (Free) Index (currency unhedged and hedged) Wealth Value with Dividends Reinvested
MSCI Non-U.S. MSCI Non-U.S. Brinson Non-U.S. Equity (Free) Index Equity (Free) Index Equity Fund (currency unhedged) (currency unhedged) - ------------------------------------------------------------------------------- 8/31/93 $1,000,000 $1,000,000 $1,000,000 12/31/93 $ 965,500 $ 988,754 $1,019,573 6/30/94 $ 975,547 $1,068,786 $1,009,004 12/31/94 $ 974,540 $1,062,774 $1,002,779 6/30/95 $ 974,540 $1,095,525 $ 944,943 12/31/95 $1,126,103 $1,187,456 $1,125,441 6/30/96 $1,204,891 $1,244,668 $1,237,556 12/31/96 $1,269,637 $1,271,887 $1,290,200 6/30/97 $1,449,115 $1,414,422 $1,519,392
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 OF THE BRINSON FUNDS] Industry Diversification
As a Percent of Net Assets As of June 30, 1997 - ------------------------------------------------------------------- NON-U.S. EQUITIES Aerospace & Military....................................... 0.13% Airlines................................................... 0.55 Appliances & Household Durables............................ 2.52 Automobiles................................................ 2.47 Banking.................................................... 11.10 Beverages & Tobacco........................................ 1.74 Broadcasting & Publishing.................................. 1.43 Building Materials......................................... 1.66 Business & Public Service.................................. 3.95 Chemicals.................................................. 4.10 Construction............................................... 1.70 Data Processing............................................ 1.21 Electric Components........................................ 1.52 Electronics................................................ 4.06 Energy..................................................... 6.57 Financial Services......................................... 1.27 Food & House Products...................................... 3.33 Forest Products............................................ 1.88 Gold Mining................................................ 0.07 Health & Personal Care..................................... 5.38 Industrial Components...................................... 2.01 Insurance.................................................. 4.42 Leisure & Tourism.......................................... 0.56 Machinery & Engineering.................................... 1.09 Merchandising.............................................. 4.17 Metals-Steel............................................... 1.84 Miscellaneous Materials.................................... 0.66 Multi-Industry............................................. 4.54 Non-Ferrous Metals......................................... 2.00 Real Estate................................................ 0.91 Recreation................................................. 0.82 Shipping................................................... 0.52 Telecommunications......................................... 5.80 Textiles & Apparel......................................... 0.19 Transportation............................................. 0.95 Utilities.................................................. 4.51 Wholesale & International Trade............................ 0.27 ------ Total Non-U.S. Equities............................ 91.90* ------ SHORT-TERM INVESTMENTS..................................... 8.31* ------ TOTAL INVESTMENTS.................................. 100.21 LIABILITIES, LESS CASH AND OTHER ASSETS................................... (0.21) ------ NET ASSETS......................................... 100.00% ======
Market and Currency Strategy As of June 30,1997
Portfolio ------------------- Market Currency Strategy Strategy Index - ------------------------------------------------- U.S. Dollar 0.0% 5.9% 0.0% Japan 28.7 31.7 31.7 Australia 4.8 2.7 2.7 Belgium 3.1 1.1 1.1 Canada 2.8 4.5 4.5 Finland 0.7 0.7 0.7 France 4.5 6.4 6.4 Germany 8.6 8.1 8.1 Hong Kong 1.4 0.4 3.6 Italy 3.3 3.3 2.9 Malaysia 2.8 2.0 2.0 Netherlands 5.5 4.8 4.8 New Zealand 3.2 3.2 0.3 Spain 2.2 2.2 2.3 Sweden 0.0 2.3 2.3 Switzerland 2.4 6.2 6.2 U.K. 18.8 13.3 17.3 Cash Reserves 5.0 0.0 0.0 Other Markets 2.2 1.2 3.1 - ------------------------------------------------- 100.0% 100.0% 100.0%
Top Ten Non-U.S. Equity Holdings As of June 30,1997
Percent of Net Assets - ---------------------------------------------------------- 1. Royal Dutch Petroleum Co. 1.46% 2. Glaxo Wellcome PLC 1.24 3. Matsushita Electric Industrial Co. 1.20 4. Toray Industries, Inc. 1.17 5. Telecom Corp. of New Zealand Ltd. 1.15 6. General Electric Co. PLC 1.06 7. British Telecommunications PLC 0.99 8. Sankyo Co. Ltd. 0.98 9. Lloyds TSB Group PLC 0.96 10. British Petroleum Co. PLC 0.94 - ----------------------------------------------------------
* The Fund held a long position in Topix futures on June 30, 1997 which increased Japanese equity exposure from 25.76% to 26.72% and decreased the Fund's exposure to Short-Term Investments from 8.31% to 7.35% 8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ Non-U.S. Equities -- 91.90% AUSTRALIA -- 4.72% Amcor Ltd................................................. 118,700 $ 782,583 Boral Ltd................................................. 202,000 631,080 Brambles Industries Ltd................................... 29,000 569,045 Broken Hill Proprietary Co. Ltd........................... 261,270 3,813,662 Coca-Cola Amatil Ltd...................................... 37,000 476,790 CSR Ltd................................................... 152,000 584,195 David Jones Ltd........................................... 505,600 700,770 Lend Lease Corp. Ltd...................................... 34,578 725,362 M.I.M. Holdings Ltd....................................... 346,840 509,310 National Australia Bank Ltd............................... 185,448 2,635,641 News Corp. Ltd............................................ 387,257 1,842,340 News Corp. Ltd. Preferred................................. 95,000 371,528 Pacific Dunlop Ltd........................................ 242,700 712,775 Qantas Airways Ltd........................................ 249,010 578,329 Rio Tinto Ltd............................................. 94,209 1,593,724 Santos Ltd................................................ 73,900 308,387 Westpac Banking Corp. Ltd................................. 323,851 1,933,750 WMC Ltd................................................... 167,700 1,049,099 Woolworth's Ltd........................................... 124,000 404,118 ------------ 20,222,488 ------------ BELGIUM -- 3.03% Delhaize-Le Lion S.A...................................... 16,200 851,683 Electrabel S.A............................................ 8,965 1,922,675 Fortis AG................................................. 723 161 Fortis AG Strip (b)....................................... 8,833 1,825,569 General de Banque S.A..................................... 2,000 770,515 Groupe Bruxelles Lambert S.A.............................. 5,230 877,243 Kredietbank NV............................................ 3,286 1,325,369 Petrofina S.A............................................. 4,775 1,809,718 Societe Generale de Belgique.............................. 8,428 787,707 Solvay S.A. Class A....................................... 1,503 886,331 Tractebel................................................. 2,350 980,528 Tractebel Warrants "99" (b)............................... 1,350 14,495 Union Miniere Group S.A. (b).............................. 10,070 943,975 ------------ 12,995,969 ------------ CANADA -- 2.92% Alcan Aluminium Ltd....................................... 24,300 829,610 Bank of Montreal.......................................... 22,000 859,524 Barrick Gold Corp......................................... 13,600 296,231 BCE, Inc.................................................. 27,000 751,522 Canadian National Railway Co.............................. 16,900 737,446 Canadian Pacific Ltd...................................... 55,600 1,583,850 Hudson's Bay Co........................................... 23,000 516,816 Imperial Oil Ltd.......................................... 20,000 1,025,660 MacMillan Bloedel Ltd..................................... 33,300 457,404 Moore Corp. Ltd........................................... 21,800 429,806 Noranda, Inc.............................................. 25,100 541,262 Northern Telecom Ltd...................................... 8,400 757,741 NOVA Corp................................................. 35,000 299,362 Royal Bank of Canada...................................... 24,700 1,119,879 Seagram Co. Ltd........................................... 21,300 856,879 Thomson Corp.............................................. 34,900 804,451 TransCanada Pipelines Ltd................................. 33,100 665,791 ------------ 12,533,234 ------------
SHARES VALUE ------- ------------ FINLAND -- 0.69% Merita Ltd. Class A....................................... 94,500 $ 314,745 Nokia Ab Class A.......................................... 19,200 1,433,845 Outokumpu Class A......................................... 16,200 321,243 Pohjola Insurance Group Class B........................... 3,900 115,629 Sampo Insurance Co. Ltd. Class A.......................... 1,700 165,281 The Rauma Group........................................... 693 15,877 UPM-Kymmene Corp.......................................... 24,900 575,257 ------------ 2,941,877 ------------ FRANCE -- 5.90% Accor S.A................................................. 6,695 1,003,509 Alcatel Alsthom........................................... 9,725 1,219,145 AXA UAP................................................... 19,551 1,217,150 AXA UAP Rights (b)........................................ 10,752 41,755 Banque Nationale de Paris................................. 21,930 904,692 Cie Bancaire S.A.......................................... 6,688 854,369 Cie de Saint Gobain....................................... 10,613 1,549,198 Cie de Suez............................................... 162,880 400,889 Cie Generale des Eaux..................................... 7,964 1,021,443 Cie Generale des Eaux Warrants "01" (b)................... 13,864 8,312 Colas..................................................... 3,077 406,179 Dexia France.............................................. 9,050 881,724 Elf Aquitaine S.A......................................... 15,334 1,655,894 Groupe Danone............................................. 6,100 1,008,874 Lafarge S.A............................................... 9,000 560,296 Lagardere S.C.A........................................... 20,800 604,762 LVMH...................................................... 3,715 999,779 Michelin Class B.......................................... 21,550 1,295,349 Pechiney S.A. Class A..................................... 21,893 863,265 Peugeot S.A............................................... 12,280 1,188,050 Rhone-Poulenc Class A..................................... 31,230 1,276,648 SEITA..................................................... 23,700 750,843 Societe Generale.......................................... 11,203 1,251,775 Suez Lyonnaise des Eaux S.A............................... 9,600 968,012 Thomson CSF............................................... 21,700 559,595 Total S.A. Class B........................................ 13,595 1,375,478 Usinor Sacilor............................................ 79,900 1,442,582 ------------ 25,309,567 ------------ GERMANY -- 8.90% Allianz AG Holding........................................ 15,730 3,362,461 BASF AG................................................... 42,880 1,583,455 Bayer AG.................................................. 56,790 2,189,997 Bayerische Motoren Werke AG............................... 2,000 1,650,407 Commerzbank AG............................................ 46,940 1,341,451 Daimler-Benz AG........................................... 22,450 1,828,104 Deutsche Bank AG.......................................... 45,567 2,677,643 Deutsche Telekom AG....................................... 112,550 2,767,570 Henkel KGaA-Vorzug AG..................................... 17,950 1,011,529 Hochtief AG............................................... 13,400 599,793 Hoechst AG................................................ 18,580 787,939 M.A.N. AG................................................. 3,040 947,274 Mannesmann AG............................................. 3,607 1,612,449 Metro AG.................................................. 13,208 1,440,101 Muenchener Rueckver AG.................................... 792 2,245,197 Muenchener Rueckver AG Warrants "98" (b).................. 12 4,304 Preussag AG............................................... 4,469 1,315,619
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ GERMANY (CONTINUED) RWE AG.................................................. 32,200 $ 1,385,860 Schering AG............................................. 18,592 1,992,991 Siemens AG.............................................. 23,500 1,408,571 Thyssen AG.............................................. 7,150 1,721,235 Veba AG................................................. 37,688 2,130,304 Volkswagen AG........................................... 2,850 2,162,114 ------------ 38,166,368 ------------ HONG KONG -- 1.39% Cheung Kong Holdings Ltd................................ 58,000 572,716 China Light & Power Co. Ltd............................. 111,000 628,980 Guoco Group Ltd......................................... 68,000 358,112 Hang Seng Bank Ltd...................................... 45,500 648,968 Hong Kong Telecommunications Ltd........................ 193,200 461,348 Hutchison Whampoa Ltd................................... 123,000 1,063,725 Jardine Matheson Holdings ADR (c)....................... 45,200 320,920 New World Development Co. Ltd........................... 77,000 459,179 Sun Hung Kai Properties Ltd............................. 39,000 469,422 Swire Pacific Ltd. Class A.............................. 63,000 567,198 Wharf (Holdings) Ltd.................................... 98,000 425,025 ------------ 5,975,593 ------------ ITALY -- 3.24% Assicurazioni Generali.................................. 74,250 1,348,413 Banca Commerciale Italiana.............................. 198,000 409,615 Credito Italiano Spa.................................... 502,000 917,555 Danieli & Co. Savings (Risp)............................ 129,100 451,452 Edison Spa.............................................. 79,600 395,544 ENI ADR (c)............................................. 22,100 1,256,938 ENI Spa................................................. 165,000 933,368 Fiat Spa-Priv........................................... 551,200 1,017,201 INA-Istituto Nazionale delle Assicurazioni.............. 310,100 472,030 Istituto Mobilaire Italiano Spa......................... 79,100 711,272 Italgas Spa............................................. 107,300 346,841 La Rinascente Spa....................................... 68,900 382,463 La Rinascente Spa Rights (b)............................ 159,200 7,111 La Rinascente Spa RNC................................... 90,300 219,448 La Rinascente Spa RNC Rights (b)........................ 159,200 25,917 La Rinascente Spa Warrants "99" (b)..................... 2,800 1,382 Mediobanca Spa.......................................... 34,600 209,857 Montedison Spa (b)...................................... 1,408,280 928,646 SAI-Savings (Risp)...................................... 83,000 255,610 Telecom Italia Mobile Spa............................... 214,000 691,743 Telecom Italia Mobile Spa RNC........................... 600,000 1,071,995 Telecom Italia Spa...................................... 130,000 388,892 Telecom Italia Spa RNC.................................. 732,300 1,448,245 ------------ 13,891,538 ------------ JAPAN -- 25.76% Amada Co. Ltd........................................... 173,000 1,526,960 Asahi Glass Co. Ltd..................................... 204,000 2,032,334 Bank of Tokyo-Mitsubishi, Ltd........................... 187,000 3,758,630 Canon, Inc.............................................. 139,000 3,789,915 Canon Sales Co., Inc.................................... 58,200 1,357,983 Citizen Watch Co. Ltd................................... 157,000 1,212,864 Dai Nippon Printing Co. Ltd............................. 158,000 3,576,160 Daiichi Pharmaceutical Co. Ltd.......................... 113,000 1,994,757 Daikin Industries Ltd................................... 170,000 1,545,049
SHARES VALUE ------- ------------ Daiwa House Industry Co. Ltd.............................. 85,000 $ 1,039,937 Fanuc..................................................... 68,100 2,618,544 Fujitsu................................................... 101,000 1,403,391 Hitachi Ltd............................................... 337,000 3,769,641 Honda Motor Co............................................ 43,000 1,296,426 Inax...................................................... 177,000 1,327,152 Isetan.................................................... 58,000 719,741 Ito Yokado Co. Ltd........................................ 65,000 3,777,419 Kaneka Corp............................................... 158,000 991,383 Keio Teito Electric Railway............................... 193,000 919,208 Kinki Nippon Railway...................................... 195,000 1,192,869 Kirin Brewery Co. Ltd..................................... 184,000 1,913,484 Kokuyo.................................................... 56,000 1,517,085 Kuraray Co. Ltd........................................... 202,000 2,012,409 Kyocera Corp.............................................. 21,000 1,670,017 Maeda Road Construction................................... 34,000 292,668 Marui Co. Ltd............................................. 90,000 1,675,260 Matsushita Electric Industrial Co......................... 255,000 5,147,689 Mitsubishi Paper Mills.................................... 211,000 826,077 NGK Insulators............................................ 275,000 3,028,052 Nintendo Corp. Ltd........................................ 15,500 1,300,358 Nippon Denso Co. Ltd...................................... 82,000 1,963,471 Nippon Meat Packers, Inc.................................. 108,000 1,396,836 Nippon Steel Co........................................... 132,000 422,197 Okumura................................................... 173,000 917,688 Osaka Gas Co.............................................. 330,000 948,790 Sankyo Co. Ltd............................................ 125,000 4,205,628 Sanwa Bank Ltd............................................ 83,000 1,233,068 Secom..................................................... 40,000 2,939,789 Seino Transportation...................................... 114,000 1,235,340 Sekisui House Ltd......................................... 331,000 3,355,414 Shinmaywa Industries Ltd.................................. 72,000 507,769 Sony Corp................................................. 38,600 3,369,868 Sumitomo Bank............................................. 181,000 2,973,696 Sumitomo Chemical Co...................................... 20,000 90,710 Sumitomo Electric Industries.............................. 140,000 2,349,034 Sumitomo Trust & Banking.................................. 95,000 1,021,148 Takeda Chemical Industries................................ 106,000 2,982,784 TDK Corp.................................................. 30,000 2,204,841 Tokio Marine & Fire Insurance Co.......................... 154,000 2,018,701 Tokyo Electric Power...................................... 44,500 937,211 Tokyo Steel Mfg........................................... 123,700 1,383,693 Tonen Corp................................................ 123,000 1,483,352 Toray Industries, Inc..................................... 702,000 5,012,095 Toshiba Corp.............................................. 397,000 2,556,926 Toyo Suisan Kaisha........................................ 93,000 950,887 Toyota Motor Corp......................................... 44,000 1,299,659 Yamazaki Baking Co. Ltd................................... 81,000 1,429,870 ------------ 110,423,927 ------------ MALAYSIA -- 1.63% Hume Industries (Malaysia) Bhd............................ 70,000 321,712 Kuala Lumpur Kepong Bhd................................... 182,000 450,673 Land & General Holdings Bhd............................... 211,500 243,007 Malayan Banking Bhd....................................... 90,000 944,929 Malaysia International Shipping Bhd (Frgn.)............... 126,000 326,981 Nestle (Malaysia) Bhd..................................... 30,000 224,643
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ MALAYSIA (CONTINUED) New Straits Times Press Bhd.............................. 24,000 $ 140,729 Perusahaan Otomobil Nasional Bhd......................... 35,000 163,629 Public Bank Bhd (Frgn.).................................. 194,998 304,395 Resorts World Bhd........................................ 134,000 403,487 Rothmans of Pall Mall Bhd................................ 20,000 196,513 Sime Darby Bhd........................................... 219,000 728,843 Telekom Malaysia Bhd..................................... 171,000 799,445 Tenaga Nasional Bhd...................................... 207,000 1,008,756 UMW Holdings Bhd......................................... 36,000 169,731 United Engineers Ltd..................................... 51,000 367,750 YTL Corp. Bhd............................................ 55,000 169,968 YTL Power International Bhd (b).......................... 4,900 6,174 ------------ 6,971,365 ------------ NETHERLANDS -- 5.66% ABN AMRO Holdings NV..................................... 102,046 1,906,233 Akzo Nobel NV............................................ 3,400 466,799 DSM NV................................................... 6,450 642,926 Elsevier NV.............................................. 89,800 1,503,313 Heineken NV.............................................. 3,700 632,624 Hoogovens NV............................................. 10,900 608,615 ING Groep NV............................................. 69,233 3,197,870 KLM Royal Dutch Air Lines NV............................. 34,300 1,059,128 KPN NV................................................... 55,248 2,171,233 Philips Electronics NV................................... 32,000 2,296,330 Royal Dutch Petroleum Co................................. 119,720 6,238,663 Royal Dutch Petroleum Co. NY Shares (c).................. 20,800 1,131,000 Unilever NV.............................................. 11,440 2,412,601 ------------ 24,267,335 ------------ NEW ZEALAND -- 3.33% Brierley Investments Ltd................................. 2,405,600 2,347,945 Carter Holt Harvey Ltd................................... 829,600 2,142,376 Fletcher Challenge Building.............................. 286,572 860,477 Fletcher Challenge Energy................................ 315,692 952,194 Fletcher Challenge Forest Ltd............................ 546,445 792,615 Fletcher Challenge Paper................................. 568,984 1,376,798 Telecom Corp. of New Zealand Ltd......................... 970,200 4,932,017 Telecom Corp. of New Zealand ADS (c)..................... 21,000 855,750 ------------ 14,260,172 ------------ SINGAPORE -- 1.47% City Developments Ltd.................................... 51,000 499,371 DBS Land Ltd............................................. 82,000 259,225 Development Bank of Singapore Ltd........................ 63,000 793,118 Fraser & Neave Ltd....................................... 13,000 92,740 Hotel Properties Ltd..................................... 155,000 263,428 Keppel Corp. Ltd. (b).................................... 36,750 163,213 Oversea-Chinese Banking Corp. Ltd........................ 113,400 1,173,815 Singapore Airlines Ltd. (Frgn.).......................... 80,000 716,184 Singapore Press Holdings Ltd. (Frgn.).................... 37,000 745,279 Singapore Telecommunications, Ltd........................ 290,000 535,459
SHARES VALUE ------- ------------ United Overseas Bank Ltd. (Frgn.)......................... 81,000 $ 832,774 Wing Tai Holdings Ltd..................................... 78,000 224,759 ------------ 6,299,365 ------------ SPAIN -- 2.30% Acerinox S.A.............................................. 1,900 356,694 Banco Bilbao-Vizcaya S.A.................................. 12,300 1,001,095 Banco Central Hispanoamericano............................ 14,830 543,508 Banco Popular Espanol S.A................................. 2,680 657,836 Banco Santander S.A....................................... 29,400 907,568 Empresa Nacional de Electridad S.A........................ 17,500 1,471,918 Fomento de Construcciones y Contratas S.A................. 4,000 511,049 Gas Natural SDG S.A....................................... 2,800 612,851 Iberdrola S.A............................................. 61,900 782,852 Mapfre Corp............................................... 5,200 277,201 Repsol S.A................................................ 13,800 584,579 Repsol S.A. ADR (c)....................................... 7,700 326,769 Telefonica de Espana...................................... 42,300 1,225,253 Vallehermosa S.A.......................................... 10,000 270,279 Viscofan Envolturas Celulosicas S.A....................... 14,400 337,309 ------------ 9,866,761 ------------ SWITZERLAND -- 2.08% ABB AG (Bearer)........................................... 315 477,502 Alusuisse-Lonza Holding AG (Reg.)......................... 350 362,988 Ciba Specialty Chemicals AG (Reg.)........................ 1,267 117,323 CS Holdings AG (Reg.)..................................... 3,878 498,748 Nestle S.A. (Reg.)........................................ 1,305 1,724,007 Novartis AG (Reg.)........................................ 1,603 2,566,295 Roche Holding AG (Gen.)................................... 184 1,666,589 Swiss Reinsurance Co. (Reg.).............................. 250 354,105 UBS (Bearer).............................................. 400 458,193 Zurich Versicherungs (Reg.)............................... 1,741 693,821 ------------ 8,919,571 ------------ UNITED KINGDOM -- 18.88% Abbey National PLC........................................ 101,000 1,378,381 Bass PLC.................................................. 61,500 750,262 B.A.T. Industries PLC..................................... 353,000 3,157,818 BG PLC.................................................... 711,300 2,604,410 Booker PLC................................................ 74,500 338,495 British Energy PLC........................................ 620,000 1,511,692 British Petroleum Co. PLC................................. 324,534 4,034,732 British Steel PLC......................................... 789,000 1,963,144 British Telecommunications PLC............................ 574,200 4,262,182 BTR PLC................................................... 183,000 625,888 Centrica PLC.............................................. 706,300 858,116 Charter PLC............................................... 88,914 1,180,143 Coats Viyella PLC......................................... 392,100 822,245 FKI PLC................................................... 440,625 1,246,671 General Electric Co. PLC.................................. 757,700 4,527,158 Glaxo Wellcome PLC........................................ 256,500 5,304,173 Grand Metropolitan PLC.................................... 116,700 1,122,620 Guinness PLC.............................................. 257,200 2,516,994
- -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ UNITED KINGDOM (CONTINUED) Hanson PLC................................................ 156,312 $ 775,251 Hillsdown Holdings PLC.................................... 501,900 1,415,862 House of Fraser PLC....................................... 536,800 1,424,975 HSBC Holdings PLC......................................... 111,000 3,414,887 Imperial Chemical Industries PLC.......................... 36,000 499,692 Inchcape PLC.............................................. 173,000 814,829 Legal & General Group PLC................................. 244,000 1,652,792 Lloyds TSB Group PLC...................................... 400,185 4,109,414 Marks & Spencer PLC....................................... 292,900 2,427,631 Mirror Group PLC.......................................... 230,600 721,525 National Westminster Bank PLC............................. 102,500 1,377,528 Northern Foods PLC........................................ 292,000 967,097 Peninsular & Oriental Steam Navigation Co................. 189,700 1,888,002 Reckitt & Colman PLC...................................... 55,746 832,224 Redland PLC............................................... 86,600 490,039 Reuters Holdings PLC...................................... 112,000 1,179,928 Rio Tinto PLC............................................. 109,800 1,912,386 RJB Mining PLC............................................ 205,000 1,228,260 Royal & Sun Alliance Insurance Group PLC.................. 274,149 2,025,833 Sainsbury (J.) PLC........................................ 222,000 1,344,895 Scottish Hydro-Electric PLC............................... 117,800 813,631 Sears PLC................................................. 657,700 744,339 Sedgwick Group PLC........................................ 429,000 878,206 SmithKline Beecham PLC.................................... 127,800 2,351,384 Smurfit (Jefferson) Group PLC............................. 390,000 1,122,909 Tesco PLC................................................. 196,900 1,215,776 Thames Water PLC.......................................... 133,600 1,534,226 Unilever PLC.............................................. 28,200 806,787 Vodafone Group PLC........................................ 182,500 889,948 Williams PLC.............................................. 227,000 1,227,844 Yorkshire Water PLC....................................... 94,400 617,445 ------------ 80,910,669 ------------ Total Non-U.S. Equities (Cost $344,810,576)...................................... 393,955,799 ------------
FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 8.31% COMMERCIAL PAPER -- 8.31% American Stores Co. 5.830%, due 07/23/97.................................. $1,500,000 $ 1,499,146 Case Credit Corp. 6.250%, due 07/07/97.................................. 2,000,000 1,997,916 5.760%, due 07/21/97.................................. 1,250,000 1,246,000 Crown Cork & Seal Co. 5.800%, due 07/09/97.................................. 1,500,000 1,498,067 CSX Corp. 5.780%, due 07/09/97......................... 2,000,000 1,997,431 Cummins Engine Company, Inc. 6.500%, due 07/01/97.................................. 2,500,000 2,500,000 Enron Oil & Gas 6.520%, due 07/01/97................... 2,183,000 2,183,000 Hughes Electronics Corp. 5.780%, due 07/11/97.................................. 1,000,000 998,395 5.850%, due 08/11/97.................................. 3,000,000 2,980,012 Marriott Corp. 5.770%, due 07/08/97.................... 1,000,000 998,878 Norfolk Southern Corp. 5.780%, due 07/18/97.................................. 1,500,000 1,495,906 Occidental Petroleum 5.800%, due 08/13/97.................................. 1,750,000 1,737,876 Sundstrand Corp. 5.800%, due 07/09/97.................................. 2,000,000 1,997,422 5.850%, due 07/15/97.................................. 1,000,000 997,725 Tenneco, Inc. 5.780%, due 07/17/97.................................. 1,500,000 1,496,147 5.800%, due 07/23/97.................................. 2,000,000 1,992,911 Textron Financial Corp. 6.400%, due 07/01/97.................................. 8,000,000 8,000,000 ------------ Total Short-Term Investments (Cost $35,616,832).................................... 35,616,832 ------------ Total Investments (Cost $380,427,408) -- 100.21% (a).................... 429,572,631 ------------ Liabilities, less cash and other assets -- (0.21%)..................................... (920,308) ------------ Net Assets -- 100%..................................... $428,652,323 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $381,041,356; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $58,108,348 Gross unrealized depreciation................................ (9,577,073) ----------- Net unrealized appreciation................................ $48,531,275 ===========
(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 June 30, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) -------------- ------------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar......... 08/22/97 7,100,000 $ 5,163,674 $ (134,833) Dutch Guilder........... 08/22/97 12,700,000 6,506,548 (231,329) French Franc............ 08/22/97 82,000,000 14,016,830 (405,811) German Mark............. 08/22/97 5,500,000 3,168,659 (87,835) Japanese Yen............ 08/22/97 3,025,000,000 26,643,827 1,619,521 Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 (139,252) Swedish Krona........... 08/22/97 65,000,000 8,424,229 (359,555) Swiss Franc............. 08/22/97 21,600,000 14,912,081 (52,213) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 08/22/97 18,800,000 14,092,320 495,907 Belgian Franc........... 08/22/97 235,000,000 6,560,714 205,614 British Pounds.......... 08/22/97 8,750,000 14,538,989 (569,527) Dutch Guilder........... 08/22/97 19,700,000 10,092,834 337,621 French Franc............ 08/22/97 82,000,000 14,016,830 409,757 German Mark............. 08/22/97 8,800,000 5,069,855 157,972 Hong Kong Dollar........ 08/22/97 25,800,000 3,327,727 (1,613) Japanese Yen............ 08/22/97 1,150,000,000 10,129,058 (466,880) Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 80,228 ----------- Total................. $ 857,772 =========== FUTURES CONTRACTS (NOTE 5) The Non-U.S. Equity Fund had the following open index futures contracts as of June 30, 1997: SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN -------------- ------------- ----------- ----------- INDEX FUTURES BUY CON- TRACTS Topix, 30 contracts..... September 1997 $ 4,009,756 $ 4,117,382 $ 107,626 ===========
The segregated cash pledged to cover margin requirements for the open positions at June 30, 1997 was $1,019,494. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $380,427,408) (Note 1)............... $429,572,631 Cash............................................................. 879,934 Foreign currency, at value (Cost $2,612,014)..................... 3,192,987 Receivables: Investment securities sold...................................... 5,328,950 Dividends....................................................... 2,962,324 Fund shares sold................................................ 127,682 Variation margin (Note 5)....................................... 107,626 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 857,772 Other assets..................................................... 56,372 ------------ TOTAL ASSETS.................................................. 443,086,278 ------------ LIABILITIES: Payables: Investment securities purchased................................. 12,332,011 Fund shares redeemed............................................ 1,596,751 Investment advisory fees (Note 2)............................... 378,079 Accrued expenses................................................ 127,114 ------------ TOTAL LIABILITIES............................................. 14,433,955 ------------ NET ASSETS........................................................ $428,652,323 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $356,332,425 Accumulated undistributed net investment income.................. 1,777,930 Accumulated net realized gain.................................... 19,814,253 Net unrealized appreciation...................................... 50,727,715 ------------ NET ASSETS.................................................... $428,652,323 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $420,854,653 and 33,436,374 shares is- sued and outstanding) (Note 7)................................. $ 12.59 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 79 shares issued and outstanding) (Note 7).......... $ 12.59 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $7,796,670 and 624,388 shares issued and outstanding) (Note 7)...................................... $ 12.49 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Dividends (net of $1,127,372 for foreign taxes withheld)......... $ 7,182,900 Interest......................................................... 1,394,180 ----------- TOTAL INCOME.................................................. 8,577,080 ----------- EXPENSES: Advisory (Note 2)................................................ 2,420,667 Custodian........................................................ 116,023 Distribution (Note 6)............................................ 24,209 Other............................................................ 486,426 ----------- TOTAL EXPENSES................................................ 3,047,325 ----------- NET INVESTMENT INCOME ........................................ 5,529,755 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 13,830,230 Futures contracts............................................... (371,505) Foreign currency transactions................................... 10,962,774 ----------- Net realized gain............................................. 24,421,499 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ............................... 36,478,339 Futures contracts .............................................. 87,477 Forward contracts............................................... (1,207,773) Translation of other assets and liabilities denominated in for- eign currency.................................................. 33,687 ----------- Change in net unrealized appreciation or depreciation......... 35,391,730 ----------- Net realized and unrealized gain.................................. 59,813,229 ----------- Net increase in net assets resulting from operations.............. $65,342,984 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 5,529,755 $ 3,265,964 Net realized gain................................. 24,421,499 22,260,813 Change in net unrealized appreciation or deprecia- tion ............................................ 35,391,730 10,918,989 ------------ ------------ Net increase in net assets resulting from opera- tions............................................ 65,342,984 36,445,766 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I ................................. (4,371,883) (3,057,609) SwissKey Class................................... (40,369) (8,629) Distributions from net realized gain: Brinson Class I.................................. (12,209,010) (8,632,717) SwissKey Class................................... (94,152) (14,731) ------------ ------------ Total distributions to shareholders............... (16,715,414) (11,713,686) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 232,045,893 86,752,018 Shares issued on reinvestment of distributions.... 16,204,754 10,473,903 Shares redeemed................................... (81,854,223) (56,648,208) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 7)...................... 166,396,424 40,577,713 ------------ ------------ TOTAL INCREASE IN NET ASSETS.................... 215,023,994 65,309,793 ------------ ------------ NET ASSETS: Beginning of year................................. 213,628,329 148,318,536 ------------ ------------ End of year (including accumulated undistributed net investment income of $1,777,930 and $785,599, respectively).................................... $428,652,323 $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.
YEAR ENDED JUNE 30, AUGUST 31, 1993* ----------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $ 11.17 $ 9.68 $ 9.69 $ 10.00 -------- -------- -------- ------- Income from investment opera- tions: Net investment income....... 0.18 0.18 0.15 0.10 Net realized and unrealized gain (loss)................ 1.97 2.05 (0.16) (0.34) -------- -------- -------- ------- Total income (loss) from investment operations.... 2.15 2.23 (0.01) (0.24) -------- -------- -------- ------- Less distributions: Distributions from net in- vestment income............ (0.17) (0.18) -- (0.07) Distributions from net real- ized gain.................. (0.56) (0.56) -- -- -------- -------- -------- ------- Total distributions....... (0.73) (0.74) -- (0.07) -------- -------- -------- ------- Net asset value, end of peri- od........................... $ 12.59 $ 11.17 $ 9.68 $ 9.69 ======== ======== ======== ======= Total return (non-annualized). 20.27% 23.64% (0.10)% (2.45)% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $420,855 $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 1.00% 1.20% 1.23% 1.60%** After expense reimbursement. N/A 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimburse- ment....................... 1.83% 1.67% 1.93% 1.28%** After expense reimbursement. N/A 1.87% 2.16% 1.88%** Portfolio turnover rate...... 25% 20% 14% 12% Average commission rate paid per share................... $ 0.0245 $ 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.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 11.12 $ 10.26 ------- ------- Income from investment operations: Net investment income........................... 0.11 0.12 Net realized and unrealized gain................ 1.93 1.45 ------- ------- Total income from investment operations....... 2.04 1.57 ------- ------- Less distributions: Distributions from net investment income........ (0.11) (0.15) Distributions from net realized gain............ (0.56) (0.56) ------- ------- Total distributions........................... (0.67) (0.71) ------- ------- Net asset value, end of period.................... $ 12.49 $ 11.12 ======= ======= Total return (non-annualized)..................... 19.32% 15.78% Ratios/Supplemental data Net assets, end of period (in 000s).............. $ 7,797 $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.81% 2.04%** After expense reimbursement..................... N/A 1.84%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 1.02% 0.83%** After expense reimbursement..................... N/A 1.03%** Portfolio turnover rate.......................... 25% 20% Average commission rate paid per share........... $0.0245 $0.0219
* Commencement of SwissKey Class ** Annualized N/A = Not applicable 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. Effective June 30, 1997, the Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey 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 foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate 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 year ended June 30, 1997, 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 tax 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 Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey 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 that total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00%, 1.25% and 1.84% of the average daily net assets of the Brinson Class I, Brinson Class N and SwissKey Class, respectively. Investment advisory fees and other transactions with affiliates for the year ended June 30, 1997 were as follows:
ADVISORY ADVISORY FEE FEES -------- ---------- Non-U.S. Equity Fund........................................ 0.80% $2,420,667
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 $5,780. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ----------- Non-U.S. Equity Fund................................... $223,917,155 $69,621,954
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 year ended June 30, 1997, 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 PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class and, effective June 30, 1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N. - -------------------------------------------------------------------------------- 20 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I.................. 19,910,853 $225,344,857 8,044,119 $85,398,213 Brinson Class N.................. 79 1,000 -- -- SwissKey Class................... 590,377 6,700,036 125,829 1,353,805 ---------- ------------ --------- ----------- Total Sales................... 20,501,309 $232,045,893 8,169,948 $86,752,018 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I.................. 1,461,013 $ 16,110,105 998,992 $10,452,496 Brinson Class N.................. -- -- -- -- SwissKey Class................... 8,477 94,649 2,042 21,407 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 1,469,490 $ 16,204,754 1,001,034 $10,473,903 ========== ============ ========= =========== Redemptions: Brinson Class I.................. 6,945,571 $ 80,838,515 5,347,882 $56,492,091 Brinson Class N.................. -- -- -- -- SwissKey Class................... 87,985 1,015,708 14,352 156,117 ---------- ------------ --------- ----------- Total Redemptions............. 7,033,556 $ 81,854,223 5,362,234 $56,648,208 ========== ============ ========= ===========
- -------------------------------------------------------------------------------- 21 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds--Non-U.S. Equity Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of June 30, 1997, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Non-U.S. Equity Fund at June 30, 1997, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 8, 1997 - -------------------------------------------------------------------------------- 22 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 - ------------------------------------------------------------------------------- [LOGO OF THE BRINSON FUNDS] Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris Singapore . Sydney . Tokyo . Zurich 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 SWISSKEY GLOBAL FUND SWISSKEY GLOBAL EQUITY FUND SWISSKEY GLOBAL BOND FUND ANNUAL REPORT JUNE 30, 1997 Your Key to Performance ----------------------------- Trustees and Officers - -------------------------------------------------------------------------------- Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Debra L. Nichols Chairman of the Board Secretary E. Thomas McFarlan Carolyn M. Burke, CPA President Treasurer Thomas J. Digenan, CFA, CPA Catherine E. Macrae Vice President Assistant Secretary - -------------------------------------------------------------------------------- 1 The Funds' Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- Brinson Partners is the global institutional asset management division of Swiss Bank Corporation. Brinson Partners continues as the name used within North America, while SBC Brinson is the name used outside North America. We are a global investment management organization with over $75 billion in institutional assets under discretionary active management. We are also the investment manager for SBC Private Banking mutual fund assets which total $50 billion. In addition, we act as an investment advisor to SBC Private Banking. The division manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other 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. 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 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 - -------------------------------------------------------------------------------- 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 Report of Independent Auditors....................................... 53 - -------------------------------------------------------------------------------- 3 Shareholder Letter - -------------------------------------------------------------------------------- August 20, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1997 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: SwissKey Global Fund For the period from July 31, 1995 to June 30, 1997, the Fund provided an annualized total return of 16.39%. The Fund returned 8.48% in the first half of 1997. The strategy of underweighting the overpriced equity markets in favor of the attractive bond markets remains in place. Currency strategy is largely neutral except for the sterling and Hong Kong dollar underweights. SwissKey Global Equity Fund For the period from July 31, 1995 to June 30, 1997, the Fund provided an annualized total return of 20.74%. The Fund returned 12.23% in the first half of 1997. Reflecting only modestly attractive equity markets, the Fund maintains its 20% cash hedge. The primary underweight is the U.S. market, in light of its overvaluation and increasing volatility. Currency strategy is largely neutral except for the sterling and Hong Kong dollar underweights. SwissKey Global Bond Fund For the period from July 31, 1995 to June 30, 1997, the Fund provided an annualized total return of 8.55%. The Fund returned 0.42% in the first half of 1997. Bond markets are generally attractive. However, yields in Japan are unsustainably low, making that market very unattractive. It remains the largest underweight in the portfolio. Currency strategy is largely neutral except for the sterling and Hong Kong dollar underweights. 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.Banking Private.Banking - -------------------------------------------------------------------------------- 4 Global Economic and Market Highlights - ------------------------------------------------------------------------------ Fiscal restraint in continental Europe, caused by the drive to monetary union (EMU), has amplified the economic slowdown, resulting in persistently high unemployment. These economies are hindered by more structurally rigid labor markets than in the U.S. and Asia. As yet, governments seem unwilling to take hard measures necessary to free up wages and encourage labor mobility and flexibility. Apart from some temporary yen strengthening in the second quarter, a weaker currency has aided the Japanese economy. Export-oriented industries in particular have recovered significantly from the prolonged recession brought on by the bursting of the "bubble" at the start of the 1990s. The hike in the consumption tax from 3% to 5% at the start of April had caused a spurt in spending in the first quarter. However, now that it is in place, there has been some softening in demand, particularly for big ticket items, which is likely to adversely affect domestically-oriented firms. The currency turmoil in Southeast Asia is drawing attention to some of the weaknesses of those economies. In Thailand, which was the initial casualty, the crisis was precipitated by a bad bank loan problem. These problems in the banking system prevented the central bank from increasing rates sufficiently to maintain the peg to a strengthening U.S. dollar.
Global Environment 6 months 1 year 7/31/95* Major Markets ended ended to Total Return in U.S. Dollars 6/30/97 6/30/97 6/30/97 - ------------------------------------------------------------------------------ U.S. Equity 17.65% 29.32% 26.44% Non-U.S. Equities (currency unhedged) 11.21 13.64 10.81 Non-U.S. Equities (currency hedged) 17.76 22.77 23.54 U.S. Bonds 3.06 8.15 6.96 Non-U.S. Bonds (currency unhedged) -3.12 2.16 -0.04 Non-U.S. Bonds (currency hedged) 4.67 13.02 12.14 U.S. Cash Equivalents 2.52 5.14 5.23 - ------------------------------------------------------------------------------ 6 months 1 year 7/31/95* Major Currencies ended ended to Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97 - ------------------------------------------------------------------------------ Yen 1.43% -4.15% -12.78% Pound -2.75 7.11 2.07 Deutschemark -11.56 -12.65 -11.44 Canadian Dollar -0.65 -1.01 -0.27 - ------------------------------------------------------------------------------
* Inception date of the SwissKey Class. Returns in excess of 1 year are average annualized returns. - ------------------------------------------------------------------------------ 5 Global Fund - -------------------------------------------------------------------------------- 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 16.39% since its inception on July 31, 1995. This compares with the corresponding 15.97% return of its benchmark, the GSMI Mutual Fund Index. For the year ended June 30, 1997, the Fund returned 18.13%, while the benchmark returned 18.00%. For the first half of 1997, the SwissKey Global Fund returned 8.48% compared to the 10.69% return of the benchmark. A substantial positive contribution to performance came from the active overweight of the U.S. dollar relative to the yen, deutschemark and DM-related currencies. These currencies moved from a substantially overvalued status to levels that were closer to our long-term equilibriums. The Fund's market strategy centers on reducing the risk of exposure to the overpriced equity markets; the relatively attractive bond markets are the primary overweights. Consequently, market allocation made a substantial negative contribution to Fund performance. Numerous equity markets provided double-digit returns in dollar-hedged terms. Bond markets, especially outside the U.S., provided positive returns. However, bond markets rallies failed to match the torrid pace of world equity markets. The strategy for emerging markets equities is neutral to the normal policy exposure of 3.0%. The emerging markets debt strategy mirrors the developed bond market overweight, with a 3.0% exposure relative to the 2.0% normal policy. A small underweight is carried in the U.S. high yield bond market. - -------------------------------------------------------------------------------- 6 Global Fund - -------------------------------------------------------------------------------- Total Return 6 months 1 year 7/31/95* ended ended to 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- SwissKey Global Fund 8.48% 18.13% 16.39% GSMI Mutual Fund Index** 10.69 18.00 15.97 - -------------------------------------------------------------------------------- * 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. All total returns in excess of 1 year are average annualized returns. 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 June 30, 1997. 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 [GRAPH APPEARS HERE] SwissKey GSMI Mutual Global Fund Fund Index - -------------------------------------------------------------------------------- 7/31/95 $10,000.00 $10,000.00 9/30/95 $10,293.00 $10,232.00 12/31/95 $10,861.00 $10,665.00 3/31/96 $11,091.00 $10,963.00 6/30/96 $11,324.00 $11,258.00 9/30/96 $11,687.00 $11,505.00 12/31/96 $12,332.00 $12,001.00 3/31/97 $12,373.00 $11,965.00 6/30/97 $13,377.00 $13,284.00
7/31/95 = $10,000 Data through 6/30/97 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 - -------------------------------------------------------------------------------- Asset Allocation As of June 30, 1997
Current Benchmark Strategy - -------------------------------------------------------------------- U.S. Equity 40.0% 23.0% Non-U.S. Equities 22.0 17.0 Japan Equities 6.5 4.0 Other Equities 15.5 13.0 Emerging Markets Equities 3.0 3.0 Dollar Bonds 21.0 33.5 U.S. Bonds 19.0 29.5 International $ Bonds 2.0 4.0 High Yield Bonds 3.0 2.5 Non-U.S. Bonds 9.0 18.0 Japan Bonds 2.7 0.0 Other Bonds 6.3 18.0 Emerging Markets Debt 2.0 3.0 Cash Equivalents 0.0 0.0 - -------------------------------------------------------------------- 100.0% 100.0%
Currency Allocation As of June 30, 1997
Current Benchmark Strategy - -------------------------------------------------------------------- U.S. 66.0% 69.5% Japan 9.6 9.6 U.K. 4.7 1.4 Continental Europe 13.0 13.0 Canada 1.4 1.4 Emerging Markets 3.0 3.0 Other 2.3 2.1 - -------------------------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of June 30, 1997
Percent of Net Assets - -------------------------------------------------- 1. Xerox Corp. 1.36% 2. Chase Manhattan Corp. 1.17 3. Lockheed Martin Corp. 1.08 4. Philip Morris Companies, Inc. 1.07 5. Aon Corp. 0.89 6. CIGNA Corp. 0.88 7. Goodyear Tire & Rubber Co. 0.80 8. Burlington Northern Santa Fe 0.80 9. Federal Express Corp. 0.74 10. Citicorp 0.73 - --------------------------------------------------
Top Ten Non-U.S. Equity Holdings As of June 30, 1997
Percent of Net Assets - -------------------------------------------------- 1. Telecom Corp. of New Zealand Ltd. 0.24% 2. Glaxo Wellcome PLC 0.23 3. Royal Dutch Petroleum Co. 0.23 4. General Electric Co. PLC 0.20 5. Matsushita Electric Industrial Co. 0.19 6. British Telecommunications PLC 0.19 7. Toray Industries, Inc. 0.19 8. Lloyds TSB Group PLC 0.18 9. Broken Hill Proprietary Co. Ltd. 0.18 10. British Petroleum Co. PLC 0.17 - --------------------------------------------------
- ------------------------------------------------------------------------------- 8 Global Fund - ------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of June 30, 1997
- ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals................................. 0.59% Housing/Paper............................. 1.20 Metals.................................... 0.16 ------ 1.95 Capital Investment Capital Goods............................. 1.99 Technology................................ 2.68 ------ 4.67 Consumer Autos/Durables............................ 0.83 Discretionary............................. 1.24 Health: Drugs............................. 1.94 Health: Non-Drugs......................... 0.96 Non-Durables.............................. 2.66 Retail/Apparel............................ 1.16 ------ 8.79 Energy..................................... 1.14 Financial Banks..................................... 1.97 Non-Banks................................. 2.06 ------ 4.03 Post Venture............................... 1.18 Transportation............................. 1.51 Utilities.................................. 1.65 Services/Miscellaneous..................... 2.18 ------ Total U.S. Equities................ 27.10* ------ NON-U.S. EQUITIES Aerospace & Military....................... 0.03% Airlines................................... 0.11 Appliances & Household Durables............ 0.42 Automobiles................................ 0.46 Banking.................................... 2.11 Beverages & Tobacco........................ 0.31 Broadcasting & Publishing.................. 0.27 Building Materials......................... 0.32 Business & Public Service.................. 0.70 Chemicals.................................. 0.72 Construction............................... 0.28 Data Processing............................ 0.19 Electric Components........................ 0.25 Electronics................................ 0.73 Energy..................................... 1.28 Financial Services......................... 0.24 Food & House Products...................... 0.66 Forest Products............................ 0.37 Gold Mining................................ 0.02 Health & Personal Care..................... 0.97 Industrial Components...................... 0.34 Insurance.................................. 0.85 Leisure & Tourism.......................... 0.11 Machinery & Engineering.................... 0.18 Merchandising.............................. 0.75 Metals--Steel.............................. 0.35 Miscellaneous Materials.................... 0.12 Multi-Industry............................. 0.88 Non-Ferrous Metals......................... 0.40 Real Estate................................ 0.16 Recreation................................. 0.15 Shipping................................... 0.09 Telecommunications......................... 1.09 Textiles and Apparel....................... 0.04 Transportation............................. 0.16 Utilities.................................. 0.86 Wholesale & International Trade............ 0.05 ------ Total Non-U.S. Equities........... 17.02 ------ EMERGING MARKETS EQUITIES.................. 2.71 ------
U.S. BONDS Corporate Bonds Asset-Backed.............................. 0.80 CMO....................................... 0.75 Consumer.................................. 0.82 Financial................................. 1.64 Industrial................................ 0.61 Telecommunications........................ 0.02 Transportation............................ 0.31 ------ 4.95 U.S. Government Agencies................... 7.31 U.S. Government Obligations................ 10.83 International Dollar Bonds................. 3.57 ------ Total U.S. Bonds.................. 26.66* ------ HIGH YIELD BONDS........................... 2.18 ------ NON-U.S. BONDS Foreign Government Bonds................... 17.22 ------ EMERGING MARKETS DEBT...................... 3.32 ------ SHORT-TERM INVESTMENTS..................... 4.37* ------ TOTAL INVESTMENTS................. 100.58 LIABILITIES, LESS CASH AND OTHER ASSETS................................... (0.58) ------ NET ASSETS........................ 100.00% ======
- ------------------------------------------------------------------------------- * The Fund held a long position in U.S. Treasury futures on June 30, 1997 which increased U.S. bond exposure from 26.66% to 31.76%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 27.10% to 22.38%. These adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 4.37% to 3.99%. - -------------------------------------------------------------------------------- 9 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------ Equities -- 46.83% U.S. EQUITIES -- 27.10% Aetna Life & Casualty Co............................. 20,800 $ 2,129,400 Allergan, Inc........................................ 53,800 1,711,512 Alza Corp. (b)....................................... 52,500 1,522,500 Aon Corp............................................. 105,499 5,459,547 Automatic Data Processing, Inc....................... 51,300 2,411,100 Beckman Instruments, Inc............................. 15,200 733,400 Birmingham Steel Corp................................ 21,100 327,050 Boston Technology, Inc. (b).......................... 20,100 594,206 Brinson Post-Venture Fund (b)........................ 423,765 7,248,708 Browning-Ferris Industries, Inc...................... 39,800 1,323,350 Burlington Northern Santa Fe......................... 54,400 4,889,200 Centerior Energy Co.................................. 45,200 505,675 Champion Enterprises, Inc. (b)....................... 26,000 390,000 Champion International Corp.......................... 1,600 88,400 Chase Manhattan Corp................................. 73,800 7,163,212 CIGNA Corp........................................... 30,400 5,396,000 Circuit City Stores, Inc............................. 77,600 2,759,650 Citicorp............................................. 36,900 4,448,756 CMS Energy Corp...................................... 57,900 2,040,975 Coca-Cola Enterprises, Inc........................... 42,300 972,900 Comerica, Inc........................................ 14,500 986,000 Comverse Technology, Inc. (b)........................ 9,700 504,400 Corning, Inc......................................... 67,200 3,738,000 Covance, Inc......................................... 26,472 511,240 CPC International, Inc............................... 23,000 2,123,187 CVS Corp............................................. 33,400 1,711,750 Dial Corp............................................ 31,900 498,437 Eastman Chemical Co.................................. 36,300 2,305,050 EMC Corp./Mass. (b).................................. 99,900 3,896,100 Enron Corp........................................... 101,300 4,134,306 Entergy Corp......................................... 6,000 164,250 Federal Express Corp. (b)............................ 78,100 4,510,275 Federated Department Stores (b)...................... 29,100 1,011,225 FileNet Corp. (b).................................... 10,900 158,050 First American Corp.-Tenn............................ 13,700 525,737 First Bank System, Inc............................... 10,700 913,512 First Data Corp...................................... 87,230 3,832,668 First of America Bank Corp........................... 10,150 464,362 First Security Corp.................................. 17,250 471,141 Fleetwood Enterprises, Inc........................... 11,300 336,881 Food Lion, Inc. Class A.............................. 83,800 599,694 Forest Laboratories, Inc. (b)........................ 24,100 998,644 Gannett Co., Inc..................................... 34,900 3,446,375 General Instrument Corp. (b)......................... 119,800 2,995,000 Genzyme Corp. (b).................................... 21,200 588,300 Geon Co.............................................. 14,900 301,725 Goodyear Tire & Rubber Co............................ 77,500 4,906,719 Harnischfeger Industries, Inc........................ 34,900 1,448,350 Health Care and Retirement Corp. (b)................. 35,400 1,181,475 Hibernia Corp. Class A............................... 29,300 408,369 Informix Corp. (b)................................... 28,100 252,900 Interpublic Group of Companies, Inc.................. 22,900 1,404,056 James River Corp. of Virginia........................ 42,900 1,587,300 Kroger Co. (b)....................................... 28,600 829,400 Lockheed Martin Corp................................. 64,120 6,640,428 Lyondell Petrochemical Co............................ 57,400 1,252,038
SHARES VALUE ------------ ------------ Manor Care, Inc...................................... 46,798 $ 1,526,785 Martin Marietta Materials, Inc....................... 15,300 495,338 Masco Corp........................................... 61,300 2,559,275 Mattel, Inc.......................................... 76,024 2,575,313 Nabisco Holdings Corp. Class A....................... 53,600 2,137,300 National Service Industries Inc...................... 10,300 501,481 Nextel Communications, Inc. Class A (b).............. 80,100 1,516,894 Octel Communications Corp. (b)....................... 17,300 405,469 Old Republic International Corp...................... 18,896 572,785 Peco Energy Co....................................... 130,300 2,736,300 Pentair, Inc......................................... 27,696 910,506 Pharmacia & Upjohn, Inc.............................. 66,900 2,324,775 Philip Morris Companies, Inc......................... 148,200 6,576,375 Raytheon Co.......................................... 20,300 1,035,300 Regions Financial Corp............................... 13,600 430,100 Reynolds & Reynolds Co. Class A...................... 18,800 296,100 Schering Plough Corp................................. 92,100 4,409,288 Seagate Technology, Inc. (b)......................... 21,900 770,606 Timken Co............................................ 36,300 1,290,919 Trinity Industries, Inc.............................. 9,700 307,975 Tyson Foods, Inc. Class A............................ 107,100 2,048,288 UCAR International, Inc. (b)......................... 1,600 73,200 Ultramar Diamond Shamrock Corp....................... 59,808 1,951,236 US Bancorp........................................... 32,000 2,052,000 Vencor, Inc. (b)..................................... 27,400 1,157,650 Viad Corp............................................ 51,600 993,300 Westvaco Corp........................................ 12,598 396,050 Witco Corp........................................... 5,200 197,275 Xerox Corp........................................... 106,000 8,360,750 York International Corp.............................. 32,700 1,504,200 360 Communications Co. (b)........................... 15,566 266,568 ------------ Total U.S. Equities.................................. 166,132,286 ------------ NON-U.S. EQUITIES -- 17.02% AUSTRALIA -- 0.92% Amcor Ltd............................................ 33,770 222,644 Boral Ltd............................................ 59,240 185,075 Brambles Industries Ltd.............................. 8,590 168,555 Broken Hill Proprietary Co. Ltd...................... 74,200 1,083,070 Coca-Cola Amatil Ltd................................. 11,270 145,228 CSR Ltd.............................................. 42,930 164,997 David Jones Ltd...................................... 147,010 203,758 Lend Lease Corp. Ltd................................. 9,596 201,301 M.I.M. Holdings Ltd.................................. 106,287 156,075 National Australia Bank Ltd.......................... 51,467 731,464 News Corp. Ltd....................................... 107,030 509,185 News Corp. Ltd. Preferred............................ 27,670 108,212 Pacific Dunlop Ltd................................... 70,210 206,197 Qantas Airways Ltd................................... 69,435 161,264 Rio Tinto Ltd........................................ 28,145 476,126 Santos Ltd........................................... 16,610 69,314 Westpac Banking Corp. Ltd............................ 77,408 462,212 WMC Ltd.............................................. 46,840 293,022 Woolworth's Ltd...................................... 30,790 100,345 ------------ 5,648,044 ------------
- -------------------------------------------------------------------------------- 10 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- BELGIUM -- 0.64% Delhaize-Le Lion S.A.................................... 4,670 $ 245,516 Electrabel S.A.......................................... 2,730 585,488 Fortis AG............................................... 216 48 Fortis AG Strip (b)..................................... 2,643 546,244 General de Banque S.A................................... 670 258,122 Groupe Bruxelles Lambert S.A............................ 1,670 280,114 Kredietbank NV.......................................... 1,000 403,338 Kredietbank VVPR........................................ 25 9,875 Petrofina S.A........................................... 1,425 540,073 Societe Generale de Belgique............................ 2,533 236,742 Solvay S.A. Class A..................................... 457 269,497 Tractebel............................................... 675 281,641 Tractebel Warrants "99" (b)............................. 605 6,496 Union Miniere Group S.A. (b)............................ 2,955 277,006 ---------- 3,940,200 ---------- CANADA -- 0.59% Alcan Aluminium Ltd..................................... 7,250 247,517 Bank of Montreal........................................ 6,390 249,653 Barrick Gold Corp....................................... 4,200 91,483 BCE, Inc................................................ 7,250 201,798 Canadian National Railway Co............................ 5,150 224,724 Canadian Pacific Ltd.................................... 15,650 445,814 Hudson's Bay Co......................................... 6,300 141,563 Imperial Oil Ltd........................................ 5,720 293,339 MacMillan Bloedel Ltd................................... 9,440 129,667 Moore Corp. Ltd......................................... 6,110 120,464 Noranda, Inc............................................ 7,440 160,438 Northern Telecom Ltd.................................... 2,290 206,575 NOVA Corp............................................... 9,920 84,848 Royal Bank of Canada.................................... 7,350 333,243 Seagram Co. Ltd......................................... 6,490 261,086 Thomson Corp............................................ 8,970 206,760 TransCanada Pipelines Ltd............................... 10,020 201,547 ---------- 3,600,519 ---------- FINLAND -- 0.13% Merita Ltd. Class A..................................... 25,950 86,430 Nokia Ab Class A........................................ 5,250 392,067 Outokumpu Class A....................................... 4,480 88,838 Pohjola Insurance Group Class B......................... 1,050 31,131 Sampo Insurance Co. Ltd. Class A........................ 480 46,667 UPM-Kymmene Corp........................................ 6,870 158,716 ---------- 803,849 ---------- FRANCE -- 1.24% Accor S.A............................................... 2,092 313,568 Alcatel Alsthom......................................... 2,932 367,561 AXA UAP................................................. 5,258 327,338 AXA UAP Rights (b)...................................... 4,328 16,808 Banque Nationale de Paris............................... 9,920 409,236 Cie Bancaire S.A........................................ 2,038 260,347 Cie de Saint Gobain..................................... 3,090 451,053 Cie de Suez............................................. 37,900 93,282 Cie Generale des Eaux................................... 1,844 236,507 Cie Generale des Eaux Warrants "01" (b)................. 4,224 2,533
SHARES VALUE --------- ---------- Colas.................................................... 814 $ 107,452 Dexia France............................................. 3,399 331,158 Elf Aquitaine S.A........................................ 4,594 496,098 Groupe Danone............................................ 2,000 330,778 Lafarge S.A.............................................. 2,480 154,393 Lagardere S.C.A.......................................... 6,600 191,896 LVMH..................................................... 1,099 295,762 Michelin Class B......................................... 6,570 394,917 Pechiney S.A. Class A.................................... 6,664 262,769 Peugeot S.A.............................................. 3,580 346,353 Rhone-Poulenc Class A.................................... 8,544 349,269 SEITA.................................................... 6,010 190,404 Societe Generale......................................... 3,334 372,526 Suez Lyonnaise des Eaux S.A.............................. 3,130 315,612 Thomson CSF.............................................. 6,900 177,936 Total S.A. Class B....................................... 3,986 403,284 Usinor Sacilor........................................... 23,380 422,122 ---------- 7,620,962 ---------- GERMANY -- 1.63% Allianz AG Holding....................................... 4,160 889,246 BASF AG.................................................. 11,480 423,929 Bayer AG................................................. 15,290 589,629 Bayerische Motoren Werke AG.............................. 590 486,870 Commerzbank AG........................................... 12,840 366,941 Daimler-Benz AG.......................................... 5,850 476,366 Deutsche Bank AG......................................... 12,311 723,428 Deutsche Telekom AG...................................... 25,380 624,086 Henkel KGaA-Vorzug AG.................................... 4,540 255,841 Hochtief AG.............................................. 3,500 156,663 Hoechst AG............................................... 4,710 199,741 M.A.N. AG................................................ 750 233,703 Mannesmann AG............................................ 897 400,989 Metro AG................................................. 3,420 372,891 Muenchener Rueckver AG................................... 211 598,152 Muenchener Rueckver AG Warrants "98" (b)................. 2 717 Preussag AG.............................................. 1,122 330,303 RWE AG................................................... 8,870 381,757 Schering AG.............................................. 4,805 515,078 Siemens AG............................................... 5,650 338,657 Thyssen AG............................................... 2,240 539,240 Veba AG.................................................. 10,339 584,409 Volkswagen AG............................................ 710 538,632 ---------- 10,027,268 ---------- HONG KONG -- 0.21% Cheung Kong Holdings Ltd................................. 14,000 138,242 China Light & Power Co. Ltd.............................. 26,500 150,162 Guoco Group Ltd.......................................... 14,000 73,729 Hang Seng Bank Ltd....................................... 9,700 138,351 Hong Kong Telecommunications Ltd......................... 41,200 98,383 Hutchison Whampoa Ltd.................................... 26,000 224,853 Jardine Matheson Holdings ADR (c)........................ 9,200 65,320 New World Development Co. Ltd............................ 16,000 95,414 Sun Hung Kai Properties Ltd.............................. 7,000 84,255 Swire Pacific Ltd. Class A............................... 13,500 121,542 Wharf (Holdings) Ltd..................................... 21,000 91,077 ---------- 1,281,328 ----------
- -------------------------------------------------------------------------------- 11 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- ITALY -- 0.64% Assicurazioni Generali.................................. 21,080 $ 382,822 Banca Commerciale Italiana.............................. 55,000 113,782 Credito Italiano Spa.................................... 141,000 257,720 Danieli & Co. Savings (Risp)............................ 36,000 125,889 Edison Spa.............................................. 22,200 110,315 ENI ADR (c)............................................. 7,600 432,250 ENI Spa................................................. 31,000 175,360 Fiat Spa-Priv........................................... 156,000 287,887 INA-Istituto Nazionale delle Assicurazioni.............. 87,000 132,430 Istituto Mobilaire Italiano Spa......................... 22,500 202,321 Italgas Spa............................................. 30,300 97,943 La Rinascente Spa....................................... 18,000 99,918 La Rinascente Spa Rights (b)............................ 45,200 2,019 La Rinascente Spa RNC................................... 27,200 66,102 La Rinascente Spa RNC Rights (b)........................ 45,200 7,358 La Rinascente Spa Warrants "99" (b)..................... 1,400 691 Mediobanca Spa.......................................... 11,000 66,718 Montedison Spa (b)...................................... 357,700 235,874 SAI-Savings (Risp)...................................... 24,500 75,451 Telecom Italia Mobile Spa............................... 60,000 193,946 Telecom Italia Mobile Spa RNC........................... 169,500 302,839 Telecom Italia Spa...................................... 48,000 143,591 Telecom Italia Spa RNC.................................. 194,500 384,656 ---------- 3,897,882 ---------- JAPAN -- 4.16% Amada Co. Ltd........................................... 40,000 353,054 Asahi Glass Co. Ltd..................................... 48,000 478,196 Bank of Tokyo-Mitsubishi, Ltd........................... 44,000 884,383 Canon, Inc.............................................. 31,000 845,233 Canon Sales Co., Inc.................................... 13,100 305,663 Citizen Watch Co. Ltd................................... 36,000 278,109 Dai Nippon Printing Co. Ltd............................. 36,000 814,821 Daiichi Pharmaceutical Co. Ltd.......................... 26,000 458,971 Daikin Industries Ltd................................... 39,000 354,453 Daiwa House Industry Co. Ltd............................ 20,000 244,691 Fanuc................................................... 15,900 611,378 Fujitsu................................................. 24,000 333,479 Hitachi Ltd............................................. 77,000 861,313 Honda Motor Co.......................................... 10,000 301,494 Inax.................................................... 37,000 277,427 Isetan.................................................. 13,000 161,321 Ito Yokado Co. Ltd...................................... 15,000 871,712 Kaneka Corp............................................. 40,000 250,983 Keio Teito Electric Railway............................. 45,000 214,323 Kinki Nippon Railway.................................... 45,000 275,277 Kirin Brewery Co. Ltd................................... 43,000 447,173 Kokuyo.................................................. 13,000 352,180 Kuraray Co. Ltd......................................... 46,000 458,271 Kyocera Corp............................................ 5,000 397,623 Maeda Road Construction................................. 8,000 68,863 Marui Co. Ltd........................................... 20,000 372,280 Matsushita Electric Industrial Co....................... 58,000 1,170,847 Mitsubishi Paper Mills.................................. 49,000 191,838 NGK Insulators.......................................... 64,000 704,710 Nintendo Corp. Ltd...................................... 3,900 327,187 Nippon Denso Co. Ltd.................................... 19,000 454,951 Nippon Meat Packers, Inc................................ 25,000 323,342 Nippon Steel Co......................................... 27,000 86,359 Okumura................................................. 40,000 212,182
SHARES VALUE ----------- ----------- Osaka Gas Co........................................... 76,000 $ 218,509 Sankyo Co. Ltd......................................... 29,000 975,706 Sanwa Bank Ltd......................................... 19,000 282,269 Secom.................................................. 10,000 734,947 Seino Transportation................................... 27,000 292,581 Sekisui House Ltd...................................... 75,000 760,290 Shinmaywa Industries Ltd............................... 17,000 119,890 Sony Corp.............................................. 9,200 803,181 Sumitomo Bank.......................................... 42,000 690,029 Sumitomo Electric Industries........................... 32,000 536,922 Sumitomo Trust & Banking............................... 22,000 236,476 Takeda Chemical Industries............................. 23,000 647,208 TDK Corp............................................... 7,000 514,463 Tokio Marine & Fire Insurance Co....................... 36,000 471,904 Tokyo Electric Power................................... 9,900 208,503 Tokyo Steel Mfg........................................ 29,000 324,390 Tonen Corp............................................. 29,000 349,733 Toray Industries, Inc.................................. 161,000 1,149,498 Toshiba Corp........................................... 93,000 598,978 Toyo Suisan Kaisha..................................... 22,000 224,941 Toyota Motor Corp...................................... 10,000 295,377 Yamazaki Baking Co. Ltd................................ 19,000 335,402 ----------- 25,515,284 ----------- MALAYSIA -- 0.32% Hume Industries (Malaysia) Bhd......................... 20,000 91,917 Kuala Lumpur Kepong Bhd................................ 57,500 142,383 Land & General Holdings Bhd............................ 73,000 83,875 Malayan Banking Bhd.................................... 26,000 272,979 Malaysia International Shipping Bhd (Frgn.)............ 32,000 83,043 Nestle (Malaysia) Bhd.................................. 9,000 67,393 New Straits Times Press Bhd............................ 6,000 35,182 Perusahaan Otomobil Nasional Bhd....................... 12,000 56,101 Public Bank Bhd (Frgn.)................................ 72,000 112,393 Resorts World Bhd...................................... 30,000 90,333 Rothmans of Pall Mall Bhd.............................. 4,000 39,303 Sime Darby Bhd......................................... 62,000 206,339 Telekom Malaysia Bhd................................... 42,000 196,355 Tenaga Nasional Bhd.................................... 61,000 297,266 UMW Holdings Bhd....................................... 9,000 42,433 United Engineers Ltd................................... 15,000 108,162 YTL Corp. Bhd.......................................... 17,000 52,536 ----------- 1,977,993 ----------- NETHERLANDS -- 1.07% ABN AMRO Holdings NV................................... 27,047 505,242 Akzo Nobel NV.......................................... 860 118,073 DSM NV................................................. 1,610 160,482 Elsevier NV............................................ 23,880 399,767 Heineken NV............................................ 850 145,332 Hoogovens NV........................................... 2,860 159,692 ING Groep NV........................................... 18,760 866,524 KLM Royal Dutch Air Lines NV........................... 8,840 272,964 KPN NV................................................. 14,409 566,270 Philips Electronics NV................................. 8,450 606,375 Royal Dutch Petroleum Co............................... 26,120 1,361,125 Royal Dutch Petroleum Co. NY Shares (c)................ 13,600 739,500 Unilever NV............................................ 3,000 632,675 ----------- 6,534,021 -----------
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ---------- ---------- NEW ZEALAND -- 0.66% Brierley Investments Ltd................................. 677,530 $ 661,292 Carter Holt Harvey Ltd................................... 234,110 604,570 Fletcher Challenge Building.............................. 80,886 242,873 Fletcher Challenge Energy................................ 88,821 267,904 Fletcher Challenge Forest Ltd............................ 153,913 223,250 Fletcher Challenge Paper................................. 159,786 386,641 Telecom Corp. of New Zealand Ltd......................... 293,830 1,493,686 Telecom Corp. of New Zealand Ltd. ADS (c)................ 3,800 154,850 ---------- 4,035,066 ---------- SINGAPORE -- 0.30% City Developments Ltd.................................... 18,000 176,248 DBS Land Ltd............................................. 27,000 85,355 Development Bank of Singapore Ltd........................ 16,000 201,427 Fraser & Neave Ltd....................................... 3,000 21,401 Hotel Properties Ltd..................................... 42,000 71,381 Keppel Corp. Ltd. (b).................................... 10,000 44,412 Oversea-Chinese Banking Corp. Ltd........................ 32,000 331,235 Singapore Airlines Ltd. (Frgn.).......................... 24,000 214,855 Singapore Press Holdings Ltd. (Frgn.).................... 10,000 201,427 Singapore Telecommunications, Ltd........................ 92,000 169,870 United Overseas Bank Ltd. (Frgn.)........................ 24,000 246,748 Wing Tai Holdings Ltd.................................... 22,000 63,393 ---------- 1,827,752 ---------- SPAIN -- 0.44% Acerinox S.A............................................. 570 107,008 Banco Bilbao-Vizcaya S.A................................. 3,240 263,703 Banco Central Hispanoamericano........................... 3,920 143,665 Banco Popular Espanol S.A................................ 750 184,096 Banco Santander S.A...................................... 7,980 246,340 Empresa Nacional de Electridad S.A....................... 4,960 417,184 Fomento de Construcciones y Contratas S.A................ 1,100 140,538 Gas Natural SDG S.A...................................... 860 188,233 Iberdrola S.A............................................ 16,410 207,538 Mapfre Corp.............................................. 1,430 76,230 Repsol S.A............................................... 3,910 165,631 Repsol S.A. ADR (c)...................................... 1,000 42,438 Telefonica de Espana..................................... 11,640 337,162 Vallehermosa S.A......................................... 2,670 72,164 Viscofan Envolturas Celulosicas S.A...................... 3,910 91,589 ---------- 2,683,519 ---------- SWITZERLAND -- 0.45% ABB AG (Bearer).......................................... 105 159,167 Alusuisse-Lonza Holding AG (Reg.)........................ 120 124,453 Ciba Specialty Chemicals AG (Reg.)....................... 358 33,150 CS Holdings AG (Reg.).................................... 1,023 131,568 Nestle S.A. (Reg.)....................................... 395 521,826 Novartis AG (Reg.)....................................... 478 765,246 Roche Holding AG (Gen.).................................. 56 507,223 Swiss Reinsurance Co. (Reg.)............................. 90 127,478 UBS (Bearer)............................................. 106 121,421 Zurich Versicherungs (Reg.).............................. 609 242,698 ---------- 2,734,230 ----------
SHARES VALUE ---------- ---------- UNITED KINGDOM -- 3.62% Abbey National PLC...................................... 25,620 $ 349,645 Bass PLC................................................ 15,070 183,845 B.A.T. Industries PLC................................... 93,484 836,276 BG PLC.................................................. 191,380 700,734 Booker PLC.............................................. 18,220 82,784 British Energy PLC...................................... 163,630 398,965 British Petroleum Co. PLC............................... 85,794 1,066,624 British Steel PLC....................................... 208,470 518,703 British Telecommunications PLC.......................... 155,980 1,157,811 BTR PLC................................................. 53,420 182,705 Centrica PLC............................................ 196,430 238,652 Charter PLC............................................. 28,846 382,869 Coats Viyella PLC....................................... 112,860 236,671 FKI PLC................................................. 128,500 363,568 General Electric Co. PLC................................ 202,550 1,210,210 Glaxo Wellcome PLC...................................... 67,600 1,397,903 Grand Metropolitan PLC.................................. 52,740 507,343 Guinness PLC............................................ 66,410 649,897 Hanson PLC.............................................. 52,102 258,407 Hillsdown Holdings PLC.................................. 138,520 390,765 House of Fraser PLC..................................... 143,400 380,666 HSBC Holdings PLC....................................... 30,050 924,481 Imperial Chemical Industries PLC........................ 11,450 158,930 Inchcape PLC............................................ 46,470 218,873 Legal & General Group PLC............................... 64,400 436,229 Lloyds TSB Group PLC.................................... 108,409 1,113,229 Marks & Spencer PLC..................................... 78,040 646,816 Mirror Group PLC........................................ 69,450 217,302 National Westminster Bank PLC........................... 27,380 367,968 Northern Foods PLC...................................... 82,040 271,714 Peninsular & Oriental Steam Navigation Co............... 50,040 498,026 Reckitt & Colman PLC.................................... 14,938 223,007 Redland PLC............................................. 27,860 157,650 Reuters Holdings PLC.................................... 30,530 321,636 Rio Tinto PLC........................................... 27,580 480,361 RJB Mining PLC.......................................... 56,570 338,940 Royal & Sun Alliance Insurance Group PLC................ 74,839 553,025 Sainsbury (J.) PLC...................................... 63,920 387,233 Scottish Hydro-Electric PLC............................. 29,480 203,615 Sears PLC............................................... 170,480 192,937 Sedgwick Group PLC...................................... 125,360 256,624 SmithKline Beecham PLC.................................. 37,590 691,616 Smurfit (Jefferson) Group PLC........................... 112,647 324,339 Tesco PLC............................................... 52,140 321,943 Thames Water PLC........................................ 35,210 404,342 Unilever PLC............................................ 8,010 229,162 Vodafone Group PLC...................................... 47,090 229,631 Williams PLC............................................ 62,010 335,412 Yorkshire Water PLC..................................... 29,190 190,924 ----------- 22,191,008 ----------- Total Non-U.S. Equities................................. 104,318,925 ----------- EMERGING MARKETS EQUITIES -- 2.71% Brinson Emerging Markets Equity Fund (b)................ 1,353,286 16,597,643 ----------- Total Equities (Cost $229,910,786)...................... 287,048,854 -----------
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------------- ------------ Bonds -- 49.38% U.S. BONDS -- 26.66% U.S. CORPORATE BONDS -- 4.95% Aetna Services Inc. 6.970%, due 08/15/36........... $ 265,000 $ 267,630 Bell Atlantic Corp. 8.000%, due 10/15/29........... 98,000 106,064 BellSouth Savings & Employee ESOP 9.125%, due 07/01/03.......................................... 289,556 301,553 Capital One Bank 6.830%, due 05/17/99.............. 1,946,000 1,953,877 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.......................................... 1,000,000 992,430 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03.......................................... 1,050,000 1,060,006 Chemical Master Credit Card Trust 95-2A 6.230%, due 06/15/03.......................................... 1,430,000 1,420,977 Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,009,480 Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,197 4.220%, due 03/02/99.............................. 2,385 2,363 Comcast Cable Communications 144-A 8.500%, due 05/01/27.......................................... 1,720,000 1,854,435 Continental Airlines, Inc. Pass Thru 144-A 7.461%, due 04/01/15...................................... 1,850,000 1,871,514 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 06/20/29.............................. 1,465,000 1,486,975 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02...................................... 132,000 132,286 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00.......................................... 600,000 600,000 Eastman Chemical Co. 7.600%, due 02/01/27.......... 252,000 249,750 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.......................................... 96,130 96,141 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09.............................. 1,637,884 1,546,212 GMAC 9.625%, due 12/15/01.......................... 331,000 366,251 Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,250,000 1,256,020 Lockheed Martin Corp. 7.700%, due 06/15/08......... 148,000 154,654 MBNA Global Capital Securities FRN 6.659%, due 02/01/27.......................................... 1,100,000 1,086,996 News America Holdings 7.750%, due 01/20/24......... 1,877,000 1,780,928 Premier Auto Trust 96-3A 6.500%, due 03/06/00........................ 215,000 216,408 96-4A 6.400%, due 10/06/01........................ 455,000 455,801 Residential Funding Mortgage Security Insurance 8.500%, due 06/25/26...................................... 1,440,000 1,477,087 Salomon, Inc. 6.500%, due 03/01/00.............................. 2,520,000 2,504,051 6.750%, due 02/15/03.............................. 550,000 538,981 Standard Credit Card Trust 95-1A 8.250%, due 01/07/07.......................................... 500,000 537,285
FACE AMOUNT VALUE ---------- ----------- Thrift Financial Corp. 11.250%, due 01/01/16.......................................... $ 97,862 $ 105,732 Time Warner, Inc. 9.150%, due 02/01/23................. 1,815,000 2,003,154 Time Warner Entertainment, Inc. 8.375%, due 03/15/23... 1,206,000 1,236,095 WMX Technologies, Inc. 7.000%, due 10/15/06............ 1,500,000 1,485,904 ----------- 30,322,237 ----------- INTERNATIONAL DOLLAR BONDS -- 3.57% Abbey National PLC 7.350%, due 10/29/49................ 250,000 249,461 ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01........ 250,000 248,289 AT&T Corp. 8.250%, due 01/11/00........................ 645,000 669,300 Banque Paribas, Sub. Notes 6.875%, due 03/01/09........ 175,000 165,923 Bayerische Landesbank 6.850%, due 07/19/01............. 212,000 213,530 BBV International 7.000%, due 12/01/25................. 2,200,000 2,025,525 Credit Suisse-London 144-A 7.900%, due 05/01/07........ 2,600,000 2,672,805 Den Danske Bank 144-A 7.400%, due 06/15/10............. 2,050,000 2,065,640 DR Investments 144-A 7.450%, due 05/15/07.............. 320,000 323,218 Empresa Nacional Electric 7.875%, due 02/01/27......... 316,000 318,691 Hanson PLC Notes 6.750%, due 09/15/05.................. 290,000 282,680 International Telecom Satellite 8.125%, due 02/28/05... 335,000 354,934 Japanese Development Bank 8.375%, due 02/15/01......... 970,000 1,022,854 LKB Baden-Wuerttemberg Finance 8.125%, due 01/27/00.... 350,000 362,913 Pan Pacific Industry 144-A 0.000%, due 04/28/07........ 2,130,000 938,789 Petroliam Nasional 7.125%, due 08/15/05................ 420,000 419,825 Province of Quebec 7.500%, due 07/15/23................ 175,000 172,144 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.......................................... 1,910,000 1,996,897 Repsol International Finance 7.000%, due 08/01/05...... 735,000 737,634 Republic of Italy 6.875%, due 09/27/23................. 150,000 141,102 Republic of South Africa 9.625%, due 12/15/99.......... 1,079,000 1,140,233 Royal Bank of Scotland 7.375%, due 04/29/49............ 690,000 687,669 Skandinaviska Enskilda Banken 144-A 6.625%, due 03/29/49.............................................. 500,000 494,900 Soc Quimica & Minera de Ser 144-A 7.700%, due 09/15/06. 1,500,000 1,526,395 Southern Investments UK 6.800%, due 12/01/06........... 1,625,000 1,587,462 Swedbank FRN 7.773%, due 10/29/49...................... 270,000 274,725 Telstra Corp. Ltd. 6.500%, due 11/28/05................ 350,000 336,639 Usinor Sacilor 7.250%, due 08/01/06.................... 470,000 467,805 ----------- 21,897,982 -----------
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ---------- U.S. GOVERNMENT AGENCIES -- 7.31% Federal Home Loan Mortgage Corp. 7.000%, due 03/15/10................................... $ 885,000 $ 881,316 5.800%, due 08/15/19................................... 2,399,000 2,256,931 7.500%, due 01/15/23................................... 749,116 715,683 7.238%, due 05/01/26................................... 396,144 408,013 Federal Home Loan Mortgage Corp. Gold 8.000%, due 11/01/22................................... 159,672 163,315 8.000%, due 05/01/23................................... 1,672,660 1,710,818 9.000%, due 03/01/24................................... 1,232,440 1,313,128 9.000%, due 04/01/25................................... 1,959,533 2,068,531 9.500%, due 04/01/25................................... 55,514 59,452 Federal National Mortgage Association 5.000%, due 06/01/01................................... 1,534,205 1,465,626 6.500%, due 12/01/03 Balloon TBA....................... 2,520,000 2,486,925 6.220%, due 03/13/06................................... 1,700,000 1,643,732 8.000%, due 02/25/07................................... 1,635,000 1,682,049 6.500%, due 04/25/08................................... 113,544 108,826 6.500%, due 05/25/08................................... 1,040,147 1,022,069 6.500%, due 01/01/11................................... 905,405 886,731 9.000%, due 08/01/21................................... 319,738 339,549 8.000%, due 05/01/22................................... 136,316 139,256 8.500%, due 07/01/22................................... 769,021 809,264 6.500%, due 12/25/23................................... 2,330,000 2,232,546 9.000%, due 01/01/25................................... 1,113,176 1,172,313 9.000%, due 02/01/25................................... 2,066 2,176 6.500%, due 04/01/26................................... 1,606,732 1,536,944 6.500%, due 12/01/26 TBA............................... 6,135,000 5,868,526 7.500%, due 12/01/26 TBA............................... 4,035,000 4,043,837 6.070%, due 08/01/29 TBA............................... 1,430,000 1,413,019 Federal National Mortgage Association Strips 0.000%, due 04/01/27 principal only................................ 3,991,910 2,646,616 Government National Mortgage Association 10.000%, due 09/15/00.................................. 3,695 3,918 10.000%, due 05/15/01.................................. 6,787 7,196 9.000%, due 11/15/04................................... 23,281 24,365 11.000%, due 09/15/15.................................. 221,706 246,233 8.500%, due 05/15/21................................... 56,468 58,638 8.000%, due 08/15/22................................... 557,885 569,914 8.000%, due 11/15/22................................... 467,835 481,314 8.000%, due 12/15/22................................... 1,613,507 1,659,993 7.500%, due 11/15/24................................... 2,628,494 2,646,736 ---------- 44,775,498 ---------- U.S. GOVERNMENT OBLIGATIONS -- 10.83% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................... 172,000 170,925 7.750%, due 11/30/99................................... 215,000 222,458 6.625%, due 07/31/01................................... 9,570,000 9,665,700 6.250%, due 10/31/01................................... 7,910,000 7,875,394 7.000%, due 07/15/06................................... 4,615,000 4,747,681 8.125%, due 05/15/21................................... 1,500,000 1,716,095 6.000%, due 02/15/26................................... 12,628,000 11,298,120
FACE AMOUNT VALUE ---------- ----------- U.S. Treasury Principal Strips 0.000%, due 02/15/03 .................................. $ 225,000 $ 157,441 0.000%, due 05/15/03 .................................. 1,960,000 1,348,539 0.000%, due 08/15/03 .................................. 6,280,000 4,249,550 0.000%, due 11/15/04................................... 28,467,000 17,637,584 0.000%, due 05/15/08 .................................. 15,095,000 7,319,113 ----------- 66,408,600 ----------- Total U.S. Bonds........................................ 163,404,317 ----------- SHARES ---------- HIGH YIELD BONDS -- 2.18% Brinson High Yield Fund (b)............................. 1,016,353 13,327,440 ----------- FACE AMOUNT ---------- NON-U.S. BONDS -- 17.22% AUSTRALIA -- 1.37% Government of Australia 12.000%, due 11/15/01.............................. AUD 4,150,000 3,780,537 9.000%, due 09/15/04................................... 4,020,000 3,374,817 6.750%, due 11/15/06................................... 1,700,000 1,253,590 ----------- 8,408,944 ----------- BELGIUM -- 0.76% Kingdom of Belgium 5.000%, due 03/28/01............................... BEF 65,000,000 1,849,652 8.750%, due 06/25/02................................... 32,000,000 1,047,855 9.000%, due 03/28/03................................... 7,000,000 233,853 8.500%, due 10/01/07................................... 46,000,000 1,545,958 ----------- 4,677,318 ----------- CANADA -- 2.54% Government of Canada 7.500%, due 09/01/00............................... CAD 3,380,000 2,601,958 7.250%, due 06/01/03................................... 4,840,000 3,733,143 8.750%, due 12/01/05................................... 600,000 505,477 7.000%, due 12/01/06................................... 2,570,000 1,954,139 4.250%, due 12/01/21 (d)............................... 6,060,000 4,717,606 9.000%, due 06/01/25................................... 1,510,000 1,377,705 4.250%, due 12/01/26 (d)............................... 1,000,000 733,859 ----------- 15,623,887 ----------- DENMARK -- 1.98% Kingdom of Denmark 9.000%, due 11/15/98............................... DKK 3,200,000 514,600 9.000%, due 11/15/00................................... 14,600,000 2,505,959 8.000%, due 05/15/03................................... 8,700,000 1,485,010 7.000%, due 12/15/04................................... 16,900,000 2,730,986 8.000%, due 03/15/06................................... 19,000,000 3,224,788 7.000%, due 11/10/24................................... 11,300,000 1,685,448 ----------- 12,146,791 -----------
- -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ---------- FRANCE -- 0.72% Government of France (OAT) 9.500%, due 01/25/01... FRF 8,300,000 $1,656,890 7.500%, due 04/25/05................................. 11,300,000 2,192,443 8.500%, due 12/26/12................................. 2,500,000 533,810 ---------- 4,383,143 ---------- GERMANY -- 4.23% Bundesrepublik Deutscheland 7.000%, due 09/20/99............................. DEM 7,000,000 4,300,987 8.500%, due 08/21/00................................. 2,180,000 1,413,385 9.000%, due 01/22/01................................. 5,500,000 3,649,202 8.375%, due 05/21/01................................. 1,580,000 1,037,617 6.750%, due 04/22/03................................. 4,900,000 3,068,616 6.750%, due 07/15/04................................. 6,300,000 3,938,133 6.875%, due 05/12/05................................. 800,000 501,320 6.000%, due 01/05/06................................. 1,350,000 798,720 6.250%, due 04/26/06................................. 2,500,000 1,501,635 6.250%, due 01/04/24................................. 2,900,000 1,619,081 Treuhandanstalt 7.750%, due 10/01/02................................. 4,500,000 2,934,839 6.250%, due 03/04/04................................. 1,900,000 1,157,707 ---------- 25,921,242 ---------- ITALY -- 1.67% Republic of Italy (BTP) 9.500%, due 12/01/97............................. ITL 900,000,000 531,590 9.500%, due 12/01/99................................. 3,900,000,000 2,449,104 10.500%, due 04/01/00................................ 995,000,000 645,478 12.000%, due 09/01/02................................ 1,700,000,000 1,233,911 9.000%, due 10/01/03................................. 5,100,000,000 3,349,844 8.500%, due 04/01/04................................. 3,100,000,000 1,996,280 ---------- 10,206,207 ---------- NETHERLANDS -- 1.11% Government of Netherlands 6.250%, due 07/15/98............................. NLG 1,400,000 734,834 8.500%, due 03/15/01................................. 2,100,000 1,221,865 8.750%, due 09/15/01................................. 700,000 415,184 6.500%, due 04/15/03................................. 200,000 110,141 7.250%, due 10/01/04................................. 2,400,000 1,371,306 8.250%, due 02/15/07................................. 4,815,000 2,937,954 ---------- 6,791,284 ---------- SPAIN -- 0.43% Kingdom of Spain 6.750%, due 04/15/00............................. ESP 145,000,000 1,026,890 7.900%, due 02/28/02................................. 100,000,000 744,815 10.000%, due 02/28/05................................ 100,000,000 839,443 ---------- 2,611,148 ---------- SWEDEN -- 0.55% Kingdom of Sweden 10.250%, due 05/05/03............................ SEK 12,300,000 1,919,350 6.000%, due 02/09/05................................. 11,500,000 1,456,819 ---------- 3,376,169 ---------- UNITED KINGDOM -- 1.86% UK Treasury 8.000%, due 06/10/03............................ GBP 2,490,000 $ 4,318,960 8.500%, due 12/07/05................................ 2,570,000 4,656,882 8.500%, due 07/16/07................................ 1,200,000 2,191,271 8.750%, due 08/25/17................................ 130,000 252,533 ------------ 11,419,646 ------------ Total Non-U.S. Bonds................................. 105,565,779 ------------ EMERGING MARKETS DEBT -- 3.32% SHARES ----------- Brinson Emerging Markets Debt Fund (b)............................................ 1,066,734 20,369,079 ------------ Total Bonds (Cost $296,423,259)...................... 302,666,615 ------------ Short-Term Investments -- 4.37% U.S. GOVERNMENT FACE AMOUNT OBLIGATIONS -- 0.25% ----------- U.S. Treasury Bill 5.360%, due 11/13/97.............. $ 1,550,000 1,520,065 ------------ COMMERCIAL PAPER -- 4.12% American Stores Co. 5.830%, due 07/23/97............. 1,000,000 996,437 Crown Cork & Seal Co. 5.800%, due 07/09/97................................ 1,500,000 1,498,067 5.770%, due 07/15/97................................ 1,800,000 1,795,961 CSX Corp. 5.800%, due 07/22/97....................... 2,000,000 1,993,233 Enron Oil & Gas 6.520%, due 07/01/97................. 6,467,000 6,467,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................ 1,500,000 1,497,592 5.850%, due 08/11/97................................ 3,000,000 2,980,012 Norfolk Southern Corp. 5.770%, due 07/10/97................................ 1,064,000 1,062,465 5.780%, due 07/18/97................................ 1,500,000 1,495,906 Occidental Petroleum 5.800%, due 08/13/97............ 1,750,000 1,737,876 Sundstrand Corp. 5.800%, due 07/09/97................ 1,000,000 998,711 Tenneco, Inc. 5.780%, due 07/17/97................................ 1,750,000 1,745,504 5.800%, due 07/23/97................................ 1,000,000 996,456 ------------ 25,265,220 ------------ Total Short-Term Investments (Cost $26,784,066).................................. 26,785,285 ------------ Total Investments (Cost $553,118,111) -- 100.58% (a).................. 616,500,754 ------------ Liabilities, less cash and other assets-- (0.58%).... (3,529,952) ------------ Net Assets -- 100%................................... $612,970,802 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 16 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $553,326,762; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $75,361,347 Gross unrealized depreciation................................ (12,187,355) ----------- Net unrealized appreciation............................... $63,173,992 ===========
(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 June 30, 1997. MTN: Medium term note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144-A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $13,744,593 or 2.24% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Fund had the following open forward foreign currency contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE LOCAL CURRENCY VALUE GAIN/(LOSS) ---------- -------------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Belgian Franc............... 08/05/97 90,000,000 $ 2,509,676 $ (58,084) British Pound............... 08/05/97 7,800,000 12,967,150 348,700 Canadian Dollar............. 08/05/97 1,400,000 1,017,094 (30,810) Danish Kroner............... 08/05/97 4,400,000 665,009 (25,957) Dutch Guilder............... 08/05/97 28,900,000 14,788,206 (632,819) French Franc................ 08/05/97 132,000,000 22,537,866 (836,060) German Mark................. 08/05/97 25,900,000 14,902,615 (669,163) Italian Lira................ 08/05/97 11,500,000,000 6,751,065 (130,539) Japanese Yen................ 08/05/97 3,680,000,000 32,331,212 1,874,554 Swiss Franc................. 08/05/97 10,800,000 7,440,527 (114,033) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar........... 08/05/97 18,500,000 13,865,052 544,409 Belgian Franc............... 08/05/97 250,000,000 6,971,323 480,242 British Pound............... 08/05/97 20,300,000 33,747,839 (1,135,639) Canadian Dollar............. 08/05/97 16,500,000 11,987,185 349,975 Danish Kroner............... 08/05/97 71,000,000 10,730,830 693,696 Dutch Guilder............... 08/05/97 38,000,000 19,444,700 1,376,647 French Franc................ 08/05/97 132,000,000 22,537,866 1,463,443 German Mark................. 08/05/97 57,800,000 33,257,574 2,231,938 Italian Lira................ 08/05/97 20,150,000,000 11,829,040 329,829 Swiss Franc................. 08/05/97 2,200,000 1,515,663 57,563 ---------- Total...................... $6,117,892 ==========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of June 30, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) -------------- ----------- ----------- ----------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 60 contracts.............. September 1997 $ 6,301,388 $ 6,353,438 $ 52,050 10 year U.S. Treasury Notes, 157 contracts...... September 1997 16,795,490 16,936,375 140,885 30 year U.S. Treasury Bonds, 72 contracts....... September 1997 7,847,977 7,996,500 148,523 INDEX FUTURES SALE CON- TRACTS Standard & Poor's 500, 65 contracts................. September 1997 28,298,725 28,933,125 (634,400) --------- Total..................... $(292,942) =========
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $1,520,065. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $506,645,477)....................... $558,957,884 Affiliated issuers (Cost $46,472,634).......................... 57,542,870 Cash........................................................... 1,054,556 Foreign currency, at value (Cost $1,121,492).................... 1,135,377 Receivables: Investment securities sold..................................... 8,894,189 Dividends...................................................... 1,213,182 Interest....................................................... 5,013,738 Fund shares sold............................................... 129,728 Variation margin (Note 5)...................................... 106,656 Net unrealized appreciation on forward foreign currency con- tracts......................................................... 6,117,892 Other assets.................................................... 16,660 ------------ TOTAL ASSETS................................................. 640,182,732 ------------ LIABILITIES: Payables: Investment securities purchased................................ 24,097,873 Fund shares redeemed........................................... 2,558,669 Investment advisory fees (Note 2).............................. 371,662 Accrued expenses............................................... 183,726 ------------ TOTAL LIABILITIES............................................ 27,211,930 ------------ NET ASSETS....................................................... $612,970,802 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)........................................ $514,920,224 Accumulated distribution in excess of net investment income..... (964,704) Accumulated net realized gain................................... 29,814,069 Net unrealized appreciation..................................... 69,201,213 ------------ NET ASSETS................................................... $612,970,802 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $586,667,003 and 44,671,292 shares is- sued and outstanding) (Note 7)................................ $ 13.13 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 76 shares issued and outstanding) (Note 7)......... $ 13.13 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $26,302,799 and 2,015,597 shares is- sued and outstanding) (Note 7)................................ $ 13.05 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Interest (net of $8,019 for foreign taxes withheld).............. $16,746,503 Dividends (net of $386,201 for foreign taxes withheld)........... 4,910,912 ----------- TOTAL INCOME.................................................. 21,657,415 ----------- EXPENSES: Advisory (Note 2)................................................ 4,294,925 Administration................................................... 340,936 Custodian........................................................ 135,269 Distribution (Note 6)............................................ 122,983 Other............................................................ 568,542 ----------- TOTAL EXPENSES................................................ 5,462,655 ----------- NET INVESTMENT INCOME ........................................ 16,194,760 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 39,756,574 Futures contracts............................................... (4,286,707) Foreign currency transactions................................... 7,798,176 ----------- Net realized gain............................................. 43,268,043 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 29,265,335 Futures contracts............................................... (366,385) Forward contracts............................................... 6,780,244 Translation of other assets and liabilities denominated in for- eign currency.................................................. 77,694 ----------- Change in net unrealized appreciation or depreciation......... 35,756,888 ----------- Net realized and unrealized gain................................. 79,024,931 ----------- Net increase in net assets resulting from operations............. $95,219,691 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1997 JUNE 30, 1996 ------------- ------------- OPERATIONS: Net investment income........................... $ 16,194,760 $ 15,718,942 Net realized gain............................... 43,268,043 33,576,934 Change in net unrealized appreciation or depre- ciation........................................ 35,756,888 13,188,606 ------------- ------------- Net increase in net assets resulting from opera- tions.......................................... 95,219,691 62,484,482 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income........ (24,660,333) (20,214,114) Distributions in excess of net investment in- come........................................... -- (1,430,745) Distributions from net realized gain............ (26,428,094) (10,937,826) ------------- ------------- Total distributions to shareholders*............ (51,088,427) (32,582,685) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................... 192,297,100 109,483,562 Shares issued on reinvestment of distributions.. 49,580,585 31,162,315 Shares redeemed................................. (145,001,283) (64,262,463) ------------- ------------- Net increase in net assets resulting from capi- tal share transactions (Note 7)................ 96,876,402 76,383,414 ------------- ------------- TOTAL INCREASE IN NET ASSETS................. 141,007,666 106,285,211 ------------- ------------- NET ASSETS: Beginning of year............................... 471,963,136 365,677,925 ------------- ------------- End of year (including accumulated undistributed net investment income of ($964,704) and $9,848,069, respectively)....... $ 612,970,802 $471,963,136 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net invest- ment income: Brinson Class I................................. $ (23,918,105) $ (21,444,413) SwissKey Class.................................. (742,228) (200,446) Distributions from net realized gain: Brinson Class I................................. (25,579,684) (10,892,522) SwissKey Class.................................. (848,410) (45,304) ------------- ------------- Total distributions to shareholders............. $ (51,088,427) $ (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.
YEAR ENDED JUNE 30, AUGUST 31, 1992* -------------------------------------- THROUGH BRINSON CLASS I 1997 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. 0.38 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... 1.79 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- -------- Total income from investment operations......... 2.17 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................. $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== ======== Total return (non- annualized)............ 18.79% 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $586,667 $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.99% 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............ 3.03% 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.................. 150% 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0326 $ 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.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 12.18 $ 11.60 ------- ------- Income from investment operations: Net investment income........................... 0.34 0.39 Net realized and unrealized gain................ 1.75 1.10 ------- ------- Total income from investment operations....... 2.09 1.49 ------- ------- Less distributions: Distributions from and in excess of net invest- ment 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.................... $ 13.05 $ 12.18 ======= ======= Total return (non-annualized)..................... 18.13% 13.24% Ratios/Supplemental data: Net assets, end of period (in 000s).............. $26,303 $14,030 Ratio of expenses to average net assets.......... 1.64% 1.69%** Ratio of net investment income to average net as- sets............................................ 2.38% 3.04%** Portfolio turnover rate.......................... 150% 142% Average commission rate paid per share........... $0.0326 $0.0291
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 Global Equity Fund - -------------------------------------------------------------------------------- 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 20.74% since July 31, 1995, compared to the 18.70% return of its benchmark, the MSCI World Equity (Free) Index. For the year ended June 30, 1997, the Fund returned 20.34%, while the benchmark returned 22.64%. For the first half of 1997, the SwissKey Global Equity Fund returned 12.23%, lagging the index's unhedged return of 15.51%. Most major global equity markets have experienced extraordinarily strong performance year-to-date, led by stellar results in Switzerland (45%), the Netherlands (38%) and Spain (36%). The U.S. market responded vigorously to positive corporate earnings surprises, rising 21%. While very good, this return did not make the U.S. a standout performer. Nonetheless, the U.S. market's continued strength has extended its fundamental overvaluation, leading to a decision to increase the scale of the underweight from -10% to -15%. Japan's comparatively low 10.34% hedged return made it a relative underperformer. Due to this underperformance and subsequently improved attractiveness, the Japan underweight was reduced from -10% to-2.5%, in two stages. Given the extreme overvaluations of many equity markets, the cash allocation within the Global Equity Fund was increased from 15% to 20% earlier in the year. In the first half of the year, this risk hedge and the Switzerland underweight detracted from Fund performance. The Fund's defensive U.S. dollar overweight, underweight of the Japanese yen and the core European currencies contributed strongly to Fund performance. As these currencies returned to fair value, the underweight positions in the yen and European currencies were gradually removed. At the current time, the Fund is largely currency neutral. Stock selection detracted from returns due to negative U.S. stock selection. Stock selection in Japan had a significant beneficial impact on performance. - -------------------------------------------------------------------------------- 23 Global Equity Fund - -------------------------------------------------------------------------------- Total Return 6 months 1 year 7/31/95* ended ended to 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- SwissKey Global Equity Fund 12.23% 20.34% 20.74% MSCI World Equity (Free) Index 15.51 22.64 18.70 - -------------------------------------------------------------------------------- * Inception date of the SwissKey Global Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $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 June 30, 1997. 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 [GRAPH APPEARS HERE] $14,351 ====== SwissKey Global Equity Fund $13,889 ------ MSCI World Equity (Free) Index SwissKey MSCI World Equity Global Equity Fund (Free) Index - -------------------------------------------------------------------------------- 7/31/95 $10,000.00 $10,000.00 9/30/95 $10,329.00 $10,066.00 12/31/95 $10,993.00 $10,556.00 3/31/96 $11,539.00 $10,998.00 6/30/96 $11,925.00 $11,325.00 9/30/96 $12,110.00 $11,488.00 12/31/96 $12,787.00 $12,025.00 3/31/97 $13,011.00 $12,064.00 6/30/97 $14,351.00 $13,889.00
7/31/95 = $10,000 Data through 6/30/97 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. - -------------------------------------------------------------------------------- 24 Global Equity Fund - -------------------------------------------------------------------------------- Market Allocation As of June 30, 1997
Current Benchmark Strategy - --------------------------------------------------- U.S. 45.5% 30.4% Japan 17.3 14.8 Australia 1.4 2.5 Belgium 0.6 1.6 Canada 2.5 1.5 France 3.5 2.3 Germany 4.4 4.5 Hong Kong 2.0 0.8 Italy 1.6 1.7 Malaysia 1.1 1.5 Netherlands 2.6 2.9 New Zealand 0.2 1.7 Spain 1.2 1.1 Sweden 1.3 0.0 Switzerland 3.4 1.3 U.K. 9.4 9.8 Other Markets 2.0 1.6 Cash Reserves 0.0 20.0 - --------------------------------------------------- 100.0% 100.0%
Currency Allocation As of June 30, 1997
Current Benchmark Strategy - --------------------------------------------------- U.S. 45.5% 49.9% Japan 17.3 17.3 Australia 1.4 1.4 Belgium 0.6 0.6 Canada 2.5 2.5 France 3.5 3.5 Germany 4.4 4.4 Hong Kong 2.0 0.0 Italy 1.6 1.6 Malaysia 1.1 1.1 Netherlands 2.6 2.6 New Zealand 0.2 1.7 Spain 1.2 1.2 Sweden 1.3 1.3 Switzerland 3.4 3.4 U.K. 9.4 5.4 Other Markets 2.0 2.1 - --------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of June 30, 1997
Percent of Net Assets - ---------------------------------------------- 1. Xerox Corp. 2.22% 2. Chase Manhattan Corp. 1.89 3. Lockheed Martin Corp. 1.77 4. Philip Morris Companies, Inc. 1.75 5. Aon Corp. 1.45 6. CIGNA Corp. 1.44 7. Burlington Northern Santa Fe 1.31 8. Goodyear Tire & Rubber Co. 1.30 9. Federal Express Corp. 1.20 10. Citicorp 1.19 - ----------------------------------------------
Top Ten Non-U.S. Equity Holdings As of June 30, 1997
Percent of Net Assets - -------------------------------------------------- 1. Royal Dutch Petroleum Co. 0.74% 2. Glaxo Wellcome PLC 0.67 3. Telecom Corp of New Zealand Ltd. 0.64 4. Matsushita Electric Industrial Co. 0.63 5. Toray Industries, Inc. 0.60 6. General Electric Co. PLC 0.58 7. British Telecommunications PLC 0.53 8. British Petroleum Co. PLC 0.53 9. Lloyds TSB Group PLC 0.51 10. Sankyo Co. Ltd. 0.49 - --------------------------------------------------
- -------------------------------------------------------------------------------- 25 Global Equity Fund - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of June 30, 1997 - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals................................................. 0.95% Housing/Paper............................................. 1.96 Metals.................................................... 0.26 ------ 3.17 Capital Investments Capital Goods............................................. 3.23 Technology................................................ 4.35 ------ 7.58 Consumer Autos/Durables............................................ 1.36 Discretionary............................................. 2.02 Health: Drugs............................................. 3.16 Health: Non-Drugs......................................... 1.56 Non-Durables.............................................. 4.33 Retail/Apparel............................................ 1.89 ------ 14.32 Energy...................................................... 1.85 Financial Banks..................................................... 3.20 Non-Banks................................................. 3.35 ------ 6.55 Transportation.............................................. 2.45 Utilities................................................... 2.68 Services/Miscellaneous...................................... 3.54 ------ Total U.S. Equities...................................... 42.14* ------ NON-U.S. EQUITIES Aerospace & Military........................................ 0.07% Airlines.................................................... 0.28 Appliances & Household Durables............................. 1.29 Automobiles................................................. 1.35 Banking..................................................... 5.87 Beverages & Tobacco......................................... 0.92 Broadcasting & Publishing................................... 0.76 Building Materials.......................................... 0.92 Business & Public Service................................... 2.06 Chemicals................................................... 2.14 Construction................................................ 0.88 Data Processing............................................. 0.62 Electric Components......................................... 0.80 Electronics................................................. 2.09 Energy...................................................... 3.54 Financial Services.......................................... 0.70 Food & House Products....................................... 1.88 Forest Products............................................. 0.96 Gold Mining................................................. 0.03 Health & Personal Care...................................... 2.92 Industrial Components....................................... 1.06 Insurance................................................... 2.40 Leisure & Tourism........................................... 0.30 Machinery & Engineering..................................... 0.58 Merchandising............................................... 2.27 Metals--Steel............................................... 1.02 Miscellaneous Materials..................................... 0.36 Multi-Industry.............................................. 2.37 Non-Ferrous Metal........................................... 1.03 Real Estate................................................. 0.42 Recreation.................................................. 0.44 Shipping.................................................... 0.25 Telecommunications.......................................... 3.04 Textiles & Apparel.......................................... 0.11 Transportation.............................................. 0.50 Utilities................................................... 2.40 Wholesale & International Trade............................. 0.15 ------ Total Non-U.S. Equities.................................. 48.78 ------ SHORT-TERM INVESTMENTS...................................... 8.38* ------ TOTAL INVESTMENTS........................................ 99.30 CASH AND OTHER ASSETS, LESS LIABILITIES..................... 0.70 ------ NET ASSETS............................................... 100.00% ======
- -------------------------------------------------------------------------------- * The Fund held a short position in stock index futures on June 30, 1997 which reduced U.S. equity exposure from 42.14% to 28.35%. This adjustment results in an increase in the Fund's exposure to Short-Term Investments from 8.38% to 22.17%. ================================================================================ 26 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE -------- ----------- Equities -- 90.92% U.S. EQUITIES -- 42.14% Aetna Life & Casualty Co................................... 6,000 $ 614,250 Allergan, Inc.............................................. 15,700 499,456 Alza Corp. (b)............................................. 15,300 443,700 Aon Corp................................................... 30,750 1,591,312 Automatic Data Processing, Inc............................. 15,000 705,000 Beckman Instruments, Inc................................... 4,500 217,125 Birmingham Steel Corp...................................... 6,100 94,550 Boston Technology, Inc. (b)................................ 5,800 171,463 Browning-Ferris Industries, Inc............................ 11,600 385,700 Burlington Northern Santa Fe............................... 16,000 1,438,000 Centerior Energy Co........................................ 14,900 166,694 Champion Enterprises, Inc. (b)............................. 7,200 108,000 Champion International Corp................................ 400 22,100 Chase Manhattan Corp....................................... 21,400 2,077,137 CIGNA Corp................................................. 8,900 1,579,750 Circuit City Stores, Inc................................... 22,600 803,712 Citicorp................................................... 10,800 1,302,075 CMS Energy Corp............................................ 16,700 588,675 Coca-Cola Enterprises, Inc................................. 12,300 282,900 Comerica, Inc.............................................. 4,200 285,600 Comverse Technology, Inc. (b).............................. 2,800 145,600 Corning, Inc............................................... 19,600 1,090,250 Covance, Inc............................................... 7,700 148,706 CPC International, Inc..................................... 6,700 618,494 CVS Corp................................................... 9,700 497,125 Dial Corp.................................................. 9,200 143,750 Eastman Chemical Co........................................ 10,400 660,400 EMC Corp./Mass. (b)........................................ 29,100 1,134,900 Enron Corp................................................. 29,400 1,199,887 Entergy Corp............................................... 1,800 49,275 Federal Express Corp. (b).................................. 22,800 1,316,700 Federated Department Stores (b)............................ 8,800 305,800 FileNet Corp. (b).......................................... 3,000 43,500 First American Corp.-Tenn.................................. 4,000 153,500 First Bank System, Inc..................................... 2,400 204,900 First Data Corp............................................ 25,404 1,116,188 First of America Bank Corp................................. 3,000 137,250 First Security Corp........................................ 5,100 139,294 Fleetwood Enterprises, Inc................................. 2,300 68,569 Food Lion, Inc. Class A.................................... 28,100 201,091 Forest Laboratories, Inc. (b).............................. 7,000 290,062 Gannett Co., Inc........................................... 10,300 1,017,125 General Instrument Corp. (b)............................... 34,900 872,500 Genzyme Corp. (b).......................................... 6,200 172,050 Geon Co.................................................... 4,200 85,050 Goodyear Tire & Rubber Co.................................. 22,600 1,430,862 Harnischfeger Industries, Inc.............................. 10,200 423,300 Health Care and Retirement Corp. (b)....................... 11,050 368,794 Hibernia Corp. Class A..................................... 8,500 118,469 Informix Corp. (b)......................................... 8,200 73,800 Interpublic Group of Companies, Inc........................ 6,700 410,794 James River Corp. of Virginia.............................. 12,100 447,700 Kroger Co. (b)............................................. 8,400 243,600 Lockheed Martin Corp....................................... 18,751 1,941,900 Lyondell Petrochemical Co.................................. 16,700 364,269
SHARES VALUE -------- ----------- Manor Care, Inc............................................ 13,600 $ 443,700 Martin Marietta Materials, Inc............................. 4,535 146,821 Masco Corp................................................. 17,900 747,325 Mattel, Inc................................................ 22,450 760,494 Nabisco Holdings Corp. Class A............................. 15,600 622,050 National Service Industries Inc............................ 3,000 146,063 Nextel Communications, Inc. Class A (b).................... 23,300 441,244 Octel Communications Corp. (b)............................. 4,500 105,469 Old Republic International Corp............................ 5,550 168,234 Peco Energy Co............................................. 38,100 800,100 Pentair, Inc............................................... 8,100 266,288 Pharmacia & Upjohn, Inc.................................... 19,500 677,625 Philip Morris Companies, Inc............................... 43,200 1,917,000 Raytheon Co................................................ 5,300 270,300 Regions Financial Corp..................................... 4,000 126,500 Reynolds & Reynolds Co. Class A............................ 5,500 86,625 Schering Plough Corp....................................... 26,800 1,283,050 Seagate Technology, Inc. (b)............................... 7,100 249,831 Timken Co.................................................. 10,600 376,963 Trinity Industries, Inc.................................... 2,600 82,550 Tyson Foods, Inc. Class A.................................. 31,100 594,787 UCAR International, Inc. (b)............................... 400 18,300 Ultramar Diamond Shamrock Corp............................. 17,452 569,371 US Bancorp................................................. 9,300 596,362 Vencor, Inc. (b)........................................... 8,000 338,000 Viad Corp.................................................. 15,000 288,750 Westvaco Corp.............................................. 3,650 114,747 Witco Corp................................................. 1,000 37,938 Xerox Corp................................................. 30,900 2,437,237 York International Corp.................................... 9,500 437,000 360 Communications Co. (b)................................. 4,533 77,628 ----------- Total U.S. Equities........................................ 46,241,005 ----------- NON-U.S. EQUITIES -- 48.78% AUSTRALIA -- 2.49% Amcor Ltd.................................................. 16,100 106,146 Boral Ltd.................................................. 28,800 89,976 Brambles Industries Ltd.................................... 4,000 78,489 Broken Hill Proprietary Co. Ltd............................ 34,450 502,854 Coca-Cola Amatil Ltd....................................... 7,000 90,204 CSR Ltd.................................................... 20,000 76,868 David Jones Ltd............................................ 71,000 98,407 Lend Lease Corp. Ltd....................................... 4,197 88,043 M.I.M. Holdings Ltd........................................ 51,829 76,107 National Australia Bank Ltd................................ 24,475 347,846 News Corp. Ltd............................................. 50,536 240,421 News Corp. Ltd. Preferred.................................. 13,000 50,841 Pacific Dunlop Ltd......................................... 33,600 98,678 Qantas Airways Ltd......................................... 35,664 82,830 Rio Tinto Ltd.............................................. 13,563 229,444 Santos Ltd................................................. 8,000 33,384 Westpac Banking Corp. Ltd.................................. 41,945 250,458 WMC Ltd.................................................... 21,700 135,751 Woolworth's Ltd............................................ 16,000 52,144 ----------- 2,728,891 -----------
- -------------------------------------------------------------------------------- 27 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------ ---------- BELGIUM -- 1.59% Delhaize-Le Lion S.A.......................................... 2,200 $ 115,661 Electrabel S.A................................................ 1,150 246,634 Fortis AG..................................................... 88 20 Fortis AG Strip (b)........................................... 1,168 241,397 General de Banque S.A......................................... 300 115,577 Groupe Bruxelles Lambert S.A.................................. 730 122,445 Kredietbank NV................................................ 465 187,552 Kredietbank VVPR.............................................. 11 4,345 Petrofina S.A................................................. 610 231,189 Societe Generale de Belgique.................................. 1,140 106,548 Solvay S.A. Class A........................................... 215 126,787 Tractebel..................................................... 300 125,174 Tractebel Warrants "99" (b)................................... 200 2,147 Union Miniere Group S.A. (b).................................. 1,302 122,051 ---------- 1,747,527 ---------- CANADA -- 1.36% Alcan Aluminium Ltd........................................... 2,900 99,007 Bank of Montreal.............................................. 2,700 105,487 Barrick Gold Corp............................................. 1,600 34,851 BCE, Inc...................................................... 3,200 89,069 Canadian National Railway Co.................................. 2,000 87,272 Canadian Pacific Ltd.......................................... 6,700 190,860 Hudson's Bay Co............................................... 3,400 76,399 Imperial Oil Ltd.............................................. 2,400 123,079 MacMillan Bloedel Ltd......................................... 4,100 56,317 Moore Corp. Ltd............................................... 2,200 43,375 Noranda, Inc.................................................. 2,600 56,067 Northern Telecom Ltd.......................................... 1,000 90,207 NOVA Corp..................................................... 4,300 36,779 Royal Bank of Canada.......................................... 3,000 136,018 Seagram Co. Ltd............................................... 2,600 104,595 Thomson Corp.................................................. 3,900 89,896 TransCanada Pipelines Ltd..................................... 3,400 68,389 ---------- 1,487,667 ---------- FINLAND -- 0.32% Merita Ltd. Class A........................................... 11,700 38,968 Nokia Ab Class A.............................................. 2,300 171,763 Outokumpu Class A............................................. 2,000 39,660 Pohjola Insurance Group Class B............................... 500 14,824 Sampo Insurance Co. Ltd. Class A.............................. 200 19,445 The Rauma Group............................................... 83 1,901 UPM-Kymmene Corp.............................................. 3,000 69,308 ---------- 355,869 ---------- FRANCE -- 3.29% Accor S.A..................................................... 977 146,442 Alcatel Alsthom............................................... 1,261 158,082 AXA UAP....................................................... 2,722 169,458 AXA UAP Rights (b)............................................ 1,722 6,687 Banque Nationale de Paris..................................... 4,780 197,192 Cie Bancaire S.A.............................................. 1,003 128,130 Cie de Saint Gobain........................................... 1,357 198,084
SHARES VALUE ------ ---------- Cie de Suez................................................... 24,340 $ 59,907 Cie Generale des Eaux......................................... 971 124,539 Cie Generale des Eaux Warrants "01" (b)....................... 1,771 1,062 Colas......................................................... 330 43,561 Dexia France.................................................. 1,403 136,692 Elf Aquitaine S.A............................................. 2,150 232,175 Groupe Danone................................................. 900 148,850 Lafarge S.A................................................... 1,500 93,382 Lagardere S.C.A............................................... 3,000 87,225 LVMH.......................................................... 530 142,633 Michelin Class B.............................................. 2,934 176,360 Pechiney S.A. Class A......................................... 3,013 118,806 Peugeot S.A................................................... 1,790 173,177 Rhone-Poulenc Class A......................................... 3,800 155,340 SEITA......................................................... 3,200 101,380 Societe Generale.............................................. 1,571 175,537 Suez Lyonnaise des Eaux S.A................................... 1,500 151,252 Thomson CSF................................................... 3,100 79,942 Total S.A. Class B............................................ 1,759 177,967 Usinor Sacilor................................................ 12,400 223,880 ---------- 3,607,742 ---------- GERMANY -- 4.80% Allianz AG Holding............................................ 2,150 459,586 BASF AG....................................................... 5,800 214,180 Bayer AG...................................................... 7,950 306,576 Bayerische Motoren Werke AG................................... 280 231,057 Commerzbank AG................................................ 6,050 172,897 Daimler-Benz AG............................................... 3,200 260,576 Deutsche Bank AG.............................................. 6,150 361,391 Deutsche Telekom AG........................................... 15,300 376,222 Henkel KGaA-Vorzug AG......................................... 2,550 143,699 Hochtief AG................................................... 1,750 78,331 Hoechst AG.................................................... 2,600 110,260 M.A.N. AG..................................................... 420 130,873 Mannesmann AG................................................. 530 236,928 Metro AG...................................................... 1,870 203,891 Muenchener Rueckver AG........................................ 112 317,503 Muenchener Rueckver AG Warrants "98" (b)...................... 3 1,076 Preussag AG................................................... 660 194,296 RWE AG........................................................ 4,700 202,284 Schering AG................................................... 2,550 273,350 Siemens AG.................................................... 2,600 155,842 Thyssen AG.................................................... 950 228,696 Veba AG....................................................... 5,350 302,407 Volkswagen AG................................................. 400 303,455 ---------- 5,265,376 ---------- HONG KONG -- 0.59% Cheung Kong Holdings Ltd...................................... 6,000 59,247 China Light & Power Co. Ltd................................... 11,000 62,331 Guoco Group Ltd............................................... 9,000 47,397 Hang Seng Bank Ltd............................................ 5,800 82,726 Hong Kong Telecommunications Ltd.............................. 16,000 38,207
- -------------------------------------------------------------------------------- 28 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- HONG KONG (CONTINUED) Hutchison Whampoa Ltd....................................... 14,000 $ 121,074 Jardine Matheson Holdings ADR (c)........................... 3,600 25,560 New World Development Co. Ltd............................... 9,000 53,670 Sun Hung Kai Properties Ltd................................. 5,000 60,182 Swire Pacific Ltd. Class A.................................. 7,000 63,022 Wharf (Holdings) Ltd........................................ 8,000 34,696 ----------- 648,112 ----------- ITALY -- 1.66% Assicurazioni Generali...................................... 9,540 173,251 Banca Commerciale Italiana.................................. 26,000 53,788 Credito Italiano Spa........................................ 67,000 122,463 Danieli & Co. Savings (Risp)................................ 13,400 46,859 Edison Spa.................................................. 8,000 39,753 ENI ADR (c)................................................. 2,300 130,812 ENI Spa..................................................... 33,000 186,674 Fiat Spa-Priv............................................... 73,000 134,716 INA-Istituto Nazionale delle Assicurazioni.................. 33,000 50,232 Istituto Mobilaire Italiano Spa............................. 10,500 94,417 Italgas Spa................................................. 16,000 51,719 La Rinascente Spa........................................... 8,000 44,408 La Rinascente Spa Rights (b)................................ 23,000 1,027 La Rinascente Spa RNC....................................... 15,000 36,453 La Rinascente Spa RNC Rights (b)............................ 23,000 3,744 La Rinascente Spa Warrants "99" (b)......................... 550 272 Mediobanca Spa.............................................. 2,800 16,983 Montedison Spa (b).......................................... 175,560 115,767 SAI-Savings (Risp).......................................... 13,000 40,035 Telecom Italia Mobile Spa................................... 28,000 90,508 Telecom Italia Mobile Spa RNC............................... 79,000 141,146 Telecom Italia Spa.......................................... 20,000 59,830 Telecom Italia Spa RNC...................................... 96,000 189,856 ----------- 1,824,713 ----------- JAPAN -- 13.53% Amada Co. Ltd............................................... 25,000 220,659 Asahi Glass Co. Ltd......................................... 27,000 268,985 Bank of Tokyo-Mitsubishi, Ltd............................... 25,000 502,491 Canon, Inc.................................................. 18,000 490,780 Canon Sales Co., Inc........................................ 7,600 177,331 Citizen Watch Co. Ltd....................................... 23,000 177,681 Dai Nippon Printing Co. Ltd................................. 21,000 475,312 Daiichi Pharmaceutical Co. Ltd.............................. 16,000 282,443 Daikin Industries Ltd....................................... 23,000 209,036 Daiwa House Industry Co. Ltd................................ 11,000 134,580 Fanuc....................................................... 8,900 342,218 Fujitsu..................................................... 14,000 194,529 Hitachi Ltd................................................. 44,000 492,179 Honda Motor Co.............................................. 6,000 180,897 Inax........................................................ 24,000 179,953 Isetan...................................................... 9,000 111,684 Ito Yokado Co. Ltd.......................................... 9,000 523,027 Kaneka Corp................................................. 21,000 131,766 Keio Teito Electric Railway................................. 28,000 133,357 Kinki Nippon Railway........................................ 27,000 165,166
SHARES VALUE ------- ----------- Kirin Brewery Co. Ltd........................................ 26,000 $ 270,384 Kokuyo....................................................... 7,000 189,636 Kuraray Co. Ltd.............................................. 28,000 278,948 Kyocera Corp................................................. 3,000 238,574 Maeda Road Construction...................................... 5,000 43,039 Marui Co. Ltd................................................ 12,000 223,368 Matsushita Electric Industrial Co............................ 34,000 686,358 Mitsubishi Paper Mills....................................... 27,000 105,707 NGK Insulators............................................... 37,000 407,411 Nintendo Corp. Ltd........................................... 1,900 159,399 Nippon Denso Co. Ltd......................................... 11,000 263,392 Nippon Meat Packers, Inc..................................... 15,000 194,005 Nippon Steel Co.............................................. 19,000 60,771 Okumura...................................................... 25,000 132,614 Osaka Gas Co................................................. 48,000 138,006 Sankyo Co. Ltd............................................... 16,000 538,320 Sanwa Bank Ltd............................................... 11,000 163,419 Secom........................................................ 5,000 367,474 Seino Transportation......................................... 15,000 162,545 Sekisui House Ltd............................................ 44,000 446,037 Shinmaywa Industries Ltd..................................... 14,000 98,733 Sony Corp.................................................... 5,000 436,511 Sumitomo Bank................................................ 24,000 394,302 Sumitomo Electric Industries................................. 19,000 318,797 Sumitomo Trust & Banking..................................... 14,000 150,485 Takeda Chemical Industries................................... 14,000 393,953 TDK Corp..................................................... 4,000 293,979 Tokio Marine & Fire Insurance Co............................. 21,000 275,277 Tokyo Electric Power......................................... 6,300 132,684 Tokyo Steel Mfg.............................................. 16,500 184,567 Tonen Corp................................................... 17,000 205,016 Toray Industries, Inc........................................ 92,000 656,856 Toshiba Corp................................................. 53,000 341,353 Toyo Suisan Kaisha........................................... 11,000 112,470 Toyota Motor Corp............................................ 6,000 177,226 Yamazaki Baking Co. Ltd...................................... 12,000 211,833 ----------- 14,847,523 ----------- MALAYSIA -- 0.85% Hume Industries (Malaysia) Bhd............................... 11,000 50,555 Kuala Lumpur Kepong Bhd...................................... 30,000 74,287 Land & General Holdings Bhd.................................. 24,000 27,575 Malayan Banking Bhd.......................................... 11,600 121,791 Malaysia International Shipping Bhd (Frgn.).................. 10,000 25,951 Nestle (Malaysia) Bhd........................................ 3,000 22,464 New Straits Times Press Bhd.................................. 7,000 41,046 Perusahaan Otomobil Nasional Bhd............................. 5,000 23,376 Public Bank Bhd (Frgn.)...................................... 27,664 43,184 Resorts World Bhd............................................ 14,000 42,155 Rothmans of Pall Mall Bhd.................................... 2,000 19,651 Sime Darby Bhd............................................... 29,000 96,514 Telekom Malaysia Bhd......................................... 18,500 86,490 Tenaga Nasional Bhd.......................................... 29,000 141,323 UMW Holdings Bhd............................................. 6,000 28,288
- -------------------------------------------------------------------------------- 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ---------- MALAYSIA (CONTINUED) United Engineers Ltd......................................... 8,000 $ 57,686 YTL Corp. Bhd................................................ 8,000 24,723 YTL Power International Bhd (b).............................. 800 1,008 ---------- 928,067 ---------- NETHERLANDS -- 3.09% ABN AMRO Holdings NV......................................... 15,119 282,425 Akzo Nobel NV................................................ 400 54,918 DSM NV....................................................... 880 87,717 Elsevier NV.................................................. 11,900 199,214 Heineken NV.................................................. 500 85,490 Hoogovens NV................................................. 1,448 80,868 ING Groep NV................................................. 10,106 466,796 KLM Royal Dutch Air Lines NV................................. 4,600 142,041 KPN NV....................................................... 7,965 313,022 Philips Electronics NV....................................... 4,050 290,629 Royal Dutch Petroleum Co..................................... 15,600 812,923 Royal Dutch Petroleum Co. NY Shares (c)...................... 4,800 261,000 Unilever NV.................................................. 1,500 316,337 ---------- 3,393,380 ---------- NEW ZEALAND -- 1.74% Brierley Investments Ltd..................................... 320,000 312,330 Carter Holt Harvey Ltd....................................... 110,500 285,357 Fletcher Challenge Building.................................. 38,220 114,762 Fletcher Challenge Energy.................................... 42,172 127,200 Fletcher Challenge Forest Ltd................................ 65,803 95,447 Fletcher Challenge Paper..................................... 75,400 182,449 Telecom Corp. of New Zealand Ltd............................. 138,000 701,524 Telecom Corp. of New Zealand Ltd. ADS (c).................... 2,200 89,650 ---------- 1,908,719 ---------- SINGAPORE -- 0.72% City Developments Ltd........................................ 7,000 68,541 DBS Land Ltd................................................. 9,000 28,452 Development Bank of Singapore Ltd............................ 8,000 100,713 Fraser & Neave Ltd........................................... 2,000 14,268 Hotel Properties Ltd......................................... 19,000 32,291 Keppel Corp. Ltd. (b)........................................ 3,750 16,654 Oversea-Chinese Banking Corp. Ltd............................ 14,600 151,126 Singapore Airlines Ltd. (Frgn.).............................. 9,000 80,571 Singapore Press Holdings Ltd. (Frgn.)........................ 5,000 100,713 Singapore Telecommunications, Ltd............................ 38,000 70,164 United Overseas Bank Ltd. (Frgn.)............................ 9,000 92,530 Wing Tai Holdings Ltd........................................ 11,000 31,697 ---------- 787,720 ---------- SPAIN -- 1.15% Acerinox S.A................................................. 300 56,320 Banco Bilbao-Vizcaya S.A..................................... 1,500 122,085 Banco Central Hispanoamericano............................... 1,700 62,304 Banco Popular Espanol S.A.................................... 400 98,184
SHARES VALUE ------- ---------- Banco Santander S.A.......................................... 3,600 $ 111,131 Empresa Nacional de Electridad S.A........................... 2,350 197,658 Fomento de Construcciones y Contratas S.A.................... 500 63,881 Gas Natural SDG S.A.......................................... 400 87,550 Iberdrola S.A................................................ 7,700 97,382 Mapfre Corp.................................................. 700 37,316 Repsol S.A................................................... 2,300 97,430 Telefonica de Espana......................................... 5,400 156,415 Vallehermosa S.A............................................. 1,200 32,434 Viscofan Envolturas Celulosicas S.A.......................... 2,000 46,848 ---------- 1,266,938 ---------- SWITZERLAND -- 1.24% ABB AG (Bearer).............................................. 55 83,373 Alusuisse-Lonza Holding AG (Reg.)............................ 35 36,299 Ciba Specialty Chemicals AG (Reg.)........................... 160 14,816 CS Holdings AG (Reg.)........................................ 646 83,082 Nestle S.A. (Reg.)........................................... 200 264,216 Novartis AG (Reg.)........................................... 251 400,761 Roche Holding AG (Gen.)...................................... 26 235,496 Swiss Reinsurance Co. (Reg.)................................. 60 84,985 UBS (Bearer)................................................. 42 48,110 Zurich Versicherungs (Reg.).................................. 273 108,796 ---------- 1,359,934 ---------- UNITED KINGDOM -- 10.36% Abbey National PLC........................................... 13,000 177,415 Bass PLC..................................................... 8,800 107,355 B.A.T. Industries PLC........................................ 49,000 438,337 BG PLC....................................................... 100,500 367,979 Booker PLC................................................... 10,500 47,707 British Energy PLC........................................... 89,000 217,001 British Petroleum Co. PLC.................................... 46,807 581,923 British Steel PLC............................................ 113,000 281,160 British Telecommunications PLC............................... 78,700 584,176 BTR PLC...................................................... 24,000 82,084 Centrica PLC................................................. 93,500 113,597 Charter PLC.................................................. 13,902 184,519 Coats Viyella PLC............................................ 55,000 115,337 FKI PLC...................................................... 58,875 166,577 General Electric Co. PLC..................................... 106,100 633,934 Glaxo Wellcome PLC........................................... 35,500 734,106 Grand Metropolitan PLC....................................... 25,000 240,493 Guinness PLC................................................. 33,300 325,878 Hanson PLC................................................... 25,000 123,991 Hillsdown Holdings PLC....................................... 72,000 203,112 House of Fraser PLC.......................................... 79,000 209,711 HSBC Holdings PLC............................................ 15,000 461,471 Imperial Chemical Industries PLC............................. 5,000 69,402 Inchcape PLC................................................. 24,000 113,040 Legal & General Group PLC.................................... 35,000 237,081 Lloyds TSB Group PLC......................................... 54,630 560,984 Marks & Spencer PLC.......................................... 41,500 343,963 Mirror Group PLC............................................. 36,000 112,640
- -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- UNITED KINGDOM (CONTINUED) National Westminster Bank PLC............................. 13,800 $ 185,462 Northern Foods PLC........................................ 38,000 125,855 Peninsular & Oriental Steam Navigation Co................. 25,000 248,814 Reckitt & Colman PLC...................................... 8,175 122,043 Redland PLC............................................... 13,500 76,392 Reuters Holdings PLC...................................... 16,000 168,561 Rio Tinto PLC............................................. 14,700 256,030 RJB Mining PLC............................................ 30,000 179,745 Royal & Sun Alliance Insurance Group PLC.................. 37,697 278,563 Sainsbury (J.) PLC........................................ 30,000 181,743 Scottish Hydro-Electric PLC............................... 18,200 125,705 Sears PLC................................................. 91,000 102,987 Sedgwick Group PLC........................................ 60,000 122,826 SmithKline Beecham PLC.................................... 18,900 347,740 Smurfit (Jefferson) Group PLC............................. 54,000 155,480 Tesco PLC................................................. 27,000 166,714 Thames Water PLC.......................................... 18,000 206,707 Unilever PLC.............................................. 3,500 100,133 Vodafone Group PLC........................................ 23,600 115,084 Williams PLC.............................................. 32,000 173,088 Yorkshire Water PLC....................................... 15,000 98,111 ----------- 11,372,756 ----------- Total Non-U.S. Equities................................... 53,530,934 ----------- Total Equities (Cost $82,959,665)......................... 99,771,939 ----------- FACE AMOUNT --------- Short-Term Investments -- 8.38% U.S. GOVERNMENT OBLIGATIONS -- 0.65% U.S. Treasury Bills 5.375%, due 11/13/97.................. $ 720,000 706,095 ----------- COMMERCIAL PAPER -- 7.73% American Stores Co. 5.830%, due 07/23/97..................................... 500,000 498,218 Case Credit Corp. 5.760%, due 07/21/97..................................... 500,000 498,390 Enron Oil & Gas 6.520%, due 07/01/97..................................... 2,001,000 2,001,000 Hughes Electronics Corp. 5.780%, due 07/11/97..................................... 500,000 499,197 5.850%, due 08/11/97..................................... 500,000 496,669 Marriott Corp. 5.770%, due 07/08/97..................................... 500,000 499,439 Norfolk Southern Corp. 5.770%, due 07/10/97..................................... 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97..................................... 500,000 496,536
Tenneco, Inc. 5.780%, due 07/17/97.................................. $ 500,000 $ 498,716 5.800%, due 07/23/97.................................. 500,000 498,228 Textron Financial Corp. 6.400%, due 07/01/97.................................. 2,000,000 2,000,000 ------------ 8,485,672 ------------ Total Short-Term Investments (Cost $9,191,159)..................................... 9,191,767 ------------ Total Investments (Cost $92,150,824) -- 99.30% (a)...................... 108,963,706 ------------ Cash and other assets, less liabilities -- 0.70%.................................. 771,142 ------------ Net Assets -- 100%..................................... $109,734,848 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $92,209,751; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,850,801 Gross unrealized depreciation................................ (2,096,846) ----------- Net unrealized appreciation................................ $16,753,955 ===========
(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 June 30, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ---------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar............... 12/03/97 1,400,000 $1,024,021 $ (4,257) Japanese Yen.................. 12/03/97 380,000,000 3,399,543 39,981 Swedish Krona................. 12/03/97 9,900,000 1,288,522 (3,990) Swiss Franc................... 12/03/97 3,200,000 2,237,371 (78,449) FORWARD FOREIGN CURRENCY SALES CONTRACTS Australian Dollar............. 12/03/97 3,200,000 2,403,485 44,515 Belgian Franc................. 12/03/97 36,800,000 1,035,047 24,555 British Pounds................ 12/03/97 1,850,000 3,064,233 (46,328) Hong Kong Dollar.............. 12/03/97 4,400,000 566,988 44 Japanese Yen.................. 12/03/97 80,000,000 715,693 22,655 -------- Total..................... $ (1,274) ========
FUTURES CONTRACTS (NOTE 5) The Global Equity Fund had the following open index futures contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE PROCEEDS VALUE LOSS -------------- ----------- ----------- ---------- INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 34 contracts............ September 1997 $14,830,760 $15,134,250 $(303,490)
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $706,095. See accompanying notes to the financial statements. - -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $92,150,824) (Note 1)................ $108,963,706 Foreign currency, at value (Cost $205,638)....................... 203,894 Receivables: Investment securities sold...................................... 713,846 Dividends....................................................... 511,404 Interest........................................................ 20,000 Fund shares sold................................................ 77,238 Variation margin (Note 5)....................................... 112,402 Other assets..................................................... 24,096 ------------ TOTAL ASSETS.................................................. 110,626,586 ------------ LIABILITIES: Payables: Investment securities purchased................................. 643,775 Fund shares redeemed............................................ 7,788 Due to custodian bank........................................... 26,595 Investment advisory fees (Note 2)............................... 101,236 Accrued expenses................................................ 111,070 Net unrealized depreciation on forward foreign currency con- tracts.......................................................... 1,274 ------------ TOTAL LIABILITIES............................................. 891,738 ------------ NET ASSETS........................................................ $109,734,848 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $ 89,355,851 Accumulated undistributed net investment income.................. 336,561 Accumulated net realized gain.................................... 3,533,361 Net unrealized appreciation...................................... 16,509,075 ------------ NET ASSETS.................................................... $109,734,848 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $48,053,593 and 3,765,449 shares issued and outstanding) (Note 7)...................................... $ 12.76 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 78 shares issued and outstanding) (Note 7).......... $ 12.76 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $61,680,255 and 4,845,038 shares issued and outstanding) (Note 7)...................................... $ 12.73 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Dividends (net of $136,196 for foreign taxes withheld)........... $ 1,593,631 Interest......................................................... 498,155 ----------- TOTAL INCOME.................................................. 2,091,786 ----------- EXPENSES: Advisory (Note 2)................................................ 641,075 Distribution (Note 6)............................................ 324,716 Accounting....................................................... 92,251 Custodian........................................................ 85,485 Other............................................................ 183,508 ----------- TOTAL EXPENSES................................................ 1,327,035 Expenses waived by Advisor (Note 2)........................... (195,511) ----------- NET EXPENSES.................................................. 1,131,524 ----------- NET INVESTMENT INCOME ........................................ 960,262 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 5,245,255 Futures contracts............................................... (1,943,047) Foreign currency transactions................................... 1,930,570 ----------- Net realized gain............................................. 5,232,778 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 10,953,503 Futures contracts............................................... (330,387) Forward contracts............................................... (5,030) Translation of other assets and liabilities denominated in for- eign currency.................................................. 1,431 ----------- Change in net unrealized appreciation or depreciation......... 10,619,517 ----------- Net realized and unrealized gain.................................. 15,852,295 ----------- Net increase in net assets resulting from operations.............. $16,812,557 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 960,262 $ 462,604 Net realized gain................................. 5,232,778 8,259,766 Change in net unrealized appreciation or depreciation..................................... 10,619,517 1,258,707 ------------ ----------- Net increase in net assets resulting from opera- tions............................................ 16,812,557 9,981,077 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................... (425,929) (295,340) SwissKey Class.................................... (253,945) (41,698) Distributions from net realized gain: Brinson Class I................................... (3,076,886) (1,399,995) SwissKey Class.................................... (3,396,000) (1,621,590) ------------ ----------- Total distributions to shareholders............... (7,152,760) (3,358,623) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 42,520,630 11,563,213 Shares issued in acquisition of SBC World Growth Fund (Note 1).................................... -- 25,670,575 Shares issued on reinvestment of distributions.... 6,711,937 3,336,320 Shares redeemed................................... (9,295,598) (7,760,045) ------------ ----------- Net increase in net assets resulting from capital share transactions (Note 7)...................... 39,936,969 32,810,063 ------------ ----------- TOTAL INCREASE IN NET ASSETS................... 49,596,766 39,432,517 ------------ ----------- NET ASSETS: Beginning of year................................. 60,138,082 20,705,565 ------------ ----------- End of year (including accumulated undistributed net investment income of $336,561 and $90,547, respectively).................................... $109,734,848 $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.
YEAR ENDED JUNE 30, JANUARY 28, 1994* ------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $ 11.57 $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- ------- Income from investment opera- tions: Net investment income....... 0.16 0.18 0.18 0.07 Net realized and unrealized gain (loss)................ 2.14 2.29 0.39 (0.54) ------- ------- ------- ------- Total income (loss) from investment operations.... 2.30 2.47 0.57 (0.47) ------- ------- ------- ------- Less distributions: Distributions from net in- vestment income............ (0.12) (0.14) (0.04) (0.04) Distributions from and in excess of net realized gain.............. (0.99) (0.69) (0.09) -- ------- ------- ------- ------- Total distributions....... (1.11) (0.83) (0.13) (0.04) ------- ------- ------- ------- Net asset value, end of peri- od........................... $ 12.76 $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= ======= Total return (non-annualized). 21.26% 25.66% 6.06% (4.70)% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $48,054 $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 1.25% 1.77% 2.06% 2.65%** After expense reimbursement. 1.00% 1.00% 1.00% 1.00%** Ratio of net investment in- come to average net assets: Before expense reimburse- ment....................... 1.35% 0.57% 0.71% 0.24%** After expense reimbursement. 1.60% 1.34% 1.77% 1.89%** Portfolio turnover rate...... 32% 74% 36% 21% Average commission rate paid per share................... $0.0246 $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.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 11.57 $ 10.35 ------- ------- Income from investment operations: Net investment gain (loss)...................... 0.08 (0.01) Net realized and unrealized gain................ 2.13 1.93 ------- ------- Total income from investment operations....... 2.21 1.92 ------- ------- Less distributions: Distributions from net investment income........ (0.06) (0.01) Distributions from net realized gain............ (0.99) (0.69) ------- ------- Total distributions........................... (1.05) (0.70) ------- ------- Net asset value, end of period.................... $ 12.73 $ 11.57 ======= ======= Total return (non-annualized)..................... 20.34% 19.25% Ratios/Supplemental data Net assets, end of period (in 000s).............. $61,680 $33,012 Ratio of expenses to average net assets: Before expense reimbursement.................... 2.00% 2.53%** After expense reimbursement..................... 1.75% 1.76%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement.................... 0.60% (0.19)%** After expense reimbursement..................... 0.85% 0.58%** Portfolio turnover rate.......................... 32% 74% Average commission rate paid per share........... $0.0246 $0.0288
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 Global Bond Fund - -------------------------------------------------------------------------------- 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 8.55% since July 31, 1995. Its benchmark, the Salomon World Government Bond Index, returned 2.08%. For the year ended June 30, 1997, the Fund returned 7.20%, while the benchmark returned 3.89%. During the first half of 1997, the Fund returned 0.42%, compared to the index return of -1.23% on an unhedged basis. The negative index return reflected weakness of other currencies relative to the U.S. dollar. On a dollar-hedged basis the index returned 4.02%, ranging from 6.77% in Switzerland to 2.59% in U.S. Treasuries. This unremarkable performance reflected a period without major macroeconomic surprises, although U.S. GDP and job growth were somewhat faster than initially expected. Market allocation made a minor negative contribution to performance. The Fund moved to overweight U.S. bonds in February, and this hampered performance, as did underweighting of Japan. However, the Fund benefited from being overweight in Denmark and from a well-timed allocation to Australian bonds. The deutschemark and related European currencies fell against the U.S. dollar (the DM by 11.6%) during the period. The gap in short-term interest rates between the U.S. and Germany widened slightly, and there was growing concern that European Monetary Union might bias the participants towards depreciation. The Japanese yen depreciated in the first quarter but recovered sharply in the first half of May, and ended the period 1.4% higher against the dollar. Currency allocation was the dominant contributor to relative performance during the first half of 1997. The Fund started the year with a substantial defensive overweight in U.S. dollars. This position was sharply reduced in February and again in March, in response to market developments. Bond management made a small positive contribution to performance. The Fund benefited from issue selection in the U.S. The short duration strategy in Japan detracted from performance in the first quarter; however, duration was then reduced further, and bond prices fell thereafter. Holdings of Canadian Real Return Bonds hurt relative performance. The range of durations at June 30, 1997 was from 0.5 times the market index in Japan to 1.3 times in Denmark and the U.S. - -------------------------------------------------------------------------------- 38 GLOBAL BOND FUND
- -------------------------------------------------------------------------------- Total Return 6 months 1 year 7/31/95* ended ended to 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- SwissKey Global Bond Fund 0.42% 7.20% 8.55% Salomon World Government Bond Index -1.23 3.89 2.08 - --------------------------------------------------------------------------------
* Inception date of the SwissKey Global Bond Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $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 June 30, 1997. 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 [GRAPH APPEARS HERE] $11,703 ====== SwissKey Global Bond Fund $10,402 ------ Salomon World Government Bond Index Label A B - -------------------------------------------------------------------------------- SwissKey Global Salomon World Bond Fund Gov't 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 3/31/97 $11,313 $10,096 6/30/97 $11,703 $10,402
7/31/95 = $10,000 Data through 6/30/97 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 - -------------------------------------------------------------------------------- Asset Allocation As of June 30, 1997
Current Benchmark Strategy - -------------------------------------------------------------------------------- U.S. 33.4% 39.4% Japan 19.7 6.2 Australia 1.0 4.3 Austria 0.9 0.0 Belgium 2.5 2.5 Canada 3.4 8.3 Denmark 1.6 6.3 Finland 0.5 0.0 France 7.0 2.2 Germany 9.0 13.2 Ireland 0.4 0.0 Italy 6.5 5.3 Netherlands 3.2 3.2 Spain 2.8 1.3 Sweden 1.5 1.5 Switzerland 0.4 0.0 U.K. 6.2 6.3 - -------------------------------------------------------------------------------- 100.0% 100.0%
Currency Allocation As of June 30, 1997
Current Benchmark Strategy - -------------------------------------------------------------------------------- U.S. 33.4% 36.9% Japan 19.7 19.7 Australia 1.0 1.0 Austria 0.9 0.9 Belgium 2.5 2.5 Canada 3.4 3.4 Denmark 1.6 1.6 Finland 0.5 0.5 France 7.0 7.0 Germany 9.0 9.0 Ireland 0.4 0.4 Italy 6.5 6.5 Netherlands 3.2 3.2 Spain 2.8 2.8 Sweden 1.5 1.5 Switzerland 0.4 0.4 U.K. 6.2 2.7 - -------------------------------------------------------------------------------- 100.0% 100.0%
Industry Diversification As a Percent of Net Assets As of June 30, 1997 - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed................................................. 2.04% CMO.......................................................... 0.54 Consumer..................................................... 0.95 Financial.................................................... 2.21 Industrial................................................... 0.22 Transportation............................................... 0.36 ------ 6.32 International Dollar Bonds................................... 2.47 U.S. Government Agencies..................................... 13.15 U.S. Government Obligations.................................. 14.45 ------ Total U.S. Bonds....................................... 36.39* ------ NON-U.S. BONDS Foreign Financial Bonds........................................ 13.99 Foreign Government Bonds....................................... 42.16 ------ Total Non-U.S. Bonds................................... 56.15 ------ SHORT-TERM INVESTMENTS......................................... 11.28* ------ TOTAL INVESTMENTS...................................... 103.82 LIABILITIES, LESS CASH AND OTHER ASSETS....................................................... (3.82) ------ NET ASSETS................................................ 100.00% ======
- -------------------------------------------------------------------------------- *The Fund held a long position in U.S. Treasury futures on June 30, 1997 which increased U.S. bond exposure from 36.39% to 38.06% and decreased the Fund's exposure to Short-Term Investments from 11.28% to 9.61%. - -------------------------------------------------------------------------------- 40 GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------- ---------- Bonds -- 92.54% U.S. BONDS -- 36.39% U.S. CORPORATE BONDS -- 6.32% Capital One Bank 6.830%, due 05/17/99 ..................................... $200,000 $ 200,809 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02...................................... 125,000 124,054 Chrysler Financial Corp. MTN 6.500%, due 08/21/97...................................... 165,000 165,197 Continental Airlines, Inc. Pass Thru 144-A 7.461%, due 04/01/15.................................................. 210,000 212,442 Countrywide Capital, Inc. 8.000%, due 12/15/26...................................... 250,000 245,545 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00...................................... 375,000 375,000 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03.................................................. 240,000 237,530 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00...................................... 50,468 50,474 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09...................................... 332,540 313,928 Lockheed Martin Corp. 7.700%, due 06/15/08...................................... 125,000 130,620 Metlife Funding 6.850%, due 05/20/08...................................... 225,000 225,598 News America Holdings 7.750%, due 01/20/24...................................... 275,000 260,924 Salomon, Inc. 6.500%, due 03/01/00...................................... 300,000 298,101 Sears Roebuck Acceptance MTN 95-5A 6.050%, due 01/16/08.... 225,000 218,635 The Money Store 94-A3 5.525%, due 09/15/18...................................... 76,492 74,927 Time Warner, Inc. 9.150%, due 02/01/23...................................... 265,000 292,471 World Omni Automobile Lease Securitization Trust 6.850%, due 06/25/03...................................... 255,000 257,864 ---------- 3,684,119 ---------- INTERNATIONAL DOLLAR BONDS -- 2.47% DR Investments 144-A 7.450%, due 05/15/07...................................... 455,000 459,576 Pan Pacific Industry 144-A 0.000%, due 04/28/07...................................... 715,000 315,133 Province of Quebec 7.500%, due 07/15/23...................................... 235,000 231,165 Republic of South Africa 9.625%, due 12/15/99...................................... 125,000 132,094 Royal Bank of Scotland 7.375%, due 04/29/49...................................... 300,000 298,987 ---------- 1,436,955 ---------- U.S. GOVERNMENT AGENCIES -- 13.15% Federal Home Loan Mortgage Corp. 7.000%, due 04/15/07...................................... 200,790 196,692 5.800%, due 08/15/19...................................... 90,000 84,670 7.500%, due 01/15/23...................................... 75,101 71,749 6.500%, due 02/15/24...................................... 375,000 351,621 7.238%, due 05/01/26...................................... 68,899 70,963 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23. 104,207 106,584 9.000%, due 03/01/24...................................... 305,522 325,524
FACE AMOUNT VALUE ---------- ---------- 9.000%, due 04/01/25.................................. $ 264,905 $ 279,641 9.500%, due 04/01/25.................................. 29,129 31,195 Federal National Mortgage Association 6.500%, due 12/01/03 Balloon TBA.................................. 585,000 577,322 7.875%, due 02/24/05.................................. 500,000 533,645 6.220%, due 03/13/06.................................. 150,000 145,035 6.500%, due 04/25/08.................................. 104,799 100,445 9.000%, due 08/01/21.................................. 28,233 29,982 8.500%, due 07/01/22.................................. 21,708 22,844 7.500%, due 05/01/25.................................. 4,193 4,202 6.500%, due 03/01/26.................................. 77,040 73,693 6.500%, due 12/01/26 TBA.............................. 1,000,000 956,565 7.000%, due 12/01/26 TBA.............................. 1,150,000 1,127,003 7.500%, due 12/01/26 TBA.............................. 825,000 826,807 6.070%, due 08/01/29 TBA.............................. 205,000 202,566 Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only.................... 1,031 335 0.000%, due 07/01/26 principal only................... 569 380 0.000%, due 04/01/27 principal only................... 520,231 344,911 Government National Mortgage Association 7.000%, due 08/15/23.................................. 803 788 7.500%, due 08/15/23.................................. 113,659 113,943 7.000%, due 08/15/24.................................. 530,741 523,863 7.000%, due 07/15/25.................................. 73,437 72,159 Tennessee Valley Authority 6.375%, due 06/15/05.................................. 500,000 489,184 ---------- 7,664,311 ---------- U.S. GOVERNMENT OBLIGATIONS-- 14.45% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01.................................. 1,020,000 1,030,200 6.250%, due 10/31/01.................................. 1,120,000 1,115,100 7.000%, due 07/15/06.................................. 760,000 781,850 8.125%, due 05/15/21.................................. 1,315,000 1,504,443 6.000%, due 02/15/26.................................. 1,980,000 1,771,482 U.S. Treasury Principal Strips 0.000%, due 08/15/03.................................. 1,440,000 974,419 0.000%, due 11/15/04.................................. 2,000,000 1,239,160 ---------- 8,416,654 ---------- Total U.S. Bonds....................................... 21,202,039 ---------- NON-U.S. BONDS -- 56.15% AUSTRALIA -- 3.92% Government of Australia 9.500%, due 08/15/03...............................AUD 1,400,000 1,195,185 9.000%, due 09/15/04.................................. 1,300,000 1,091,359 ---------- 2,286,544 ---------- BELGIUM -- 2.26% Kingdom of Belgium 10.000%, due 08/02/00............................. BEF 23,000,000 749,051 7.500%, due 07/29/08.................................. 18,000,000 565,736 ---------- 1,314,787 ---------- CANADA -- 7.71% British Columbia 7.750%, due 06/16/03.............................. CAD 1,250,000 979,396 7.250%, due 09/21/05.................................. 1,640,000 1,241,351 Government of Canada 4.250%, due 12/01/21 (b).............................. 1,820,000 1,416,839 Province of Ontario 7.500%, due 01/19/06.................................. 1,100,000 855,331 ---------- 4,492,917 ----------
- -------------------------------------------------------------------------------- 41 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ------------ DENMARK -- 5.74% City of Copenhagen 6.250%, due 03/15/01............................ DKK 2,400,000 $ 380,955 Great Belt 7.000%, due 09/02/03...................... 10,650,000 1,730,643 Kingdom of Denmark 7.000%, due 12/15/04................................ 3,500,000 565,589 7.000%, due 11/15/07................................ 1,400,000 221,802 7.000%, due 11/10/24................................ 3,000,000 447,464 ----------- 3,346,453 ----------- FRANCE -- 2.19% Government of France (OAT) 7.500%, due 04/25/05............................ FRF 1,200,000 232,826 8.500%, due 04/25/23................................ 1,600,000 343,819 KFW International Finance 7.750%, due 02/17/98................................ 2,600,000 454,479 Republic of Finland 9.000%, due 08/13/03................................ 1,200,000 246,551 ----------- 1,277,675 ----------- GERMANY -- 12.87% Bundesrepublik Deutscheland 6.500%, due 03/15/00............................ DEM 2,000,000 1,225,295 6.875%, due 05/12/05................................ 800,000 501,320 6.250%, due 01/04/24................................ 800,000 446,643 European Economic Community 6.500%, due 03/10/00................................ 1,910,000 1,166,650 International Bank for Reconstruction & Development 7.125%, due 04/12/05................................ 650,000 411,612 Kingdom of Norway 6.125%, due 05/05/98................................ 1,040,000 610,536 LKB Baden-Wuerttemberg Finance 6.500%, due 09/15/08.. 1,300,000 781,820 Republic of Ireland 7.250%, due 03/18/03................................ 2,900,000 1,848,904 Treuhandanstalt 7.125%, due 01/29/03................. 800,000 508,849 ----------- 7,501,629 ----------- ITALY -- 5.15% Bayerische Landesbank 10.750%, due 03/01/03........................... ITL 250,000,000 174,846 Landesbank Rheinland-Pfalz Girozentrale 8.250%, due 06/02/98............................................ 750,000,000 447,124 LKB Baden-Wuerttemberg Finance 10.750%, due 04/14/03. 1,450,000,000 1,016,236 Republic of Italy (BTP) 7.750%, due 09/15/01................................ 1,500,000,000 928,739 9.000%, due 10/01/03................................ 350,000,000 229,891 9.500%, due 02/01/06................................ 300,000,000 205,936 ----------- 3,002,772 ----------- JAPAN -- 4.48% Government of Japan No.161 4.700%, due 09/22/03............................ JPY 45,000,000 453,068 Government of Japan No.129 6.400%, due 03/20/00................................ 25,000,000 248,951 Republic of Austria 5.000%, due 01/22/01................................ 130,000,000 1,270,974 International Bank for Reconstruction & Development 4.500%, due 06/20/00................................ 40,000,000 382,111 4.750%, due 12/20/04................................ 25,000,000 255,478 ----------- 2,610,582 ----------- NETHERLANDS -- 3.05% Government of Netherlands 7.500%, due 11/15/99............................. NLG 1,000,000 $ 552,799 5.750%, due 09/15/02................................. 500,000 266,805 International Nederland Verzekeringen 6.250%, due 12/28/05............................................. 1,800,000 955,914 ----------- 1,775,518 ----------- SPAIN -- 1.28% Kingdom of Spain 7.900%, due 02/28/02............................. ESP 100,000,000 744,815 ----------- SWEDEN -- 1.50% Kingdom of Sweden 6.000%, due 02/09/05............................. SEK 6,900,000 874,092 ----------- UNITED KINGDOM -- 6.00% Abbey National 8.750%, due 05/24/04............................. GBP 350,000 616,002 British Gas PLC 8.125%, due 03/31/03.................. 545,000 927,457 UK Treasury 7.750%, due 09/08/06................................. 555,000 961,216 9.000%, due 10/13/08................................. 340,000 647,031 8.000%, due 09/27/13................................. 190,000 341,220 ----------- 3,492,926 ----------- Total Non-U.S. Bonds.................................. 32,720,710 ----------- Total Bonds (Cost $54,127,041)........................ 53,922,749 ----------- Short-Term Investments -- 11.28% U.S. GOVERNMENT OBLIGATIONS -- 0.04% U.S. Treasury Bills 5.361%, due 11/13/97.............. $ 25,000 24,517 ----------- COMMERCIAL PAPER -- 11.24% American Stores Co. 5.830%, due 07/23/97................................. 500,000 498,219 Case Credit Corp. 5.760%, due 07/21/97................ 500,000 498,400 Crown Cork & Seal Co. 5.770%, due 07/15/97................................. 500,000 498,878 Enron Oil & Gas 6.520%, due 07/01/97.................. 2,063,000 2,063,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................. 500,000 499,197 5.850%, due 08/11/97................................. 500,000 496,669 Norfolk Southern Corp. 5.770%, due 07/10/97................................. 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97................................. 500,000 496,536 Sundstrand Corp. 5.850%, due 07/15/97................. 500,000 498,862 Tenneco, Inc. 5.800%, due 07/23/97.................... 500,000 498,228 ----------- 6,547,268 ----------- Total Short-Term Investments (Cost $6,571,765).................................... 6,571,785 ----------- Total Investments (Cost $60,698,806) -- 103.82 (a)..................... 60,494,534 ----------- Liabilities, less cash and other assets -- (3.82%).... (2,226,520) ----------- Net Assets -- 100%.................................... $58,268,014 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 42 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $60,723,855; and net unrealized depreciation consisted of: Gross unrealized appreciation............................... $ 1,618,080 Gross unrealized depreciation............................... (1,847,401) ----------- Net unrealized depreciation............................. $ (229,321) ===========
(b)Linked to Canada's retail price index. Reset semi-annually. FRN: Floating Rate Note--The rate disclosed is that in effect at June 30, 1997. MTN: Medium term note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $987,151 or 1.69% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of June 30, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS French Franc.................. 11/28/97 16,600,000 $2,856,602 $(51,481) Italian Lira.................. 11/28/97 2,340,000,000 1,370,595 (20,400) Japanese Yen.................. 11/28/97 930,000,000 8,313,616 46,950 Spanish Peseta................ 11/28/97 230,000,000 1,568,085 (41,432) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar............. 11/28/97 2,900,000 2,177,978 66,622 British Pound................. 11/28/97 940,000 1,557,194 (19,354) Canadian Dollar............... 11/28/97 3,700,000 2,705,549 27,096 Danish Kroner................. 11/28/97 16,800,000 2,556,813 64,092 German Mark................... 11/28/97 3,900,000 2,263,533 55,167 Italian Lira.................. 11/28/97 1,100,000,000 644,297 5,879 Japanese Yen.................. 11/28/97 45,000,000 402,272 (3,406) Spanish Peseta................ 11/28/97 100,000,000 681,776 7,546 -------- Total..................... $137,279 ========
FUTURES CONTRACTS (NOTE 5) The Global Bond Fund had the following open futures contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN -------------- -------- -------- ---------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 3 con- tracts............................ September 1997 $315,077 $317,672 $ 2,595 10 year U.S. Treasury Notes, 3 con- tracts............................ September 1997 321,022 323,625 2,603 30 year U.S. Treasury Bonds, 3 con- tracts............................ September 1997 326,366 333,187 6,821 ------- Total.......................... $12,019 =======
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $24,517. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 43 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $60,698,806) (Note 1)................ $60,494,534 Cash............................................................. 244,951 Foreign currency, at value (Cost $1,097,578)..................... 1,108,021 Receivables: Investment securities sold...................................... 671,484 Interest........................................................ 1,218,865 Fund shares sold................................................ 30,035 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 137,279 Other assets..................................................... 43,409 ----------- TOTAL ASSETS.................................................. 63,948,578 ----------- LIABILITIES: Payables: Investment securities purchased................................. 4,692,855 Fund shares redeemed............................................ 880,477 Investment advisory fees (Note 2)............................... 43,424 Accrued expenses................................................ 60,339 Variation margin (Note 5)....................................... 3,469 ----------- TOTAL LIABILITIES............................................. 5,680,564 ----------- NET ASSETS........................................................ $58,268,014 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $57,507,385 Accumulated undistributed net investment income.................. 489,146 Accumulated net realized gain.................................... 322,580 Net unrealized depreciation...................................... (51,097) ----------- NET ASSETS.................................................... $58,268,014 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $54,157,066 and 5,616,633 shares issued and outstanding) (Note 7).............................................................. $ 9.64 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 104 shares issued and outstanding) (Note 7).......... $ 9.64 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $4,109,948 and 427,815 shares issued and outstanding) (Note 7).. $ 9.61 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 44 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Interest (net of $5,999 for foreign taxes withheld)............... $2,856,724 ---------- TOTAL INCOME................................................... 2,856,724 ---------- EXPENSES: Advisory (Note 2)................................................. 344,152 Accounting........................................................ 89,764 Professional...................................................... 33,901 Transfer agent.................................................... 33,614 Custodian......................................................... 32,064 Distribution (Note 6)............................................. 18,598 Other............................................................. 72,791 ---------- TOTAL EXPENSES................................................. 624,884 Expenses waived by Advisor (Note 2)............................ (194,924) ---------- NET EXPENSES................................................... 429,960 ---------- NET INVESTMENT INCOME.......................................... 2,426,764 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments...................................................... 1,109,544 Futures contracts................................................ 31,621 Foreign currency transactions.................................... 582,099 ---------- Net realized gain............................................... 1,723,264 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. (682,472) Futures contracts................................................ 13,878 Forward contracts................................................ 280,252 Translation of other assets and liabilities denominated in for- eign currency................................................... 6,883 ---------- Change in net unrealized appreciation or depreciation........... (381,459) ---------- Net realized and unrealized gain.................................. 1,341,805 ---------- Net increase in net assets resulting from operations.............. $3,768,569 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE JUNE 30, 1997 30, 1996 ----------- ----------- OPERATIONS: Net investment income............................... $ 2,426,764 $ 2,351,810 Net realized gain................................... 1,723,264 4,022,906 Change in net unrealized appreciation or deprecia- tion .............................................. (381,459) (1,992,544) ----------- ----------- Net increase in net assets resulting from opera- tions.............................................. 3,768,569 4,382,172 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income............ (3,479,707) (3,447,154) Distributions in excess of net investment income.... (340,005) (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......................................... 23,164,253 14,584,928 Shares issued on reinvestment of distributions...... 3,667,961 3,954,345 Shares redeemed..................................... (12,462,273) (24,728,515) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 7)................ 14,369,941 (6,189,242) ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS.......... 13,549,009 (7,143,513) ----------- ----------- NET ASSETS: Beginning of year................................... 44,719,005 51,862,518 ----------- ----------- End of year (including accumulated undistributed net investment income of $489,146 and $1,052,943, re- spectively)........................................ $58,268,014 $44,719,005 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income: Brinson Class I.................................... $(3,503,032) $(4,734,956) SwissKey Class..................................... (316,680) (246,430) Distributions from net realized gain: Brinson Class I.................................... (704,236) (338,786) SwissKey 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.
YEAR ENDED JUNE 30, JULY 30, 1993* ------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period. $ 10.04 $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- ------- Income (loss) from investment opera- tions: Net investment income ............. 0.67 0.84 0.50 0.45 Net realized and unrealized gain (loss)............................ 0.08 0.31 0.58 (0.52) ------- ------- ------- ------- Total income (loss) from invest- ment operations................. 0.75 1.15 1.08 (0.07) ------- ------- ------- ------- Less distributions: Distributions from and in excess of net investment income............. (0.96) (1.40) (0.24) (0.28) Distributions from net realized gain.............................. (0.19) (0.10) -- (0.10) ------- ------- ------- ------- Total distributions.............. (1.15) (1.50) (0.24) (0.38) ------- ------- ------- ------- Net asset value, end of period....... $ 9.64 $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= ======= Total return (non-annualized)........ 7.71% 11.50% 11.34% (0.79)% Ratios/Supplemental data Net assets, end of period (in 000s). $54,157 $41,066 $51,863 $36,849 Ratio of expenses to average net as- sets: Before expense reimbursement....... 1.32% 1.65% 1.43% 1.78%** After expense reimbursement........ 0.90% 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reimbursement....... 4.90% 4.98% 5.53% 4.03%** After expense reimbursement........ 5.32% 5.73% 6.06% 4.91%** Portfolio turnover rate............. 235% 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.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $10.02 $10.56 ------ ------ Income from investment operations: Net investment income........................... 0.62 0.78 Net realized and unrealized gain................ 0.10 0.15 ------ ------ Total income from investment operations....... 0.72 0.93 ------ ------ Less distributions: Distributions from and in excess of net invest- ment 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.................... $ 9.61 $10.02 ====== ====== Total return (non-annualized)..................... 7.20% 9.17% Ratios/Supplemental data Net assets, end of period (in 000s).............. $4,110 $3,653 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.81% 2.14%** After expense reimbursement..................... 1.39% 1.39%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 4.41% 4.49%** After expense reimbursement..................... 4.83% 5.24%** Portfolio turnover rate.......................... 235% 184%
* Commencement of SwissKey Class ** 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. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey 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 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. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate 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 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 year ended June 30, 1997. 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. Amounts equal to 8.05% and 16.09% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Global Fund and the Global Equity Fund, respectively. G. INCOME AND EXPENSE ALLOCATION: 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 Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey 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. 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 that 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 year ended June 30, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED -------- --------------- --------------- -------------- ---------- -------- Global Fund............. 0.80% 1.10% 1.35% 1.75% $4,294,925 $ -- Global Equity Fund...... 0.80 1.00 1.25 1.76 641,075 195,511 Global Bond Fund........ 0.75 0.90 1.15 1.39 344,152 194,924
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 for the year ended June 30, 1997, were $11,680, $4,380 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. The Brinson Global Fund invests in shares of certain affiliated investment companies also sponsored by Brinson Partners, Inc. These investments represented 9.39% of the Fund's total net assets at June 30, 1997. Activity for the year ended June 30, 1997 was as follows:
NET NET SALES REALIZED UNREALIZED AFFILIATES PURCHASES PROCEEDS GAINS GAINS VALUE - ---------- ---------- ---------- -------- ----------- ----------- Brinson Post-Venture Fund................... $ -- $ -- $ -- $ 1,248,708 $ 7,248,708 Brinson High Yield Fund. -- 639,104 87,104 1,879,440 13,327,440 Brinson Emerging Markets Equity Fund............ 5,400,000 787,001 101,635 1,883,009 16,597,643 Brinson Emerging Markets Debt Fund.............. -- 970,548 280,548 6,059,079 20,369,079 ---------- ---------- -------- ----------- ----------- $5,400,000 $2,396,653 $469,287 $11,070,236 $57,542,870 ========== ========== ======== =========== ===========
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $854,084,076 $764,571,276 Global Equity Fund.................................... 54,289,814 22,588,116 Global Bond Fund...................................... 112,551,785 98,638,852
- -------------------------------------------------------------------------------- 50 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4.FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to 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 year ended June 30, 1997, 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 as amended for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class and, effective June 30, 1997, the Brinson Class N Shares. Annual fees under the SwissKey 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 Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the Global Fund, Global Equity Fund and Global Bond Fund. 7.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND ---------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- ---------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ------------ Sales: Brinson Class I................ 14,513,488 $180,787,534 7,972,013 $ 95,544,500 Brinson Class N................ 76 1,000 -- -- SwissKey Class................. 932,414 11,508,566 1,155,619 13,939,062 ---------- ------------ --------- ------------ Total Sales................. 15,445,978 $192,297,100 9,127,632 $109,483,562 ========== ============ ========= ============ Dividend Reinvestment: Brinson Class I................ 4,022,259 $ 48,025,771 2,632,284 $ 30,918,724 Brinson Class N................ -- -- -- -- SwissKey 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 Class I................ 11,346,380 $142,532,012 5,330,521 $ 63,966,318 Brinson Class N................ -- -- -- -- SwissKey Class................. 198,888 2,469,271 24,583 296,145 ---------- ------------ --------- ------------ Total Redemptions........... 11,545,268 $145,001,283 5,355,104 $ 64,262,463 ========== ============ ========= ============
- -------------------------------------------------------------------------------- 51 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL EQUITY FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class I.................. 1,338,623 $15,816,109 285,419 $ 3,205,567 Brinson Class N.................. 78 1,000 -- -- SwissKey Class................... 2,271,465 26,703,521 746,285 8,357,646 --------- ----------- --------- ----------- Total Sales................... 3,610,166 $42,520,630 1,031,704 $11,563,213 ========= =========== ========= =========== Shares issued in acquisition of SBC World Growth Fund: Brinson Class I.................. -- -- -- -- Brinson Class N.................. -- -- -- -- SwissKey Class................... -- -- 2,474,177 $25,670,575 --------- ----------- --------- ----------- Total......................... -- -- 2,474,177 $25,670,575 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I.................. 308,273 $ 3,485,504 160,063 $ 1,694,631 Brinson Class N.................. -- -- -- -- SwissKey Class................... 286,226 3,226,433 155,720 1,641,689 --------- ----------- --------- ----------- Total Dividend Reinvestment... 594,499 $ 6,711,937 315,783 $ 3,336,320 ========= =========== ========= =========== Redemptions: Brinson Class I.................. 225,435 $ 2,683,391 186,600 $ 2,055,092 Brinson Class N.................. -- -- -- -- SwissKey Class................... 565,431 6,612,207 523,404 5,704,953 --------- ----------- --------- ----------- Total Redemptions............. 790,866 $ 9,295,598 710,004 $ 7,760,045 ========= =========== ========= =========== GLOBAL BOND FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class I.................. 2,335,856 $22,155,311 1,094,889 $10,985,420 Brinson Class N.................. 104 1,000 -- -- SwissKey Class................... 103,968 1,007,942 345,211 3,599,508 --------- ----------- --------- ----------- Total Sales................... 2,439,928 $23,164,253 1,440,100 $14,584,928 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I.................. 348,609 $ 3,318,757 374,786 $ 3,722,031 Brinson Class N.................. -- -- -- -- SwissKey Class................... 36,719 349,204 23,414 232,314 --------- ----------- --------- ----------- Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345 ========= =========== ========= =========== Redemptions: Brinson Class I.................. 1,159,373 $11,665,371 2,369,683 $24,686,522 Brinson Class N.................. -- -- -- -- SwissKey Class................... 77,300 796,902 4,197 41,993 --------- ----------- --------- ----------- Total Redemptions............. 1,236,673 $12,462,273 2,373,880 $24,728,515 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 52 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- Global Fund Global Equity Fund Global Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund as of June 30, 1997, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30, 1997, the results of their operations for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. LOGO Chicago, Illinois August 8, 1997 - -------------------------------------------------------------------------------- 53 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY . http://networth.galt.com/swisskey SWISSKEY U.S. BALANCED FUND SWISSKEY U.S. EQUITY FUND SWISSKEY U.S. BOND FUND ANNUAL REPORT JUNE 30, 1997 YOUR KEY TO PERFORMANCE ----------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Debra L. Nichols Chairman of the Board Secretary E. Thomas McFarlan Carolyn M. Burke, CPA President Treasurer Thomas J. Digenan, CFA, CPA Catherine E. Macrae Vice President Assistant Secretary - -------------------------------------------------------------------------------- 1 THE FUNDS' ADVISOR--BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- Brinson Partners is the global institutional asset management division of Swiss Bank Corporation. Brinson Partners continues as the name used within North America, while SBC Brinson is the name used outside North America. We are a global investment management organization with over $75 billion in institutional assets under discretionary active management. We are also the investment manager for SBC Private Banking mutual fund assets which total $50 billion. In addition, we act as an investment advisor to SBC Private Banking. The division manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other 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. 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 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 - -------------------------------------------------------------------------------- Shareholder Letter........................................................... 4 U.S. Economic and Market Highlights.......................................... 5 U.S. Balanced Fund........................................................... 6 Schedule of Investments................................................. 9 Financial Statements....................................................13 Financial Highlights....................................................16 U.S. Equity Fund.............................................................18 Schedule of Investments.................................................21 Financial Statements....................................................23 Financial Highlights....................................................26 U.S. Bond Fund...............................................................28 Schedule of Investments.................................................30 Financial Statements....................................................32 Financial Highlights....................................................35 The SwissKey Funds--Notes to Financial Statements............................37 Report of Independent Auditors...............................................40 - -------------------------------------------------------------------------------- 3 Shareholder Letter - -------------------------------------------------------------------------------- August 20, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1997 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: SwissKey U.S. Balanced Fund For the period from July 31, 1995 to June 30, 1997, the Fund provided an annualized total return of 13.87%. For the first half of 1997, the Fund returned 6.72%. The strategy of underweighting the overpriced U.S. equity market in favor of the attractive U.S. bond market remains in place. Return and risk characteristics continue to be more attractive in the U.S. bond market. SwissKey U.S. Equity Fund For the period from July 31, 1995 to June 30, 1997, the Fund provided an annualized total return of 29.85%. The Fund returned 16.54% in the first half of 1997. One of the most significant factor positions in the Fund is the tilt away from the very largest stocks in the market. Fund strategy presently maintains an overweight in stocks with high book-to-price and earnings variability. In addition, the Fund has underweighted the foreign earnings exposure embedded in U.S. corporate earnings as well as relative strength. Current industry positions include relative overweights in air freight, railroads, business machines, electric utilities, tire and rubber, and insurance. The fund is underweight in electronics, energy reserves, miscellaneous finance and traditional telephone. SwissKey U.S. Bond Fund For the period from August 31, 1995 to June 30, 1997, the Fund provided an annualized total return of 6.09%. For the first half of 1997, the Fund returned 2.58%. Fund strategy currently maintains a duration target of 1.0 times that of the benchmark. This duration is in response to the less favorable valuations accompanying falling market yields as well as an increase in our concern about asset price inflation and the Federal Reserve's potential reaction to it. 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, Raoul Weil Raymond Simon Managing Director Executive Director Private . Banking Private . Banking - -------------------------------------------------------------------------------- 4 U.S. Economic and Market Highlights - -------------------------------------------------------------------------------- The inflation outlook in the U.S. remains good. While consumer price inflation has generally been running at 3.0% or less since 1991, other measures of inflation, such as the personal consumption deflator, the producer price index and the core CPI, indicate even lower price pressures. Second quarter real GDP growth of 2.2% annualized was dramatically slower than the almost 5% growth in the first quarter. Personal consumption, particularly of durable goods, was lackluster, while non-residential fixed investment and federal government expenditures showed strength. The continued healthy economy has again brought unemployment back down to 4.8%. Strong growth has led to an increase in the government's tax revenues and consequently to a shrinkage in the budget deficit. Congress and the President have taken advantage of this in the recent budget. However, the agreement on an array of tax cuts demonstrates the potential for renewed fiscal irresponsibility in the future. U.S. Environment Major Markets Six Months Ended June 30, 1997 [GRAPH] U.S. CASH EQUIVALENTS 2.52 U.S. BONDS 3.06 U.S. EQUITIES 17.65
Salomon U.S. Treasury Benchmark Returns Six Months Ended June 30, 1997 [GRAPH] Total Return 1 year 2.99 2 years 2.86 3 years 2.70 5 years 2.20 10 years 2.51 30 years -0.74
Top Ten Industry Returns Relative to S&P 500 Six Months Ended June 30, 1997 [GRAPH] Real Property 13.55 Miscellaneous Finance 11.64 Media 7.62 Oil 7.59 Life Insurance 5.93 Leisure, Luxury 3.76 Thrift Institutions 3.72 Retail 3.63 Aerospace 3.53 Tire & Rubber 3.12
Bottom Ten Industry Returns Relative to S&P 500 Six Months Ended June 30, 1997 [GRAPH] Containers -9.93 Motor Vehicles -10.01 Pollution Control -10.18 Aluminum -10.49 Electric Utilities -12.26 Domestic Petroleum Reserves -16.09 Tobacco -16.59 Foreign Petroleum Reserves -24.18 Precious Metals -24.96 Coal & Uranium -38.32
================================================================================ 5 U.S. Balanced Fund - -------------------------------------------------------------------------------- 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 13.87% since its inception on July 31, 1995. This compares with the corresponding 19.41% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the year ended June 30, 1997, the Fund produced a total return of 14.99% compared to the benchmark return of 21.71%. In the first half of 1997, the Fund returned 6.72% while the benchmark returned 12.43%. Bond management in conventional bonds provided the primary positive contribution to performance in the first half of the year. The underweight in the equity market and offsetting overweights in bonds and cash were the main reasons for the Fund's underperformance. Security selection in the U.S. equity segment of the Fund was essentially neutral. The first six months of the year saw bond prices fall and then recover, as strong economic news led to inflation fears and increases in real interest rates. Real GDP growth was substantially above average and the unemployment rate fell to 4.8%, the lowest figure in almost 25 years. However, yields started to come back down when none of this news had any impact on inflation. Despite the apparent tightness on the real side of the economy, consumer and producer price inflation remained quiescent. Because the bond portion of the Fund maintained duration longer than the benchmark, the fall in yields benefited performance. Equities continue to appear greatly overpriced according to our assessment of fundamental value. The Fund therefore remains overweighted bonds and underweighted equities. ================================================================================ 6 U.S. Balanced Fund - -------------------------------------------------------------------------------- Total Return Annualized 6 months 1 year 7/31/95* ended ended to 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- SwissKey U.S. Balanced Fund 6.72% 14.99% 13.87% - -------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 12.43 21.71 19.41 - -------------------------------------------------------------------------------- * 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 June 30, 1997. 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 [GRAPH APPEARS HERE] - -------------------------------------------------------------------------------- SwissKey U.S. Balanced Fund U.S. Balanced Mutual Fund Index 7/31/95 $10,000 $10,000 9/30/95 10,387 10,368 12/31/95 11,058 11,091 3/31/96 11,049 11,354 6/30/96 10,982 11,150 9/30/96 11,670 12,040 12/31/96 12,162 12,948 3/31/97 12,182 12,949 6/30/97 12,826 14,050
7/31/95 = $10,000 Data through 6/30/97 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
- ------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of June 30, 1997 - ---------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals................................. 0.86% Housing/Paper............................. 1.76 Metals.................................... 0.24 ------ 2.86 Capital Investment Capital Goods............................. 2.91 Technology................................ 3.92 ------ 6.83 Consumer Autos/Durables............................ 1.22 Discretionary............................. 1.82 Health: Drugs............................. 2.85 Health: Non-Drugs......................... 1.41 Non-Durables.............................. 3.91 Retail/Apparel............................ 1.71 ------ 12.92 Energy..................................... 1.67 Financial Banks..................................... 2.89 Non-Banks................................. 3.02 ------ 5.91 Transportation............................. 2.21 Utilities.................................. 2.42 Miscellaneous.............................. 3.17 ------ Total U.S. Equities................. 37.99* ------ U.S. BONDS Corporate Bonds Asset-Backed.............................. 1.89 CMO....................................... 0.42 Consumer.................................. 1.63 Financial................................. 1.35 Industrial................................ 2.32 Telecommunications........................ 0.57 ------ 8.18 International Dollar Bonds................. 7.59 Mortgage-Backed Securities................. 2.25 U.S. Government Agencies................... 16.93 U.S. Government Obligations................ 21.05 ------ Total U.S. Bonds.................... 56.00* ------ SHORT-TERM INVESTMENTS..................... 12.44* ------ TOTAL INVESTMENTS...................106.43 LIABILITIES, LESS CASH AND OTHER ASSETS................... (6.43) ------ NET ASSETS.................................100.00% ======
* The Fund held a long position in U.S. Treasury futures on June 30, 1997 which increased U.S. bond exposure from 56.00% to 61.62%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 37.99 to 28.13%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 12.44% to 16.68%. - --------------------------------------------------------------------------------
Asset Allocation As of June 30, 1997 Current Benchmark Strategy - --------------------------------------------------- U.S. Equity 65% 30% U.S. Bonds 35 65 Cash Equivalents 0 5 - --------------------------------------------------- 100% 100%
Top Ten U.S. Equity Holdings As of June 30, 1997 Percent of Net Assets - --------------------------------------------------- 1. Xerox Corp. 2.00% 2. Chase Manhattan Corp. 1.71 3. Lockheed Martin Corp. 1.59 4. Philip Morris Companies, Inc. 1.57 5. Aon Corp. 1.32 6. CIGNA Corp. 1.29 7. Burlington Northern Santa Fe 1.18 8. Goodyear Tire & Rubber Co. 1.17 9. Federal Express Corp. 1.08 10. Citicorp 1.06 - ---------------------------------------------------
- ------------------------------------------------------------------------------- 8 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------ ------------ U.S. Equities -- 37.99% Aetna Life & Casualty Co................................... 14,100 $ 1,443,487 Allergan, Inc.............................................. 36,600 1,164,337 Alza Corp. (b)............................................. 35,700 1,035,300 Aon Corp................................................... 72,600 3,757,050 Automatic Data Processing, Inc............................. 34,900 1,640,300 Beckman Instruments, Inc................................... 10,500 506,625 Birmingham Steel Corp...................................... 14,400 223,200 Boston Technology, Inc. (b)................................ 13,900 410,919 Browning-Ferris Industries, Inc............................ 27,100 901,075 Burlington Northern Santa Fe............................... 37,400 3,361,325 Centerior Energy Co........................................ 30,600 342,338 Champion Enterprises, Inc. (b)............................. 16,800 252,000 Champion International Corp................................ 1,200 66,300 Chase Manhattan Corp....................................... 50,100 4,862,831 CIGNA Corp................................................. 20,700 3,674,250 Circuit City Stores, Inc................................... 52,800 1,877,700 Citicorp................................................... 25,100 3,026,119 CMS Energy Corp............................................ 39,500 1,392,375 Coca-Cola Enterprises, Inc................................. 28,800 662,400 Comerica, Inc.............................................. 9,800 666,400 Comverse Technology, Inc. (b).............................. 6,600 343,200 Corning, Inc............................................... 45,900 2,553,187 Covance, Inc............................................... 17,975 347,142 CPC International, Inc..................................... 15,600 1,440,075 CVS Corp................................................... 22,700 1,163,375 Dial Corp.................................................. 22,500 351,562 Eastman Chemical Co........................................ 24,400 1,549,400 EMC Corp./Mass. (b)........................................ 67,900 2,648,100 Enron Corp................................................. 68,700 2,803,819 Entergy Corp............................................... 4,000 109,500 Federal Express Corp. (b).................................. 53,100 3,066,525 Federated Department Stores (b)............................ 20,400 708,900 FileNet Corp. (b).......................................... 7,300 105,850 First American Corp.-Tenn.................................. 9,400 360,725 First Bank System, Inc..................................... 7,600 648,850 First Data Corp............................................ 59,257 2,603,604 First of America Bank Corp................................. 6,900 315,675 First Security Corp........................................ 11,950 326,384 Fleetwood Enterprises, Inc................................. 6,700 199,744 Food Lion, Inc. Class A.................................... 66,100 473,028 Forest Laboratories, Inc. (b).............................. 16,400 679,575 Gannett Co., Inc........................................... 23,300 2,300,875 General Instrument Corp. (b)............................... 81,500 2,037,500 Genzyme Corp. (b).......................................... 14,400 399,600 Geon Co.................................................... 9,800 198,450 Goodyear Tire & Rubber Co.................................. 52,700 3,336,569 Harnischfeger Industries, Inc.............................. 23,800 987,700 Health Care and Retirement Corp. (b)....................... 24,450 816,019 Hibernia Corp. Class A..................................... 19,900 277,356 Informix Corp. (b)......................................... 19,100 171,900 Interpublic Group of Companies, Inc........................ 15,500 950,344 James River Corp. of Virginia.............................. 28,200 1,043,400 Kroger Co. (b)............................................. 19,500 565,500 Lockheed Martin Corp....................................... 43,671 4,522,678 Lyondell Petrochemical Co.................................. 39,100 852,869 Manor Care, Inc............................................ 31,800 1,037,475 Martin Marietta Materials, Inc............................. 10,436 337,866 Masco Corp................................................. 41,700 1,740,975 Mattel, Inc................................................ 52,750 1,786,906
SHARES VALUE ---------- ----------- Nabisco Holdings Corp. Class A.......................... 36,400 $ 1,451,450 National Service Industries Inc......................... 7,000 340,813 Nextel Communications, Inc. Class A (b)................. 54,500 1,032,094 Octel Communications Corp. (b).......................... 10,800 253,125 Old Republic International Corp......................... 12,850 389,516 Peco Energy Co.......................................... 89,100 1,871,100 Pentair, Inc............................................ 18,900 621,337 Pharmacia & Upjohn, Inc................................. 45,500 1,581,125 Philip Morris Companies, Inc............................ 100,800 4,473,000 Raytheon Co............................................. 12,700 647,700 Regions Financial Corp.................................. 9,200 290,950 Reynolds & Reynolds Co. Class A......................... 12,900 203,175 Schering Plough Corp.................................... 62,600 2,996,975 Seagate Technology, Inc. (b)............................ 15,000 527,812 Timken Co............................................... 24,800 881,950 Trinity Industries, Inc................................. 6,600 209,550 Tyson Foods, Inc. Class A............................... 72,500 1,386,562 UCAR International, Inc. (b)............................ 700 32,025 Ultramar Diamond Shamrock Corp.......................... 40,590 1,324,249 US Bancorp.............................................. 21,800 1,397,925 Vencor, Inc. (b)........................................ 18,700 790,075 Viad Corp............................................... 35,000 673,750 Westvaco Corp........................................... 8,550 268,791 Witco Corp.............................................. 3,300 125,194 Xerox Corp.............................................. 72,100 5,686,888 York International Corp................................. 22,200 1,021,200 360 Communications Co. (b).............................. 10,600 181,525 ----------- Total U.S. Equities (Cost $81,714,881).................. 108,088,389 ----------- FACE AMOUNT VALUE ---------- ----------- Bonds -- 56.00% U.S. CORPORATE BONDS -- 8.18% AirTouch Communications 7.500%, due 07/15/06................................... $2,000,000 $ 2,032,738 Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,008,096 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02............................ 1,360,000 1,349,705 Chase Manhattan Credit Card Master Trust 96-4A 6.730%, due 02/15/03........................................... 2,000,000 2,019,060 Chrysler Financial Corp. MTN 6.500%, due 08/21/97................................... 1,000,000 1,001,192 Comcast Cable Communications 144-A 8.500%, due 05/01/27. 2,000,000 2,156,320 CSX Transportation, Inc. 144-A 6.950%, due 05/01/27................................... 1,600,000 1,614,099 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02............................................... 2,000,000 2,004,340 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00................................... 840,000 840,000 Eastman Chemical Co. 7.600%, due 02/01/27................................... 2,380,000 2,358,749 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09.................... 1,270,601 1,199,485 Lockheed Martin Corp. 7.700%, due 06/15/08................................... 2,000,000 2,089,916 News America Holdings 7.750%, due 01/20/24................................... 1,000,000 948,816 Time Warner, Inc. 9.150%, due 02/01/23.................. 1,500,000 1,655,499 ----------- 23,278,015 -----------
- -------------------------------------------------------------------------------- 9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- INTERNATIONAL DOLLAR BONDS -- 7.59% Bangkok Bank 144-A 8.250%, due 03/15/16.................................. $ 3,700,000 $ 3,699,260 Credit Suisse-London 144-A 7.900%, due 05/01/07.................................. 2,170,000 2,230,764 Den Danske Bank 144-A 7.400%, due 06/15/10.................................. 1,400,000 1,410,681 Empresa Nacional Electric 7.875%, due 02/01/27.................................. 2,335,000 2,354,885 International Bank for Reconstruction & Development 6.375%, due 07/21/05.................................. 1,500,000 1,470,171 LKB Baden-Wuerttemberg Finance 8.125%, due 01/27/00.................................. 1,780,000 1,845,673 Montell Finance Co. 144-A 8.100%, due 03/15/27.................................. 1,610,000 1,653,879 Petroliam Nasional 7.125%, due 08/15/05.................................. 1,500,000 1,499,376 Province of Quebec 7.500%, due 07/15/23.................................. 750,000 737,760 Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%, due 03/15/14.......................................... 1,735,000 1,813,936 Skandinaviska Enskilda Banken 144-A 6.625%, due 03/29/49.............................................. 2,000,000 1,979,600 Southern Investments UK 6.800%, due 12/01/06.................................. 930,000 908,517 ----------- 21,604,502 ----------- MORTGAGE-BACKED SECURITIES -- 2.25% Independent National Mortgage Corp. 7.145%, due 02/25/26.................................. 1,876,156 1,879,552 7.000%, due 03/25/26.................................. 1,344,251 1,340,299 Morgan Stanley Capital, Inc. 6.830%, due 10/15/06.................................. 1,250,000 1,253,665 Vanderbilt Mortgage Finance 6.975%, due 08/07/11.................................. 1,925,000 1,930,414 ----------- 6,403,930 ----------- U.S. GOVERNMENT AGENCIES -- 16.93% Federal Home Loan Mortgage Corp. 7.500%, due 01/15/23.................................. 1,023,663 977,977 0.000%, due 04/15/27 principal only................... 2,497,000 1,482,049 Federal Home Loan Mortgage Corp. Gold 6.500%, due 12/01/03 TBA.............................. 2,180,000 2,152,070 8.000%, due 05/01/23.................................. 795,363 813,508 9.000%, due 03/01/24.................................. 399,511 425,667 9.000%, due 04/01/25.................................. 1,201,673 1,268,516 9.500%, due 04/01/25.................................. 1,281,693 1,372,614 Federal National Mortgage Association 6.500%, due 05/25/08.................................. 1,705,842 1,676,194 6.500%, due 08/25/08.................................. 1,945,894 1,906,781 8.000%, due 12/18/11.................................. 1,000,000 1,043,071 6.500%, due 12/25/23.................................. 2,000,000 1,916,348 6.500%, due 04/01/26.................................. 586,130 560,672 6.500%, due 05/01/26.................................. 2,064,982 1,975,290 6.500%, due 12/01/26 TBA.............................. 8,000,000 7,652,520 7.500%, due 12/01/26 TBA.............................. 5,595,000 5,607,253
FACE AMOUNT VALUE ---------- ----------- Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only..................... $ 9,671 $ 3,139 0.000%, due 07/01/26 principal only.................... 5,478 3,660 0.000%, due 04/01/27 principal only.................... 4,270,755 2,831,489 Government National Mortgage Association 11.000%, due 09/15/15.................................. 312,435 346,999 8.000%, due 08/15/22................................... 993,405 1,014,826 8.000%, due 11/15/22................................... 2,207,891 2,271,500 7.500%, due 08/15/23................................... 1,079,758 1,082,461 7.500%, due 09/15/23................................... 1,115,920 1,118,713 7.000%, due 12/15/23................................... 1,354,532 1,338,224 9.000%, due 07/15/24................................... 136,907 144,565 8.500%, due 11/15/24................................... 173,216 179,874 8.500%, due 01/15/25................................... 309,204 321,089 9.000%, due 05/15/25................................... 389,027 410,788 7.500%, due 06/15/25................................... 2,026,365 2,035,889 8.000%, due 09/15/26................................... 4,149,445 4,238,919 ----------- 48,172,665 ----------- U.S. GOVERNMENT OBLIGATIONS-- 21.05% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01................................... 3,635,000 3,671,350 6.250%, due 10/31/01................................... 12,860,000 12,803,738 7.000%, due 07/15/06................................... 8,230,000 8,466,613 8.125%, due 05/15/21................................... 14,420,000 16,497,388 U.S. Treasury Principal Strips 0.000%, due 08/15/03................................... 7,230,000 4,892,396 0.000%, due 11/15/04................................... 15,985,000 9,903,986 0.000%, due 05/15/08................................... 5,245,000 2,543,143 0.000%, due 02/15/19................................... 4,900,000 1,095,248 ----------- 59,873,862 ----------- Total U.S. Bonds (Cost $157,642,385).................... 159,332,974 ----------- Short-Term Investments--12.44% U.S. GOVERNMENT OBLIGATIONS-- 0.48% U.S. Treasury Bill 5.360%, due 11/13/97................. 1,400,000 1,372,962 ----------- COMMERCIAL PAPER -- 11.96% American Stores Co. 5.830%, due 07/23/97................................... 1,000,000 996,437 Case Credit Corp. 5.760%, due 07/21/97.................. 1,000,000 996,800 Crown Cork & Seal Co. 5.800%, due 07/09/97................................... 1,500,000 1,498,067 5.770%, due 07/15/97................................... 1,700,000 1,696,185 CSX Corp. 5.780%, due 07/09/97................................... 2,500,000 2,496,789 5.800%, due 07/22/97................................... 1,000,000 996,617 Cummins Engine Company, Inc. 6.500%, due 07/01/97................................... 500,000 500,000 Enron Oil & Gas 6.520%, due 07/01/97.................... 7,176,000 7,176,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................... 1,500,000 1,497,592 5.850%, due 08/11/97................................... 2,500,000 2,483,344
- -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ------------ Marriott Corp. 5.770%, due 07/08/97.................... $1,000,000 $ 998,878 Norfolk Southern Corp. 5.770%, due 07/10/97.................................. 1,000,000 998,558 5.780%, due 07/18/97.................................. 1,500,000 1,495,906 Occidental Petroleum 5.800%, due 08/13/97.................................. 1,750,000 1,737,876 Sundstrand Corp. 5.800%, due 07/09/97.................................. 1,200,000 1,198,453 5.850%, due 07/15/97.................................. 1,000,000 997,725 Tenneco, Inc. 5.780%, due 07/17/97.................................. 1,750,000 1,745,504 5.800%, due 07/23/97.................................. 1,000,000 996,455 Textron Financial Corp. 6.400%, due 07/01/97.................................. 3,500,000 3,500,000 ------------ 34,007,186 ------------ Total Short-Term Investments (Cost $35,379,046).................................... 35,380,148 ------------ Total Investments (Cost $274,736,312)--106.43% (a)...................... 302,801,511 ------------ Liabilities, less cash and other assets-- (6.43%)...................................... (18,291,697) ------------ Net Assets--100%....................................... $284,509,814 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $274,855,422; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $29,429,449 Gross unrealized depreciation................................ (1,483,360) ----------- Net unrealized appreciation................................ $27,946,089 ===========
(b) Non-income producing security FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1997. MTN: Medium term note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144-A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $16,558,539 or 5.82% of net assets. FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of June 30, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) -------------- ----------- ----------- ----------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 55 contracts.............. September 1997 $ 5,776,272 $ 5,823,985 $ 47,713 10 Year U.S. Treasury Note, 49 contracts.............. September 1997 5,243,368 5,285,875 42,507 30 Year U.S. Treasury Bond, 44 contracts.............. September 1997 4,797,455 4,886,750 89,295 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 63 contracts.............. September 1997 26,671,770 28,042,875 (1,371,105) ----------- Total.................... $(1,191,590) ===========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $1,372,962. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $274,736,312) (Note 1)............... $302,801,511 Receivables: Investment securities sold...................................... 8,232,355 Dividends....................................................... 232,210 Interest........................................................ 1,792,937 Fund shares sold................................................ 806,039 Variation margin (Note 4)....................................... 154,131 Other assets..................................................... 42,136 ------------ TOTAL ASSETS.................................................. 314,061,319 ------------ LIABILITIES: Payables: Investment securities purchased................................. 27,505,092 Fund shares redeemed............................................ 194,098 Due to custodian bank........................................... 1,596,904 Investment advisory fees (Note 2)............................... 203,965 Accrued expenses................................................ 51,446 ------------ TOTAL LIABILITIES............................................. 29,551,505 ------------ NET ASSETS........................................................ $284,509,814 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $244,115,671 Accumulated undistributed net investment income.................. 3,271,123 Accumulated net realized gain.................................... 10,249,411 Net unrealized appreciation...................................... 26,873,609 ------------ NET ASSETS.................................................... $284,509,814 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $282,859,904 and 22,583,464 shares is- sued and outstanding) (Note 6)................................. $ 12.53 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 80 shares issued and outstanding) (Note 6).......... $ 12.53 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,648,910 and 132,351 shares issued and outstanding) (Note 6). $ 12.46 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME Interest.......................................................... $10,015,932 Dividends......................................................... 1,832,510 ----------- TOTAL INCOME................................................... 11,848,442 ----------- EXPENSES: Advisory (Note 2)................................................. 1,775,454 Administration.................................................... 131,904 Custodian......................................................... 79,580 Distribution (Note 5)............................................. 6,675 Other............................................................. 260,939 ----------- TOTAL EXPENSES................................................. 2,254,552 Expenses waived by Advisor (Note 2)............................ (215,473) ----------- NET EXPENSES................................................... 2,039,079 ----------- NET INVESTMENT INCOME ......................................... 9,809,363 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 19,028,392 Futures contracts................................................ (2,961,151) ----------- Net realized gain.............................................. 16,067,241 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 11,790,507 Futures contracts................................................ (1,255,734) ----------- Change in net unrealized appreciation or depreciation.......... 10,534,773 ----------- Net realized and unrealized gain.................................. 26,602,014 ----------- Net increase in net assets resulting from operations.............. $36,411,377 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 9,809,363 $ 8,308,870 Net realized gain................................. 16,067,241 8,233,205 Change in net unrealized appreciation or deprecia- tion............................................. 10,534,773 8,676,412 ------------ ------------ Net increase in net assets resulting from opera- tions............................................ 36,411,377 25,218,487 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.................................. (7,953,731) (7,711,341) SwissKey Class................................... (43,714) (9,781) Distributions from net realized gain: Brinson Class I.................................. (10,324,917) (9,885,505) SwissKey Class................................... (65,778) (992) ------------ ------------ Total distributions to shareholders................ (18,388,140) (17,607,619) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 80,528,530 81,710,433 Shares issued on reinvestment of distributions.... 18,312,423 17,593,608 Shares redeemed................................... (60,962,669) (36,030,444) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 6)...................... 37,878,284 63,273,597 ------------ ------------ TOTAL INCREASE IN NET ASSETS................... 55,901,521 70,884,465 ------------ ------------ NET ASSETS: Beginning of year................................. 228,608,293 157,723,828 ------------ ------------ End of year (including accumulated undistributed net investment income of $3,271,123 and $1,459,205, respectively)........................ $284,509,814 $228,608,293 ============ ============
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.
YEAR YEAR DECEMBER 30, 1994* ENDED ENDED THROUGH BRINSON CLASS I JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 11.71 $ 11.23 $ 10.00 -------- -------- -------- Income from investment opera- tions: Net investment income......... 0.47 0.44 0.23 Net realized and unrealized gain......................... 1.29 1.04 1.16 -------- -------- -------- Total income from investment operations................. 1.76 1.48 1.39 -------- -------- -------- Less distributions: Distributions from net invest- ment income.................. (0.40) (0.43) (0.16) Distributions from net real- ized gain.................... (0.54) (0.57) -- -------- -------- -------- Total distributions......... (0.94) (1.00) (0.16) -------- -------- -------- Net asset value, end of period.. $ 12.53 $ 11.71 $ 11.23 ======== ======== ======== Total return (non-annualized)... 15.50% 13.52% 13.91% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $282,860 $227,829 $157,724 Ratio of expenses to average net assets: Before expense reimbursement.. 0.88% 1.01% 1.06%** After expense reimbursement... 0.80% 0.80% 0.80%** Ratio of net investment income to average net assets: Before expense reimbursement.. 3.78% 3.76% 4.36%** After expense reimbursement... 3.86% 3.97% 4.63%** Portfolio turnover rate........ 329% 240% 196% Average commission rate paid per share..................... $0.0441 $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 11.67 $ 11.38 ------- ------- Income from investment operations: Net investment income........................... 0.38 0.42 Net realized and unrealized gain................ 1.31 0.86 ------- ------- Total income from investment operations....... 1.69 1.28 ------- ------- Less distributions: Distributions from net investment income........ (0.36) (0.42) Distributions from net realized gain............ (0.54) (0.57) ------- ------- Total distributions........................... (0.90) (0.99) ------- ------- Net asset value, end of period.................... $ 12.46 $ 11.67 ======= ======= Total return (non-annualized)..................... 14.99% 11.54% Ratios/Supplemental data Net assets, end of period (in 000s).............. $ 1,649 $ 779 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.38% 1.51%** After expense reimbursement..................... 1.30% 1.30%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 3.28% 3.26%** After expense reimbursement..................... 3.36% 3.47%** Portfolio turnover rate.......................... 329% 240% Average commission rate paid per share........... $0.0441 $0.0481
*Commencement of SwissKey Class **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 U.S EQUITY FUND - -------------------------------------------------------------------------------- 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 June 30, 1997, the SwissKey U.S. Equity Fund provided an annualized return of 29.85% compared to its benchmark, the Wilshire 5000 Index, return of 26.44%. For the year ended June 30, 1997, the Fund returned 31.28%, while the benchmark returned 29.32%. The total return of the SwissKey U.S. Equity Fund was 16.54% for the first six months of 1997, compared to the 17.65% return for the Wilshire 5000 Index. The following paragraphs review the sources of returns in the first half of 1997. Market exposure (average beta of 0.99) detracted modestly from Fund relative performance in the strong equity market environment which characterized the first half of 1997. Conversely, other broad factor positions added to results. The most significant of these was a higher than benchmark exposure to the strongly performing traditional value measures of earnings-price, book-price, and yield coupled with an underweighting in growth issues. Also positive was an underweighting in stocks ranked high in price and earnings momentum. Some offset to the favorable contribution of these factors was the underweight in foreign income. Large, multinational issues have been among the best market performers so far this year. Industry weightings had a fairly neutral influence upon performance in the first half. On the positive side, the Fund's low exposure to telephone and electric utilities continued to benefit results. We strongly believe that a combination of new technology, intensifying competition and the easing of regulatory barriers will meaningfully pressure future profitability of the traditional telephone and electric utilities. Another positive was the underweighting in several of the basic industries, particularly chemicals. Chemical product pricing is suffering as rapid capacity growth outstrips demand, particularly in many developing countries. In addition, the underweight in autos and overweight in health care contributed favorably to results. Offsetting these gains were several adverse industry positions including the Fund overweighting in pollution control stocks. Waste stream volume growth has been lackluster and landfill tipping fees continue under pressure. Consumer industry weightings were also a negative due to an underweight in beverages and an overweight in tobacco. Finally, the underweighting in the miscellaneous finance group, which includes brokerage and investment management firms, detracted from performance. The stock specific influence upon the Fund's active return was negative for the first six months. Among large capitalization issues, the best performers were Xerox, Schering Plough, Corning, Gannett and CIGNA while the worst were Pharmacia & Upjohn, Chase Manhattan, Burlington Northern Santa Fe, Enron and Rhone Poulenc Rorer. In the intermediate capitalization segment of the Fund, the strongest contributors were Timken, U.S. Bancorp, Nextel Communications, Coca- Cola Enterprises and Interpublic Group, while the weakest were Tyson Foods, Allergan, York International, Harnischfeger and Informix. - -------------------------------------------------------------------------------- 18 U.S. Equity Fund - -------------------------------------------------------------------------------- Total Return 6 months 1 year 7/31/95* ended ended to 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- SwissKey U.S. Equity Fund 16.54% 31.28% 29.85% - -------------------------------------------------------------------------------- Wilshire 5000 Index 17.65 29.32 26.44 - -------------------------------------------------------------------------------- * Inception date of the SwissKey U.S. Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $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 June 30, 1997. 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 [GRAPH 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 3/31/97 14,260 13,412 6/30/97 16,499 15,677
$16,499 SwissKey U.S. Equity Fund $15,677 Wilshire 5,000 Index 7/31/95 = $10,000 Data through 6/30/97 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. 19 U.S. Equity Fund
- ------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of June 30, 1997 - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals................................................... 2.13% Housing/Paper............................................... 4.38 Metals...................................................... 0.59 ------ 7.10 Capital Investments Capital Goods............................................... 7.24 Technology.................................................. 9.75 ------ 16.99 Consumer Autos/Durables.............................................. 3.04 Discretionary............................................... 4.52 Health: Drugs............................................... 7.08 Health: Non-Drugs........................................... 3.50 Non-Durables................................................ 9.70 Retail/Apparel.............................................. 4.24 ------ 32.08 Energy........................................................ 4.14 Financial Banks....................................................... 7.17 Non-Banks................................................... 7.50 ------ 14.67 Transportation................................................ 5.49 Utilities..................................................... 6.00 Services/Miscellaneous........................................ 7.93 ------ Total U.S. Equities......................................... 94.40* ------ SHORT-TERM INVESTMENTS........................................ 6.76* ------ TOTAL INVESTMENTS........................................... 101.16 ------ LIABILITIES, LESS CASH AND OTHER ASSETS................................................ (1.16) ------ NET ASSETS.................................................... 100.00% ======
* The Fund held a long position in stock index futures on June 30, 1997 which increased U.S. equity exposure from 94.40% to 99.65% and reduced exposure to Short-Term Investments from 6.76% to 1.51%. - ------------------------------------------------------------------------------
Top Ten U.S. Equity Holdings As of June 30, 1997 Percent of Net Assets - ------------------------------------------------------------------------------ 1. Xerox Corp 4.98% 2. Chase Manhattan Corp 4.22 3. Lockheed Martin Corp 3.96 4. Philip Morris Companies, Inc 3.92 5. Aon Corp 3.26 6. CIGNA Corp 3.21 7. Goodyear Tire & Rubber Co 2.93 8. Burlington Northern Santa Fe 2.92 9. Federal Express Corp 2.69 10. Citicorp 2.65 - -------------------------------------------------------------------------------
20 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 94.40% Aetna Life & Casualty Co.................................. 46,000 $ 4,709,250 Allergan, Inc............................................. 119,700 3,807,956 Alza Corp. (b)............................................ 116,700 3,384,300 Aon Corp.................................................. 234,650 12,143,137 Automatic Data Processing, Inc............................ 114,000 5,358,000 Beckman Instruments, Inc.................................. 34,000 1,640,500 Birmingham Steel Corp..................................... 46,800 725,400 Boston Technology, Inc. (b)............................... 43,600 1,288,925 Browning-Ferris Industries, Inc........................... 88,500 2,942,625 Burlington Northern Santa Fe.............................. 121,200 10,892,850 Centerior Energy Co....................................... 110,500 1,236,219 Champion Enterprises, Inc. (b)............................ 55,100 826,500 Champion International Corp............................... 4,000 221,000 Chase Manhattan Corp...................................... 162,200 15,743,537 CIGNA Corp................................................ 67,500 11,981,250 Circuit City Stores, Inc.................................. 172,600 6,138,087 Citicorp.................................................. 82,000 9,886,125 CMS Energy Corp........................................... 128,100 4,515,525 Coca-Cola Enterprises, Inc................................ 94,200 2,166,600 Comerica, Inc............................................. 32,100 2,182,800 Comverse Technology, Inc. (b)............................. 21,600 1,123,200 Corning, Inc.............................................. 149,200 8,299,250 Covance, Inc.............................................. 58,750 1,134,609 CPC International, Inc.................................... 51,100 4,717,169 CVS Corp.................................................. 74,200 3,802,750 Dial Corp................................................. 67,700 1,057,813 Eastman Chemical Co....................................... 79,000 5,016,500 EMC Corp./Mass. (b)....................................... 222,100 8,661,900 Enron Corp................................................ 225,300 9,195,056 Entergy Corp.............................................. 13,400 366,825 Federal Express Corp. (b)................................. 173,700 10,031,175 Federated Department Stores (b)........................... 66,200 2,300,450 FileNet Corp. (b)......................................... 23,800 345,100 First American Corp.-Tenn................................. 30,600 1,174,275 First Bank System, Inc.................................... 23,700 2,023,388 First Data Corp........................................... 193,830 8,516,406 First of America Bank Corp................................ 22,450 1,027,088 First Security Corp....................................... 38,600 1,054,263 Fleetwood Enterprises, Inc................................ 23,000 685,688 Food Lion, Inc. Class A................................... 213,800 1,530,006 Forest Laboratories, Inc. (b)............................. 43,700 1,810,819 Gannett Co., Inc.......................................... 76,500 7,554,375 General Instrument Corp. (b).............................. 266,200 6,655,000 Genzyme Corp. (b)......................................... 47,200 1,309,800 Geon Co................................................... 32,300 654,075 Goodyear Tire & Rubber Co................................. 172,400 10,915,075 Harnischfeger Industries, Inc............................. 77,400 3,212,100 Health Care and Retirement Corp. (b)...................... 73,950 2,468,081 Hibernia Corp. Class A.................................... 64,900 904,544 Informix Corp. (b)........................................ 62,400 561,600 Interpublic Group of Companies, Inc....................... 50,700 3,108,544 James River Corp. of Virginia............................. 92,100 3,407,700 Kroger Co. (b)............................................ 63,700 1,847,300 Lockheed Martin Corp...................................... 142,626 14,770,705 Lyondell Petrochemical Co................................. 127,700 2,785,456 Manor Care, Inc........................................... 104,000 3,393,000 Martin Marietta Materials, Inc............................ 34,257 1,109,070 Masco Corp................................................ 136,100 5,682,175 Mattel, Inc............................................... 169,275 5,734,191 Nabisco Holdings Corp. Class A............................ 119,000 4,745,125 National Service Industries Inc........................... 22,800 1,110,075 Nextel Communications, Inc. Class A (b)................... 178,000 3,370,875 Octel Communications Corp. (b)............................ 38,700 907,031 Old Republic International Corp........................... 42,050 1,274,641 Peco Energy Co............................................ 271,500 5,701,500 Pentair, Inc.............................................. 61,800 2,031,675
SHARES VALUE ---------- ------------ Pharmacia & Upjohn, Inc.................... 148,700 $ 5,167,325 Philip Morris Companies, Inc.................... 329,600 14,626,000 Raytheon Co............. 41,400 2,111,400 Regions Financial Corp.. 30,000 948,750 Reynolds & Reynolds Co. Class A................ 41,800 658,350 Schering Plough Corp.... 204,900 9,809,587 Seagate Technology, Inc. (b).................... 56,100 1,974,019 Timken Co............... 79,300 2,820,106 Trinity Industries, Inc.................... 25,200 800,100 Tyson Foods, Inc. Class A...................... 237,700 4,546,012 UCAR International, Inc. (b).................... 2,900 132,675 Ultramar Diamond Shamrock Corp.......... 132,918 4,336,450 US Bancorp.............. 71,100 4,559,287 Vencor, Inc. (b)........ 61,100 2,581,475 Viad Corp............... 114,500 2,204,125 Westvaco Corp........... 27,900 877,106 Witco Corp.............. 14,300 542,506 Xerox Corp.............. 235,700 18,590,838 York International Corp................... 72,800 3,348,800 360 Communications Co. (b).................... 34,633 593,090 ------------ Total U.S. Equities (Cost $293,837,346).... 352,106,030 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 6.76% U.S. GOVERNMENT OBLIGATIONS -- 0.19% U.S. Treasury Bill 5.368%, due 11/13/97... $ 710,000 $ 696,288 ------------ COMMERCIAL PAPER -- 6.57% Case Credit Corp. 6.250%, due 07/07/97... 1,000,000 998,958 5.760%, due 07/21/97... 500,000 498,400 Crown Cork & Seal Co. 5.800%, due 07/09/97... 500,000 499,356 5.770%, due 07/15/97... 500,000 498,878 CSX Corp. 5.780%, due 07/09/97............... 500,000 499,358 Cummins Engine Company, Inc. 6.500%, due 07/01/97............... 2,500,000 2,500,000 Enron Oil & Gas 6.520%, due 07/01/97........... 5,524,000 5,524,000 Hughes Electronics Corp. 5.780%, due 07/11/97... 500,000 499,197 5.850%, due 08/11/97... 500,000 496,669 Marriott Corp. 5.770%, due 07/08/97........... 500,000 499,439 Norfolk Southern Corp. 5.770%, due 07/10/97........... 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97........... 500,000 496,536 Sundstrand Corp. 5.800%, due 07/09/97... 500,000 499,356 5.850%, due 07/15/97... 500,000 498,862 Tenneco, Inc. 5.780%, due 07/17/97........... 500,000 498,716 Textron Financial Corp. 6.400%, due 07/01/97........... 9,500,000 9,500,000 ------------ 24,507,004 ------------ Total Short-Term Investments (Cost $25,202,710)..... 25,203,292 ------------ Total Investments (Cost $319,040,056) -- 101.16% (a)............ 377,309,322 ------------ Liabilities, less cash and other assets-- (1.16%)................ (4,319,862) ------------ Net Assets -- 100%...... $372,989,460 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 21 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $319,163,004; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $60,885,827 Gross unrealized depreciation................................ (2,739,509) ----------- Net unrealized appreciation................................ $58,146,318 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of June 30, 1997:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN -------------- ----------- ----------- ---------- Index Futures Buy Contracts Standard & Poor's 500, 44 contracts.................. September 1997 $19,350,765 $19,585,500 $234,735 ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1997 was $696,288. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $319,040,056) (Note 1) .............. $377,309,322 Cash............................................................. 423,747 Receivables: Investment securities sold...................................... 1,645,118 Dividends....................................................... 555,543 Fund shares sold................................................ 1,181,693 Other assets..................................................... 39,163 ------------ TOTAL ASSETS.................................................. 381,154,586 ------------ LIABILITIES: Payables: Investment securities purchased................................. 6,850,007 Fund shares redeemed............................................ 885,591 Investment advisory fees (Note 2)............................... 224,739 Variation margin (Note 4)....................................... 147,926 Accrued expenses................................................ 56,863 ------------ TOTAL LIABILITIES............................................. 8,165,126 ------------ NET ASSETS........................................................ $372,989,460 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $298,910,691 Accumulated undistributed net investment income.................. 679,544 Accumulated net realized gain.................................... 14,895,224 Net unrealized appreciation...................................... 58,504,001 ------------ NET ASSETS.................................................... $372,989,460 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $337,949,448 and 19,159,533 shares is- sued and outstanding) (Note 6)................................. $ 17.64 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 57 shares issued and outstanding) (Note 6).......... $ 17.64 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $35,039,012 and 1,992,413 shares issued and outstanding) (Note 6)...................................... $ 17.59 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Dividends......................................................... $ 3,429,477 Interest.......................................................... 545,249 ----------- TOTAL INCOME................................................... 3,974,726 ----------- EXPENSES: Advisory (Note 2)................................................. 1,423,666 Administration.................................................... 89,029 Distribution (Note 5)............................................. 73,831 Custodian......................................................... 72,024 Other............................................................. 236,863 ----------- TOTAL EXPENSES................................................. 1,895,413 Expenses waived by Advisor (Note 2)............................ (189,305) ----------- NET EXPENSES................................................... 1,706,108 ----------- NET INVESTMENT INCOME.......................................... 2,268,618 ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments...................................................... 19,441,498 Futures contracts................................................ 2,138,520 ----------- Net realized gain ............................................. 21,580,018 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 40,649,230 Futures contracts ............................................... 237,510 ----------- Change in net unrealized appreciation or depreciation.......... 40,886,740 ----------- Net realized and unrealized gain ................................. 62,466,758 ----------- Net increase in net assets resulting from operations.............. $64,735,376 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 2,268,618 $ 1,333,171 Net realized gain ................................ 21,580,018 7,826,393 Change in net unrealized appreciation or deprecia- tion ............................................ 40,886,740 13,357,238 ------------ ------------ Net increase in net assets resulting from opera- tions............................................ 64,735,376 22,516,802 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................. (1,717,943) (1,233,245) SwissKey Class.................................. (87,137) (17,809) Distributions from net realized gain: Brinson Class I................................. (12,393,329) (1,764,213) SwissKey Class.................................. (838,501) (2,611) ------------ ------------ Total distributions to shareholders............... (15,036,910) (3,017,878) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 212,394,882 71,976,805 Shares issued on reinvestment of distributions.... 14,138,565 2,944,272 Shares redeemed................................... (34,971,198) (5,264,717) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 6)...................... 191,562,249 69,656,360 ------------ ------------ TOTAL INCREASE IN NET ASSETS................... 241,260,715 89,155,284 ------------ ------------ NET ASSETS: Beginning of year................................. 131,728,745 42,573,461 ------------ ------------ End of year (including accumulated undistributed net investment income of $679,544 and $216,006, respectively).................................... $372,989,460 $131,728,745 ============ ============
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.
YEAR ENDED JUNE 30, FEBRUARY 22, 1994* --------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period........................ $ 14.59 $ 11.53 $ 9.65 $10.00 -------- -------- ------- ------ Income from investment opera- tions: Net investment income........ 0.15 0.17 0.16 0.05 Net realized and unrealized gain (loss)................. 4.27 3.31 1.89 (0.36) -------- -------- ------- ------ Total income (loss) from investment operations..... 4.42 3.48 2.05 (0.31) -------- -------- ------- ------ Less distributions: Distributions from net in- vestment income............. (0.14) (0.17) (0.14) (0.04) Distributions from net real- ized gain................... (1.23) (0.25) (0.03) -- -------- -------- ------- ------ Total distributions........ (1.37) (0.42) (0.17) (0.04) -------- -------- ------- ------ Net asset value, end of period. $ 17.64 $ 14.59 $ 11.53 $ 9.65 ======== ======== ======= ====== Total return (non-annualized).. 31.87% 30.57% 21.45% (3.10)% Ratios/Supplemental data Net assets, end of period (in 000s)........................ $337,949 $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reimbursement. 0.89% 1.14% 1.70% 5.40% ** After expense reimbursement.. 0.80% 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reimbursement. 1.06% 1.13% 1.09% (2.82)%** After expense reimbursement.. 1.15% 1.47% 1.99% 1.78% ** Portfolio turnover rate....... 43% 36% 33% 9% Average commission rate paid per share.................... $ 0.0422 $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 14.58 $ 11.94 ------- ------- Income from investment operations: Net investment income........................... 0.11 0.10 Net realized and unrealized gain................ 4.22 2.92 ------- ------- Total income from investment operations....... 4.33 3.02 ------- ------- Less distributions: Distributions from net investment income........ (0.09) (0.13) Distributions from net realized gain............ (1.23) (0.25) ------- ------- Total distributions........................... (1.32) (0.38) ------- ------- Net asset value, end of period.................... $ 17.59 $ 14.58 ======= ======= Total return (non-annualized)..................... 31.28% 25.70% Ratios/Supplemental data Net assets, end of period (in 000s).............. $35,039 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.41% 1.66%** After expense reimbursement..................... 1.32% 1.32%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 0.54% 0.61%** After expense reimbursement..................... 0.63% 0.95%** Portfolio turnover rate.......................... 43% 36% Average commission rate paid per share........... $0.0422 $0.0457
*Commencement of SwissKey Class **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 27 U.S. BOND FUND 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 6.09% since its inception on August 31, 1995 compared to the Salomon Brothers Broad Investment Grade (BIG) Bond Index return of 6.62%. For the year ended June 30, 1997, the Fund produced a total return of 7.91% compared to the Benchmark return of 8.15%. In the first half of 1997, the Fund returned 2.58% compared to the Benchmark return of 3.06%. The first quarter of 1997 in the U.S. was characterized by unusually strong rates of real economic growth, heightened fears of inflation, rising market interest rates and a 25 basis point hike in the Federal Reserve's overnight funds target rate. In the second quarter, economic activity slowed, Fed policy held steady and market interest rates declined. Over the full semi-annual period there was a net increase in yields on U.S. fixed income securities of about 10 to 20 basis points. Industry Diversification As a Percent of Net Assets As of June 30, 1997 - -------------------------------------------------------------------------------- U.S. BONDS
Corporate Bonds Asset-Backed.......................................................... 3.84% CMO................................................................... 2.60 Consumer.............................................................. 2.18 Financial............................................................. 8.22 Industrial............................................................ 3.93 Telecommunications.................................................... 0.40 Transportation........................................................ 1.48 ------ Total U.S. Corporate Bonds.................................... 22.65 U.S. Government Agencies................................................ 28.68 U.S. Government Obligations............................................. 37.26 International Dollar Bonds.............................................. 6.05 ------ Total U.S. Bonds.............................................. 94.64 ------ SHORT-TERM INVESTMENTS.................................................. 14.42 ------ TOTAL INVESTMENTS............................................. 109.06 LIABILITIES, LESS CASH AND OTHER ASSETS...................................................... (9.06) ------ NET ASSETS.............................................................. 100.00% ======
- -------------------------------------------------------------------------------- 28 U.S. BOND FUND - -------------------------------------------------------------------------------- Total Return 6 months 1 year Annualized ended ended 8/31/95* to 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- SwissKey U.S. Bond Fund 2.58% 7.91% 6.09% - -------------------------------------------------------------------------------- Salomon Brothers Broad Investment Grade (BIG) Bond Index 3.06 8.15 6.62 - -------------------------------------------------------------------------------- * 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 June 30, 1997. 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 [GRAPH APPEARS HERE]
SwissKey U.S. Bond Salomon Brothers BIG Fund Bond Fund - ------- ------------------------------------------------------------------------ 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 3/31/97 10,731 10,857 6/30/97 11,141 11,248 8/31/95=$10,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. - -------------------------------------------------------------------------------- 29 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE -------- --------- Bonds -- 94.64% U.S. CORPORATE BONDS -- 22.65% Aetna Services Inc. 6.970%, due 08/15/36.................... $235,000 $ 237,332 BellSouth Savings & Employee ESOP 9.125%, due 07/01/03....................................... 88,949 92,634 Capital One Bank 6.830%, due 05/17/99....................... 359,000 360,453 Chase Mortgage Finance Corp. 93-J1 Class 1A5 6.625%, due 08/25/09................................................... 70,026 66,997 Ches Pot Tel MD 8.000%, due 10/15/29........................ 87,000 94,158 Citicorp Mortgage Securities, Inc. 94-9 Class A8 5.750%, due 06/25/09................................................... 91,612 77,402 Comcast Cable Communications 144-A 8.500%, due 05/01/27....................................... 300,000 323,448 Countrywide Funding Corp. FRN 6.360%, due 12/01/03....................................... 250,000 238,799 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 06/20/29................................................... 245,000 248,675 CSX Transportation, Inc. 144-A 6.950%, due 05/01/27....................................... 350,000 353,084 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02................................................... 218,000 218,473 Eastman Chemical Co. 7.600%, due 02/01/27................... 223,000 221,009 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03................................................... 155,000 153,405 GE Capital Management Services, Inc. 94-7 Class A12 6.000%, due 02/25/09............................................... 178,678 168,678 GMAC 9.625%, due 12/15/01................................... 294,000 325,311 Hanson Overseas BV 6.750%, due 09/15/05..................... 100,000 97,476 Interamer Development Bank 6.800%, due 10/15/25....................................... 100,000 95,100 Lehman Brothers Holdings 7.250%, due 04/15/03....................................... 225,000 226,083 Lockheed Martin Corp. 7.700%, due 06/15/08.................. 282,000 294,678 MBNA Global Capital Securities FRN 6.659%, due 02/01/27....................................... 90,000 88,936 News America Holdings 7.750%, due 01/20/24.................. 358,000 339,676 Premier Auto Trust 96-3A 6.500%, due 03/06/00................................. 190,000 191,244 96-4A 6.400%, due 10/06/01................................. 350,000 350,616 Salomon, Inc. 6.750%, due 02/15/03.......................... 300,000 293,990 Thrift Financial Corp. 11.250%, due 01/01/16................ 54,270 58,634 Time Warner, Inc. 9.150%, due 02/01/23...................... 75,000 82,775 Time Warner Entertainment, Inc. 8.375%, due 03/15/23....................................... 94,000 96,346 --------- 5,395,412 --------- INTERNATIONAL DOLLAR BONDS -- 6.05% Bayerische Landesbank 6.850%, due 07/19/01.................. 188,000 189,357 Empresa Nacional Electric 7.875%, due 02/01/27....................................... 394,000 397,355
FACE AMOUNT VALUE -------- --------- Province of Quebec 7.500%, due 07/15/23....................................... $200,000 $ 196,736 Repsol International Finance 7.000%, due 08/01/05....................................... 200,000 200,717 Republic of South Africa 9.625%, due 12/15/99............... 71,000 75,029 Royal Bank of Scotland 7.375%, due 04/29/49................. 80,000 79,730 Skandinaviska Enskilda Banken 144-A 6.625%, due 03/29/49....................................... 305,000 301,889 --------- 1,440,813 --------- U.S. GOVERNMENT AGENCIES -- 28.68% Federal Home Loan Mortgage Corp. 5.800%, due 08/15/19....................................... 661,000 621,856 7.500%, due 01/15/23....................................... 139,328 133,110 7.238%, due 05/01/26....................................... 51,187 52,721 0.000%, due 04/15/27 principal only........................ 300,000 178,060 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03....................................... 108,489 105,302 6.500%, due 12/01/03 TBA................................... 300,000 296,156 8.000%, due 11/01/22....................................... 212,105 216,944 9.000%, due 03/01/24....................................... 172,791 184,104 9.000%, due 04/01/25....................................... 410,527 433,362 9.500%, due 04/01/25....................................... 53,394 57,182 Federal National Mortgage Association 6.500%, due 12/01/03 TBA................................... 800,000 759,500 6.500%, due 12/01/03 Balloon TBA........................... 200,000 197,375 6.500%, due 04/25/08....................................... 105,383 101,005 6.500%, due 05/25/08....................................... 132,160 129,863 8.000%, due 12/18/11....................................... 100,000 104,307 9.000%, due 08/01/21....................................... 33,735 35,825 8.500%, due 07/01/22....................................... 25,508 26,843 8.500%, due 12/01/25....................................... 334,233 346,558 6.500%, due 02/01/26....................................... 128,409 122,831 6.500%, due 04/01/26....................................... 423,606 405,207 7.500%, due 12/01/26 TBA................................... 460,000 461,007 6.070%, due 08/01/29 TBA................................... 530,000 523,706 Federal National Mortgage Association Strips 7.500%, due 05/01/23 interest only......................... 188,272 63,317 0.000%, due 07/01/26 principal only........................ 185,521 123,958 0.000%, due 04/01/27 principal only........................ 458,215 303,795 Government National Mortgage Association 10.000%, due 09/15/00...................................... 3,212 3,406 10.000%, due 05/15/01...................................... 6,249 6,626 9.000%, due 11/15/04....................................... 20,543 21,500 9.000%, due 12/15/17....................................... 64,649 69,391 8.000%, due 08/15/22....................................... 89,260 91,185 7.500%, due 12/15/22....................................... 397,800 401,475 7.500%, due 06/15/25....................................... 128,896 129,501 7.000%, due 07/15/25....................................... 127,437 125,219 --------- 6,832,197 ---------
- -------------------------------------------------------------------------------- 30 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE --------- ----------- U.S. GOVERNMENT OBLIGATIONS-- 37.26% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................... $ 153,000 $ 152,044 6.250%, due 10/31/01................................... 525,000 522,703 7.000%, due 07/15/06................................... 940,000 967,025 8.125%, due 05/15/21................................... 1,370,000 1,567,366 6.000%, due 02/15/26................................... 1,812,000 1,621,175 U.S. Treasury Principal Strips 0.000%, due 05/15/03................................... 1,915,000 1,317,577 0.000%, due 08/15/03................................... 1,305,000 883,067 0.000%, due 11/15/04................................... 2,153,000 1,333,956 0.000%, due 05/15/08................................... 1,055,000 511,538 ----------- 8,876,451 ----------- Total U.S. Bonds (Cost $22,347,621)..................... 22,544,873 ----------- Short-Term Investments-- 14.42% COMMERCIAL PAPER -- 14.42% American Stores Co. 5.830%, due 07/23/97................ 500,000 498,219 Case Credit Corp. 5.760%, due 07/21/97.................. 250,000 249,200 Crown Cork & Seal Co. 5.770%, due 07/15/97................................... 500,000 498,878 CSX Corp. 5.780%, due 07/09/97.......................... 500,000 499,358 Enron Oil & Gas 6.520%, due 07/01/97.................... 143,000 143,000 Hughes Electronics Corp. 5.780%, due 07/11/97................................... 500,000 499,197 Norfolk Southern Corp. 5.770%, due 07/10/97................................... 500,000 499,279 Occidental Petroleum 5.800%, due 08/13/97............... 250,000 248,268 Sundstrand Corp. 5.800%, due 07/09/97................... 300,000 299,613 ----------- Total Short-Term Investments (Cost $3,435,012)...................................... 3,435,012 ----------- Total Investments (Cost $25,782,633) -- 109.06% (a)...................... 25,979,885 ----------- Liabilities, less cash and other assets -- (9.06%)...................................... (2,159,180) ----------- Net Assets -- 100%...................................... $23,820,705 ===========
(a) Aggregate cost for federal income tax purposes was $25,786,476; and net unrealized appreciation consisted of: Gross unrealized ap- preciation........... $219,233 Gross unrealized de- preciation........... (25,824) -------- Net unrealized ap- preciation........... $193,409 ========
FRN: Floating rate note---The rate disclosed is that in effect at June 30, 1997. MTN: Medium Term Note TBA: Security is subject to delayed delivery. 144-A: Security exempt from registration under Rule 144-A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1997, the value of these securities amounted to $978,421 or 4.11% of net assets. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $25,782,633) (Note 1)................ $25,979,885 Cash............................................................. 46,542 Receivables: Investment securities sold...................................... 980,757 Interest........................................................ 250,445 Fund shares sold................................................ 1,025 Other assets..................................................... 28,677 ----------- TOTAL ASSETS.................................................. 27,287,331 ----------- LIABILITIES: Payables: Investment securities purchased................................. 3,358,346 Fund shares redeemed............................................ 29,387 Investment advisory fees (Note 2)............................... 29,369 Accrued expenses................................................ 49,524 ----------- TOTAL LIABILITIES............................................. 3,466,626 ----------- NET ASSETS........................................................ $23,820,705 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $23,420,309 Accumulated undistributed net investment income.................. 271,841 Accumulated net realized loss.................................... (68,697) Net unrealized appreciation...................................... 197,252 ----------- NET ASSETS.................................................... $23,820,705 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $22,420,622 and 2,189,278 shares issued and outstanding) (Note 6)...................................... $ 10.24 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 98 shares issued and outstanding) (Note 6).......... $ 10.24 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,399,083 and 136,949 shares issued and outstanding) (Note 6). $ 10.22 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Interest........................................................... $ 921,854 ---------- TOTAL INCOME.................................................... 921,854 ---------- EXPENSES: Advisory (Note 2).................................................. 67,835 Accounting......................................................... 38,182 Registration....................................................... 37,673 Transfer Agent..................................................... 35,540 Professional....................................................... 33,928 Distribution (Note 5).............................................. 4,104 Other.............................................................. 10,538 ---------- TOTAL EXPENSES.................................................. 227,800 Expenses waived and reimbursed by Advisor (Note 2).............. (142,178) ---------- NET EXPENSES.................................................... 85,622 ---------- NET INVESTMENT INCOME .......................................... 836,232 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss.................................................. (36,166) Change in net unrealized appreciation or depreciation.............. 343,515 ---------- Net realized and unrealized gain................................... 307,349 ---------- Net increase in net assets resulting from operations............... $1,143,581 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31, 1995* JUNE 30, THROUGH 1997 JUNE 30, 1996 OPERATIONS: ----------- ---------------- Net investment income........................... $ 836,232 $ 456,231 Net realized loss............................... (36,166) (11,035) Change in net unrealized appreciation or depre- ciation........................................ 343,515 (146,263) ----------- ----------- Net increase in net assets resulting from opera- tions.......................................... 1,143,581 298,933 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................ (598,393) (350,335) SwissKey Class................................. (31,712) (13,132) Distributions in excess of net realized gain: Brinson Class I................................ (675) (23,071) SwissKey Class................................. (39) (268) ----------- ----------- Total distributions to shareholders............. (630,819) (386,806) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................... 16,583,813 10,200,031 Shares issued on reinvestment of distributions.. 461,917 386,807 Shares redeemed................................. (3,420,321) (867,431) ----------- ----------- Net increase in net assets resulting from capi- tal share transactions (Note 6)................ 13,625,409 9,719,407 ----------- ----------- TOTAL INCREASE IN NET ASSETS................. 14,138,171 9,631,534 ----------- ----------- NET ASSETS: Beginning of period............................. 9,682,534 51,000 ----------- ----------- End of period (including accumulated undistrib- uted net investment income of $271,841 and $90,190, respectively).. $23,820,705 $ 9,682,534 =========== ===========
*Commencement of investment operations 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.
AUGUST 31, 1995* YEAR ENDED THROUGH BRINSON CLASS I JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period............ $ 9.93 $10.00 ------- ------ Income from investment operations: Net investment income......................... 0.51*** 0.50 Net realized and unrealized gain (loss)....... 0.32 (0.14) ------- ------ Total income from investment operations..... 0.83 0.36 ------- ------ Less distributions: Distributions from net investment income...... (0.52) (0.40) Distributions in excess of net realized gain.. -- (0.03) ------- ------ Total distributions......................... (0.52) (0.43) ------- ------ Net asset value, end of period.................. $ 10.24 $ 9.93 ======= ====== Total return (non-annualized)................... 8.45% 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)............ $22,421 $9,047 Ratio of expenses to average net assets: Before expense reimbursement.................. 1.65% 3.63%** After expense reimbursement................... 0.60% 0.60%** Ratio of net investment income to average net assets: Before expense reimbursement.................. 5.14% 3.00%** After expense reimbursement................... 6.19% 6.03%** Portfolio turnover rate........................ 410% 363%
*Commencement of investment operations **Annualized ***The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
AUGUST 31, 1995* YEAR ENDED THROUGH JUNE 30, SWISSKEY CLASS JUNE 30, 1997 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period............ $ 9.92 $10.00 ------ ------ Income from investment operations: Net investment income......................... 0.46*** 0.46 Net realized and unrealized gain (loss)....... 0.32 (0.13) ------ ------ Total income from investment operations..... 0.78 0.33 ------ ------ Less distributions: Distributions from net investment income...... (0.48) (0.38) Distributions in excess of net realized gain.. -- (0.03) ------ ------ Total distributions......................... (0.48) (0.41) ------ ------ Net asset value, end of period.................. $10.22 $ 9.92 ====== ====== Total return (non-annualized)................... 7.91% 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)............ $1,399 $ 636 Ratio of expenses to average net assets: Before expense reimbursement.................. 2.12% 4.10%** After expense reimbursement................... 1.07% 1.07%** Ratio of net investment income to average net assets: Before expense reimbursement.................. 4.67% 2.53%** After expense reimbursement................... 5.72% 5.56%** Portfolio turnover rate........................ 410% 363%
*Commencement of investment operations **Annualized ***The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 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. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey 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. 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 year ended June 30, 1997, 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. Amounts equal to 15.05% and 38.95% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the U.S. Balanced Fund and the U.S. Equity Fund, respectively. 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 Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. 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. - -------------------------------------------------------------------------------- 37 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 that 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 year ended June 30, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES WAIVED FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES AND/OR REIMBURSED -------- --------------- --------------- -------------- ---------- ----------------- U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,775,454 $215,473 U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,423,666 189,305 U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 67,835 142,178
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1997, were $7,300, $4,998 and $3,828 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $809,073,589 $785,163,972 U.S. Equity Fund...................................... 226,474,872 84,130,110 U.S. Bond Fund........................................ 66,672,483 53,682,174
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 PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares and, effective June 30, 1997, the Brinson Class N shares. Annual fees under the SwissKey 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 Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. - -------------------------------------------------------------------------------- 38 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. BALANCED FUND --------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I................. 6,578,157 $ 78,728,712 6,944,846 $80,934,038 Brinson Class N................. 80 1,000 -- -- SwissKey Class.................. 148,317 1,798,818 67,290 776,395 ---------- ------------ --------- ----------- Total Sales................... 6,726,554 $ 80,528,530 7,012,136 $81,710,433 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I................. 1,541,262 $ 18,266,191 1,540,774 $17,588,758 Brinson Class N................. -- -- -- -- SwissKey Class.................. 3,904 46,232 422 4,850 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 1,545,166 $ 18,312,423 1,541,196 $17,593,608 ========== ============ ========= =========== Redemptions: Brinson Class I................. 4,988,208 $ 59,912,281 3,073,501 $36,019,481 Brinson Class N................. -- -- -- -- SwissKey Class.................. 86,625 1,050,388 957 10,963 ---------- ------------ --------- ----------- Total Redemptions............. 5,074,833 $ 60,962,669 3,074,458 $36,030,444 ========== ============ ========= =========== U.S. EQUITY FUND --------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I................. 11,551,336 $183,660,431 5,125,613 $66,685,850 Brinson Class N................. 57 1,000 -- -- SwissKey Class.................. 1,834,556 28,733,451 375,655 5,290,955 ---------- ------------ --------- ----------- Total Sales................... 13,385,949 $212,394,882 5,501,268 $71,976,805 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I................. 907,559 $ 13,745,444 222,497 $ 2,935,334 Brinson Class N................. -- -- -- -- SwissKey Class.................. 25,905 393,121 644 8,938 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 933,464 $ 14,138,565 223,141 $ 2,944,272 ========== ============ ========= =========== Redemptions: Brinson Class I................. 1,959,184 $ 31,250,336 380,602 $ 5,174,675 Brinson Class N................. -- -- -- -- SwissKey Class.................. 237,473 3,720,862 6,874 90,042 ---------- ------------ --------- ----------- Total Redemptions............. 2,196,657 $ 34,971,198 387,476 $ 5,264,717 ========== ============ ========= =========== U.S. BOND FUND --------------------------------------------- YEAR ENDED PERIOD ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I................. 1,521,821 $ 15,371,166 953,454 $ 9,550,552 Brinson Class N................. 98 1,000 -- -- SwissKey Class.................. 119,951 1,211,647 63,717 649,479 ---------- ------------ --------- ----------- Total Sales................... 1,641,870 $ 16,583,813 1,017,171 $10,200,031 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I................. 44,351 $ 449,362 37,309 $ 373,407 Brinson Class N................. -- -- -- -- SwissKey Class.................. 1,239 12,555 1,362 13,400 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 45,590 $ 461,917 38,671 $ 386,807 ========== ============ ========= =========== Redemptions: Brinson Class I................. 288,064 $ 2,929,252 84,593 $ 856,547 Brinson Class N................. -- -- -- -- SwissKey Class.................. 48,365 491,069 1,055 10,884 ---------- ------------ --------- ----------- Total Redemptions............. 336,429 $ 3,420,321 85,648 $ 867,431 ========== ============ ========= ===========
- -------------------------------------------------------------------------------- 39 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund as of June 30, 1997, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund at June 30, 1997, the results of their operations for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 8, 1997 - -------------------------------------------------------------------------------- 40 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. - -------------------------------------------------------------------------------- [SWISSKEY LOGO] 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY N . http://networth.galt.com/swisskey Swisskey Non-U.S. Equity Fund Annual Report June 30, 1997 Your Key to Performance -------------------------- Trustees and Officers - -------------------------------------------------------------------------------- Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Debra L. Nichols Chairman of the Board Secretary E. Thomas McFarlan Carolyn M. Burke, CPA President Treasurer Thomas J. Digenan, CFA, CPA Catherine E. Macrae Vice President Assistant Secretary - -------------------------------------------------------------------------------- 1 The Fund's Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- Brinson Partners is the global institutional asset management division of Swiss Bank Corporation. Brinson Partners continues as the name used within North America, while SBC Brinson is the name used outside North America. We are a global investment management organization with over $75 billion in institutional assets under discretionary active management. We are also the investment manager for SBC Private Banking mutual fund assets which total $50 billion. In addition, we act as an investment advisor to SBC Private Banking. The division manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other 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. 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 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 - --------------------------------------------------------------------------------
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 Report of Independent Auditors.............................................22
- -------------------------------------------------------------------------------- 3 Shareholder Letter - -------------------------------------------------------------------------------- August 20, 1997 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1997 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 to June 30, 1997, the Fund provided an annualized total return of 18.37%. In the first half of 1997, the Fund returned 13.80%. Market Strategy The Fund continues to hold a 5.0% 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, remains somewhat more overpriced than most of the other non-U.S. markets. Given our valuation analyses and fundamental considerations, we are underweight in Japan by 3.0%. Currency Strategy Currency strategy is largely neutral except for the sterling and Hong Kong dollar underweights. Sterling is overvalued by 20%; its strength is unsustainable. The riskiness of the Hong Kong dollar continues to support a strategy which minimizes exposure. We look forward to the challenges ahead and, as always, welcome your thoughts and comments. 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 Banking Private Banking - -------------------------------------------------------------------------------- 4 Global Economic and Market Highlights - -------------------------------------------------------------------------------- Fiscal restraint in continental Europe, caused by the drive to monetary union (EMU), has amplified the economic slowdown, resulting in persistently high unemployment. These economies are hindered by more structurally rigid labor markets than in the U.S. and Asia. As yet, governments seem unwilling to take the hard measures necessary to free up wages and encourage labor mobility and flexibility. Apart from some temporary yen strengthening in the second quarter, a weaker currency has aided the Japanese economy. Export-oriented industries in particular have recovered significantly from the prolonged recession brought on by the bursting of the "bubble" at the start of the 1990s. The hike in the consumption tax from 3% to 5% at the start of April had caused a spurt in spending in the first quarter. However, now that it is in place, there has been some softening in demand, particularly for big ticket items, which is likely to adversely affect domestically-oriented firms. The currency turmoil in Southeast Asia is drawing attention to some of the weaknesses of those economies. In Thailand, which was the initial casualty, the crisis was precipitated by a bad bank loan problem. These problems in the banking system prevented the central bank from increasing rates sufficiently to maintain the peg to a strengthening U.S. dollar.
Non-U.S. Equity Environment 6 months 1 year 7/31/95* Major Markets ended ended to Total Return in U.S. Dollar Hedged Terms 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- Japan 10.34% 0.16% 16.80% U.K. 12.04 26.27 18.14 Germany 33.62 48.75 32.17 France 24.72 38.71 28.31 Canada 13.72 35.08 24.59 Netherlands 37.77 62.07 48.28 Australia 12.64 21.32 11.58 - -------------------------------------------------------------------------------- 6 months 1 year 7/31/95* Major Currencies ended ended to Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- Yen 1.43% -4.15% -12.78% Pound -2.75 7.11 2.07 Deutschemark -11.56 -12.65 -11.44 Canadian Dollar -0.65 -1.01 -0.27 - --------------------------------------------------------------------------------
*Inception date of the SwissKey Class Non-U.S. Equity Fund. Returns in excess of 1 year are average annualized returns. - -------------------------------------------------------------------------------- 5 Non-U.S. Equity Fund - -------------------------------------------------------------------------------- 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 18.37% versus 10.81% for the benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. For the year ended June 30, 1997, the Fund returned 19.32% while the benchmark returned 13.64%. For the first half of 1997, the SwissKey Non-U.S. Equity Fund returned 13.80% outperforming the 11.21% return of the benchmark. In the first half of the year, the best performing markets in dollar-hedged terms were Switzerland, the Netherlands and Spain, followed by Germany, Finland and Sweden, each growing over 30%. In aggregate, the non-U.S. markets were very strong, gaining 17.76% in dollar-hedged terms. At the opposite end of the spectrum, Malaysia experienced a steep decline, down 12.34%, followed by Singapore's loss of 3.79%; notably, these were the only markets to decline. Japan's 10.34% hedged increase was relatively subdued, the fourth weakest in the year-to-date period. Market allocation had a somewhat negative impact on returns. The value added from underweighting Japan and Southeast Asia, as from overweighting continental Europe, was offset by holding strategic cash, underweighting Switzerland and overweighting New Zealand. Currency management had a highly significant positive impact on performance, accounting for an important portion of the value added by the Fund. Defensive strategies that focused on holding the U.S. dollar, while maintaining minimal exposure to the core European currencies and the yen, continued to prove highly successful for the first half of the year. This was a period when the DM-bloc currencies fell considerably: the Belgian franc, the Dutch guilder, the French franc and the DM, all losing over 12%. Overall stock selection was very beneficial. In particular, Japanese stock selection added substantial value, while stock selection in several other markets (the Netherlands, Germany, France and Finland) also made a positive contribution. ================================================================================ 6 Non-U.S. Equity Fund - -------------------------------------------------------------------------------- Total Return 6 months 1 year 7/31/95* ended ended to 6/30/97 6/30/97 6/30/97 - -------------------------------------------------------------------------------- SwissKey Non-U.S. Equity Fund 13.80% 19.32% 18.37% MSCI Non-U.S. Equity (Free) Index** 11.21 13.64 10.81 - -------------------------------------------------------------------------------- * 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. All total returns in excess of 1 year are average annualized returns. 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 June 30, 1997. 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 [GRAPH APPEARS HERE] $13,815 ====== SwissKey Non-U.S. Equity Fund $12,174 ------ MSCI Non-U.S. Equity (Free) Index SwissKey Non-U.S. MSCI Non-U.S. Equity Fund Equity (Free) Index - -------------------------------------------------------------------------------- 7/31/95 $10,000.00 $10,000.00 9/30/95 $10,302.00 $ 9,817.00 12/31/95 $10,858.00 $10,220.00 3/31/96 $11,158.00 $10,538.00 6/30/96 $11,578.00 $10,713.00 9/30/96 $11,630.00 $10,727.00 12/31/96 $12,104.00 $10,947.00 3/31/97 $12,328.00 $10,775.00 6/30/97 $13,815.00 $12,174.00
7/31/95 = $10,000 Data through 6/30/97 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 Industry Diversification As a Percent of Net Assets As of June 30, 1997 - --------------------------------------------------------------------------------
NON-U.S. EQUITIES Aerospace & Military......................................... 0.13% Airlines..................................................... 0.55 Appliances & Household Durables.............................. 2.52 Automobiles.................................................. 2.47 Banking...................................................... 11.10 Beverages & Tobacco.......................................... 1.74 Broadcasting & Publishing.................................... 1.43 Building Materials........................................... 1.66 Business & Public Service.................................... 3.95 Chemicals.................................................... 4.10 Construction................................................. 1.70 Data Processing.............................................. 1.21 Electric Components.......................................... 1.52 Electronics.................................................. 4.06 Energy....................................................... 6.57 Financial Services........................................... 1.27 Food & House Products........................................ 3.33 Forest Products.............................................. 1.88 Gold Mining.................................................. 0.07 Health & Personal Care....................................... 5.38 Industrial Components........................................ 2.01 Insurance.................................................... 4.42 Leisure & Tourism............................................ 0.56 Machinery & Engineering...................................... 1.09 Merchandising................................................ 4.17 Metals-Steel................................................. 1.84 Miscellaneous Materials...................................... 0.66 Multi-Industry............................................... 4.54 Non-Ferrous Metals........................................... 2.00 Real Estate.................................................. 0.91 Recreation................................................... 0.82 Shipping..................................................... 0.52 Telecommunications........................................... 5.80 Textiles & Apparel........................................... 0.19 Transportation............................................... 0.95 Utilities.................................................... 4.51 Wholesale & International Trade.............................. 0.27 ------ Total Non-U.S. Equities.............................. 91.90* ------ SHORT-TERM INVESTMENTS....................................... 8.31* ------ TOTAL INVESTMENTS.................................... 100.21 LIABILITIES, LESS CASH AND OTHER ASSETS..................................... (0.21) ------ NET ASSETS........................................... 100.00% ======
Market and Currency Strategy As of June 30, 1997 Portfolio ------------------------ Market Currency Strategy Strategy Index - --------------------------------------------------- U.S. Dollar 0.0% 5.9% 0.0% Japan 28.7 31.7 31.7 Australia 4.8 2.7 2.7 Belgium 3.1 1.1 1.1 Canada 2.8 4.5 4.5 Finland 0.7 0.7 0.7 France 4.5 6.4 6.4 Germany 8.6 8.1 8.1 Hong Kong 1.4 0.4 3.6 Italy 3.3 3.3 2.9 Malaysia 2.8 2.0 2.0 Netherlands 5.5 4.8 4.8 New Zealand 3.2 3.2 0.3 Spain 2.2 2.2 2.3 Sweden 0.0 2.3 2.3 Switzerland 2.4 6.2 6.2 U.K. 18.8 13.3 17.3 Cash Reserves 5.0 0.0 0.0 Other Markets 2.2 1.2 3.1 - --------------------------------------------------- 100.0% 100.0% 100.0% Top Ten Non-U.S. Equity Holdings As of June 30, 1997 Percent of Net Assets - ------------------------------------------------- 1. Royal Dutch Petroleum Co. 1.46% 2. Glaxo Wellcome PLC 1.24 3. Matsushita Electric Industrial Co. 1.20 4. Toray Industries, Inc. 1.17 5. Telecom Corp. of New Zealand Ltd. 1.15 6. General Electric Co. PLC 1.06 7. British Telecommunications PLC 0.99 8. Sankyo Co. Ltd. 0.98 9. Lloyds TSB Group PLC 0.96 10. British Petroleum Co. PLC 0.94 - ------------------------------------------------- * The Fund held a long position in Topix futures on June 30, 1997 which increased Japanese equity exposure from 25.76% to 26.72% and decreased the Fund's exposure to Short-Term Investments from 8.31% to 7.35% - -------------------------------------------------------------------------------- 8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ Non-U.S. Equities -- 91.90% AUSTRALIA -- 4.72% Amcor Ltd................................................. 118,700 $ 782,583 Boral Ltd................................................. 202,000 631,080 Brambles Industries Ltd................................... 29,000 569,045 Broken Hill Proprietary Co. Ltd........................... 261,270 3,813,662 Coca-Cola Amatil Ltd...................................... 37,000 476,790 CSR Ltd................................................... 152,000 584,195 David Jones Ltd........................................... 505,600 700,770 Lend Lease Corp. Ltd...................................... 34,578 725,362 M.I.M. Holdings Ltd....................................... 346,840 509,310 National Australia Bank Ltd............................... 185,448 2,635,641 News Corp. Ltd............................................ 387,257 1,842,340 News Corp. Ltd. Preferred................................. 95,000 371,528 Pacific Dunlop Ltd........................................ 242,700 712,775 Qantas Airways Ltd........................................ 249,010 578,329 Rio Tinto Ltd............................................. 94,209 1,593,724 Santos Ltd................................................ 73,900 308,387 Westpac Banking Corp. Ltd................................. 323,851 1,933,750 WMC Ltd................................................... 167,700 1,049,099 Woolworth's Ltd........................................... 124,000 404,118 ------------ 20,222,488 ------------ BELGIUM -- 3.03% Delhaize-Le Lion S.A...................................... 16,200 851,683 Electrabel S.A............................................ 8,965 1,922,675 Fortis AG................................................. 723 161 Fortis AG Strip (b)....................................... 8,833 1,825,569 General de Banque S.A..................................... 2,000 770,515 Groupe Bruxelles Lambert S.A.............................. 5,230 877,243 Kredietbank NV............................................ 3,286 1,325,369 Petrofina S.A............................................. 4,775 1,809,718 Societe Generale de Belgique.............................. 8,428 787,707 Solvay S.A. Class A....................................... 1,503 886,331 Tractebel................................................. 2,350 980,528 Tractebel Warrants "99" (b)............................... 1,350 14,495 Union Miniere Group S.A. (b).............................. 10,070 943,975 ------------ 12,995,969 ------------ CANADA -- 2.92% Alcan Aluminium Ltd....................................... 24,300 829,610 Bank of Montreal.......................................... 22,000 859,524 Barrick Gold Corp......................................... 13,600 296,231 BCE, Inc.................................................. 27,000 751,522 Canadian National Railway Co.............................. 16,900 737,446 Canadian Pacific Ltd...................................... 55,600 1,583,850 Hudson's Bay Co........................................... 23,000 516,816 Imperial Oil Ltd.......................................... 20,000 1,025,660 MacMillan Bloedel Ltd..................................... 33,300 457,404 Moore Corp. Ltd........................................... 21,800 429,806 Noranda, Inc.............................................. 25,100 541,262 Northern Telecom Ltd...................................... 8,400 757,741 NOVA Corp................................................. 35,000 299,362 Royal Bank of Canada...................................... 24,700 1,119,879 Seagram Co. Ltd........................................... 21,300 856,879 Thomson Corp.............................................. 34,900 804,451 TransCanada Pipelines Ltd................................. 33,100 665,791 ------------ 12,533,234 ------------
SHARES VALUE ------- ------------ FINLAND -- 0.69% Merita Ltd. Class A....................................... 94,500 $ 314,745 Nokia Ab Class A.......................................... 19,200 1,433,845 Outokumpu Class A......................................... 16,200 321,243 Pohjola Insurance Group Class B........................... 3,900 115,629 Sampo Insurance Co. Ltd. Class A.......................... 1,700 165,281 The Rauma Group........................................... 693 15,877 UPM-Kymmene Corp.......................................... 24,900 575,257 ------------ 2,941,877 ------------ FRANCE -- 5.90% Accor S.A................................................. 6,695 1,003,509 Alcatel Alsthom........................................... 9,725 1,219,145 AXA UAP................................................... 19,551 1,217,150 AXA UAP Rights (b)........................................ 10,752 41,755 Banque Nationale de Paris................................. 21,930 904,692 Cie Bancaire S.A.......................................... 6,688 854,369 Cie de Saint Gobain....................................... 10,613 1,549,198 Cie de Suez............................................... 162,880 400,889 Cie Generale des Eaux..................................... 7,964 1,021,443 Cie Generale des Eaux Warrants "01" (b)................... 13,864 8,312 Colas..................................................... 3,077 406,179 Dexia France.............................................. 9,050 881,724 Elf Aquitaine S.A......................................... 15,334 1,655,894 Groupe Danone............................................. 6,100 1,008,874 Lafarge S.A............................................... 9,000 560,296 Lagardere S.C.A........................................... 20,800 604,762 LVMH...................................................... 3,715 999,779 Michelin Class B.......................................... 21,550 1,295,349 Pechiney S.A. Class A..................................... 21,893 863,265 Peugeot S.A............................................... 12,280 1,188,050 Rhone-Poulenc Class A..................................... 31,230 1,276,648 SEITA..................................................... 23,700 750,843 Societe Generale.......................................... 11,203 1,251,775 Suez Lyonnaise des Eaux S.A............................... 9,600 968,012 Thomson CSF............................................... 21,700 559,595 Total S.A. Class B........................................ 13,595 1,375,478 Usinor Sacilor............................................ 79,900 1,442,582 ------------ 25,309,567 ------------ GERMANY -- 8.90% Allianz AG Holding........................................ 15,730 3,362,461 BASF AG................................................... 42,880 1,583,455 Bayer AG.................................................. 56,790 2,189,997 Bayerische Motoren Werke AG............................... 2,000 1,650,407 Commerzbank AG............................................ 46,940 1,341,451 Daimler-Benz AG........................................... 22,450 1,828,104 Deutsche Bank AG.......................................... 45,567 2,677,643 Deutsche Telekom AG....................................... 112,550 2,767,570 Henkel KGaA-Vorzug AG..................................... 17,950 1,011,529 Hochtief AG............................................... 13,400 599,793 Hoechst AG................................................ 18,580 787,939 M.A.N. AG................................................. 3,040 947,274 Mannesmann AG............................................. 3,607 1,612,449 Metro AG.................................................. 13,208 1,440,101 Muenchener Rueckver AG.................................... 792 2,245,197 Muenchener Rueckver AG Warrants "98" (b).................. 12 4,304 Preussag AG............................................... 4,469 1,315,619
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ GERMANY (CONTINUED) RWE AG.................................................. 32,200 $ 1,385,860 Schering AG............................................. 18,592 1,992,991 Siemens AG.............................................. 23,500 1,408,571 Thyssen AG.............................................. 7,150 1,721,235 Veba AG................................................. 37,688 2,130,304 Volkswagen AG........................................... 2,850 2,162,114 ------------ 38,166,368 ------------ HONG KONG -- 1.39% Cheung Kong Holdings Ltd................................ 58,000 572,716 China Light & Power Co. Ltd............................. 111,000 628,980 Guoco Group Ltd......................................... 68,000 358,112 Hang Seng Bank Ltd...................................... 45,500 648,968 Hong Kong Telecommunications Ltd........................ 193,200 461,348 Hutchison Whampoa Ltd................................... 123,000 1,063,725 Jardine Matheson Holdings ADR (c)....................... 45,200 320,920 New World Development Co. Ltd........................... 77,000 459,179 Sun Hung Kai Properties Ltd............................. 39,000 469,422 Swire Pacific Ltd. Class A.............................. 63,000 567,198 Wharf (Holdings) Ltd.................................... 98,000 425,025 ------------ 5,975,593 ------------ ITALY -- 3.24% Assicurazioni Generali.................................. 74,250 1,348,413 Banca Commerciale Italiana.............................. 198,000 409,615 Credito Italiano Spa.................................... 502,000 917,555 Danieli & Co. Savings (Risp)............................ 129,100 451,452 Edison Spa.............................................. 79,600 395,544 ENI ADR (c)............................................. 22,100 1,256,938 ENI Spa................................................. 165,000 933,368 Fiat Spa-Priv........................................... 551,200 1,017,201 INA-Istituto Nazionale delle Assicurazioni.............. 310,100 472,030 Istituto Mobilaire Italiano Spa......................... 79,100 711,272 Italgas Spa............................................. 107,300 346,841 La Rinascente Spa....................................... 68,900 382,463 La Rinascente Spa Rights (b)............................ 159,200 7,111 La Rinascente Spa RNC................................... 90,300 219,448 La Rinascente Spa RNC Rights (b)........................ 159,200 25,917 La Rinascente Spa Warrants "99" (b)..................... 2,800 1,382 Mediobanca Spa.......................................... 34,600 209,857 Montedison Spa (b)...................................... 1,408,280 928,646 SAI-Savings (Risp)...................................... 83,000 255,610 Telecom Italia Mobile Spa............................... 214,000 691,743 Telecom Italia Mobile Spa RNC........................... 600,000 1,071,995 Telecom Italia Spa...................................... 130,000 388,892 Telecom Italia Spa RNC.................................. 732,300 1,448,245 ------------ 13,891,538 ------------ JAPAN -- 25.76% Amada Co. Ltd........................................... 173,000 1,526,960 Asahi Glass Co. Ltd..................................... 204,000 2,032,334 Bank of Tokyo-Mitsubishi, Ltd........................... 187,000 3,758,630 Canon, Inc.............................................. 139,000 3,789,915 Canon Sales Co., Inc.................................... 58,200 1,357,983 Citizen Watch Co. Ltd................................... 157,000 1,212,864 Dai Nippon Printing Co. Ltd............................. 158,000 3,576,160 Daiichi Pharmaceutical Co. Ltd.......................... 113,000 1,994,757 Daikin Industries Ltd................................... 170,000 1,545,049
SHARES VALUE ------- ------------ Daiwa House Industry Co. Ltd.............................. 85,000 $ 1,039,937 Fanuc..................................................... 68,100 2,618,544 Fujitsu................................................... 101,000 1,403,391 Hitachi Ltd............................................... 337,000 3,769,641 Honda Motor Co............................................ 43,000 1,296,426 Inax...................................................... 177,000 1,327,152 Isetan.................................................... 58,000 719,741 Ito Yokado Co. Ltd........................................ 65,000 3,777,419 Kaneka Corp............................................... 158,000 991,383 Keio Teito Electric Railway............................... 193,000 919,208 Kinki Nippon Railway...................................... 195,000 1,192,869 Kirin Brewery Co. Ltd..................................... 184,000 1,913,484 Kokuyo.................................................... 56,000 1,517,085 Kuraray Co. Ltd........................................... 202,000 2,012,409 Kyocera Corp.............................................. 21,000 1,670,017 Maeda Road Construction................................... 34,000 292,668 Marui Co. Ltd............................................. 90,000 1,675,260 Matsushita Electric Industrial Co......................... 255,000 5,147,689 Mitsubishi Paper Mills.................................... 211,000 826,077 NGK Insulators............................................ 275,000 3,028,052 Nintendo Corp. Ltd........................................ 15,500 1,300,358 Nippon Denso Co. Ltd...................................... 82,000 1,963,471 Nippon Meat Packers, Inc.................................. 108,000 1,396,836 Nippon Steel Co........................................... 132,000 422,197 Okumura................................................... 173,000 917,688 Osaka Gas Co.............................................. 330,000 948,790 Sankyo Co. Ltd............................................ 125,000 4,205,628 Sanwa Bank Ltd............................................ 83,000 1,233,068 Secom..................................................... 40,000 2,939,789 Seino Transportation...................................... 114,000 1,235,340 Sekisui House Ltd......................................... 331,000 3,355,414 Shinmaywa Industries Ltd.................................. 72,000 507,769 Sony Corp................................................. 38,600 3,369,868 Sumitomo Bank............................................. 181,000 2,973,696 Sumitomo Chemical Co...................................... 20,000 90,710 Sumitomo Electric Industries.............................. 140,000 2,349,034 Sumitomo Trust & Banking.................................. 95,000 1,021,148 Takeda Chemical Industries................................ 106,000 2,982,784 TDK Corp.................................................. 30,000 2,204,841 Tokio Marine & Fire Insurance Co.......................... 154,000 2,018,701 Tokyo Electric Power...................................... 44,500 937,211 Tokyo Steel Mfg........................................... 123,700 1,383,693 Tonen Corp................................................ 123,000 1,483,352 Toray Industries, Inc..................................... 702,000 5,012,095 Toshiba Corp.............................................. 397,000 2,556,926 Toyo Suisan Kaisha........................................ 93,000 950,887 Toyota Motor Corp......................................... 44,000 1,299,659 Yamazaki Baking Co. Ltd................................... 81,000 1,429,870 ------------ 110,423,927 ------------ MALAYSIA -- 1.63% Hume Industries (Malaysia) Bhd............................ 70,000 321,712 Kuala Lumpur Kepong Bhd................................... 182,000 450,673 Land & General Holdings Bhd............................... 211,500 243,007 Malayan Banking Bhd....................................... 90,000 944,929 Malaysia International Shipping Bhd (Frgn.)............... 126,000 326,981 Nestle (Malaysia) Bhd..................................... 30,000 224,643
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ MALAYSIA (CONTINUED) New Straits Times Press Bhd.............................. 24,000 $ 140,729 Perusahaan Otomobil Nasional Bhd......................... 35,000 163,629 Public Bank Bhd (Frgn.).................................. 194,998 304,395 Resorts World Bhd........................................ 134,000 403,487 Rothmans of Pall Mall Bhd................................ 20,000 196,513 Sime Darby Bhd........................................... 219,000 728,843 Telekom Malaysia Bhd..................................... 171,000 799,445 Tenaga Nasional Bhd...................................... 207,000 1,008,756 UMW Holdings Bhd......................................... 36,000 169,731 United Engineers Ltd..................................... 51,000 367,750 YTL Corp. Bhd............................................ 55,000 169,968 YTL Power International Bhd (b).......................... 4,900 6,174 ------------ 6,971,365 ------------ NETHERLANDS -- 5.66% ABN AMRO Holdings NV..................................... 102,046 1,906,233 Akzo Nobel NV............................................ 3,400 466,799 DSM NV................................................... 6,450 642,926 Elsevier NV.............................................. 89,800 1,503,313 Heineken NV.............................................. 3,700 632,624 Hoogovens NV............................................. 10,900 608,615 ING Groep NV............................................. 69,233 3,197,870 KLM Royal Dutch Air Lines NV............................. 34,300 1,059,128 KPN NV................................................... 55,248 2,171,233 Philips Electronics NV................................... 32,000 2,296,330 Royal Dutch Petroleum Co................................. 119,720 6,238,663 Royal Dutch Petroleum Co. NY Shares (c).................. 20,800 1,131,000 Unilever NV.............................................. 11,440 2,412,601 ------------ 24,267,335 ------------ NEW ZEALAND -- 3.33% Brierley Investments Ltd................................. 2,405,600 2,347,945 Carter Holt Harvey Ltd................................... 829,600 2,142,376 Fletcher Challenge Building.............................. 286,572 860,477 Fletcher Challenge Energy................................ 315,692 952,194 Fletcher Challenge Forest Ltd............................ 546,445 792,615 Fletcher Challenge Paper................................. 568,984 1,376,798 Telecom Corp. of New Zealand Ltd......................... 970,200 4,932,017 Telecom Corp. of New Zealand ADS (c)..................... 21,000 855,750 ------------ 14,260,172 ------------ SINGAPORE -- 1.47% City Developments Ltd.................................... 51,000 499,371 DBS Land Ltd............................................. 82,000 259,225 Development Bank of Singapore Ltd........................ 63,000 793,118 Fraser & Neave Ltd....................................... 13,000 92,740 Hotel Properties Ltd..................................... 155,000 263,428 Keppel Corp. Ltd. (b).................................... 36,750 163,213 Oversea-Chinese Banking Corp. Ltd........................ 113,400 1,173,815 Singapore Airlines Ltd. (Frgn.).......................... 80,000 716,184 Singapore Press Holdings Ltd. (Frgn.).................... 37,000 745,279 Singapore Telecommunications, Ltd........................ 290,000 535,459
SHARES VALUE ------- ------------ United Overseas Bank Ltd. (Frgn.)......................... 81,000 $ 832,774 Wing Tai Holdings Ltd..................................... 78,000 224,759 ------------ 6,299,365 ------------ SPAIN -- 2.30% Acerinox S.A.............................................. 1,900 356,694 Banco Bilbao-Vizcaya S.A.................................. 12,300 1,001,095 Banco Central Hispanoamericano............................ 14,830 543,508 Banco Popular Espanol S.A................................. 2,680 657,836 Banco Santander S.A....................................... 29,400 907,568 Empresa Nacional de Electridad S.A........................ 17,500 1,471,918 Fomento de Construcciones y Contratas S.A................. 4,000 511,049 Gas Natural SDG S.A....................................... 2,800 612,851 Iberdrola S.A............................................. 61,900 782,852 Mapfre Corp............................................... 5,200 277,201 Repsol S.A................................................ 13,800 584,579 Repsol S.A. ADR (c)....................................... 7,700 326,769 Telefonica de Espana...................................... 42,300 1,225,253 Vallehermosa S.A.......................................... 10,000 270,279 Viscofan Envolturas Celulosicas S.A....................... 14,400 337,309 ------------ 9,866,761 ------------ SWITZERLAND -- 2.08% ABB AG (Bearer)........................................... 315 477,502 Alusuisse-Lonza Holding AG (Reg.)......................... 350 362,988 Ciba Specialty Chemicals AG (Reg.)........................ 1,267 117,323 CS Holdings AG (Reg.)..................................... 3,878 498,748 Nestle S.A. (Reg.)........................................ 1,305 1,724,007 Novartis AG (Reg.)........................................ 1,603 2,566,295 Roche Holding AG (Gen.)................................... 184 1,666,589 Swiss Reinsurance Co. (Reg.).............................. 250 354,105 UBS (Bearer).............................................. 400 458,193 Zurich Versicherungs (Reg.)............................... 1,741 693,821 ------------ 8,919,571 ------------ UNITED KINGDOM -- 18.88% Abbey National PLC........................................ 101,000 1,378,381 Bass PLC.................................................. 61,500 750,262 B.A.T. Industries PLC..................................... 353,000 3,157,818 BG PLC.................................................... 711,300 2,604,410 Booker PLC................................................ 74,500 338,495 British Energy PLC........................................ 620,000 1,511,692 British Petroleum Co. PLC................................. 324,534 4,034,732 British Steel PLC......................................... 789,000 1,963,144 British Telecommunications PLC............................ 574,200 4,262,182 BTR PLC................................................... 183,000 625,888 Centrica PLC.............................................. 706,300 858,116 Charter PLC............................................... 88,914 1,180,143 Coats Viyella PLC......................................... 392,100 822,245 FKI PLC................................................... 440,625 1,246,671 General Electric Co. PLC.................................. 757,700 4,527,158 Glaxo Wellcome PLC........................................ 256,500 5,304,173 Grand Metropolitan PLC.................................... 116,700 1,122,620 Guinness PLC.............................................. 257,200 2,516,994
- -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ UNITED KINGDOM (CONTINUED) Hanson PLC................................................ 156,312 $ 775,251 Hillsdown Holdings PLC.................................... 501,900 1,415,862 House of Fraser PLC....................................... 536,800 1,424,975 HSBC Holdings PLC......................................... 111,000 3,414,887 Imperial Chemical Industries PLC.......................... 36,000 499,692 Inchcape PLC.............................................. 173,000 814,829 Legal & General Group PLC................................. 244,000 1,652,792 Lloyds TSB Group PLC...................................... 400,185 4,109,414 Marks & Spencer PLC....................................... 292,900 2,427,631 Mirror Group PLC.......................................... 230,600 721,525 National Westminster Bank PLC............................. 102,500 1,377,528 Northern Foods PLC........................................ 292,000 967,097 Peninsular & Oriental Steam Navigation Co................. 189,700 1,888,002 Reckitt & Colman PLC...................................... 55,746 832,224 Redland PLC............................................... 86,600 490,039 Reuters Holdings PLC...................................... 112,000 1,179,928 Rio Tinto PLC............................................. 109,800 1,912,386 RJB Mining PLC............................................ 205,000 1,228,260 Royal & Sun Alliance Insurance Group PLC.................. 274,149 2,025,833 Sainsbury (J.) PLC........................................ 222,000 1,344,895 Scottish Hydro-Electric PLC............................... 117,800 813,631 Sears PLC................................................. 657,700 744,339 Sedgwick Group PLC........................................ 429,000 878,206 SmithKline Beecham PLC.................................... 127,800 2,351,384 Smurfit (Jefferson) Group PLC............................. 390,000 1,122,909 Tesco PLC................................................. 196,900 1,215,776 Thames Water PLC.......................................... 133,600 1,534,226 Unilever PLC.............................................. 28,200 806,787 Vodafone Group PLC........................................ 182,500 889,948 Williams PLC.............................................. 227,000 1,227,844 Yorkshire Water PLC....................................... 94,400 617,445 ------------ 80,910,669 ------------ Total Non-U.S. Equities (Cost $344,810,576)...................................... 393,955,799 ------------
FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 8.31% COMMERCIAL PAPER -- 8.31% American Stores Co. 5.830%, due 07/23/97.................................. $1,500,000 $ 1,499,146 Case Credit Corp. 6.250%, due 07/07/97.................................. 2,000,000 1,997,916 5.760%, due 07/21/97.................................. 1,250,000 1,246,000 Crown Cork & Seal Co. 5.800%, due 07/09/97.................................. 1,500,000 1,498,067 CSX Corp. 5.780%, due 07/09/97......................... 2,000,000 1,997,431 Cummins Engine Company, Inc. 6.500%, due 07/01/97.................................. 2,500,000 2,500,000 Enron Oil & Gas 6.520%, due 07/01/97................... 2,183,000 2,183,000 Hughes Electronics Corp. 5.780%, due 07/11/97.................................. 1,000,000 998,395 5.850%, due 08/11/97.................................. 3,000,000 2,980,012 Marriott Corp. 5.770%, due 07/08/97.................... 1,000,000 998,878 Norfolk Southern Corp. 5.780%, due 07/18/97.................................. 1,500,000 1,495,906 Occidental Petroleum 5.800%, due 08/13/97.................................. 1,750,000 1,737,876 Sundstrand Corp. 5.800%, due 07/09/97.................................. 2,000,000 1,997,422 5.850%, due 07/15/97.................................. 1,000,000 997,725 Tenneco, Inc. 5.780%, due 07/17/97.................................. 1,500,000 1,496,147 5.800%, due 07/23/97.................................. 2,000,000 1,992,911 Textron Financial Corp. 6.400%, due 07/01/97.................................. 8,000,000 8,000,000 ------------ Total Short-Term Investments (Cost $35,616,832).................................... 35,616,832 ------------ Total Investments (Cost $380,427,408) -- 100.21% (a).................... 429,572,631 ------------ Liabilities, less cash and other assets -- (0.21%)..................................... (920,308) ------------ Net Assets -- 100%..................................... $428,652,323 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $381,041,356; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $58,108,348 Gross unrealized depreciation................................ (9,577,073) ----------- Net unrealized appreciation................................ $48,531,275 ===========
(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 June 30, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) -------------- ------------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar......... 08/22/97 7,100,000 $ 5,163,674 $ (134,833) Dutch Guilder........... 08/22/97 12,700,000 6,506,548 (231,329) French Franc............ 08/22/97 82,000,000 14,016,830 (405,811) German Mark............. 08/22/97 5,500,000 3,168,659 (87,835) Japanese Yen............ 08/22/97 3,025,000,000 26,643,827 1,619,521 Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 (139,252) Swedish Krona........... 08/22/97 65,000,000 8,424,229 (359,555) Swiss Franc............. 08/22/97 21,600,000 14,912,081 (52,213) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 08/22/97 18,800,000 14,092,320 495,907 Belgian Franc........... 08/22/97 235,000,000 6,560,714 205,614 British Pounds.......... 08/22/97 8,750,000 14,538,989 (569,527) Dutch Guilder........... 08/22/97 19,700,000 10,092,834 337,621 French Franc............ 08/22/97 82,000,000 14,016,830 409,757 German Mark............. 08/22/97 8,800,000 5,069,855 157,972 Hong Kong Dollar........ 08/22/97 25,800,000 3,327,727 (1,613) Japanese Yen............ 08/22/97 1,150,000,000 10,129,058 (466,880) Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 80,228 ----------- Total................. $ 857,772 =========== FUTURES CONTRACTS (NOTE 5) The Non-U.S. Equity Fund had the following open index futures contracts as of June 30, 1997: SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN -------------- ------------- ----------- ----------- INDEX FUTURES BUY CON- TRACTS Topix, 30 contracts..... September 1997 $ 4,009,756 $ 4,117,382 $ 107,626 ===========
The segregated cash pledged to cover margin requirements for the open positions at June 30, 1997 was $1,019,494. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 ASSETS: Investments, at value (Cost $380,427,408) (Note 1)............... $429,572,631 Cash............................................................. 879,934 Foreign currency, at value (Cost $2,612,014)..................... 3,192,987 Receivables: Investment securities sold...................................... 5,328,950 Dividends....................................................... 2,962,324 Fund shares sold................................................ 127,682 Variation margin (Note 5)....................................... 107,626 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 857,772 Other assets..................................................... 56,372 ------------ TOTAL ASSETS.................................................. 443,086,278 ------------ LIABILITIES: Payables: Investment securities purchased................................. 12,332,011 Fund shares redeemed............................................ 1,596,751 Investment advisory fees (Note 2)............................... 378,079 Accrued expenses................................................ 127,114 ------------ TOTAL LIABILITIES............................................. 14,433,955 ------------ NET ASSETS........................................................ $428,652,323 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $356,332,425 Accumulated undistributed net investment income.................. 1,777,930 Accumulated net realized gain.................................... 19,814,253 Net unrealized appreciation...................................... 50,727,715 ------------ NET ASSETS.................................................... $428,652,323 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $420,854,653 and 33,436,374 shares is- sued and outstanding) (Note 7)................................. $ 12.59 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,000 and 79 shares issued and outstanding) (Note 7).......... $ 12.59 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $7,796,670 and 624,388 shares issued and outstanding) (Note 7)...................................... $ 12.49 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 INVESTMENT INCOME: Dividends (net of $1,127,372 for foreign taxes withheld)......... $ 7,182,900 Interest......................................................... 1,394,180 ----------- TOTAL INCOME.................................................. 8,577,080 ----------- EXPENSES: Advisory (Note 2)................................................ 2,420,667 Custodian........................................................ 116,023 Distribution (Note 6)............................................ 24,209 Other............................................................ 486,426 ----------- TOTAL EXPENSES................................................ 3,047,325 ----------- NET INVESTMENT INCOME ........................................ 5,529,755 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 13,830,230 Futures contracts............................................... (371,505) Foreign currency transactions................................... 10,962,774 ----------- Net realized gain............................................. 24,421,499 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ............................... 36,478,339 Futures contracts .............................................. 87,477 Forward contracts............................................... (1,207,773) Translation of other assets and liabilities denominated in for- eign currency.................................................. 33,687 ----------- Change in net unrealized appreciation or depreciation......... 35,391,730 ----------- Net realized and unrealized gain.................................. 59,813,229 ----------- Net increase in net assets resulting from operations.............. $65,342,984 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR JUNE 30, ENDED 1997 JUNE 30, 1996 ------------ ------------- OPERATIONS: Net investment income............................. $ 5,529,755 $ 3,265,964 Net realized gain................................. 24,421,499 22,260,813 Change in net unrealized appreciation or deprecia- tion ............................................ 35,391,730 10,918,989 ------------ ------------ Net increase in net assets resulting from opera- tions............................................ 65,342,984 36,445,766 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I ................................. (4,371,883) (3,057,609) SwissKey Class................................... (40,369) (8,629) Distributions from net realized gain: Brinson Class I.................................. (12,209,010) (8,632,717) SwissKey Class................................... (94,152) (14,731) ------------ ------------ Total distributions to shareholders............... (16,715,414) (11,713,686) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 232,045,893 86,752,018 Shares issued on reinvestment of distributions.... 16,204,754 10,473,903 Shares redeemed................................... (81,854,223) (56,648,208) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 7)...................... 166,396,424 40,577,713 ------------ ------------ TOTAL INCREASE IN NET ASSETS.................... 215,023,994 65,309,793 ------------ ------------ NET ASSETS: Beginning of year................................. 213,628,329 148,318,536 ------------ ------------ End of year (including accumulated undistributed net investment income of $1,777,930 and $785,599, respectively).................................... $428,652,323 $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.
YEAR ENDED JUNE 30, AUGUST 31, 1993* ----------------------------- THROUGH BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $ 11.17 $ 9.68 $ 9.69 $ 10.00 -------- -------- -------- ------- Income from investment opera- tions: Net investment income....... 0.18 0.18 0.15 0.10 Net realized and unrealized gain (loss)................ 1.97 2.05 (0.16) (0.34) -------- -------- -------- ------- Total income (loss) from investment operations.... 2.15 2.23 (0.01) (0.24) -------- -------- -------- ------- Less distributions: Distributions from net in- vestment income............ (0.17) (0.18) -- (0.07) Distributions from net real- ized gain.................. (0.56) (0.56) -- -- -------- -------- -------- ------- Total distributions....... (0.73) (0.74) -- (0.07) -------- -------- -------- ------- Net asset value, end of peri- od........................... $ 12.59 $ 11.17 $ 9.68 $ 9.69 ======== ======== ======== ======= Total return (non-annualized). 20.27% 23.64% (0.10)% (2.45)% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $420,855 $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 1.00% 1.20% 1.23% 1.60%** After expense reimbursement. N/A 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimburse- ment....................... 1.83% 1.67% 1.93% 1.28%** After expense reimbursement. N/A 1.87% 2.16% 1.88%** Portfolio turnover rate...... 25% 20% 14% 12% Average commission rate paid per share................... $ 0.0245 $ 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.
YEAR JULY 31, 1995* ENDED THROUGH SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period.............. $ 11.12 $ 10.26 ------- ------- Income from investment operations: Net investment income........................... 0.11 0.12 Net realized and unrealized gain................ 1.93 1.45 ------- ------- Total income from investment operations....... 2.04 1.57 ------- ------- Less distributions: Distributions from net investment income........ (0.11) (0.15) Distributions from net realized gain............ (0.56) (0.56) ------- ------- Total distributions........................... (0.67) (0.71) ------- ------- Net asset value, end of period.................... $ 12.49 $ 11.12 ======= ======= Total return (non-annualized)..................... 19.32% 15.78% Ratios/Supplemental data Net assets, end of period (in 000s).............. $ 7,797 $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.81% 2.04%** After expense reimbursement..................... N/A 1.84%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 1.02% 0.83%** After expense reimbursement..................... N/A 1.03%** Portfolio turnover rate.......................... 25% 20% Average commission rate paid per share........... $0.0245 $0.0219
* Commencement of SwissKey Class ** Annualized N/A = Not applicable 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. Effective June 30, 1997, the Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey 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 foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate 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 year ended June 30, 1997, 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 tax 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 Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey 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 that total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00%, 1.25% and 1.84% of the average daily net assets of the Brinson Class I, Brinson Class N and SwissKey Class, respectively. Investment advisory fees and other transactions with affiliates for the year ended June 30, 1997 were as follows:
ADVISORY ADVISORY FEE FEES -------- ---------- Non-U.S. Equity Fund........................................ 0.80% $2,420,667
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 $5,780. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ----------- Non-U.S. Equity Fund................................... $223,917,155 $69,621,954
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 year ended June 30, 1997, 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 PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class and, effective June 30, 1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N. - -------------------------------------------------------------------------------- 20 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
YEAR ENDED YEAR ENDED JUNE 30, 1997 JUNE 30, 1996 ----------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------ --------- ----------- Sales: Brinson Class I.................. 19,910,853 $225,344,857 8,044,119 $85,398,213 Brinson Class N.................. 79 1,000 -- -- SwissKey Class................... 590,377 6,700,036 125,829 1,353,805 ---------- ------------ --------- ----------- Total Sales................... 20,501,309 $232,045,893 8,169,948 $86,752,018 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I.................. 1,461,013 $ 16,110,105 998,992 $10,452,496 Brinson Class N.................. -- -- -- -- SwissKey Class................... 8,477 94,649 2,042 21,407 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 1,469,490 $ 16,204,754 1,001,034 $10,473,903 ========== ============ ========= =========== Redemptions: Brinson Class I.................. 6,945,571 $ 80,838,515 5,347,882 $56,492,091 Brinson Class N.................. -- -- -- -- SwissKey Class................... 87,985 1,015,708 14,352 156,117 ---------- ------------ --------- ----------- Total Redemptions............. 7,033,556 $ 81,854,223 5,362,234 $56,648,208 ========== ============ ========= ===========
- -------------------------------------------------------------------------------- 21 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds--Non-U.S. Equity Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of June 30, 1997, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Non-U.S. Equity Fund at June 30, 1997, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 8, 1997 - -------------------------------------------------------------------------------- 22 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 OF SWISS KEY FUNDS] 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY . http://networth.galt.com/swisskey -----END PRIVACY-ENHANCED MESSAGE-----