-----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, LVDAf2d5u93TgUaFuCBpXa46SX5gGXtRmi/j4NZdL+K7C4yWriuE860TkRVbVxak dKDGee6nQ952/vm6K1ft3g== 0000950131-00-001577.txt : 20000307 0000950131-00-001577.hdr.sgml : 20000307 ACCESSION NUMBER: 0000950131-00-001577 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000303 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: 561155 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 SEMI-ANNUAL REPORTS --------------------------------- The Brinson Funds Brinson U.S. Balanced Fund Brinson U.S. Equity Fund Brinson U.S. Large Capitalization Equity Fund Brinson U.S. Large Capitalization Growth Fund Brinson U.S. Small Capitalization Growth Fund Brinson U.S. Bond Fund Brinson High Yield Fund Semi-Annual Report December 31, 1999 [BRINSON LOGO APPEARS HERE] Institutional Asset Management --------------------------------- Trustees and Officers - -------------------------------------------------------------------------------- [BRINSON LOGO] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Secretary and Treasurer E. Thomas McFarlan David E. Floyd, CPA President Assistant Secretary Thomas J. Digenan, CFA, CPA Mark F. Kemper Vice President Assistant Secretary Debra L. Nichols Vice President ================================================================================ 1 The Funds' Advisor - Brinson Partners, Inc. - -------------------------------------------------------------------------------- [BRINSON LOGO] Since the founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with individualized client relationships of the highest quality. Now, in 2000, more than 1,200 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, and a recognized leader in our industry. In North America, we make our investment capabilities available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are diversified, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and capabilities. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios-balancing considerations for both risk and return. Brinson Partners, Inc. is a member of UBS Asset Management, the institutional asset management division of UBS AG. ================================================================================ 2 Table of Contents - -------------------------------------------------------------------------------- [BRINSON LOGO] Shareholder Letter................................... 4 U.S. Economic and Market Highlights.................. 5 U.S. Balanced Fund................................... 6 Schedule of Investments......................... 10 Financial Statements............................ 13 Financial Highlights............................ 16 U.S. Equity Fund..................................... 18 Schedule of Investments......................... 22 Financial Statements............................ 24 Financial Highlights............................ 27 U.S. Large Capitalization Equity Fund................ 29 Schedule of Investments......................... 33 Financial Statements............................ 34 Financial Highlights............................ 37 U.S. Large Capitalization Growth Fund................ 39 Schedule of Investments......................... 43 Financial Statements............................ 44 Financial Highlights............................ 47 U.S. Small Capitalization Growth Fund................ 49 Schedule of Investments......................... 53 Financial Statements............................ 55 Financial Highlights............................ 58 U.S. Bond Fund....................................... 60 Schedule of Investments......................... 64 Financial Statements............................ 67 Financial Highlights............................ 70 High Yield Fund...................................... 72 Schedule of Investments......................... 76 Financial Statements............................ 79 Financial Highlights............................ 82 The Brinson Funds-Notes to Financial Statements...... 84 ================================================================================ 3 Shareholder Letter - -------------------------------------------------------------------------------- [BRINSON LOGO] January 27, 2000 Dear Shareholder: We are pleased to present the semi-annual report for The Brinson Funds for the six months ended December 31, 1999. This report provides a discussion on the current U.S. Economic outlook. We will also provide our current portfolio strategies and performance updates for each of our seven Domestic Mutual Funds. The decade of the 1990s ended with a particularly challenging year. We continued to apply our proven value-based investment process across all of our portfolios, but our investment results varied substantially. In some areas, such as fixed income, our performance was excellent relative to both the market and our peers. In other areas, most notably multi-asset and equity portfolios, results were disappointing. Throughout 1999, our asset allocation strategies continued to focus on reducing exposure to the risks presented by equity prices that have been driven far above even optimistic estimates of underlying value. While the risk hedge in balanced portfolios had little net effect on performance through most of the year, the surge in equity prices late in the year hampered the returns relative to the benchmarks. The broad array of our equity portfolios, with the exception of the growth portfolios, significantly lagged their benchmarks in 1999. Some degree of underperformance was unavoidable as the U.S. market was increasingly driven by momentum, which in turn focused more tightly on narrow technology and e-commerce stocks. In such a market, the fundamental price/value discrepancies that are the core of our investment process are effectively ignored in the market. In addition, our stock selection was uncharacteristically weak and a meaningful source of the underperformance of our U.S. and Global Equity portfolios. In fixed income our U.S. Bond and High Yield portfolios outpaced the market and ranked highly in their respective universes of active managers. However, outside the U.S., our Global Bond portfolio generally underperformed, due almost entirely to strength in both the Japanese bond market and the yen, where we are underweighted. Our fundamental assessments across markets have been both accurate and perceptive, but momentum rather than the reality of fundamental value has continued to drive equity markets, particularly in the U.S. We have seen this phenomenon historically and it has always proven to be a sign of danger, that ultimately ends badly for the market in general and the momentum players in particular. Over time, these styles ebb and flow but momentum driven approaches have no lasting link to underlying fundamentals and always fail to deliver when viewed over meaningful horizons. It is these concerns which underlie our current asset allocation and equity portfolio strategies. 2000 will be a challenging year, but we are confident that remaining true to our investment disciplines will in the long run accrue to our shareholders' benefit. As always, we welcome your thoughts and comments, and appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /s/ Gary P. Brinson Gary P. Brinson Chairman and Chief Investment Officer ================================================================================ 4 U.S. Economic and Market Highlights - -------------------------------------------------------------------------------- [BRINSON LOGO] U.S. economic statistics continue to surprise financial markets. In the fourth quarter of 1999, real GDP rose a larger-than-expected 5.8%. Stronger consumer spending, inventory building and exports were the main contributors. Business investment was the only major component recording a slowdown, but most of that decline reflects a pre-Y2K pause in computer equipment installation. The strength in consumer spending was broad-based, with big-ticket purchases of autos and home furnishings registering the largest increases. For the year 1999 as a whole, GDP growth came in at 4.0 percent, almost the same as in 1998. Economic releases are apt to surpass market expectations in the first half of the year, and barring unexpected strong action by the Federal Reserve, real growth would remain strong in 2000. Tight labor market conditions are producing gradually rising wage pressures, in line with our expectations. Employment costs released for the fourth quarter registered a bigger-than-expected surge of 1.1 percent, the strongest since 1991. The fourth-quarter acceleration in employment costs primarily reflects faster growth in benefits. This has been the area of our concern, as generally slowing benefit expenses have been a major force in the moderate growth of labor costs in the 1990s. Inflation moved up in 1999, with consumer prices rising 2.7 percent. The rise primarily reflects higher energy prices, and the most recent surge in oil prices suggests that short-term inflation risks have increased. Core inflation, which tended to move sideways around 2 percent in 1999, is assumed to move higher in 2000, stimulated by rising unit labor costs. - -------------------------------------------------------------------------------- U.S. Environment - -------------------------------------------------------------------------------- Major Markets One Year Ended December 31, 1999 Total Return U.S. Cash Equivalents 4.44 U.S. Bonds -0.84 U.S. Equities 23.82 Salomon U.S. Treasury Benchmark Returns One Year Ended December 31, 1999 Maturity (Years) Total Return 1 4.26 2 1.94 5 -2.54 10 -8.41 30 -14.89 Top Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1999 Wireless 146.83 Semiconductors 79.84 Media 38.07 Heavy Electrical Eqp 34.94 Electronic Equipment 34.94 Computer Software 30.34 Oil Services 18.83 Energy Reserves 13.02 Securities & Asset. Mgmt 11.97 Telephone 10.47 Bottom Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1999 Thrifts -23.15 Restaurants -23.48 Defense & Aerospace -23.62 Construction & Real Prop -24.42 Motor Vehicles & Parts -24.82 Food & Beverage -25.12 Environment Services -27.54 Apparel & Textiles -31.82 Medical Services -37.07 Tobacco -50.91 ================================================================================ 5 U.S. Balanced Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] The Brinson U.S. Balanced Fund Class I has produced an annualized return of 10.09% since its inception on December 31, 1994, while the return of the U.S. Balanced Mutual Fund Index was 20.14% over this time period. Importantly however, the U.S. Balanced Fund's performance was achieved with an annualized volatility over the life of the Fund of 5.80%, or approximately 40% less than the benchmark's annualized volatility of 9.63%. In 1999, the Brinson U.S. Balanced Fund Class I returned -6.95% which was substantially below the benchmark return of 14.66%. The underperformance in 1999 was due primarily to the equity underweight, the bond overweight, and adverse market conditions which negatively impacted our fundamental value-based equity investment style. The strength of the U.S. equity market continued to be driven in part by the success of a small number of the largest capitalization companies, with technology stocks being shown particular favor. Our significant underweight in technology growth stocks, combined with a tilt away from the largest members of the index and overweight in value shares, contributed to a large underperformance of the U.S. equity portion of the U.S. Balanced Fund. In the U.S. bond market, our moderately long duration strategy had a negative impact on performance as yields increased during 1999 while the overweight and security selection in corporate issues had significantly positive impacts on performance. The allocation to U.S. Treasury Inflation Protected Securities (TIPS) hurt the Fund's performance while the allocation to lower-credit issues helped the Fund's performance. The sustained rapid advance of the overall U.S. equity market has, in our assessment, resulted in a pronounced level of overpricing and, therefore, an expected return that is absolutely unattractive and fails to compensate adequately for the risks inherent in equity investment. Bonds are now offering yields above our estimates of longer-term equilibrium levels. This is particularly true in the case of TIPS, where the uncertainties associated with future inflation do not introduce a risk element into the assessment of value. The Fund's strategy, therefore, remains significantly overweight bonds and underweight equities. A substantial portion of the bond allocation is currently held in TIPS. ================================================================================ 6 U.S. Balanced Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 1 year 3 years 12/31/94* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------------ Brinson U.S. Balanced Fund Class I -7.83% -6.95% 5.01% 10.09% - ------------------------------------------------------------------------------------------------------ U.S. Balanced Mutual Fund Index** 7.03 14.66 18.95 20.14 - ------------------------------------------------------------------------------------------------------ Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 0.55 -0.84 5.72 7.74 - ------------------------------------------------------------------------------------------------------ Wilshire 5000 Index 10.45 23.56 26.04 27.06 - ------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Balanced Fund Class I. ** An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Smith Barney BIG Bond Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Balanced Fund Class I, the U.S. Balanced Mutual Fund Index, the Salomon Smith Barney BIG Bond Index and the Wilshire 5000 Index if you had invested $1,000,000 on December 31, 1994, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Balanced Fund Class I vs. U.S. Balanced Mutual Fund Index, Salomon Smith Barney BIG Bond Index and Wilshire 5000 Index Wealth Value with Dividends Reinvested
- ------------------------------------------------------------------------------------------------------------------------- Label A B C D - ------------------------------------------------------------------------------------------------------------------------- Brinson U.S. U.S. Balanced Salomon Smith Balanced Fund Mutual Fund Barney BIG Label Class I Index Wilshire 5000 Index Bond Index - ------------------------------------------------------------------------------------------------------------------------- 1 12/31/94 1,000,000 1,000,000 1,000,000 1,000,000 - ------------------------------------------------------------------------------------------------------------------------- 2 1/31/95 1,019,000 1,020,459 1,021,610 1,020,700 - ------------------------------------------------------------------------------------------------------------------------- 3 2/28/95 1,050,000 1,054,246 1,062,301 1,044,584 - ------------------------------------------------------------------------------------------------------------------------- 4 3/31/95 1,064,000 1,074,390 1,090,303 1,050,643 - ------------------------------------------------------------------------------------------------------------------------- 5 4/30/95 1,080,000 1,096,416 1,117,397 1,065,037 - ------------------------------------------------------------------------------------------------------------------------- 6 5/31/95 1,120,000 1,133,880 1,155,243 1,107,319 - ------------------------------------------------------------------------------------------------------------------------- 7 6/30/95 1,139,086 1,160,041 1,192,095 1,115,070 - ------------------------------------------------------------------------------------------------------------------------- 8 7/31/95 1,154,301 1,190,257 1,241,150 1,112,840 - ------------------------------------------------------------------------------------------------------------------------- 9 8/31/95 1,170,530 1,202,592 1,253,251 1,125,637 - ------------------------------------------------------------------------------------------------------------------------- 10 9/30/95 1,192,845 1,236,361 1,301,050 1,136,219 - ------------------------------------------------------------------------------------------------------------------------- 11 10/31/95 1,199,945 1,234,092 1,287,988 1,151,444 - ------------------------------------------------------------------------------------------------------------------------- 12 11/30/95 1,236,461 1,274,817 1,342,560 1,169,406 - ------------------------------------------------------------------------------------------------------------------------- 13 12/31/95 1,254,813 1,294,523 1,364,511 1,185,544 - ------------------------------------------------------------------------------------------------------------------------- 14 1/31/96 1,278,797 1,320,146 1,401,066 1,193,606 - ------------------------------------------------------------------------------------------------------------------------- 15 2/29/96 1,273,346 1,327,345 1,425,571 1,173,434 - ------------------------------------------------------------------------------------------------------------------------- 16 3/31/96 1,276,616 1,333,439 1,441,166 1,164,985 - ------------------------------------------------------------------------------------------------------------------------- 17 4/30/96 1,279,887 1,351,402 1,476,778 1,156,364 - ------------------------------------------------------------------------------------------------------------------------- 18 5/31/96 1,284,248 1,375,182 1,517,153 1,155,786 - ------------------------------------------------------------------------------------------------------------------------- 19 6/30/96 1,293,124 1,374,034 1,504,667 1,170,696 - ------------------------------------------------------------------------------------------------------------------------- 20 7/31/96 1,273,247 1,327,149 1,423,490 1,173,857 - ------------------------------------------------------------------------------------------------------------------------- 21 8/31/96 1,287,603 1,354,048 1,469,027 1,172,096 - ------------------------------------------------------------------------------------------------------------------------- 22 9/30/96 1,324,045 1,409,152 1,547,238 1,192,490 - ------------------------------------------------------------------------------------------------------------------------- 23 10/31/96 1,354,965 1,433,054 1,568,869 1,219,321 - ------------------------------------------------------------------------------------------------------------------------- 24 11/30/96 1,405,762 1,503,041 1,672,806 1,239,440 - ------------------------------------------------------------------------------------------------------------------------- 25 12/31/96 1,396,859 1,487,401 1,653,954 1,228,533 - ------------------------------------------------------------------------------------------------------------------------- 26 1/31/97 1,414,616 1,541,133 1,742,490 1,233,201 - ------------------------------------------------------------------------------------------------------------------------- 27 2/28/97 1,419,351 1,541,265 1,741,688 1,234,558 - ------------------------------------------------------------------------------------------------------------------------- 28 3/31/97 1,394,492 1,491,506 1,664,653 1,222,089 - ------------------------------------------------------------------------------------------------------------------------- 29 4/30/97 1,418,167 1,541,250 1,737,249 1,239,565 - ------------------------------------------------------------------------------------------------------------------------- 30 5/31/97 1,459,599 1,617,300 1,860,333 1,251,217 - ------------------------------------------------------------------------------------------------------------------------- 31 6/30/97 1,493,510 1,672,330 1,945,797 1,266,106 - ------------------------------------------------------------------------------------------------------------------------- 32 7/31/97 1,555,541 1,771,761 2,095,390 1,300,418 - ------------------------------------------------------------------------------------------------------------------------- 33 8/31/97 1,530,490 1,723,138 2,016,624 1,289,234 - ------------------------------------------------------------------------------------------------------------------------- 34 9/30/97 1,563,891 1,798,097 2,135,625 1,308,186 - ------------------------------------------------------------------------------------------------------------------------- 35 10/31/97 1,548,383 1,768,165 2,064,487 1,326,893 - ------------------------------------------------------------------------------------------------------------------------- 36 11/30/97 1,559,120 1,808,702 2,132,078 1,333,129 - ------------------------------------------------------------------------------------------------------------------------- 37 12/31/97 1,581,464 1,836,885 2,171,479 1,346,727 - ------------------------------------------------------------------------------------------------------------------------- 38 1/31/98 1,597,411 1,851,662 2,183,270 1,364,100 - ------------------------------------------------------------------------------------------------------------------------- 39 2/28/98 1,638,609 1,938,829 2,342,213 1,363,145 - ------------------------------------------------------------------------------------------------------------------------- 40 3/31/98 1,670,504 2,004,551 2,459,440 1,368,461 - ------------------------------------------------------------------------------------------------------------------------- 41 4/30/98 1,666,517 2,023,665 2,488,634 1,375,577 - ------------------------------------------------------------------------------------------------------------------------- 42 5/31/98 1,670,504 1,995,462 2,422,411 1,388,783 - ------------------------------------------------------------------------------------------------------------------------- 43 6/30/98 1,675,623 2,046,664 2,507,341 1,400,171 - ------------------------------------------------------------------------------------------------------------------------- 44 7/31/98 1,661,933 2,019,021 2,452,405 1,403,111 - ------------------------------------------------------------------------------------------------------------------------- 45 8/31/98 1,614,019 1,825,458 2,070,492 1,424,579 - ------------------------------------------------------------------------------------------------------------------------- 46 9/30/98 1,672,885 1,918,042 2,205,737 1,458,199 - ------------------------------------------------------------------------------------------------------------------------- 47 10/31/98 1,705,740 2,007,777 2,369,843 1,451,637 - ------------------------------------------------------------------------------------------------------------------------- 48 11/30/98 1,726,275 2,093,822 2,519,072 1,459,621 - ------------------------------------------------------------------------------------------------------------------------- 49 12/31/98 1,738,302 2,183,183 2,680,268 1,464,146 - ------------------------------------------------------------------------------------------------------------------------- 50 1/31/99 1,734,600 2,241,002 2,778,795 1,474,981 - ------------------------------------------------------------------------------------------------------------------------- 51 2/28/99 1,693,873 2,174,472 2,678,063 1,449,168 - ------------------------------------------------------------------------------------------------------------------------- 52 3/31/99 1,712,385 2,233,354 2,781,410 1,457,429 - ------------------------------------------------------------------------------------------------------------------------- 53 4/30/99 1,762,368 2,305,512 2,914,723 1,462,238 - ------------------------------------------------------------------------------------------------------------------------- 54 5/31/99 1,753,112 2,265,285 2,850,919 1,448,786 - ------------------------------------------------------------------------------------------------------------------------- 55 6/30/99 1,755,023 2,338,817 2,998,512 1,443,860 - ------------------------------------------------------------------------------------------------------------------------- 56 7/31/99 1,728,828 2,286,804 2,902,379 1,438,084 - ------------------------------------------------------------------------------------------------------------------------- 57 8/31/99 1,702,634 2,272,390 2,875,329 1,437,078 - ------------------------------------------------------------------------------------------------------------------------- 58 9/30/99 1,665,214 2,243,339 2,800,197 1,454,323 - ------------------------------------------------------------------------------------------------------------------------- 59 10/31/99 1,646,503 2,338,427 2,978,275 1,458,686 - ------------------------------------------------------------------------------------------------------------------------- 60 11/30/99 1,646,503 2,389,249 3,078,018 1,458,540 - ------------------------------------------------------------------------------------------------------------------------- 61 12/31/99 1,617,539 2,503,324 3,311,735 1,451,830 - -------------------------------------------------------------------------------------------------------------------------
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 [LOGO OF BRINSON] U.S. Balanced Fund - ------------------------------------------------------------------------------- Total Return 6 months 1 year 6/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------- Brinson U.S. Balanced Fund Class N -7.92% -7.43% 2.96% - -------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 7.03 14.66 17.51 - -------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 0.55 -0.84 5.63 - -------------------------------------------------------------------------------- Wilshire 5000 Index 10.45 23.56 23.70 - -------------------------------------------------------------------------------- * Inception date of the Brinson U.S. Balanced Fund Class N. ** An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Smith Barney BIG Bond Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Balanced Fund Class N, the U.S. Balanced Mutual Fund Index, the Salomon Smith Barney BIG Bond Index and the Wilshire 5000 Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Balanced Fund Class N vs. U.S. Balanced Mutual Fund Index, Salomon Smith Barney BIG Bond Index and Wilshire 5000 Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
- ---------------------------------------------------------------------------------------------------------------------------------- Label A B C D - ----------------------------------------------------------------------------------------------------------------------------------- Label Brinson U.S. U.S. Balanced Mutual Wilshire Salomon Smith Balanced Fund Class N Fund Index 5000 Index Big Bond Index - ------------------------------------------------------------------------------------------------------------------------------------ 1 6/30/97 $1,000,000 $1,000,000 $1,000,000 $1,000,000 2 7/31/97 $1,041,534 $1,059,457 $1,076,880 $1,027,100 3 8/31/97 $1,023,962 $1,030,382 $1,036,400 $1,018,267 4 9/30/97 $1,046,326 $1,075,205 $1,097,558 $1,033,235 5 10/31/97 $1,035,144 $1,057,307 $1,060,998 $1,048,011 6 11/30/97 $1,042,332 $1,081,546 $1,095,735 $1,052,936 7 12/31/97 $1,057,159 $1,098,399 $1,115,985 $1,063,676 8 1/31/98 $1,067,820 $1,107,235 $1,122,044 $1,077,398 9 2/28/98 $1,095,359 $1,159,358 $1,203,729 $1,076,644 10 3/31/98 $1,117,569 $1,198,658 $1,263,976 $1,080,842 11 4/30/98 $1,114,903 $1,210,087 $1,278,979 $1,086,463 12 5/31/98 $1,117,569 $1,193,223 $1,244,946 $1,096,893 13 6/30/98 $1,121,533 $1,223,840 $1,288,593 $1,105,887 14 7/31/98 $1,112,392 $1,207,310 $1,260,360 $1,108,210 15 8/31/98 $1,080,401 $1,091,566 $1,064,084 $1,125,165 16 9/30/98 $1,118,791 $1,146,928 $1,133,590 $1,151,719 17 10/31/98 $1,140,728 $1,200,587 $1,217,930 $1,146,537 18 11/30/98 $1,154,438 $1,252,039 $1,294,623 $1,152,843 19 12/31/98 $1,162,059 $1,305,474 $1,337,466 $1,156,416 20 1/31/99 $1,159,592 $1,340,048 $1,428,101 $1,164,974 21 2/28/99 $1,128,752 $1,300,265 $1,376,333 $1,144,587 22 3/31/99 $1,139,854 $1,335,474 $1,429,445 $1,151,111 23 4/30/99 $1,173,162 $1,378,623 $1,497,958 $1,154,910 24 5/31/99 $1,168,227 $1,354,568 $1,465,168 $1,144,284 25 6/30/99 $1,168,251 $1,398,538 $1,541,020 $1,140,394 26 7/31/99 $1,152,060 $1,367,436 $1,491,615 $1,135,832 27 8/31/99 $1,133,378 $1,358,817 $1,477,713 $1,135,037 28 9/30/99 $1,108,468 $1,341,445 $1,439,100 $1,148,658 29 10/31/99 $1,096,014 $1,398,305 $1,530,620 $1,152,104 30 11/30/99 $1,096,014 $1,428,695 $1,581,880 $1,151,988 31 12/31/99 $1,075,751 $1,496,908 $1,701,994 $1,146,689 - ------------------------------------------------------------------------------------------------------------------------------------
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 - -------------------------------------------------------------------------------- [BRINSON LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Energy............................................... 0.31% Capital Investment Capital Goods...................................... 2.70 Technology......................................... 9.04 ------ 11.74 Basic Industries Chemicals........................................... 1.36 Housing/Paper....................................... 4.52 Metals.............................................. 2.08 ------ 7.96 Consumer Non-Durables........................................ 1.06 Retail/Apparel...................................... 2.98 Autos/Durables...................................... 1.86 Health: Drugs....................................... 3.04 Health: Non-Drugs................................... 2.69 ------ 11.63 Financial Banks............................................... 4.73 Non-Banks........................................... 2.68 ------ 7.41 Utilities Electric............................................ 3.63 Telephone........................................... 1.87 ------ 5.50 Transportation........................................ 4.29% Services/Misc......................................... 3.13 ------ Total U.S. Equities............................. 51.97* U.S. BONDS Corporate Bonds Asset-Backed........................................ 3.39 Consumer............................................ 0.83 Industrial Components............................... 0.65 Health Drugs........................................ 0.29 Services/Miscellaneous.............................. 1.35 Telecommunications.................................. 2.16 Utilities........................................... 0.56 ------ Total U.S. Corporate Bonds...................... 9.23 International Dollar Bonds............................ 2.29 Corporate Mortgage-Backed Securities.................. 1.88 U.S. Government Agencies.............................. 2.47 U.S. Gov't. Mortgage-Backed Securities................ 8.66 U.S. Government Obligations........................... 21.19 ------ Total U.S. Bonds................................ 45.72* SHORT-TERM INVESTMENTS................................ 3.58* ------ TOTAL INVESTMENTS............................... 101.27 LIABILITIES, LESS CASH AND OTHER ASSETS,................................... (1.27) ------ NET ASSETS............................................ 100.00% ====== - -------------------------------------------------------------------------------- *The Fund held a long position in U.S. Treasury futures on December 31, 1999 which increased U.S. bond exposure from 45.72% to 72.72%. The Fund also held a short position in stock index futures which reduced U.S. Equity exposure from 51.97% to 24.45%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 3.58% to 4.10%. Asset Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - -------------------------------------------------------------------------------- U.S. Equities 65% 25% U.S. Bonds 35 75 ----------------------------------------------------------------------------- 100% 100% Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ----------------------------------------------------------- 1. FDX Corp. 2.02% 2. Electronic Data Systems Corp. 1.93 3. Burlington Northern Santa Fe Corp. 1.61 4. General Instrument Corp. 1.41 5. CIGNA Corp. 1.29 6. Compuware Corp. 1.18 7. Allergan, Inc. 1.18 8. Compaq Computer Corp. 1.12 9. Nextel Communications, Inc. 1.10 10. First Data Corp. 1.08 - ----------------------------------------------------------- ================================================================================ 9 U.S. Balanced Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value -------- ------- U.S. Equities -- 51.97% Advanced Micro Devices, Inc. (b)........... 9,600 $ 277,800 Allergan, Inc.............................. 8,000 398,000 Alza Corp. (b)............................. 3,900 135,038 American Standard Companies., Inc. (b)..... 4,600 211,025 AmSouth Bancorp............................ 5,380 103,901 Aon Corp................................... 5,150 206,000 Armstrong World Industries, Inc............ 1,200 40,050 Baxter International, Inc.................. 4,900 307,781 Burlington Northern Santa Fe Corp.......... 22,400 543,200 Central & South West Corp.................. 12,200 244,000 Champion Enterprises, Inc. (b)............. 3,900 33,394 Champion International Corp................ 1,400 86,713 Chase Manhattan Corp....................... 3,900 302,981 CIGNA Corp................................. 5,400 435,037 Circuit City Stores-Circuit City Group..... 3,700 166,731 CMS Energy Corp............................ 4,100 127,869 CommScope, Inc. (b)........................ 1,666 67,161 Compaq Computer Corp....................... 13,900 376,169 Computer Sciences Corp. (b)................ 3,100 293,337 Compuware Corp. (b)........................ 10,700 398,575 Consolidated Stores Corp. (b).............. 5,500 89,375 Corning, Inc............................... 1,500 193,406 Covance, Inc. (b).......................... 2,875 31,086 Delhaize America, Inc...................... 2,766 56,184 Dial Corp.................................. 3,000 72,938 Dominion Resources, Inc.................... 6,200 243,350 Eastman Chemical Co........................ 2,500 119,219 Electronic Data Systems Corp............... 9,700 649,294 Eli Lilly and Co........................... 2,100 139,650 Emerson Electric Co........................ 5,600 321,300 Entergy Corp............................... 5,800 149,350 FDX Corp. (b).............................. 16,600 679,562 Federal-Mogul Corp......................... 6,200 124,775 Federated Department Stores, Inc. (b)...... 1,600 80,900 First Data Corp............................ 7,358 362,841 Fleet Boston Financial Corp................ 8,505 296,080 Fleetwood Enterprises, Inc................. 2,900 59,813 Fort James Corp............................ 7,800 213,525 Gateway, Inc. (b).......................... 2,000 144,125 GATX Corp.................................. 1,800 60,750 General Instrument Corp.................... 5,600 476,000 Genzyme Corp. (b).......................... 3,000 135,000 GreenPoint Financial Corp.................. 8,600 204,787 Hibernia Corp., Class A.................... 6,500 69,063 Household International, Inc............... 7,300 271,925 Illinois Tool Works, Inc................... 5,100 344,569 IMC Global, Inc............................ 9,600 157,200 Johnson Controls, Inc...................... 2,600 147,875 Kimberly-Clark Corp........................ 4,900 319,725 Kroger Co. (b)............................. 3,700 69,838 Lafarge Corp............................... 3,600 99,450 Lear Corp. (b)............................. 5,400 172,800 Lexmark International Group, Inc. (b)...... 1,000 90,500 Lincoln National Corp...................... 2,200 88,000 Lockheed Martin Corp....................... 8,042 175,919 Lyondell Chemical Co....................... 6,500 82,875 Martin Marietta Materials, Inc............. 2,636 108,076 Masco Corp................................. 14,000 355,250 Mattel, Inc................................ 14,200 186,375 Mead Corp.................................. 2,900 125,969 Monsanto Co................................ 4,700 167,437 National Service Industries, Inc........... 2,200 64,900 New York Times Co.......................... 3,900 191,587 Newell Rubbermaid, Inc..................... 9,100 263,900 Nextel Communications, Inc. (b)............ 3,600 371,250 Norfolk Southern Corp...................... 8,000 164,000 Owens-Illinois, Inc. (b)................... 2,100 52,631 Peco Energy Co............................. 4,000 139,000 Pentair, Inc............................... 3,000 115,500 Philip Morris Companies, Inc............... 7,100 164,631 PNC Bank Corp.............................. 3,700 164,650 Praxair, Inc............................... 2,000 100,625 Raytheon Co., Class B...................... 8,400 223,125 Reliaster Financial Corp................... 2,200 86,213 SBC Communications, Inc.................... 5,300 258,375 Southdown, Inc............................. 3,116 160,863 St. Jude Medical, Inc. (b)................. 6,300 193,331 Torchmark Corp............................. 3,000 87,188 Tyson Foods, Inc., Class A................. 7,400 120,250 U.S. Bancorp............................... 5,759 137,136 Ultramar Diamond Shamrock Corp............. 4,590 104,136 Unisys Corp. (b)........................... 3,600 114,975 United Healthcare Corp..................... 4,500 239,062 USG Corp................................... 2,100 98,963 Viad Corp.................................. 4,400 122,650 W.W. Grainger, Inc......................... 2,700 129,094 Watson Pharmaceutical Co. (b).............. 5,200 186,225 Wells Fargo and Co......................... 7,800 315,412 Westvaco Corp.............................. 3,600 117,450 Xerox Corp................................. 11,000 249,562 York International Corp.................... 3,400 93,288 ----------- Total U.S. Equities (Cost $17,329,472)..... 17,520,890 ----------- Face Amount -------- Bonds -- 45.72% U.S. Corporate Bonds -- 9.23% Archer Daniels 6.950%, due 12/15/69........ $ 250,000 218,716 Electronic Data System 7.125%, due 10/15/09..................... 125,000 121,845 MBNA Global Capital Securities, FRN 5.795%, due 02/01/27..................... 215,000 176,630 Noram Energy Corp. 6.375%, due 11/01/03 200,000 190,227 PanAmSat Corp. 6.000%, due 01/15/03........ 335,000 311,771 Peco Energy Transition Trust 6.130%, due 03/01/09..................... 215,000 197,830 PP&L Transition Bond Company LLC 7.050%, due 06/25/09..................... 200,000 199,680 Rite Aid Corp., 144A, 6.125%, due 12/15/08 140,000 95,200 Sprint Capital Corp. 6.875%, due 11/15/28 200,000 177,914 TCI Communications, Inc. 8.750%, due 08/01/15..................... 220,000 240,105 Time Warner 7.570%, due 02/01/24........... 290,000 278,953 UCFC Home Equity Loan 97-C, Class A8, FRN 5.069%, due 09/15/27................. 568,857 569,517 U.S.A. Waste Services 6.500%, due 12/15/02 360,000 332,706 ----------- 3,111,094 ----------- ================================================================================ 10 U.S. Balanced Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Face Amount Value -------- ------- International Dollar Bonds -- 2.29% Abbey National PLC, Resettable Perpetual Preferred 6.700%, due 06/29/49.............. $ 250,000 $ 226,341 Credit Suisse-London, 144A, Resettable Perpetual Preferred 7.900%, due 05/01/07 270,000 256,894 Empresa Nacional de Electricidad S.A. 8.125%, due 02/01/69........................ 200,000 162,000 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14.................. 135,000 126,801 ----------- 772,036 ----------- Corporate Mortgage-Backed Securities -- 1.88% Heller Financial Commercial Mortgage Assets, Series 99-PH1, Class A1 6.500%, due 05/15/61........................ 178,117 172,271 LB Commercial Conduit Mortgage Trust, Series 99-C1, Class A1, 6.410%, due 10/15/30........................ 88,171 84,951 Residential Asset Securitization Trust 97-A10, Class A1, 7.250%, due 12/25/27.............. 344,335 343,426 Residential Asset Securitization Trust 97-A11, Class A2, 7.000%, due 01/25/28.............. 34,869 34,772 ----------- 635,420 ----------- U.S. Government Mortgage-Backed Securities -- 8.66% Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23........................ 326,964 330,799 9.000%, due 03/01/24........................ 151,892 159,020 Federal Home Loan Mortgage Corp. 9.000%, due 01/01/29........................ 139,320 144,936 Federal National Mortgage Assoc., Series 97-72, Class EG, 0.000%, due 09/25/22........................ 202,300 175,284 Federal National Mortgage Association 7.500%, due 07/01/10........................ 247,773 249,814 7.600%, due 06/17/19........................ 278,827 280,271 7.500%, due 12/01/27........................ 215,656 213,397 FNCI, 8.000%, due 02/01/13.................... 276,984 282,581 Government National Mortgage Association 8.000%, due 08/15/22........................ 455,988 463,037 7.000%, due 12/15/23........................ 128,624 125,326 7.500%, due 06/15/24........................ 500,000 494,531 ----------- 2,918,996 ----------- U.S. Government Agencies -- 2.47% Jordan Aid, 8.750%, due 09/01/19.............. 775,765 834,165 ----------- U.S. Government Obligations -- 21.19% U.S. Treasury Bond 8.000%, due 11/15/21....... 495,000 561,515 U.S. Treasury Inflation Indexed Note 3.625%, due 04/15/28........................ 2,440,000 2,267,719 3.875%, due 04/15/29........................ 4,400,000 4,204,816 U.S. Treasury Note 5.625%, due 05/15/08....... 115,000 108,172 ----------- 7,142,222 ----------- Total U.S. Bonds (Cost $16,140,158)........... 15,413,933 ----------- Short-Term Investments -- 3.58% U.S. Treasury Bills -- 2.07% U.S. Treasury Bill, due 02/03/00.............. 700,000 696,968 ----------- Investment Companies -- 1.51%................. Shares --------- Brinson Supplementary Trust U.S. Cash Management Prime Fund....................... 507,697 507,697 ----------- Total Short-Term Investments (Cost $1,204,748)........................... 1,204,665 ----------- Total Investments (Cost $34,674,378) -- 101.27% (a)........... 34,139,488 Liabilities, less cash and other assets -- (1.27%)..................... (429,267) ----------- Net Assets -- 100%............................ $33,710,221 =========== See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 11 U.S. Balanced Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $34,674,378; and net unrealized depreciation consisted of: Gross unrealized appreciation.................. $ 2,514,223 Gross unrealized depreciation.................. (3,049,113) ------------ Net unrealized depreciation............... $ (534,890) ============ (b) Non-income producing security FRN: Floating rate note-- The rate disclosed is that in effect at December 31, 1999. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $478,895 or 1.42% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally returns the right to call such a bond. FUTURES CONTRACTS The U.S. Balanced Fund had the following open futures contracts as of December 31, 1999:
Expiration Cost/ Current Unrealized Date Proceeds Value Loss ---------- -------- ------- ---------- U.S. Interest Rate Futures Buy Contracts 5 Year U.S. Treasury Notes, 69 contracts............ March 2000 $6,832,561 $6,764,156 $ (68,405) 10 Year U.S. Treasury Notes, 13 contracts........... March 2000 1,268,302 1,246,172 (22,130) 30 Year U.S. Treasury Bonds, 12 contracts........... March 2000 1,118,459 1,091,250 (27,209) Index Futures Sale Contracts Standard & Poor's 500, 25 contracts................. March 2000 9,000,450 9,276,250 (275,800) ---------- Total......................................... $ (393,544) ==========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $696,968. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 U.S. Balanced Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $34,166,681).................................. $33,631,791 Affiliated issuers (Cost $507,697)....................................... 507,697 Cash........................................................................ 392 Receivables: Investment securities sold............................................... 2,892 Dividends................................................................ 25,956 Interest................................................................. 165,142 Other assets................................................................ 215 ----------- TOTAL ASSETS........................................................... 34,334,085 ----------- LIABILITIES: Payables: Investment securities purchased.......................................... 502,266 Investment advisory fees................................................. 15,445 Variation margin......................................................... 53,015 Accrued expenses......................................................... 53,138 ----------- TOTAL LIABILITIES...................................................... 623,864 ----------- NET ASSETS.................................................................. $33,710,221 =========== NET ASSETS CONSIST OF: Paid in capital............................................................ $35,219,429 Accumulated undistributed net investment income............................ 3,059 Distributions in excess of net realized gain............................... (583,833) Net unrealized depreciation................................................ (928,434) ----------- NET ASSETS............................................................. $33,710,221 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $32,262,816 and 3,841,353 shares issued and outstanding)................................................. $ 8.40 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,075 and 128 shares issued and outstanding)............................................................ $ 8.40 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,446,330 and 173,243 shares issued and outstanding)............................................................ $ 8.35 ===========
See accompanying notes to financial statements. ================================================================================ 13 U.S. Balanced Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
INVESTMENT INCOME: Interest........................................................ $ 582,877 Dividends....................................................... 133,281 ----------- TOTAL INCOME.................................................. 716,158 ----------- EXPENSES: Advisory........................................................ 131,459 Professional.................................................... 18,552 Registration.................................................... 17,892 Distribution.................................................... 4,148 Printing........................................................ 4,114 Other........................................................... 7,576 ----------- TOTAL EXPENSES................................................ 183,741 Expenses deferred by Advisor.................................. (28,977) Earnings credits.............................................. (7) ----------- NET EXPENSES.................................................. 154,757 ----------- NET INVESTMENT INCOME......................................... 561,401 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 406,080 Futures contracts............................................... (775,642) ----------- Net realized loss............................................. (369,562) ----------- Change in net unrealized appreciation or depreciation on: Investments..................................................... (3,394,694) Futures contracts............................................... 142,826 ----------- Change in net unrealized appreciation or depreciation......... (3,251,868) ----------- Net realized and unrealized loss................................. (3,621,430) ----------- Net decrease in net assets resulting from operations............. $(3,060,029) ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. Balanced Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 --------------- ------------- OPERATIONS: Net investment income................................................... $ 561,401 $ 1,558,422 Net realized gain (loss)................................................ (369,562) 4,257,213 Change in net unrealized appreciation or depreciation................... (3,251,868) (5,162,345) --------------- ------------- Net increase (decrease) in net assets resulting from operations......... (3,060,029) 653,290 --------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I....................................................... (729,082) (2,554,055) Brinson Class N....................................................... (23) (68) UBS Investment Funds Class............................................ (29,460) (123,921) Distributions in excess of net realized gain: Brinson Class I....................................................... (225,248) (9,074,452) Brinson Class N....................................................... (7) (243) UBS Investment Funds Class............................................ (10,418) (483,100) --------------- ------------- Total distributions to shareholders....................................... (994,238) (12,235,839) --------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold............................................................. 5,675,756 14,184,340 Shares issued on reinvestment of distributions.......................... 970,972 12,036,064 Shares redeemed......................................................... (8,275,334) (57,681,932) --------------- ------------- Net decrease in net assets resulting from capital share transactions.... (1,628,606) (31,461,528) --------------- ------------- TOTAL DECREASE IN NET ASSETS....................................... (5,682,873) (43,044,077) --------------- ------------- NET ASSETS: Beginning of period..................................................... 39,393,094 82,437,171 --------------- ------------- End of period (including accumulated undistributed net investment income of $3,059 and $200,223, respectively)........................... $ 33,710,221 $ 39,393,094 =============== =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. Balanced Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year Ended June 30, December 30, 1994* December 31, 1999 ------------------------------------------------- Through Brinson Class I (Unaudited) 1999 1998 1997 1996 June 30, 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period.... $ 9.38 $ 12.24 $ 12.53 $ 11.71 $ 11.23 $ 10.00 ----------- --------- --------- --------- --------- ---------- Income (loss) from investment operations: Net investment income............... 0.14 0.34** 0.49** 0.47 0.44 0.23 Net realized and unrealized gain (loss)...................... (0.87) 0.18 0.93 1.29 1.04 1.16 ----------- --------- --------- --------- --------- ---------- Total income (loss) from investment operations........... (0.73) 0.52 1.42 1.76 1.48 1.39 ----------- --------- --------- --------- --------- ---------- Less distributions: Distributions from net investment income.................. (0.19) (0.73) (0.77) (0.40) (0.43) (0.16) Distributions from net realized gain...................... (0.06) (2.65) (0.94) (0.54) (0.57) -- ----------- --------- --------- --------- --------- ---------- Total distributions.............. (0.25) (3.38) (1.71) (0.94) (1.00) (0.16) ----------- --------- --------- --------- --------- ---------- Net asset value, end of period.......... $ 8.40 $ 9.38 $ 12.24 $ 12.53 $ 11.71 $ 11.23 =========== ========= ========= ========= ========= ========== Total return (non-annualized)........... (7.83)% 4.74% 12.19% 15.50% 13.52% 13.91% Ratios/Supplemental data: Net assets, end of period (in 000s)............................ $ 32,263 $ 37,603 $ 80,556 $ 282,860 $ 227,829 $ 157,724 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits................ 0.95%*** 0.96% 0.81% 0.88% 1.01% 1.06%*** After expense reimbursement and earnings credits................ 0.80%*** 0.80% 0.80% 0.80% 0.80% 0.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits................ 2.85%*** 3.00% 3.88% 3.78% 3.76% 4.36%*** After expense reimbursement and earnings credits................ 3.00%*** 3.16% 3.89% 3.86% 3.97% 4.63%*** Portfolio turnover rate............... 42% 113% 194% 329% 240% 196%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 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.
Six Months Ended Year Year December 31, 1999 Ended Ended Brinson Class N (Unaudited) June 30, 1999 June 30, 1998 - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period........................ $ 9.38 $ 12.27 $ 12.53 ------- ------- -------- Income (loss) from investment operations: Net investment income................................... 0.13 0.29* 0.47* Net realized and unrealized gain (loss)................. (0.87) 0.18 0.94 ------- ------- -------- Total income (loss) from investment operations...... (0.74) 0.47 1.41 ------- ------- -------- Less distributions: Distributions from net investment income................ (0.18) (0.71) (0.73) Distributions from net realized gain.................... (0.06) (2.65) (0.94) ------- ------- -------- Total distributions................................. (0.24) (3.36) (1.67) ======= ======= ======== Net asset value, end of period.............................. $ 8.40 $ 9.38 $ 12.27 Total return (non-annualized)............................... (7.92)% 4.17% 12.15% Ratios/Supplemental data: Net assets, end of period (in 000s)....................... $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits....... 1.20%** 1.21% 1.06% After expense reimbursement and earnings credits........ 1.05%** 1.05% 1.05% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits....... 2.60%** 2.75% 3.63% After expense reimbursement and earnings credits........ 2.75%** 2.91% 3.64% Portfolio turnover rate................................... 42% 113% 194%
* The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized See accompanying notes to financial statements. ================================================================================ 17 U.S. Equity Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Since its inception on February 28, 1994, the Brinson U.S. Equity Fund Class I has provided an annualized return of 16.71%, compared to the 22.60% return of its benchmark, the Wilshire 5000 Equity Index. The annualized volatility of the Fund has been 14.29% since its inception, only slightly above the 14.13% volatility for the benchmark. In 1999, the Fund's total return of -4.05% trailed the 23.56% return for its benchmark. While these results are disappointing, we feel that the Fund is now well positioned as we move into the year 2000. Recent events and stratification of the U.S. market make our current investment strategies very appealing and our conviction remains higher than ever. Market exposure (average beta of .96) detracted modestly from Fund relative performance in the very strong equity environment that characterized 1999. Factor positions detracted from performance for the full year. The most significant negatives were the underexposure to stocks ranked high in relative strength and size and low in earnings/price, as a relatively narrow segment of the largest capitalization stocks, especially in the technology sector, continued to dominate market performance. Fundamentally driven investment styles tend to perform poorly in such narrow momentum-driven market environments. The Fund has minimal exposure to these largest stocks based upon our analysis, which indicates they are meaningfully overextended. Industry weightings also detracted from active returns during 1999. The underweight to the technology software and hardware sectors had the largest negative effect on performance. Investors have been willing to pay significant premiums for recent strong relative revenue growth and to extrapolate perceived earnings growth far into the future--in spite of rising interest rates which usually dampen high-multiple issues. We believe there is a low probability that such high implied earnings and profitability levels can be achieved, much less sustained, in a competitive economy. Our overweight in economically sensitive construction and transportation stocks also detracted from performance due to concerns over higher energy costs and fears that higher interest rates would pressure building activity. The pick-up in the global industrial economy helps a number of more economically sensitive sectors that have been in recession-like conditions for much of the past two years. Our exposure in the construction area is oriented toward non-residential infrastructure and basic building materials, and is not dependent upon higher residential construction spending. Stock selection had the largest negative impact on active returns for the full year. Among large capitalization issues, the best performers were Corning, First Data and Computer Sciences, while the most detrimental to performance were our weightings in Xerox, Lockheed Martin, FDX Corp and Raytheon. Given the shift toward momentum-based styles, investors had little tolerance for shortfalls in quarterly earnings and severely punished such disappointments. In the intermediate capitalization segment of the Fund, the most positive contributors were General Instruments, Circuit City and Allergan, while the weakest were Advanced Micro Devices, Fort James and Federal Mogul. ================================================================================ 18 [BRINSON LOGO] Total Return
6 months 1 year 3 years 5 years 2/28/94* ended ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - ---------------------------------------------------------------------------------------------------------- Brinson U.S. Equity Fund Class I -13.13% -4.05% 12.39% 20.17% 16.71% - ---------------------------------------------------------------------------------------------------------- Wilshire 5000 Equity Index 10.45 23.56 26.04 27.06 22.60 - ----------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Equity Fund Class I. 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 Class I and the Wilshire 5000 Equity Index if you had invested $1,000,000 on February 28, 1994, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Equity Fund Class I vs. Wilshire 5000 Equity Index Wealth Value with Dividends Reinvested
- ----------------------------------------------------------------------- Label A B - ----------------------------------------------------------------------- Label Brinson U.S. Equity Fund Wilshire 5000 Equity Index Class 1 - ----------------------------------------------------------------------- 1 2/28/94 1,000,000 1,000,000 2 3/31/94 942,943 954,720 3 4/30/94 964,965 963,876 4 5/31/94 984,985 973,322 5 6/30/94 970,003 947,285 6 7/31/94 992,118 975,401 7 8/31/94 1,055,444 1,018,484 8 9/30/94 1,019,258 998,766 9 10/31/94 1,014,232 1,015,076 10 11/30/94 979,050 977,904 11 12/31/94 983,676 991,086 12 1/31/95 1,004,021 1,012,504 13 2/28/95 1,049,797 1,052,832 14 3/31/95 1,076,245 1,080,584 15 4/30/95 1,099,642 1,107,437 16 5/31/95 1,140,332 1,144,946 17 6/30/95 1,178,023 1,181,470 18 7/31/95 1,219,913 1,230,087 19 8/31/95 1,242,391 1,242,080 20 9/30/95 1,289,389 1,289,453 21 10/31/95 1,285,302 1,276,507 22 11/30/95 1,358,865 1,330,593 23 12/31/95 1,382,877 1,352,348 24 1/31/96 1,439,578 1,388,577 25 2/29/96 1,462,678 1,412,864 26 3/31/96 1,489,979 1,428,320 27 4/30/96 1,518,329 1,463,614 28 5/31/96 1,542,480 1,503,629 29 6/30/96 1,538,200 1,491,254 30 7/31/96 1,464,400 1,410,801 31 8/31/96 1,520,277 1,455,933 32 9/30/96 1,588,806 1,533,447 33 10/31/96 1,622,543 1,554,884 34 11/30/96 1,735,351 1,657,895 35 12/31/96 1,737,594 1,639,211 36 1/31/97 1,800,717 1,726,958 37 2/28/97 1,811,046 1,726,163 38 3/31/97 1,751,366 1,649,815 39 4/30/97 1,805,308 1,721,764 40 5/31/97 1,937,291 1,843,751 41 6/30/97 2,028,487 1,928,453 42 7/31/97 2,183,729 2,076,712 43 8/31/97 2,098,633 1,998,648 44 9/30/97 2,192,928 2,116,589 45 10/31/97 2,076,785 2,046,085 46 11/30/97 2,118,182 2,113,074 47 12/31/97 2,167,878 2,152,123 48 1/31/98 2,182,676 2,163,809 49 2/28/98 2,372,581 2,231,335 50 3/31/98 2,509,461 2,437,518 51 4/30/98 2,484,798 2,466,451 52 5/31/98 2,449,037 2,400,819 53 6/30/98 2,464,186 2,848,991 54 7/31/98 2,402,303 2,430,545 55 8/31/98 2,059,471 2,052,036 56 9/30/98 2,209,228 2,186,075 57 10/31/98 2,337,550 2,348,719 58 11/30/98 2,476,563 2,496,618 59 12/31/98 2,570,544 2,656,377 60 1/31/99 2,553,433 2,754,025 61 2/28/99 2,459,983 2,654,192 62 3/31/99 2,540,271 2,756,617 63 4/30/99 2,769,291 2,888,742 64 5/31/99 2,735,069 2,825,507 65 6/30/99 2,839,189 2,971,784 66 7/31/99 2,720,229 2,876,508 67 8/31/99 2,625,060 2,849,699 68 9/30/99 2,434,723 2,775,237 69 10/31/99 2,436,045 2,951,728 70 11/30/99 2,450,585 3,050,581 71 12/31/99 2,463,489 3,282,215
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 - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 1 year 6/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - --------------------------------------------------------------------- Brinson U.S. Equity Fund Class N -13.20% -4.22% 7.77% - --------------------------------------------------------------------- Wilshire 5000 Equity Index 10.45 23.56 23.70 - ---------------------------------------------------------------------
*Inception date of the Brinson U.S. Equity Fund Class N. 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 Class N and the Wilshire 5000 Equity Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Equity Fund Class N vs. Wilshire 5000 Equity Index Wealth Value with Dividends Reinvested
- ------------------------------------------------------------------------ Label A B - ------------------------------------------------------------------------ Label Brinson U.S Equity Fund Wilshire 5000 Equity Index Class N - ------------------------------------------------------------------------ 1 6/30/97 1,000,000 1,000,000 2 7/31/97 1,076,531 1,076,880 3 8/31/97 1,034,580 1,036,400 4 9/30/97 1,080,499 1,097,558 5 10/31/97 1,023,243 1,060,998 6 11/30/97 1,043,084 1,095,735 7 12/31/97 1,067,291 1,115,985 8 1/31/98 1,074,557 1,122,044 9 2/28/98 1,168,071 1,203,729 10 3/31/98 1,234,245 1,263,976 11 4/30/98 1,222,103 1,278,979 12 5/31/98 1,203,890 1,244,946 13 6/30/98 1,210,968 1,288,593 14 7/31/98 1,179,902 1,260,360 15 8/31/98 1,011,779 1,064,084 16 9/30/98 1,083,049 1,133,590 17 10/31/98 1,165,282 1,217,930 18 11/30/98 1,214,013 1,294,623 19 12/31/98 1,259,349 1,377,466 20 1/31/99 1,250,932 1,428,101 21 2/28/99 1,204,961 1,376,333 22 3/31/99 1,243,810 1,429,445 23 4/30/99 1,355,824 1,497,958 24 5/31/99 1,338,342 1,465,168 25 6/30/99 1,389,546 1,541,020 26 7/31/99 1,331,080 1,491,615 27 8/31/99 1,284,307 1,477,713 28 9/30/99 1,190,761 1,439,100 29 10/31/99 1,191,411 1,530,620 30 11/30/99 1,198,557 1,581,880 31 12/31/99 1,206,153 1,701,994
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 - -------------------------------------------------------------------------------- [BRINSON LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Energy........................................................ 0.57% Capital Investment Capital Goods......................................... 5.02 Technology............................................ 16.51 ------ 21.53 Basic Industries Chemicals............................................. 2.50 Housing/Paper......................................... 8.31 Metals................................................ 3.80 ------ 14.61 Consumer Non-Durables.......................................... 2.06 Retail/Apparel........................................ 5.53 Autos/Durables........................................ 3.63 Health: Drugs......................................... 5.60 Health: Non-Drugs..................................... 5.00 ------ 21.82 Financial Banks................................................. 8.67% Non-Banks............................................. 4.93 ------ 13.60 Utilities Electric.............................................. 7.07 Telephone............................................. 3.42 ------ 10.49 Transportation................................................ 7.85 Services/Misc................................................. 5.73 ------ Total U.S. Equities........................... 96.20* SHORT-TERM INVESTMENTS........................................ 3.52* ------ TOTAL INVESTMENTS............................. 99.72 CASH AND OTHER ASSETS, LESS LIABILITIES.............................................. 0.28 ------ NET ASSETS.................................................... 100.00% ====== - -------------------------------------------------------------------------------- *The Fund held a long position in stock index futures which increased U.S. Equity exposure from 96.20% to 99.66%. This adjustment results in a net decrease in the Fund's exposure to Short-Term Investments from 3.52% to 0.06%. Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------------------ 1. FDX Corp. 3.66% 2. Electronic Data Systems Corp. 3.54 3. Burlington Northern Santa Fe Corp. 2.97 4. General Instrument Corp. 2.59 5. CIGNA Corp. 2.39 6. Allergan, Inc. 2.18 7. Compuware Corp. 2.17 8. Compaq Computer Corp. 2.05 9 Nextel Communications, Inc., Class A 2.03 10. First Data Corp. 1.97 - ------------------------------------------------------------ ================================================================================ 21 U.S. Equity Fund - Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value --------- ------------ U.S. Equities - 96.20% Advanced Micro Devices, Inc. (b)....................................... 259,900 $ 7,520,856 Allergan, Inc.......................................................... 221,400 11,014,650 Alza Corp. (b)......................................................... 105,800 3,663,325 American Standard Companies., Inc. (b)................................. 126,800 5,816,950 AmSouth Bancorp........................................................ 148,209 2,862,286 Aon Corp............................................................... 140,350 5,614,000 Armstrong World Industries, Inc........................................ 33,500 1,118,063 Baxter International, Inc.............................................. 135,100 8,485,969 Burlington Northern Santa Fe Corp...................................... 616,900 14,959,825 Central & South West Corp.............................................. 335,000 6,700,000 Champion Enterprises, Inc. (b)......................................... 108,100 925,606 Champion International Corp............................................ 38,300 2,372,206 Chase Manhattan Corp................................................... 106,700 8,289,256 CIGNA Corp............................................................. 149,650 12,056,178 Circuit City Stores-Circuit City Group................................. 101,700 4,582,856 CMS Energy Corp........................................................ 113,750 3,547,578 CommScope, Inc. (b).................................................... 44,899 1,809,991 Compaq Computer Corp................................................... 382,500 10,351,406 Computer Sciences Corp. (b)............................................ 84,400 7,986,350 Compuware Corp. (b).................................................... 294,500 10,970,125 Consolidated Stores Corp. (b).......................................... 151,900 2,468,375 Corning, Inc........................................................... 40,700 5,247,756 Covance, Inc. (b)...................................................... 107,550 1,162,884 Delhaize America, Inc.................................................. 77,232 1,568,775 Dial Corp.............................................................. 87,200 2,120,050 Dominion Resources, Inc................................................ 169,400 6,648,950 Eastman Chemical Co.................................................... 67,950 3,240,366 Electronic Data Systems Corp........................................... 266,900 17,865,619 Eli Lilly and Co....................................................... 57,700 3,837,050 Emerson Electric Co.................................................... 153,700 8,818,537 Entergy Corp........................................................... 236,500 6,089,875 FDX Corp. (b).......................................................... 451,600 18,487,375 Federal-Mogul Corp..................................................... 171,300 3,447,413 Federated Department Stores, Inc. (b).................................. 44,300 2,239,919 First Data Corp........................................................ 201,430 9,933,017 Fleet Boston Financial Corp............................................ 233,955 8,144,558 Fleetwood Enterprises, Inc............................................. 78,700 1,623,188 Fort James Corp........................................................ 213,600 5,847,300 Gateway Inc. (b)....................................................... 53,300 3,840,931 GATX Corp.............................................................. 49,400 1,667,250 General Instrument Corp................................................ 153,450 13,043,250 Genzyme Corp. (b)...................................................... 81,450 3,665,250 GreenPoint Financial Corp.............................................. 236,900 5,641,181 Hibernia Corp.......................................................... 179,250 1,904,531 Household International, Inc........................................... 199,600 7,435,100 Illinois Tool Works, Inc............................................... 139,300 9,411,456 IMC Global, Inc........................................................ 262,800 4,303,350 Johnson Controls, Inc.................................................. 79,000 4,493,125 Kimberly-Clark Corp.................................................... 135,750 8,857,687 Kroger Co. (b)......................................................... 102,200 1,929,025 Lafarge Corp........................................................... 98,400 2,718,300 Lear Corp. (b)......................................................... 151,350 4,843,200 Lexmark International Group, Inc. (b).................................. 30,500 2,760,250 Lincoln National Corp.................................................. 60,300 2,412,000 Lockheed Martin Corp................................................... 237,352 5,192,075 Lyondell Chemical Co................................................... 177,250 2,259,938 Martin Marietta Materials, Inc......................................... 73,707 3,021,987 Masco Corp............................................................. 384,600 9,759,225 Mattel, Inc............................................................ 387,600 5,087,250 Mead Corp.............................................................. 79,000 3,431,563 Monsanto Co............................................................ 129,400 4,609,875 National Service Industries, Inc....................................... 60,600 1,787,700 New York Times Co...................................................... 107,200 5,266,200 Newell Rubbermaid, Inc................................................. 250,700 7,270,300 Nextel Communications, Inc., Class A (b)............................... 99,350 10,245,469 Norfolk Southern Corp.................................................. 218,500 4,479,250 Owens-Illinois, Inc. (b)............................................... 67,900 1,701,744 Peco Energy Co......................................................... 111,000 3,857,250 Pentair, Inc........................................................... 83,800 3,226,300 Philip Morris Companies, Inc........................................... 195,550 4,534,316 PNC Bank Corp.......................................................... 100,400 4,467,800 Praxair, Inc........................................................... 55,600 2,797,375 Raytheon Co., Class B.................................................. 229,650 6,100,078 Reliaster Financial Corp............................................... 60,600 2,374,763 SBC Communications, Inc................................................ 143,500 6,995,625 Southdown, Inc......................................................... 85,140 4,395,352 St. Jude Medical, Inc. (b)............................................. 174,500 5,354,969 Torchmark Corp......................................................... 82,600 2,400,563 Tyson Foods, Inc....................................................... 229,250 3,725,312 U.S. Bancorp........................................................... 158,141 3,765,733 Ultramar Diamond Shamrock Corp......................................... 127,018 2,881,721 Unisys Corp. (b)....................................................... 99,500 3,177,781 United Healthcare Corp................................................. 123,300 6,550,312 USG Corp............................................................... 56,500 2,662,563 Viad Corp.............................................................. 121,150 3,377,056 W.W. Grainger, Inc..................................................... 80,400 3,844,125 Watson Pharmaceutical Co. (b).......................................... 143,400 5,135,512 Wells Fargo and Co..................................................... 215,200 8,702,150 Westvaco Corp.......................................................... 100,200 3,269,025 Xerox Corp............................................................. 297,300 6,744,994 York International Corp................................................ 92,600 2,540,713 ------------ Total U.S. Equities (Cost $439,940,416)................................ 485,358,333 ------------ Short-Term Investments - 3.52% Investment Companies - 3.52% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $17,738,488).......................................... 17,738,488 17,738,488 ------------ Total Investments (Cost $457,678,904) - 99.72% (a)....................................... 503,096,821 Cash and other assets, less liabilities - 0.28%........................ 1,405,055 ------------ Net Assets - 100%...................................................... $504,501,876 ============
See accompanying notes to schedule of investments. =============================================================================== 22 U.S. Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $457,678,904; and net unrealized appreciation consisted of: Gross unrealized appreciation.................. $ 97,065,747 Gross unrealized depreciation.................. (51,647,830) -------------- Net unrealized appreciation................ $ 45,417,917 ============== (b) Non-income producing security. FUTURES CONTRACTS The U.S. Equity Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ----------- ------------ ----------- ------------ Index Futures Buy Contracts Standard & Poor's 500, 47 contracts............ March 2000 $17,310,345 $17,439,350 $ 129,005 ===========
The segregated cash pledged to cover margin requirements for the open futures positions at December 31, 1999 was $956,250. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (UNAUDITED)
ASSETS: Investments, at value: Unaffiliated issuers (Cost $439,940,416)............................................ $ 485,358,333 Affiliated issuers (Cost $17,738,488)............................................... 17,738,488 Cash.................................................................................. 915,483 Receivables: Dividends........................................................................... 948,360 Interest............................................................................ 8,302 Variation margin.................................................................... 39,950 Other assets.......................................................................... 7,343 ---------------- TOTAL ASSETS...................................................................... 505,016,259 ---------------- LIABILITIES: Payables: Investment securities purchased..................................................... 203,681 Investment advisory fees............................................................ 310,702 ---------------- TOTAL LIABILITIES................................................................. 514,383 ---------------- NET ASSETS.............................................................................. $ 504,501,876 ================ NET ASSETS CONSIST OF: Paid in capital....................................................................... $ 447,548,416 Accumulated undistributed net investment income....................................... 2,575,151 Accumulated net realized gain......................................................... 8,831,387 Net unrealized appreciation........................................................... 45,546,922 ---------------- NET ASSETS........................................................................ $ 504,501,876 ================ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $445,593,097 and 26,487,668 shares issued and outstanding)............... $ 16.82 ================ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $8,136,405 and 485,875 shares issued and outstanding).................... $ 16.75 ================ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $50,772,374 and 3,032,044 shares issued and outstanding)................. $ 16.75 ================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends..................................................... $ 4,864,406 Interest...................................................... 489,563 ----------------- TOTAL INCOME.............................................. 5,353,969 ----------------- EXPENSES: Advisory...................................................... 2,275,632 Distribution.................................................. 167,143 Administration................................................ 29,871 Other......................................................... 302,235 ----------------- TOTAL EXPENSES............................................ 2,774,881 Earnings credits.......................................... (528) NET EXPENSES.............................................. 2,774,353 ----------------- NET INVESTMENT INCOME..................................... 2,579,616 ----------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments................................................. 16,528,414 Futures contracts........................................... 1,121,164 ----------------- Net realized gain......................................... 17,649,578 ----------------- Change in net unrealized appreciation or depreciation on: Investments................................................. (123,031,905) Futures contracts........................................... 129,005 ----------------- Change in net unrealized appreciation or depreciation..... (122,902,900) ----------------- Net realized and unrealized loss.............................. (105,253,322) ----------------- Net decrease in net assets resulting from operations.......... $ (102,673,706) =================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ----------------- OPERATIONS: Net investment income............................................................ $ 2,579,616 $ 5,562,471 Net realized gain................................................................ 17,649,578 53,949,031 Change in net unrealized appreciation or depreciation............................ (122,902,900) 51,667,938 ----------------- ----------------- Net increase (decrease) in net assets resulting from operations.................. (102,673,706) 111,179,440 ----------------- ----------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................ (1,354,936) (5,223,351) Brinson Class N................................................................ (12,687) (28,171) UBS Investment Funds Class..................................................... -- (190,578) Distributions from net realized gain: Brinson Class I................................................................ (46,078,258) (36,404,562) Brinson Class N................................................................ (773,650) (234,496) UBS Investment Funds Class..................................................... (5,191,383) (3,937,537) ----------------- ----------------- Total distributions to shareholders.............................................. (53,410,914) (46,018,695) ----------------- ----------------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................................................... 70,513,579 283,730,686 Shares issued in connection with the acquisition of the UBS Value Equity Fund.... -- 23,269,419 Shares issued on reinvestment of distributions................................... 48,416,091 42,645,369 Shares redeemed.................................................................. (248,393,696) (285,854,547) ----------------- ----------------- Net increase (decrease) in net assets resulting from capital share transactions.. (129,464,026) 63,790,927 ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... (285,548,646) 128,951,672 ----------------- ----------------- NET ASSETS: Beginning of period.............................................................. 790,050,522 661,098,850 ----------------- ----------------- End of period (including accumulated undistributed net investment income of $2,575,151 and $1,363,158, respectively)......................................... $ 504,501,876 $ 790,050,522 ================= =================
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.
Six Months Ended December 31, 1999 Year Ended June 30, ----------------------------------------------------- Brinson Class I (Unaudited) 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period................ $ 21.48 $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65 -------- -------- -------- -------- -------- ------- Income (loss) from investment operations: Net investment income......................... 0.06* 0.17* 0.19 0.15 0.17 0.16 Net realized and unrealized gain (loss)....... (2.90) 2.67 3.39 4.27 3.31 1.89 -------- -------- -------- -------- -------- ------- Total income (loss) from investment operations............................ (2.84) 2.84 3.58 4.42 3.48 2.05 -------- -------- -------- -------- -------- ------- Less distributions: Distributions from net investment income...... (0.05) (0.15) (0.18) (0.14) (0.17) (0.14) Distributions from net realized gain.......... (1.77) (1.12) (1.13) (1.23) (0.25) (0.03) -------- -------- -------- -------- -------- ------- Total distributions....................... (1.82) (1.27) (1.31) (1.37) (0.42) (0.17) -------- -------- -------- -------- -------- ------- Net asset value, end of period...................... $ 16.82 $ 21.48 $ 19.91 $ 17.64 $ 14.59 $ 11.53 ======== ======== ======== ======== ======== ======= Total return (non-annualized)....................... (13.13)% 15.22% 21.48% 31.87% 30.57% 21.45% Ratios/Supplemental data: Net assets, end of period (in 000s)............. $445,593 $713,321 $605,768 $337,949 $126,342 $42,573 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits........................ 0.80%** 0.80% 0.80% 0.89% 1.14% 1.70% After expense reimbursement and earnings credits..................................... N/A N/A N/A 0.80% 0.80% 0.80% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits........................ 0.84%** 0.82% 1.12% 1.06% 1.13% 1.09% After expense reimbursement and earnings credits..................................... N/A N/A N/A 1.15% 1.47% 1.99% Portfolio turnover rate......................... 26% 48% 42% 43% 36% 33%
* The net investment income per share data was determined by using average shares outstanding throughout the period ** 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.
Six Months Ended December 31, 1999 Year Ended Year Ended Brinson Class N (Unaudited) June 30, 1999 June 30, 1998 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............................... $ 21.39 $ 19.88 $ 17.64 ------- -------- -------- Income from investment operations: Net investment income........................................... 0.06* 0.08* 0.15 Net realized and unrealized gain (loss)......................... (2.90) 2.67 3.37 ------- -------- -------- Total income (loss) from investment operations................ (2.84) 2.75 3.52 ------- -------- -------- Less distributions:............................................... Distributions from net investment income........................ (0.03) (0.12) (0.15) Distributions from net realized gain............................ (1.77) (1.12) (1.13) ------- -------- -------- Total distributions........................................... (1.80) (1.24) (1.28) ------- -------- -------- Net asset value, end of period..................................... $ 16.75 $ 21.39 $ 19.88 ======= ======== ======== Total return (non-annualized)...................................... (13.20)% 14.75% 21.10% Ratios/Supplemental data: Net assets, end of period (in 000s)............................... $ 8,136 $ 7,563 $ 268 Ratio of gross expenses to average net assets..................... 1.05%** 1.05% 1.05% Ratio of net investment income to average net assets.............. 0.59%** 0.57% 0.87% Portfolio turnover rate........................................... 26% 48% 42%
* The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized See accompanying notes to financial statements. ================================================================================ 28 U.S. Large Capitalization Equity Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Since its inception on April 30, 1998, the Brinson U.S. Large Capitalization Equity Fund Class I has provided an annualized return of -3.53% compared to the 19.85% return of its benchmark, the S&P 500 Equity Index. Results for the one- year period were also disappointing, with the Fund returning -11.05% versus the benchmark return of 21.04%. While these results are well below our expectations, we feel the Fund is very well positioned to take advantage of the current market environment--which has seen many sectors and market segments driven to extreme levels of over-and under-valuation. For 1999, market exposure detracted very modestly from active returns, consistent with a slightly below market beta and very strong returns. Results suffered from a meaningful underweight in the high momentum, high price/earnings and large capitalization stocks. Our Fund has minimal exposure to such stocks based upon our valuation analysis, which indicates they are meaningfully overvalued. Industry exposures also detracted from active returns, with negative contributions from the relative underweights in semiconductors and computer software and overweights in railroads and tobacco. These negative returns were only partially offset by positive contributions from our underweights in food and beverages, drugs and specialty retail and overweights in information services. Stock selection had the largest negative impact on active returns for the full year. The strongest contributors were Corning, First Data and Computer Sciences while the biggest detractors were Xerox, Lockheed Martin, FDX Corp., and Raytheon. Given the momentum orientation of the current market environment, companies that reported any disappointment in expected earnings were heavily penalized. A relatively narrow segment of the largest capitalization stocks, especially in the technology sector, continued to dominate market performance. Technology, with a return of 79% for the year, had the best return of any sector and its heavy weighting in the S&P 500 Index (30% at year-end) resulted in contributing about 67% of the Index's year-to-date return. We believe investors have been too willing to pay significant premiums for the perception of strong top-line growth and to assume strong relative earnings growth far into the future. We remain convinced that there are greater relative values away from such issues, which are dominated by momentum investors. Specifically, the Fund's most important factor exposures, as we enter 2000, include underweights in size, momentum and growth and overweights in the traditional value measures of earnings/price, book/price and yield. From an industry standpoint, the Fund is underweight in technology hardware, retail, drugs and energy and overweight in transportation, banks, information services and electric utilities. ================================================================================ 29 U.S. Large Capitalization Equity Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 1 year 4/30/98* ended ended to 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Equity Fund Class I -17.67% -11.05% -3.53% - ------------------------------------------------------------------------------------------------- S&P 500 Equity Index 7.71 21.04 19.85 - -------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Equity Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Capitalization Equity Fund Class I and the S&P 500 Equity Index if you had invested $1,000,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Equity Fund Class I vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested
- ------------------------------------------------------------------------------------ Label A B - ------------------------------------------------------------------------------------ Brinson U.S. Large Capitalization Equity Fund Label Class I S&P 500 Equity Index - ------------------------------------------------------------------------------------ 1 4/30/98 1,000,000 1,000,000 - ------------------------------------------------------------------------------------ 2 5/31/98 983,723 982,810 - ------------------------------------------------------------------------------------ 3 6/30/98 998,652 1,022,732 - ------------------------------------------------------------------------------------ 4 7/31/98 980,310 1,011,840 - ------------------------------------------------------------------------------------ 5 8/31/98 850,893 865,548 - ------------------------------------------------------------------------------------ 6 9/30/98 917,130 920,995 - ------------------------------------------------------------------------------------ 7 10/31/98 984,386 995,909 - ------------------------------------------------------------------------------------ 8 11/30/98 1,026,166 1,056,263 - ------------------------------------------------------------------------------------ 9 12/31/98 1,058,703 1,117,132 - ------------------------------------------------------------------------------------ 10 1/31/99 1,065,884 1,163,846 - ------------------------------------------------------------------------------------ 11 2/28/99 1,032,030 1,127,676 - ------------------------------------------------------------------------------------ 12 3/31/99 1,057,677 1,172,792 - ------------------------------------------------------------------------------------ 13 4/30/99 1,147,954 1,218,210 - ------------------------------------------------------------------------------------ 14 5/31/99 1,114,100 1,189,443 - ------------------------------------------------------------------------------------ 15 6/30/99 1,143,860 1,255,453 - ------------------------------------------------------------------------------------ 16 7/31/99 1,092,473 1,216,261 - ------------------------------------------------------------------------------------ 17 8/31/99 1,060,614 1,210,248 - ------------------------------------------------------------------------------------ 18 9/30/99 968,118 1,177,075 - ------------------------------------------------------------------------------------ 19 10/31/99 965,035 1,251,560 - ------------------------------------------------------------------------------------ 20 11/30/99 955,786 1,277,004 - ------------------------------------------------------------------------------------ 21 12/31/99 941,729 1,352,229 - ------------------------------------------------------------------------------------
4/30/98 = $1,000,000 Data through 12/31/99 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. Large Capitalization Equity Fund - ------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 1 year 4/30/98* ended ended to 12/31/99 12/31/99 12/31/99 - ---------------------------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Equity Fund Class N -17.67% -11.12% -3.74% - ---------------------------------------------------------------------------------------------------------------------- S&P 500 Equity Index 7.71 21.04 19.85 - ----------------------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Equity Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Capitalization Equity Fund Class N and the S&P 500 Equity Index if you had invested $1,000,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Equity Fund Class N vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested
- --------------------------------------------------------------------------------------------------------- Label A B - --------------------------------------------------------------------------------------------------------- Label Brinson U.S. Large Capitalization Equity S&P Equity Index - --------------------------------------------------------------------------------------------------------- 1 4/30/98 1,000,000 1,000,000 - --------------------------------------------------------------------------------------------------------- 2 5/31/98 983,723 982,810 - --------------------------------------------------------------------------------------------------------- 3 6/30/98 996,297 1,022,732 - --------------------------------------------------------------------------------------------------------- 4 7/31/98 977,960 1,011,840 - --------------------------------------------------------------------------------------------------------- 5 8/31/98 848,584 865,548 - --------------------------------------------------------------------------------------------------------- 6 9/30/98 914,800 920,995 - --------------------------------------------------------------------------------------------------------- 7 10/31/98 981,016 995,909 - --------------------------------------------------------------------------------------------------------- 8 11/30/98 1,023,802 1,056,263 - --------------------------------------------------------------------------------------------------------- 9 12/31/98 1,055,758 1,117,132 - --------------------------------------------------------------------------------------------------------- 10 1/31/99 1,062,927 1,163,846 - --------------------------------------------------------------------------------------------------------- 11 2/28/99 1,029,134 1,127,676 - --------------------------------------------------------------------------------------------------------- 12 3/31/99 1,054,734 1,172,792 - --------------------------------------------------------------------------------------------------------- 13 4/30/99 1,143,824 1,218,210 - --------------------------------------------------------------------------------------------------------- 14 5/31/99 1,110,031 1,189,443 - --------------------------------------------------------------------------------------------------------- 15 6/30/99 1,139,728 1,255,453 - --------------------------------------------------------------------------------------------------------- 16 7/31/99 1,088,527 1,216,261 - --------------------------------------------------------------------------------------------------------- 17 8/31/99 1,056,782 1,210,248 - --------------------------------------------------------------------------------------------------------- 18 9/30/99 964,621 1,177,075 - --------------------------------------------------------------------------------------------------------- 19 10/31/99 960,525 1,251,560 - --------------------------------------------------------------------------------------------------------- 20 11/30/99 951,309 1,277,004 - --------------------------------------------------------------------------------------------------------- 21 12/31/99 938,355 1,352,229 - ---------------------------------------------------------------------------------------------------------
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. ================================================================================ 31 U.S. Large Capitalization Equity Fund [BRINSON LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - ------------------------------------------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods....................................... 5.33% Technology.......................................... 19.11 ------ 24.44 Basic Industries Chemicals........................................... 0.93 Housing/Paper....................................... 2.94 Metals.............................................. 6.35 ------ 10.22 Consumer Non-Durables........................................ 1.50 Retail/Apparel...................................... 5.61 Health: Drugs....................................... 2.80 Health: Non-Drugs................................... 5.20 ------ 15.11 Financial Banks............................................... 11.04% Non-Banks........................................... 5.85 ------ 16.89 Utilities Electric............................................ 8.76 Telephone........................................... 2.32 ------ 11.08 Transportation.............................................. 12.54 Services/Miscellaneous...................................... 5.76 ------ Total U.S. Equities......................... 96.04* SHORT-TERM INVESTMENTS...................................... 3.43* ------ TOTAL INVESTMENTS........................... 99.47 CASH AND OTHER ASSETS, LESS LIABILITIES.................................... 0.53 ------ NET ASSETS.................................................. 100.00% ====== - -------------------------------------------------------------------------------- * The Fund held a long position in stock index futures which increased U.S. Equity exposure from 96.04% to 99.79%. This adjustment results in a net decrease in the Fund's exposure to Short-Term Investments from 3.43% to -0.32% Top 10 U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------- 1. FDX Corp. 6.12% 2. Electronic Data Systems Corp. 5.91 3. Burlington Northern Santa Fe Corp. 4.95 4. CIGNA Corp. 3.99 5. Compuware Corp. 3.63 6. Compaq Computer Corp. 3.42 7. First Data Corp. 3.29 8. Masco Corp. 3.23 9. Illinois Tool Works, Inc. 3.12 10. Kimberly-Clark Corp. 2.93 - ------------------------------------------------- ================================================================================ 32 U.S. Large Capitalization Equity Fund - Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value --------- ----------- U.S. Equities - 96.04% Aon Corp........................................ 13,750 $ 550,000 Baxter International, Inc....................... 13,200 829,125 Burlington Northern Santa Fe Corp............... 60,500 1,467,125 Central & South West Corp....................... 32,800 656,000 Chase Manhattan Corp............................ 10,500 815,719 CIGNA Corp...................................... 14,700 1,184,269 Compaq Computer Corp............................ 37,500 1,014,844 Computer Sciences Corp. (b)..................... 8,300 785,388 Compuware Corp. (b)............................. 28,900 1,076,525 Corning, Inc.................................... 4,000 515,750 Covance, Inc. (b)............................... 6,500 70,281 Dominion Resources, Inc......................... 16,600 651,550 Electronic Data Systems Corp.................... 26,200 1,753,762 Eli Lilly and Co................................ 5,700 379,050 Emerson Electric Co............................. 15,100 866,363 Entergy Corp.................................... 16,400 422,300 FDX Corp. (b)................................... 44,300 1,813,531 First Data Corp................................. 19,800 976,387 Fleet Boston Financial Corp..................... 22,985 800,165 Gateway, Inc. (b)............................... 5,200 374,725 Household International, Inc.................... 19,600 730,100 Illinois Tool Works, Inc........................ 13,700 925,606 Kimberly-Clark Corp............................. 13,300 867,825 Kroger Co. (b).................................. 10,000 188,750 Lexmark International Group, Inc. (b)........... 2,900 262,450 Lockheed Martin Corp............................ 21,400 468,125 Masco Corp...................................... 37,700 956,637 Mattel, Inc..................................... 38,000 498,750 Monsanto Co..................................... 12,700 452,438 Newell Rubbermaid, Inc.......................... 24,600 $ 713,400 Norfolk Southern Corp........................... 21,400 438,700 Philip Morris Companies, Inc.................... 19,200 445,200 PNC Bank Corp................................... 9,800 436,100 Praxair, Inc.................................... 5,500 276,719 Raytheon Co., Class B........................... 22,500 597,656 SBC Communications, Inc......................... 14,100 687,375 U.S. Bancorp.................................... 15,500 369,094 United Healthcare Corp.......................... 12,100 642,813 Wells Fargo and Co.............................. 21,100 853,231 Xerox Corp...................................... 29,200 662,475 ----------- Total U.S. Equities (Cost $31,220,080).......... 28,476,303 ----------- Short Term Investments - 3.43% Investment Companies - 3.43% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,018,306)............................. 1,018,306 1,018,306 ----------- Total Investments (Cost $32,238,386) - 99.47% (a)............... 29,494,609 Cash and other assets, less liabilities - 0.53%...................... 156,596 ----------- Net Assets - 100%............................... $29,651,205 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $32,238,386; and net unrealized depreciation consisted of: Gross unrealized appreciation................... $ 1,215,839 Gross unrealized depreciation................... (3,959,616) ----------- Net unrealized depreciation................ $(2,743,777) =========== (b) Non-income producing security FUTURES CONTRACTS The U.S. Large Capitalization Equity Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ---------- ------------ ------------ ------------- Index Futures Buy Contracts Standard & Poor's 500, 3 contracts............... March 2000 $1,108,514 $1,113,150 $ 4,636 =======
The segregated cash pledged to cover margin requirements for the open futures positions at December 31, 1999 was $93,750. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 U. S. Large Capitalization Equity Fund - Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $31,220,080).................... $ 28,476,303 Affiliated issuers (Cost $1,018,306)....................... 1,018,306 Cash......................................................... 106,990 Receivables: Dividends.................................................. 52,604 Interest................................................... 752 Variation margin........................................... 2,843 Other assets................................................. 19,431 ------------ TOTAL ASSETS............................................. 29,677,229 ------------ LIABILITIES: Payables: Investment advisory fees.................................... 6,834 Accrued expenses............................................ 19,190 ------------ TOTAL LIABILITIES........................................ 26,024 ------------ NET ASSETS.................................................... $ 29,651,205 ============ NET ASSETS CONSIST OF: Paid in capital.............................................. $ 34,129,717 Accumulated undistributed net investment income.............. 16,008 Distributions in excess of net realized gain................. (1,755,379) Net unrealized depreciation.................................. (2,739,141) ------------ NET ASSETS............................................... $ 29,651,205 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $29,011,865 and 3,569,134 shares issued and outstanding).. $ 8.13 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $562,411 and 68,872 shares issued and outstanding)........ $ 8.17 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $76,929 and 9,516 shares issued and outstanding)........... $ 8.08 ============ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 U. S. Large Capitalization Equity Fund Financial Statements - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends.................................................... $ 201,610 Interest..................................................... 31,884 ----------- TOTAL INCOME.......................................... 233,494 ----------- EXPENSES: Advisory..................................................... 85,880 Registration................................................. 25,734 Professional................................................. 19,450 Printing..................................................... 8,030 Distribution................................................. 2,932 Other........................................................ 5,285 ----------- TOTAl EXPENSES........................................ 147,311 Expenses deferred by Advisor.......................... (46,252) Earnings credits...................................... (15) ----------- NET EXPENSES.......................................... 101,044 ----------- NET INVESTMENT INCOME................................. 132,450 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments................................................ 89,048 Futures contracts.......................................... 71,238 ----------- Net realized gain..................................... 160,286 ----------- Change in net unrealized appreciation or depreciation on: Investments................................................ (4,939,653) Futures contracts.......................................... 4,636 ----------- Change in net unrealized appreciation or depreciation. (4,935,017) ----------- Net realized and unrealized loss............................... (4,774,731) ----------- Net decrease in net assets resulting from operations........... $(4,642,281) =========== See accompanying notes to financial statements. ================================================================================ 35 U.S. Large Capitalization Equity Fund Financial Statements - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ------------- OPERATIONS: Net investment income...................................................... $ 132,450 $ 185,687 Net realized gain.......................................................... 160,286 339,283 Change in net unrealized appreciation or depreciation...................... (4,935,017) 2,374,562 ---------------- ------------- Net increase (decrease) in net assets resulting from operations............ (4,642,281) 2,899,532 ---------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I......................................................... (193,937) (87,626) Brinson Class N......................................................... (3,265) (69,880) UBS Investment Funds Class.............................................. (496) (12) Distributions in excess of net realized gain: Brinson Class I......................................................... (2,112,125) - Brinson Class N......................................................... (67,253) - UBS Investment Funds Class.............................................. (6,269) - ---------------- ------------- Total distributions to shareholders........................................ (2,383,345) (157,518) ---------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold................................................................ 17,125,025 24,853,429 Shares issued on reinvestment of distributions............................. 1,897,089 147,324 Shares redeemed............................................................ (8,774,987) (17,500,436) ---------------- ------------- Net increase in net assets resulting from capital share transactions....... 10,247,127 7,500,317 ---------------- ------------- TOTAL INCREASE IN NET ASSETS......................................... 3,221,501 10,242,331 ---------------- ------------- NET ASSETS: Beginning of period........................................................ 26,429,704 16,187,373 ---------------- ------------- End of period (including accumulated undistributed net investment income of $16,008 and $81,256, respectively).............................. $29,651,205 $26,429,704 ================ =============
See accompanying notes to financial statements. =============================================================================== 36 U.S. Large Capitalization Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year April 6, 1998* December 31, 1999 Ended Through Brinson Class I (Unaudited) June 30, 1999 June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period........................... $ 11.13 $ 9.80 $ 10.00 -------- -------- ------- Income (loss) from investment operations: Net investment income...................................... 0.05** 0.11** 0.02 Net realized and unrealized gain (loss).................... (2.01) 1.31 (0.20) -------- -------- ------- Total income (loss) from investment operations........... (1.96) 1.42 (0.18) -------- -------- ------- Less distributions: Distributions from net investment income................... (0.09) (0.09) (0.02) Distributions from and in excess of net realized gain...... (0.95) -- -- -------- -------- ------- Total distributions...................................... (1.04) (0.09) (0.02) -------- -------- ------- Net asset value, end of period................................. $ 8.13 $ 11.13 $ 9.80 ======== ======== ======= Total return (non-annualized).................................. (17.67)% 14.54% (1.83)% Ratios/Supplemental data: Net assets, end of period (in 000s).......................... $ 29,012 $ 22,668 $ 154 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.......... 1.18%*** 1.29% 1.59%*** After expense reimbursement and earnings credits........... 0.80%*** 0.80% 0.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits.......... 0.72%*** 0.57% 0.52%*** After expense reimbursement and earnings credits........... 1.10%*** 1.06% 1.31%*** Portfolio turnover rate...................................... 84% 88% 12%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements ================================================================================ 37 U.S. Large Capitalization Equity Fund -- Financial Highlights - ------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year April 6, 1998* December 31, 1999 Ended Through Brinson Class N (Unaudited) June 30, 1999 June 30, 1998 - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............................... $ 11.13 $ 9.78 $ 10.00 --------- -------- --------- Income (loss) from investment operations: Net investment income.......................................... 0.05** 0.09** 0.02 Net realized and unrealized gain (loss)........................ (2.01) 1.31 (0.23) --------- -------- --------- Total income (loss) from investment operations............. (1.96) 1.40 (0.21) --------- -------- --------- Less distributions: Distributions from net investment income....................... (0.05) (0.05) (0.01) Distributions from net realized gain........................... (0.95) -- -- --------- -------- --------- Total distributions........................................ (1.00) (0.05) (0.01) --------- -------- --------- Net asset value, end of period..................................... $ 8.17 $ 11.13 $ 9.78 ========= ======== ========= Total return (non-annualized)...................................... (17.67)% 14.40% (2.02)% Ratios/Supplemental data: Net assets, end of period (in 000s).............................. $ 562 $ 3,756 $ 16,033 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.............. 1.43%*** 1.54% 1.84%*** After expense reimbursement and earnings credits............... 1.05%*** 1.05% 1.05%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits.............. 0.47%*** 0.32% 0.27%*** After expense reimbursement and earnings credits............... 0.85%*** 0.81% 1.06%*** Portfolio turnover rate.......................................... 84% 88% 12%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. =============================================================================== 38 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Since its performance inception on October 31, 1997, the Brinson U.S. Large Capitalization Growth Fund Class I has returned 28.53%, compared to a return of 36.00% for the Russell 1000 Growth Index and a return of 26.23% for the S&P 500 Equity Index. The volatility for the Fund was 20.12% compared to 19.72% for the Russell 1000 and 17.18% for the S&P 500. In 1999, the Fund returned 32.73% while the Russell 1000 returned 33.16% and the S&P 500 returned 21.04%. Just as last year, 1999 was a very good year to be a growth manager (the S&P 500 lagged the Russell Growth by 12%). The underlying forces, however, were quite different. The three key growth sectors in the U.S. stock market are technology, healthcare and consumer staples (over 70% of the benchmark). In 1999, only technology drove these positive returns, while in 1998 healthcare helped, and in 1997 consumer staples also aided returns. Indeed, by the end of the year technology comprised 45% of the benchmark and nearly 30% of the S&P 500, representing dramatic increases from just a few years ago. Another important trend in 1999 was the sharp increase in performance in smaller growth stocks in the second half of the year. This was mainly due to the broadening of the technology trend and the dramatic surge in Internet related issues. Just as the slowdown in global growth had hurt the major consumer franchise companies such as Coca Cola in 1997, major healthcare companies lagged badly in 1999 under the threat of politically controlled drug prices. What had been one of the best areas in 1998 became one of the worst in 1999. Ironically, smaller healthcare companies, particularly in biotechnology, performed almost as well as smaller technology companies in the latter part of the year. Our performance in 1999 benefited from stock selection, was hurt slightly by our sector weights, and was hurt more importantly by underweighting the price momentum factor in the market. Within the three major growth sectors, our stock selection was quite positive. The negative sector effect was mainly a result of overweighting financial stocks and modestly underweighting technology for most of the year. A major challenge facing growth investors in the year 2000 is the extreme performance of the technology sector at the expense of other areas. This is particularly true after the dramatic gains in the last quarter of the year. We have used this opportunity to take profits in many issues and reduce our sector concentration to a below-average, though still meaningful level. We are having difficulty finding companies whose fundamental prospects are as attractive as our technology holdings, but we cannot ignore the excessive enthusiasm for this area. This reduction has funded new investments in attractive retail and consumer staple companies. ================================================================================ 39 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 1 year 10/31/97* ended ended to 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Growth Fund Class I 12.98% 32.73% 28.53% - ------------------------------------------------------------------------------------------------------------------- S&P 500 Equity Index 7.71 21.04 26.23 - ------------------------------------------------------------------------------------------------------------------- Russell 1000 Growth Index** 20.56 33.16 36.00 - -------------------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Growth Fund Class I. ** The Advisor has chosen to change the Fund's benchmark index from the S&P 500 Equity Index to the Russell 1000 Growth Index due to the Advisor's determination that the Russell 1000 Growth Index more closely reflects the Fund's investment strategies. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Capitalization Growth Fund Class I, the S&P 500 Equity Index and the Russell 1000 Growth Index if you had invested $1,000,000 on October 31, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Growth Fund Class I vs. S&P 500 Equity Index and Russell 1000 Growth Index Wealth Value with Dividends Reinvested
- --------------------------------------------------------------------------------------------------------------------------------- Label A B C - --------------------------------------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization S&P Equity Index Russell 1000 Growth Label Growth of Class I Index - --------------------------------------------------------------------------------------------------------------------------------- 1 10/31/97 1,000,000 1,000,000 1,000,000 - --------------------------------------------------------------------------------------------------------------------------------- 2 11/30/97 1,018,495 1,046,290 1,042,475 - --------------------------------------------------------------------------------------------------------------------------------- 3 12/31/97 1,039,140 1,064,255 1,054,153 - --------------------------------------------------------------------------------------------------------------------------------- 4 1/31/98 1,031,495 1,076,025 1,085,675 - --------------------------------------------------------------------------------------------------------------------------------- 5 2/28/98 1,091,715 1,153,628 1,167,341 - --------------------------------------------------------------------------------------------------------------------------------- 6 3/31/98 1,134,655 1,212,706 1,213,876 - --------------------------------------------------------------------------------------------------------------------------------- 7 4/30/98 1,156,858 1,224,906 1,230,674 - --------------------------------------------------------------------------------------------------------------------------------- 8 5/31/98 1,131,408 1,203,849 1,195,753 - --------------------------------------------------------------------------------------------------------------------------------- 9 6/30/98 1,175,605 1,252,750 1,268,988 - --------------------------------------------------------------------------------------------------------------------------------- 10 7/31/98 1,171,311 1,239,408 1,260,588 - --------------------------------------------------------------------------------------------------------------------------------- 11 8/31/98 973,788 1,060,214 1,071,404 - --------------------------------------------------------------------------------------------------------------------------------- 12 9/30/98 1,026,697 1,128,132 1,153,706 - --------------------------------------------------------------------------------------------------------------------------------- 13 10/31/98 1,129,126 1,219,892 1,246,431 - --------------------------------------------------------------------------------------------------------------------------------- 14 11/30/98 1,210,713 1,293,822 1,341,241 - --------------------------------------------------------------------------------------------------------------------------------- 15 12/31/98 1,297,885 1,368,381 1,462,181 - --------------------------------------------------------------------------------------------------------------------------------- 16 1/31/99 1,380,099 1,425,601 1,548,037 - --------------------------------------------------------------------------------------------------------------------------------- 17 2/28/99 1,319,808 1,381,297 1,477,318 - --------------------------------------------------------------------------------------------------------------------------------- 18 3/31/99 1,384,483 1,436,559 1,555,122 - --------------------------------------------------------------------------------------------------------------------------------- 19 4/30/99 1,436,004 1,492,192 1,557,111 - --------------------------------------------------------------------------------------------------------------------------------- 20 5/31/99 1,418,465 1,456,988 1,509,257 - --------------------------------------------------------------------------------------------------------------------------------- 21 6/30/99 1,524,795 1,537,847 1,614,973 - --------------------------------------------------------------------------------------------------------------------------------- 22 7/31/99 1,462,313 1,489,805 1,563,646 - --------------------------------------------------------------------------------------------------------------------------------- 23 8/31/99 1,461,216 1,482,439 1,589,196 - --------------------------------------------------------------------------------------------------------------------------------- 24 9/30/99 1,411,888 1,441,805 1,555,811 - --------------------------------------------------------------------------------------------------------------------------------- 25 10/31/99 1,489,717 1,533,043 1,673,303 - --------------------------------------------------------------------------------------------------------------------------------- 26 11/30/99 1,565,354 1,564,209 1,763,584 - --------------------------------------------------------------------------------------------------------------------------------- 27 12/31/99 1,722,699 1,656,352 1,947,010 - ---------------------------------------------------------------------------------------------------------------------------------
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 balancing. ================================================================================ 40 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 12/31/98* ended to 12/31/99 12/31/99 - ---------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Growth Fund Class N 12.79% 32.22% - ---------------------------------------------------------------------------------------------------- S&P 500 Equity Index 7.71 21.04 - ---------------------------------------------------------------------------------------------------- Russell 1000 Growth Index** 20.56 33.16 - ----------------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Large Capitalization Growth Fund Class N. ** The Advisor has chosen to change the Fund's benchmark index from the S&P 500 Equity Index to the Russell 1000 Growth Index due to the Advisor's determination that the Russell 1000 Growth Index more closely reflects the Fund's investment strategies. 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. Large Capitalization Growth Fund Class N, the S&P 500 Equity Index and the Russell 1000 Growth Index if you had invested $1,000,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Growth Fund Class N vs. S&P 500 Equity Index and Russell 1000 Growth Index Wealth Value with Dividends Reinvested
- --------------------------------------------------------------------------------------------------------------------- Label A B C - --------------------------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Growth Fund Label Class N S&P 500 Equity Index Russell 1000 Growth Index - --------------------------------------------------------------------------------------------------------------------- 1 12/31/98 $1,000,000 $1,000,000 $1,000,000 - --------------------------------------------------------------------------------------------------------------------- 2 1/31/99 $1,062,500 $1,041,816 $1,058,718 - --------------------------------------------------------------------------------------------------------------------- 3 2/28/99 $1,016,047 $1,009,439 $1,010,353 - --------------------------------------------------------------------------------------------------------------------- 4 3/31/99 $1,065,034 $1,049,824 $1,063,564 - --------------------------------------------------------------------------------------------------------------------- 5 4/30/99 $1,104,730 $1,090,480 $1,064,924 - --------------------------------------------------------------------------------------------------------------------- 6 5/31/99 $1,091,216 $1,064,753 $1,032,196 - --------------------------------------------------------------------------------------------------------------------- 7 6/30/99 $1,172,297 $1,123,844 $1,104,496 - --------------------------------------------------------------------------------------------------------------------- 8 7/31/99 $1,124,155 $1,088,736 $1,069,393 - --------------------------------------------------------------------------------------------------------------------- 9 8/31/99 $1,123,311 $1,083,352 $1,084,867 - --------------------------------------------------------------------------------------------------------------------- 10 9/30/99 $1,084,459 $1,053,658 $1,064,035 - --------------------------------------------------------------------------------------------------------------------- 11 10/31/99 $1,144,426 $1,120,333 $1,144,388 - --------------------------------------------------------------------------------------------------------------------- 12 11/30/99 $1,202,703 $1,143,110 $1,206,133 - --------------------------------------------------------------------------------------------------------------------- 13 12/31/99 $1,322,210 $1,210,447 $1,331,580 - ---------------------------------------------------------------------------------------------------------------------
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. ================================================================================ 41 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Energy.......................................................... 2.45% Capital Investment Technology.................................................... 19.79 Electric Components........................................... 9.35 ------ 29.14 Basic Industries Housing/Paper................................................. 1.54 Consumer Non-Durables.................................................. 1.94 Retail/Apparel................................................ 11.11 Autos/Durables................................................ 0.77 Health: Drugs................................................. 9.56 Health: Non-Drugs............................................. 5.43 ------ 28.81 Financial Non-Banks..................................................... 8.20% Utilities Telephone..................................................... 16.09 Services/Miscellaneous.......................................... 7.03 ------ Total U.S. Equities................................... 93.26* ------ SHORT-TERM INVESTMENTS.......................................... 5.09* ------ TOTAL INVESTMENTS..................................... 98.35 CASH AND OTHER ASSETS, LESS LIABILITIES.............................................. 1.65 ------ NET ASSETS...................................................... 100.00% ====== - -------------------------------------------------------------------------------- The Fund held a long position in stock index futures which increased U.S. Equity exposure from 93.26% to 100.10%. This adjustment results in a net decrease in the Fund's exposure to Short-Term Investments from 5.09% to -1.75%. Top 10 U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - --------------------------------------------- 1. Oracle Corp. 4.08% 2. QUALCOMM, Inc. 3.90 3. Sun Microsystems, Inc. 3.85 4. Microsoft, Inc. 3.66 5. General Electric Co. 3.42 6. Texas Instruments, Inc. 2.86 7. Wal-Mart Stores, Inc. 2.80 8. America On-Line, Inc. 2.64 9. Immunex Corp. 2.52 10. Dayton Hudson Corp. 2.44 - --------------------------------------------- ================================================================================ 42 U.S. Large Capitalization Growth Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value ------ -------- U.S. Equities - 93.26% 3 Com Corp. (b)................................ 2,900 $ 136,300 AFLAC, Inc..................................... 3,900 184,031 America On-Line, Inc. (b)...................... 3,800 286,663 American Express Co............................ 1,300 216,125 American International Group, Inc.............. 1,925 208,141 AT&T Corp...................................... 4,250 215,688 AT&T Corp.-Liberty Media Group, Inc. (b)....... 4,056 230,178 Avon Products, Inc............................. 2,000 66,000 Bell Atlantic Corp............................. 1,300 80,031 BMC Software, Inc. (b)......................... 1,500 119,906 Boeing Co...................................... 2,000 83,125 Boston Scientific Corp. (b).................... 5,400 118,125 Bristol-Myers Squibb Co........................ 2,400 154,050 CBS Corp. (b).................................. 3,000 191,813 Cisco Systems, Inc. (b)........................ 2,400 257,100 Citigroup, Inc................................. 2,800 155,575 Dayton Hudson Corp............................. 3,600 264,375 Electronic Data Systems Corp................... 1,900 127,181 Federal Home Loan Association Co............... 3,400 160,013 Gap, Inc....................................... 3,300 151,800 General Electric Co............................ 2,400 371,400 Halliburton Co................................. 2,100 84,525 Immunex Corp. (b).............................. 2,500 273,281 Intel Corp..................................... 1,900 156,394 International Business Machines Corp........... 2,300 248,400 Johnson & Johnson Co........................... 2,300 214,188 Lowe's Companies, Inc.......................... 2,800 167,300 Lucent Technologies, Inc....................... 2,500 187,031 MCI WorldCom, Inc. (b)......................... 3,600 191,025 Merck & Co., Inc............................... 3,300 221,306 Merrill Lynch & Co............................. 1,800 150,300 Microsoft, Inc. (b)............................ 3,400 396,950 Motorola, Inc.................................. 1,200 176,700 Nike, Inc...................................... 2,000 99,125 Nortel Networks, Inc........................... 2,500 252,500 Oracle Corp. (b)............................... 3,950 442,647 Pepsi Bottling Group, Inc...................... 6,100 101,031 Pfizer, Inc.................................... 6,400 207,600 Philip Morris Companies, Inc................... 4,700 108,981 Proctor & Gamble Co............................ 1,300 142,431 QUALCOMM, Inc. (b)............................. 2,400 423,000 Quintiles Transnational Corp. (b).............. 3,900 72,881 Safeway, Inc. (b).............................. 5,000 177,813 SBC Communications, Inc........................ 3,400 165,750 Schering Plough Corp........................... 4,300 181,406 Schlumberger Ltd............................... 2,900 163,125 Sun Microsystems, Inc. (b)..................... 5,400 418,162 Texas Instruments, Inc......................... 3,200 310,000 Time Warner, Inc............................... 1,500 108,656 Transocean Offshore, Inc....................... 562 18,932 Tyco International Co.......................... 2,100 81,638 Wal-Mart Stores, Inc........................... 4,400 304,150 Walt Disney Co................................. 3,200 93,600 ----------- Total Equities (Cost $8,120,194)............... 10,118,448 ----------- Face Amount ------ Short-Term Investments -- 5.09% Investment Companies -- 5.09% Vista U.S. Government Money Market Fund (Cost $551,964) (b)...................... $ 551,964 551,964 ----------- Total Investments (Cost $8,672,158) -- 98.35% (a)............... 10,670,412 Cash and other assets, less liabilities -- 1.65%..................... 178,608 ----------- Net Assets -- 100%.............................. $10,849,020 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $8,672,158; and net unrealized appreciation consisted of: Gross unrealized appreciation.............. $ 2,347,701 Gross unrealized depreciation.............. (349,447) ----------- Net unrealized appreciation........... $ 1,998,254 =========== (b) Non-income producing security. FUTURES CONTRACTS The U.S. Large Capitalization Growth Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ---------- ---------- ---------- ---------- Index Futures Buy Contracts Standard & Poor's 500, 2 contracts............. March 2000 731,314 742,100 $10,786 =======
The segregated cash pledged to cover margin requirements for the open futures positions at December 31, 1999 was $18,750. See accompanying notes to financial statements. ================================================================================ 43 U.S. Large Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $8,672,158)....................................................... $ 10,670,412 Cash........................................................................................... 218,400 Receivables: Due from Advisor............................................................................. 2,780 Dividends.................................................................................... 6,891 Interest..................................................................................... 3,678 Variation margin............................................................................. 1,768 -------------- TOTAL ASSETS.............................................................................. 10,903,929 -------------- LIABILITIES: Payables: Accrued expenses............................................................................. 54,909 -------------- TOTAL LIABILITIES......................................................................... 54,909 -------------- NET ASSETS..................................................................................... $ 10,849,020 ============== NET ASSETS CONSIST OF: Paid in capital.............................................................................. $ 8,496,445 Accumulated undistributed net investment loss................................................ (19,874) Accumulated net realized gain................................................................ 363,409 Net unrealized appreciation.................................................................. 2,009,040 -------------- NET ASSETS................................................................................ $ 10,849,020 ============== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $3,767,216 and 256,482 shares issued and outstanding)....................................... $ 14.69 ============== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,317 and 90 shares issued and outstanding)................................................. $ 14.63 ============== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $7,080,487 and 486,374 shares issued and outstanding)........................................ $ 14.56 ==============
See accompanying notes to financial statements. ================================================================================ 44 U.S. Large Capitalization Growth Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends........................................................................ $ 34,407 Interest......................................................................... 5,952 -------------- TOTAL INCOME.................................................................. 40,359 -------------- EXPENSES: Advisory......................................................................... 31,958 Distribution..................................................................... 23,378 Professional..................................................................... 22,114 Registration..................................................................... 15,506 Custodian........................................................................ 6,627 Other............................................................................ 23,423 -------------- TOTAL EXPENSES................................................................ 123,006 Expenses deferred and reimbursed by Advisor................................... (56,260) Earnings credits.............................................................. (6,513) -------------- NET EXPENSES.................................................................. 60,233 -------------- NET INVESTMENT LOSS........................................................... (19,874) -------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments...................................................................... 353,419 Futures Contracts................................................................ 27,940 -------------- Net realized gain............................................................. 381,359 -------------- Change in net unrealized appreciation or depreciation on: Investments...................................................................... 946,091 Futures Contracts................................................................ 10,786 -------------- Change in net unrealized appreciation or depreciation......................... 956,877 -------------- Net realized and unrealized gain................................................... 1,338,236 -------------- Net increase in net assets resulting from operations............................... $ 1,318,362 ==============
See accompanying notes to financial statements. ================================================================================ 45 U.S. Large Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ------------------ ----------------- OPERATIONS: Net investment loss............................................................... $ (19,874) $ (123) Net realized gain................................................................. 381,359 408,525 Change in net unrealized appreciation or depreciation............................. 956,877 463,877 --------------- ------------ Net increase in net assets resulting from operations.............................. 1,318,362 872,279 --------------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net realized gain: Brinson Class I................................................................... (226,909) -- Brinson Class N................................................................... (80) -- UBS Investment Funds Class........................................................ (376,172) -- --------------- ------------ Total distributions to shareholders................................................. (603,161) -- --------------- ------------ CAPITAL SHARE TRANSACTIONS: Shares sold........................................................................ 4,243,090 5,233,678 Shares issued on reinvestment of distributions..................................... 593,637 -- Shares redeemed.................................................................... (2,787,807) (2,169,846) --------------- ------------ Net increase in net assets resulting from capital share transactions............... 2,048,920 3,063,832 --------------- ------------ TOTAL INCREASE IN NET ASSETS................................................... 2,764,121 3,936,111 --------------- ------------ NET ASSETS: Beginning of period................................................................ 8,084,899 4,148,788 --------------- ------------ End of period (including accumulated undistributed net investment income of $(19,874) and $0, respectively)......................................... $ 10,849,020 $ 8,084,899 =============== ============
* Reflects the Fund's change in fiscal year end from December 31 to June 30 See accompanying notes to financial statements. ================================================================================ 46 U.S. Large Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Six Months October 14, 1997/1/ December 31, 1999 Ended/2/ Year Ended Through Brinson Class I (Unaudited) June 30, 1999 December 31, 1998/3/ December 31, 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period.............. $ 13.91 $ 11.84 $ 9.92 $ 10.00 --------- --------- -------- --------- Income (loss) from investment operations: Net investment income.......................... 0.02/4/ 0.02 0.06 0.02 Net realized and unrealized gain (loss)........ 1.71 2.05 2.38 (0.08) --------- --------- -------- --------- Total income (loss) from investment operations................................. 1.73 2.07 2.44 (0.06) --------- --------- -------- --------- Less distributions: Distributions from net investment income....... -- -- (0.06) (0.02) Distributions from net realized gain........... (0.95) -- (0.46) -- --------- --------- -------- --------- Total distributions.......................... (0.95) -- (0.52) (0.02) --------- --------- -------- --------- Net asset value, end of period.................... $ 14.69 $ 13.91 $ 11.84 $ 9.92 ========= ========= ======== ========= Total return (non-annualized)..................... 12.98% 17.48% 24.90% (0.55)% Ratios/Supplemental Data: Net assets, end of period (in 000s).............. $ 3,767 $ 2,947 $ 4,147 $ 4,137 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits............................. 2.17%/5/ 2.38%/5/ 2.76% 8.54%/5/ After expense reimbursement and earnings credits............................. 0.80%/5/ 0.80%/5/ 0.99% 1.00%/5/ Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits............................. (1.29)%/5/ (1.26)%/5/ (1.40)% (6.19)%/5/ After expense reimbursement and earnings credits............................. 0.08%/5/ 0.32%/5/ 0.37% 1.35%/5/ Portfolio turnover rate........................... 46% 51% N/A N/A
/1/ Commencement of investment operations /2/ Reflects the Fund's change in fiscal year end from December 31 to June 30 /3/ Reflects 10 for 1 share split effective December 9, 1998 /4/ The net investment income per share data was determined by using average shares outstanding throughout the period /5/ Annualized N/A = Information is not available for periods prior to reorganization, as described in notes to financial statements See accompanying notes to financial statements. ================================================================================ 47 U.S. Large Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Period Ended Brinson Class N (Unaudited) June 30, 1999* - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period......................................... $ 13.88 $ 11.84 --------- --------- Income from investment operations: Net investment loss....................................................... (0.01)** (0.01) Net realized and unrealized gain.......................................... 1.71 2.05 --------- --------- Total income from investment operations................................. 1.70 2.04 --------- --------- Less distributions: Distributions from net realized gain...................................... (0.95) -- --------- --------- Total distributions..................................................... (0.95) -- --------- --------- Net asset value, end of period............................................... $ 14.63 $ 13.88 ========= ========= Total return (non-annualized)................................................ 12.79% 17.23% Ratios/Supplemental Data: Net assets, end of period (in 000s)......................................... $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits......................... 2.42%*** 2.63%*** After expense reimbursement and earnings credits.......................... 1.05%*** 1.05%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits......................... (1.54)%*** (1.51)%*** After expense reimbursement and earnings credits.......................... (0.17)%*** 0.07%*** Portfolio turnover rate..................................................... 46% 51%
* Commencement of Brinson Class N was December 31, 1998 ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 48 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] The Brinson U.S. Small Capitalization Growth Fund Class I appreciated 41.70% in 1999, significantly outpacing the 21.26% return of the Russell 2000 Index, a commonly cited index of small capitalization (small cap) U.S. stocks. Since the Fund's inception on September 30, 1997, it has produced an annualized return of 10.33% versus its benchmark's return of 6.08%. The Fund's outperformance relative to the Russell 2000 in 1999 may be attributed to several factors. First, a supportive economic environment and a sizzling technology sector generated renewed interest in small cap growth stocks. Stock selection was also a strong positive in 1999, particularly in the consumer cyclical and technology sectors. Industry selection was a modest positive, mostly due to an overweight of technology stocks and an underweight in basic materials and financials. Finally, the Fund benefited from participation in a number of well-received initial public offerings, mostly in the Internet arena. Stocks that helped performance in 1999 included Peregrine Systems, Mercury Interactive, Dendrite International, Cost Plus Warehouse, TMP Worldwide, DII Group, and Zebra Technologies. Most of these equities were beneficiaries of last year's technology rally. Stocks that detracted from relative performance included Halo Industries, Pediatrix Medical, Sunrise Assisted Living, Brightpoint Cellular, and Kellstrom. In general, most of these underperformers suffered earnings shortfalls due to disappointing top-line growth. As a result, we focused more research in 1999 on eliminating companies from the Fund that were likely to report decelerating future sales growth. As we consider the outlook for small cap stocks, it is heartening to note these stocks outperformed their large cap brethren last year for the first time in six years--albeit not by a wide margin. After trailing badly earlier in 1999, the Russell 2000 nosed out the S&P 500 by a mere 22 basis points at year-end. It is too early to tell whether recent strength signals the beginning of a new small cap rally, but conditions are ripe for such a move. Relative valuations for small cap stocks remain compelling by virtually any measure. The forward-looking Price/Earnings (P/E) multiple for the Russell 2000 currently weighs in at 19.3 times earnings, while investors are paying an expensive 25.2 times earnings for the S&P 500. A look at other valuation ratios leads to similar conclusions. Although large cap stocks have enjoyed superior earnings growth and asset utilization in the past year, small cap stocks are expected to grow more quickly in the year ahead. For example, the IBES analyst consensus report forecasts that small cap earnings will grow 24% in the year ahead versus 21% for the S&P 500. Extending our time horizon, Russell 2000 profits are projected to rise 21% annually over the next three to five years, while S&P 500 earnings are forecasted to grow 17% a year. Given these solid growth prospects, we remain bullish on the outlook for small cap stocks over the next several years. ================================================================================ 49 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 1 year 9/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - --------------------------------------------------------------------------------------------- Brinson U.S. Small Capitalization Growth Fund Class I 35.84% 41.70% 10.33% - --------------------------------------------------------------------------------------------- Russell 2000 Index 10.96 21.26 6.08 - ---------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Small Capitalization Growth Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year represent average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Small Capitalization Growth Fund Class I and the Russell 2000 Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Small Capitalization Growth Fund Class I vs. Russell 2000 Index Wealth Value with Dividends Reinvested
- ----------------------------------------------------------------------------------------- Label A B - ----------------------------------------------------------------------------------------- Brinson U.S. Small Capitalization Label Growth Fund Class I Russell 2000 Index - ----------------------------------------------------------------------------------------- 1 9/30/97 1,000,000 1,000,000 - ----------------------------------------------------------------------------------------- 2 10/31/97 953,600 956,071 - ----------------------------------------------------------------------------------------- 3 11/30/97 936,600 949,887 - ----------------------------------------------------------------------------------------- 4 12/31/97 943,800 996,513 - ----------------------------------------------------------------------------------------- 5 1/31/98 932,700 951,260 - ----------------------------------------------------------------------------------------- 6 2/28/98 1,007,600 1,021,599 - ----------------------------------------------------------------------------------------- 7 3/31/98 1,049,900 1,063,732 - ----------------------------------------------------------------------------------------- 8 4/30/98 1,047,200 1,069,618 - ----------------------------------------------------------------------------------------- 9 5/31/98 990,700 1,012,012 - ----------------------------------------------------------------------------------------- 10 6/30/98 971,100 1,014,141 - ----------------------------------------------------------------------------------------- 11 7/31/98 887,800 932,042 - ----------------------------------------------------------------------------------------- 12 8/31/98 700,200 751,059 - ----------------------------------------------------------------------------------------- 13 9/30/98 739,372 809,835 - ----------------------------------------------------------------------------------------- 14 10/31/98 788,803 842,863 - ----------------------------------------------------------------------------------------- 15 11/30/98 807,515 887,022 - ----------------------------------------------------------------------------------------- 16 12/31/98 880,562 941,913 - ----------------------------------------------------------------------------------------- 17 1/31/99 881,563 954,430 - ----------------------------------------------------------------------------------------- 18 2/28/99 807,515 877,126 - ----------------------------------------------------------------------------------------- 19 3/31/99 825,527 890,820 - ----------------------------------------------------------------------------------------- 20 4/30/99 823,526 970,644 - ----------------------------------------------------------------------------------------- 21 5/31/99 859,549 984,822 - ----------------------------------------------------------------------------------------- 22 6/30/99 918,586 1,029,355 - ----------------------------------------------------------------------------------------- 23 7/31/99 926,591 1,001,110 - ----------------------------------------------------------------------------------------- 24 8/31/99 906,579 964,060 - ----------------------------------------------------------------------------------------- 25 9/30/99 938,599 964,271 - ----------------------------------------------------------------------------------------- 26 10/31/99 974,622 968,176 - ----------------------------------------------------------------------------------------- 27 11/30/99 1,127,720 1,025,986 - ----------------------------------------------------------------------------------------- 28 12/31/99 1,247,796 1,142,127 - -----------------------------------------------------------------------------------------
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. ================================================================================ 50 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 12/31/98* ended to 12/31/99 12/31/99 - ------------------------------------------------------------------------------------- Brinson U.S. Small Capitalization Growth Fund Class N 35.59% 41.14% - ------------------------------------------------------------------------------------- Russell 2000 Index 10.96 21.26 - -------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Small Capitalization Growth Fund Class N. 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. Small Capitalization Growth Fund Class N and the Russell 2000 Index if you had invested $1,000,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Small Capitalization Growth Fund Class N vs. Russell 2000 Index Wealth Value with Dividends Reinvested
- ----------------------------------------------------------------------------------------- Label A B - ----------------------------------------------------------------------------------------- Brinson U.S. Small Capitalization Label Growth Fund Class N Russell 2000 Index - ----------------------------------------------------------------------------------------- 1 12/31/98 1,000,000 1,000,000 - ----------------------------------------------------------------------------------------- 2 1/31/99 1,000,000 1,013,289 - ----------------------------------------------------------------------------------------- 3 2/28/99 915,909 932,218 - ----------------------------------------------------------------------------------------- 4 3/31/99 935,227 945,756 - ----------------------------------------------------------------------------------------- 5 4/30/99 932,955 1,030,503 - ----------------------------------------------------------------------------------------- 6 5/31/99 973,864 1,045,555 - ----------------------------------------------------------------------------------------- 7 6/30/99 1,040,909 1,092,835 - ----------------------------------------------------------------------------------------- 8 7/31/99 1,050,000 1,062,848 - ----------------------------------------------------------------------------------------- 9 8/31/99 1,027,273 1,023,513 - ----------------------------------------------------------------------------------------- 10 9/30/99 1,062,500 1,023,737 - ----------------------------------------------------------------------------------------- 11 10/31/99 1,102,273 1,027,883 - ----------------------------------------------------------------------------------------- 12 11/30/99 1,276,136 1,089,257 - ----------------------------------------------------------------------------------------- 13 12/31/99 1,411,364 1,212,561 - -----------------------------------------------------------------------------------------
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 51 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - --------------------------------------------------------------------- U.S. EQUITIES Energy..................................................... 1.52% Capital Investment Technology................................................. 14.83 Electrical Components...................................... 6.51 ------ 21.34 Basic Industries Housing/Paper.............................................. 1.52 Consumer Non-Durables............................................... 2.56 Retail/Apparel............................................. 11.84 Autos/Durables............................................. 9.87 Health: Drugs.............................................. 2.84 Health: Non-Drugs.......................................... 8.77 ------ 35.88 Financial Banks...................................................... 5.63% Non-Banks.................................................. 6.08 ------ 11.71 Utilities Telephone.................................................. 3.11 Transportation............................................... 4.82 Services/Miscellaneous....................................... 14.36 ------ Total U.S. Equities..................................... 94.26 SHORT-TERM INVESTMENTS....................................... 5.89 ------ TOTAL INVESTMENTS....................................... 100.15 LIABILITIES, LESS CASH AND OTHER ASSETS............................................ (0.15) ------ NET ASSETS................................................... 100.00% ====== Top 10 U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - --------------------------------------------------------------------- 1. Zebra Technologies Corp., Class A 2.08% 2. DII Group, Inc. 2.04 3. QRS Corp. 1.99 4. Mercury Interactive Corp. 1.96 5. Peregrine Systems, Inc. 1.92 6. Dendrite International, Inc. 1.90 7. Expeditors International of Washington, Inc. 1.90 8. U.S. Trust Corp. 1.83 9. Patterson Dental Co. 1.78 10. Helix Technology Corp. 1.77 - --------------------------------------------------------------------- ================================================================================ 52 U.S. Small Capitalization Growth Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value -------- --------- U.S. Equities -- 94.26% ACT Manufacturing, Inc. (b)................... 8,300 $ 311,250 Agency.com, Inc. (b).......................... 2,100 107,100 Anixer International, Inc. (b)................ 18,700 385,687 AnnTaylor Stores Corp. (b).................... 11,500 396,031 AVT Corp. (b)................................. 17,400 817,800 C & D Technologies, Inc....................... 10,071 428,017 C-Bridge Internet Solutions, Inc. (b)......... 850 41,331 Cacheflow, Inc. (b)........................... 2,100 274,444 Calico Commerce, Inc. (b)..................... 2,200 116,600 Casey's General Stores, Inc................... 10,800 112,725 Celestial Seasonings, Inc. (b)................ 27,500 511,758 Charles River Associates, Inc. (b)............ 17,900 599,650 Children's Place Retail Stores, Inc. (b)...... 23,300 382,994 Cobalt Networks, Inc. (b)..................... 900 97,538 Cost Plus, Inc. (b)........................... 19,550 696,469 Credence Systems Corp. (b).................... 8,600 743,900 CTS Corp...................................... 4,000 301,500 Cytyc Corp. (b)............................... 9,900 604,519 Data Return Corp. (b)......................... 2,100 112,350 Datascope Corp................................ 11,800 472,000 Deltathree.com, Inc. (b)...................... 2,100 54,075 Dendrite International, Inc. (b).............. 26,550 899,381 Digex, Inc. (b)............................... 3,000 206,250 DII Group, Inc. (b)........................... 13,600 965,175 Elantec Semiconductor, Inc. (b)............... 20,400 673,200 Elcor Corp.................................... 22,550 679,319 Emmis Communications Corp. (b)................ 4,800 598,275 Ethan Allen Interiors, Inc.................... 12,850 412,003 Expeditors International of Washington, Inc... 20,500 898,156 Forward Air Corp. (b)......................... 16,749 726,488 Graco, Inc.................................... 16,700 599,112 Greater Bay Bancorp........................... 10,000 428,750 Haverty Furniture Cos., Inc................... 17,100 215,887 Helix Technology Corp......................... 18,700 837,994 Hooper Holmes, Inc............................ 24,400 628,300 Ibasis, Inc. (b).............................. 2,100 60,375 Inamed Corp. (b).............................. 15,500 680,062 Insight Communications (b).................... 5,000 148,125 Insight Enterprises, Inc. (b)................. 17,800 723,125 Insituform Technologies, Inc. (b)............. 25,400 717,550 Investors Financial Services Corp............. 18,200 837,200 Jack in the Box, Inc. (b)..................... 26,500 548,219 Jakks Pacific, Inc. (b)....................... 21,000 392,437 Jore Corp. (b)................................ 8,300 64,844 Kana Communications, Inc. (b)................. 800 164,000 Kenneth Cole Productions, Inc. (b)............ 15,900 727,425 Kent Electronics Corp. (b).................... 25,300 575,575 King Pharmaceuticals, Inc. (b)................ 14,100 790,481 Kronos, Inc. (b).............................. 3,400 $ 204,000 Manitowoc Co., Inc............................ 7,400 251,600 McAfee.com, Corp. (b)......................... 2,100 94,500 Meade Instruments Corp. (b)................... 9,600 273,600 Mediaplex, Inc. (b)........................... 5,200 326,300 MedQuist, Inc. (b)............................ 13,900 358,794 Mercury Computer Systems, Inc. (b)............ 15,000 525,000 Mercury Interactive Corp. (b)................. 8,600 928,262 Metasolv Software, Inc. (b)................... 2,100 171,675 NetRatings, Inc. (b).......................... 2,100 101,063 Netzee, Inc. (b).............................. 17,800 295,925 North Fork Bancorporation, Inc................ 33,500 586,250 Ondisplay, Inc. (b)........................... 650 59,069 Optio Software, Inc. (b)...................... 4,200 98,700 Pacific Sunwear of California, Inc. (b)....... 19,550 629,266 Patterson Dental Co. (b)...................... 19,700 839,712 Patterson Energy, Inc. (b).................... 30,500 396,500 Peoples Heritage Financial Group, Inc......... 30,700 462,419 Peregrine Systems, Inc. (b)................... 10,800 909,225 Protective Life Corp.......................... 25,500 811,219 QRS Corp. (b)................................. 8,950 939,750 Quest Diagnostics, Inc. (b)................... 18,700 571,519 ResMed, Inc. (b).............................. 14,900 622,075 Retek, Inc. (b)............................... 1,600 120,400 Richmond County Financial Corp................ 17,641 318,641 Roper Industries, Inc......................... 15,500 586,094 Rudolph Technologies, Inc. (b)................ 5,200 174,200 Sciquest.com, Inc. (b)........................ 2,100 166,950 Shaw Group, Inc. (b).......................... 27,200 688,500 SonicWall, Inc. (b)........................... 2,100 84,525 Spanish Broadcasting System (b)............... 15,500 623,875 Stone Energy Corp. (b)........................ 9,000 320,625 Swift Transportation Co., Inc. (b)............ 37,200 655,650 Sykes Enterprises, Inc. (b)................... 18,200 798,525 Syntel, Inc. (b).............................. 8,200 132,738 TMP Worldwide, Inc. (b)....................... 5,200 738,400 Tollgrade Communications, Inc. (b)............ 6,200 213,900 Tower Automotive, Inc. (b).................... 21,000 324,187 Tritel, Inc. (b).............................. 2,100 66,544 Triton PCS Holdings, Inc. (b)................. 8,300 377,650 U.S. Foodservice (b).......................... 41,600 696,800 U.S. Trust Corp............................... 10,800 866,025 Vintage Petroleum, Inc........................ 33,100 399,269 Viropharma, Inc. (b).......................... 15,000 555,000 Waters Corp. (b).............................. 14,300 757,900 Whitehall Jewellers, Inc. (b)................. 18,500 682,187 XPedior, Inc. (b)............................. 850 24,438 Zebra Technologies Corp., Class A (b)......... 16,800 982,800 ---------- Total U.S. Equities (Cost $33,705,445)........ 44,577,692 ---------- ================================================================================ 53 U.S. Small Capitalization Growth Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value --------- ----------- Short-Term Investments -- 5.89% Investment Companies -- 5.89% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,787,103)...................... 2,787,103 $ 2,787,103 ------------ Total Investments (Cost $36,492,548) -- 100.15% (a)...... 47,364,795 Liabilities, less cash and other assets -- (0.15%)...................... (71,000) ------------ Net Assets -- 100%....................... $ 47,293,795 ============ NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $36,492,548; and net unrealized appreciation consisted of: Gross unrealized appreciation.......... $12,798,752 Gross unrealized depreciation.......... (1,926,505) ----------- Net unrealized appreciation........ $10,872,247 =========== (b) Non-income producing security. See accompanying notes to financial statements. ================================================================================ 54 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $33,705,445)........................................................... $44,577,692 Affiliated issuers (Cost $2,787,103).............................................................. 2,787,103 Cash................................................................................................ 440 Receivables: Dividends......................................................................................... 1,792 Interest.......................................................................................... 12,421 ----------- TOTAL ASSETS.................................................................................... 47,379,448 ----------- LIABILITIES: Payables: Investment advisory fees.......................................................................... 32,064 Accrued expenses.................................................................................. 53,589 ----------- TOTAL LIABILITIES............................................................................... 85,653 ----------- NET ASSETS............................................................................................ $47,293,795 =========== NET ASSETS CONSIST OF: Paid in capital..................................................................................... $34,855,447 Accumulated undistributed net investment loss....................................................... (114,496) Accumulated net realized gain....................................................................... 1,680,597 Net unrealized appreciation......................................................................... 10,872,247 ----------- NET ASSETS...................................................................................... $47,293,795 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $45,914,693 and 3,681,767 shares issued and outstanding)........................................ $ 12.47 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,416 and 114 shares issued and outstanding)..................................................... $ 12.42 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,377,686 and 111,403 shares issued and outstanding)............................................. $ 12.37 ===========
See accompanying notes to financial statements. ================================================================================ 55 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends.............................................................................. $ 57,827 Interest............................................................................... 59,483 -------------- TOTAL INCOME....................................................................... 117,310 -------------- EXPENSES: Advisory............................................................................... 197,692 Professional........................................................................... 19,281 Registration........................................................................... 17,849 Distribution........................................................................... 3,123 Other.................................................................................. 31,367 -------------- TOTAL EXPENSES..................................................................... 269,312 Expenses deferred by Advisor....................................................... (37,437) Earnings credits................................................................... (69) -------------- NET EXPENSES....................................................................... 231,806 -------------- NET INVESTMENT LOSS................................................................ (114,496) -------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments....................................................... 5,935,595 Change in net unrealized appreciation or depreciation on investments................... 6,732,379 -------------- Net realized and unrealized gain....................................................... 12,667,974 -------------- Net increase in net assets resulting from operations................................... $ 12,553,478 ==============
See accompanying notes to financial statements. ================================================================================ 56 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ----------------- ----------------- OPERATIONS: Net investment loss $ (114,496) $ (68,177) Net realized gain (loss) 5,935,595 (633,451) Change in net unrealized appreciation or depreciation 6,732,379 1,970,811 ------------ ------------ Net increase in net assets resulting from operations 12,553,478 1,269,183 ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold 14,546,659 23,560,273 Shares issued on reinvestment of distributions -- -- Shares redeemed (15,658,308) (11,586,801) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (1,111,649) 11,973,472 ------------ ------------ TOTAL INCREASE IN NET ASSETS 11,441,829 13,242,655 ------------ ------------ NET ASSETS: Beginning of period 35,851,966 22,609,311 ------------ ------------ End of period (including accumulated undistributed net investment loss of $(114,496) and $0, respectively) $ 47,293,795 $ 35,851,966 ============ ============
* Reflects the Fund's change in fiscal year end from December 31 to June 30 See accompanying notes to financial statements. ================================================================================ 57 U.S. Small Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Six Months Year September 30, 1997/1/ December 31, 1999 Ended/2/ Ended Through Brinson Class I (Unaudited) June 30, 1999 December 31, 1998/3/ December 31, 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period.......... $ 9.18 $ 8.80 $ 9.44 $ 10.00 ------------ ------------ ------------ ------------- Income (loss) from investment operations: Net investment loss....................... (0.01)/4/ (0.02) (0.02) -- Net realized and unrealized gain (loss)... 3.30 0.40 (0.57) (0.56) ------------ ------------ ------------ ------------- Total income (loss) from investment operations.................. 3.29 0.38 (0.59) (0.56) ------------ ------------ ------------ ------------- Less distributions: Distributions from net realized gain...... -- -- (0.05) -- ------------ ------------ ------------ ------------- Total distributions..................... -- -- (0.05) -- ------------ ------------ ------------ ------------- Net asset value, end of period................ $ 12.47 $ 9.18 $ 8.80 $ 9.44 ============ ============ ============ ============= Total return (non-annualized)................. 35.84% 4.32% (6.70)% (5.62)% Ratios/Supplemental data: Net assets, end of period (in 000s)......... $ 45,915 $ 35,211 $ 22,607 $ 11,954 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.................... 1.34%/5/ 1.32%/5/ 1.69% 3.63%/5/ After expense reimbursement and earnings credits.................... 1.15%/5/ 1.15%/5/ 1.20% 1.20%/5/ Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits........................ (0.75)%/5/ (0.62)%/5/ (0.76)% (2.53)%/5/ After expense reimbursement and earnings credits........................ (0.56)%/5/ (0.45)%/5/ (0.27)% (0.10)%/5/ Portfolio turnover rate..................... 69% 71% N/A N/A
/1/ Commencement of investment operations /2/ Reflects the Fund's change in fiscal year end from December 31 to June 30 /3/ Reflects 10 for 1 share split effective December 9, 1998 /4/ The net investment income per share data was determined by using average shares outstanding throughout the period /5/ Annualized N/A = Information is not available for periods prior to reorganization, as described in notes to financial statements See accompanying notes to financial statements. ================================================================================ 58 U.S. Small Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Period Ended Brinson Class N (Unaudited) June 30, 1999* - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period...................................... $ 9.16 $ 8.80 ------------ ------------ Income from investment operations: Net investment loss................................................... (0.04)** (0.04) Net realized and unrealized gain...................................... 3.30 0.40 ------------ ------------ Total income from investment operations............................. 3.26 0.36 ------------ ------------ Net asset value, end of period............................................ $ 12.42 $ 9.16 ============ ============ Total return (non-annualized)............................................. 35.59% 4.09% Ratios/Supplemental data: Net assets, end of period (in 000s)..................................... $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits..................... 1.59%*** 1.57%*** After expense reimbursement and earnings credits...................... 1.40%*** 1.40%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits..................... (1.00)%*** (0.87)%*** After expense reimbursement and earnings credits...................... (0.81)%*** (0.70)%*** Portfolio turnover rate................................................. 69% 71%
* Commencement of Brinson Class N was December 31, 1998 ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 59 U.S. Bond Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Since its inception on August 31, 1995, the Brinson U.S. Bond Fund Class I has returned 5.94%, while its benchmark, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index has returned 6.05%. Over the same period, the Fund's annualized volatility or risk of 3.87% was comparable to the benchmark volatility of 3.42%. In calendar year 1999 the Fund posted a return of -1.04% compared to the benchmark's return of -0.84%. The overall U.S. bond market's returns for the year were very disappointing in absolute term's -- the worst for bonds since 1994, and was one of the rare occasions when broad market benchmarks produced negative returns. A combination of strong economic growth (unusual this late in the cycle), rising inflation pressures and monetary policy tightening by the Federal Reserve (the Fed) conspired to push yields up steadily. Yields on benchmark 30-year treasuries rose by nearly 150 basis points from their January lows to finish at 6.5%. This put them up 180 basis points from the record lows set in the fall of 1998. Shorter-term notes saw even greater increases as the yield curve flattened. The Fed raised official rates three times, undoing all three of the 25 basis point cuts taken in 1998, leaving the federal funds rate at 5.5%. This demand in the marketplace for higher yields pushed bond prices substantially lower. While U.S. Treasuries suffered, spread (i.e., corporate, mortgage) sectors did not fare as badly. After the virtually unprecedented widening seen during 1998's global market crisis, spreads narrowed this year, although not quite enough to retrace all of the 1998 sell-off. The tightening in spreads produced strong relative performance for corporates and mortgages, which outperformed equivalent duration U.S. Treasuries by 174 and 112 basis points, respectively. Our overweights to corporate bonds, particularly within the BBB-rated and Yankee sectors, helped Fund returns. Issue selection within both corporates and mortgages was also a source of added value. These positives were offset by our duration strategy, as we maintained a posture slightly longer than benchmarks for most of the year. Yield curve strategy was also slightly positive, with our barbell strategy benefiting from a flattening in the yield curve. ================================================================================ 60 U.S. Bond Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return
6 months 1 year 3 years 8/31/95* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - ----------------------------------------------------------------------------------------------------------- Brinson U.S. Bond Fund Class I 0.36% -1.04% 5.55% 5.94% - ----------------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 0.55 -0.84 5.72 6.05 - -----------------------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Bond Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Bond Fund Class I and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Bond Fund Class I vs. Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested
- -------------------------------------------------------------------------------- Label A B - -------------------------------------------------------------------------------- Brinson U.S. Bond Salomon Smith Barney Label Fund Class I BIG Bond Index - -------------------------------------------------------------------------------- 1 8/31/95 1,000,000 1,000,000 2 9/30/95 1,009,000 1,009,400 3 10/31/95 1,024,000 1,022,926 4 11/30/95 1,040,000 1,038,884 5 12/31/95 1,054,932 1,053,220 6 1/31/96 1,061,071 1,060,382 7 2/29/96 1,038,561 1,042,462 8 3/31/96 1,031,398 1,034,956 9 4/30/96 1,023,213 1,027,297 10 5/31/96 1,020,143 1,026,784 11 6/30/96 1,035,997 1,040,029 12 7/31/96 1,039,127 1,042,837 13 8/31/96 1,032,867 1,041,273 14 9/30/96 1,054,776 1,059,391 15 10/31/96 1,081,902 1,083,227 16 11/30/96 1,109,028 1,101,101 17 12/31/96 1,092,169 1,091,411 18 1/31/97 1,094,338 1,095,558 19 2/28/97 1,096,507 1,096,763 20 3/31/97 1,081,323 1,085,686 21 4/30/97 1,098,676 1,101,211 22 5/31/97 1,109,522 1,111,563 23 6/30/97 1,123,558 1,124,790 24 7/31/97 1,158,669 1,155,272 25 8/31/97 1,148,794 1,145,337 26 9/30/97 1,164,156 1,162,173 27 10/31/97 1,180,614 1,178,792 28 11/30/97 1,183,906 1,184,333 29 12/31/97 1,197,458 1,196,413 30 1/31/98 1,211,341 1,211,847 31 2/28/98 1,211,341 1,210,998 32 3/31/98 1,214,812 1,215,721 33 4/30/98 1,220,597 1,222,043 34 5/31/98 1,232,167 1,233,775 35 6/30/98 1,242,614 1,243,892 36 7/31/98 1,243,789 1,246,504 37 8/31/98 1,264,930 1,265,575 38 9/30/98 1,287,245 1,295,443 39 10/31/98 1,282,547 1,289,613 40 11/30/98 1,291,943 1,296,706 41 12/31/98 1,297,674 1,300,726 42 1/31/99 1,308,672 1,310,351 43 2/28/99 1,286,677 1,287,420 44 3/31/99 1,295,231 1,294,759 45 4/30/99 1,298,896 1,299,031 46 5/31/99 1,285,455 1,287,080 47 6/30/99 1,279,528 1,282,704 48 7/31/99 1,273,304 1,277,573 49 8/31/99 1,269,570 1,276,679 50 9/30/99 1,285,751 1,291,999 51 10/31/99 1,286,996 1,295,875 52 11/30/99 1,289,485 1,295,746 53 12/31/99 1,284,169 1,289,785 - --------------------------------------------------------------------------------
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. ================================================================================ 61 [LOGO OF BRINSON] U.S. Bond Fund - --------------------------------------------------------------------------------
Total Return 6 months 1 year 6/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - ----------------------------------------------------------------------------------------------- Brinson U.S. Bond Fund Class N 0.14% -1.45% 5.24% - ----------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 0.55 -0.84 5.63 - -----------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Bond Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Bond Fund Class N and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Bond Fund Class N vs. Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested
- -------------------------------------------------------------------------------- Label A B - -------------------------------------------------------------------------------- Label Brinson U.S. Bond Salomon Smith Barney Fund Class N BIG Bond Index - -------------------------------------------------------------------------------- 1 6/30/97 1,000,000 1,000,000 2 7/31/97 1,031,250 1,027,100 3 8/31/97 1,021,484 1,018,267 4 9/30/97 1,035,156 1,033,235 5 10/31/97 1,049,805 1,048,011 6 11/30/97 1,052,734 1,052,936 7 12/31/97 1,065,178 1,063,676 8 1/31/98 1,077,516 1,077,398 9 2/28/98 1,076,488 1,076,644 10 3/31/98 1,079,573 1,080,842 11 4/30/98 1,084,714 1,086,463 12 5/31/99 1,094,995 1,096,893 13 6/30/98 1,103,029 1,105,887 14 7/31/98 1,104,072 1,108,210 15 8/31/98 1,121,795 1,125,165 16 9/30/98 1,141,604 1,151,719 17 10/31/98 1,140,561 1,146,537 18 11/30/98 1,148,902 1,152,843 19 12/31/98 1,153,031 1,156,416 20 1/31/99 1,162,774 1,164,974 21 2/28/99 1,142,204 1,144,587 22 3/31/99 1,149,783 1,151,111 23 4/30/99 1,153,031 1,154,910 24 5/31/99 1,140,039 1,144,284 25 6/30/99 1,134,778 1,140,394 26 7/31/99 1,128,168 1,135,832 27 8/31/99 1,125,964 1,135,037 28 9/30/99 1,139,185 1,148,658 29 10/31/99 1,139,185 1,152,104 30 11/30/99 1,141,388 1,151,988 31 12/31/99 1,136,367 1,146,689 - --------------------------------------------------------------------------------
6/30/97 = $1,000,000 Data through 12/31/99 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. - -------------------------------------------------------------------------------- 62 [LOGO OF BRINSON] U.S. Bond Fund - --------------------------------------------------------------------------------
Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed......................................... 10.13% Consumer............................................. 1.65 Energy............................................... 1.11 Financial Services................................... 5.32 Food & House Products................................ 0.61 Health............................................... 2.09 Industrial Components................................ 0.12 Publishing........................................... 0.41 Services/Miscellaneous............................... 3.23 Telecommunications................................... 2.46 Utilities............................................ 0.51 ------ Total U.S. Corporate Bonds..................... 27.64 International Dollar Bonds............................. 9.95 Corporate Mortgage-Backed Securities................... 19.87 U.S. Government Agencies............................... 2.64 U.S. Gov't Mortgage-Backed Securities.................. 27.87 U.S. Government Obligations............................ 10.79 ------ Total U.S. Bonds............................... 98.76 ------ SHORT-TERM INVESTMENTS................................. 0.32 ------ TOTAL INVESTMENTS.............................. 99.08 CASH AND OTHER ASSETS, LESS LIABILITIES................ 0.92 ------ NET ASSETS............................................. 100.00% ====== - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 63 U.S. Bond Fund -- Schedule of Investments
December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Face Amount Value ----------- ------------ Bonds -- 98.76% U.S. Corporate Bonds -- 27.64% Cendant Corp., 7.750%, due 12/01/03........ $ 1,060,000 $ 1,058,440 Centaur Funding Corp., 144A (b), 0.000%, due 04/21/20...................... 1,355 207,965 9.080%, due 04/21/20...................... 715 730,194 Ches Pot Tel MD, 8.000%, due 10/15/29...................... 87,000 88,319 Chrysler Financial Corp., 7.400%, due 08/01/69...................... 100,000 92,321 Countrywide Funding Corp. FRN, 5.420%, due 12/01/03...................... 250,000 232,065 Farmers Exchange Capital, 144A, 7.050%, due 07/15/28...................... 1,090,000 925,441 Fidelity Investments, 144A, 7.570%, due 06/15/29...................... 1,250,000 1,201,834 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03...................... 980,000 970,406 Ford Motor Credit Co., 6.700%, due 07/16/04...................... 310,000 303,248 GE Capital Mortgage Services, Inc., 97-HE4 A76.735%, due 12/25/28............. 410,000 400,652 General Motors Acceptance Corp., 9.625%, due 12/15/01...................... 294,000 307,423 Green Tree Financial Corp., 6.160%, due 02/01/31...................... 1,000,000 947,460 Green Tree Financial Corp., Series 94-5, Class A5, 8.300%, due 11/15/19...................... 320,000 327,552 Illinois Power Special Purpose Trust, 98-1, 5.650%, due 12/25/10...................... 1,565,000 1,411,927 Kroger Co., 8.000%, due 09/15/29........... 500,000 488,245 Lilly Del Mar, 144A, 0.000%, due 08/01/29.. 1,000,000 995,182 MBNA Global Capital Securities FRN, 0.000%, due 02/01/27...................... 90,000 73,938 Monsanto Co., 144A, 6.600%, due 12/01/28...................... 1,250,000 1,074,251 News America Holdings, 7.750%, due 12/01/45...................... 358,000 326,417 Northern States Power, 6.875%, due 08/01/09...................... 925,000 888,811 PanAmSat Corp., 6.000%, due 01/15/03...................... 375,000 348,997 6.375%, due 01/15/08...................... 500,000 423,820 Peco Energy Transition Trust, 6.130%, due 03/01/09...................... 1,135,000 1,044,359 PP&L Transition Bond Company LLC, 6.960%, due 12/26/07...................... 200,000 199,394 7.050%, due 06/25/09...................... 1,390,000 1,387,776 Premier Auto Trust, Series 96-4A, Class A4, 6.400%, due 10/06/01...................... 180,716 180,843 Rite Aid Corp., 144A, 6.125%, due 12/15/08...................... 890,000 605,200 Salomon, Inc., 6.750%, due 02/15/03........ $ 300,000 $ 294,980 Service Corp., International, 6.000%, due 12/15/05...................... 750,000 557,393 Sears Credit Account Master Trust, Series 99-3, Class A, 6.450%, due 11/15/09...................... 1,200,000 1,169,640 Tele-Communications, Inc., 9.800%, due 02/01/12...................... 950,000 1,109,684 Texas Utilities, 5.940%, due 10/15/11...... 420,000 412,590 Time Warner, Inc., 7.570%, due 02/01/24.... 340,000 327,048 U.S.A. Waste Services, 6.500%, due 12/15/02...................... 400,000 369,674 Westinghouse Electric, 8.625%, due 08/01/12...................... 575,000 606,102 UCFC Home Equity Loan, Series 97-C, Class A8, FRN, due 09/15/27.............................. 85,441 85,540 ---------- 22,175,131 ---------- Corporate Mortgage-Backed Securities -- 19.87% ABN Amro Mortgage Corp., Series 99-2 IA2, 6.300%, due 04/25/29...................... 2,100,000 1,998,360 ABN Amro Mortgage Corp., Series 99-3, Class A2, 6.300%, due 05/25/29...................... 1,000,000 950,750 Chase Mortgage Finance Corp., Series 93-J1, Class 1A5, 6.625%, due 08/25/09...................... 58,831 56,160 Chemical Mortgage Securities Inc., Series 93-1, Class A5, 7.450%, due 02/25/23...................... 159,954 159,756 Citicorp Mortgage Securities, Inc., Series 94-9, Class A8, 5.750%, due 06/25/09...................... 1,100,910 1,016,657 Heller Financial Commercial Mortgage Assets, Series 99-PH1 A1, 6.500%, due 05/15/61...................... 1,203,494 1,163,995 LB Commercial Conduit Mortgage Trust, Series 99-C1 A1, 6.410%, due 08/15/07...................... 690,672 665,449 Nomura Asset Securities Corp., 7.120%, due 04/13/36...................... 1,200,000 1,174,452 Norwest Asset Securities Corp., Series 98-25, Class A5, 6.000%, due 12/25/28...................... 2,400,000 2,253,384 PNC Mortgage Securities Corp., Series 94-3, Class A8, 7.500%, due 07/25/24...................... 215,000 206,185 Prudential Home Mortgage Securities, Series 93-43, Class A9, 6.750%, due 10/25/23...................... 268,294 257,903
- -------------------------------------------------------------------------------- 64 U.S. Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Face Amount Value ----------- ------------ Prudential Home Mortgage Securities, Series 94-3, Class A10, 97-HE4 A7 6.500%, due 02/25/24...................... $ 170,000 $ 162,591 Residential Accredit Loans, Inc., Series 96-QS4, Class Al10, 7.900%, due 08/25/26...................... 275,000 274,409 Residential Accredit Loans, Inc., Series 98-QS4, Class AI5, 7.000%, due 03/25/28...................... 2,850,000 2,686,495 Residential Asset Securitization Trust, Series 97-A10, Class A1, 7.250%, due 12/25/27...................... 391,024 389,992 Residential Funding Mortgage, Series 95-S6, Class A7, 7.500%, due 11/25/25...................... 949,408 930,790 Structured Asset Securities Corp., Series 98-RF1, Class A, 144A, 7.900%, due 10/15/28...................... 473,810 477,216 Structured Asset Securities Corp., Series 98-RF1, Class A, 8.712%, due 03/15/27...................... 388,513 400,290 Structured Asset Securities Corp., Series 98-RF2, 8.582%, due 07/15/27...................... 137,457 141,237 Thrift Financial Corp., 11.250%, due 01/01/16..................... 29,379 30,263 Vendee Mortgage Trust, Series 92-1, Class 2Z, 7.750%, due 05/15/22...................... 553,329 550,087 ---------- 15,946,421 ---------- International Dollar Bonds -- 9.95% Abbey National PLC, 6.700%, Resettable Perpetual Preferred, 6.700%, due 06/29/49...................... 1,075,000 973,264 Banco Santiago S.A., 7.000%, due 07/18/07...................... 380,000 340,945 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.900%, due 05/01/07...................... 1,100,000 1,046,604 Empresa Nacional de Electricidad S.A., 7.875%, due 02/01/27...................... 594,000 516,298 Interamer Development Bank, 6.800%, due 10/15/25...................... 100,000 93,077 Korea Development Bank, 7.125%, due 09/17/01...................... 500,000 496,120 Pemex Finance Ltd., 2A-B1, 144A, 8.450%, due 02/15/07...................... 940,000 913,304 Petroliam Nasional Berhad, 144A, 7.625%, due 10/15/26...................... 430,000 378,616 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14...................... $ 450,000 $ 422,672 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49...................... 585,000 557,858 Southern Investments UK, 6.800%, due 12/01/06...................... 1,345,000 1,259,134 Tyco International Group, S.A., 5.875%, due 11/01/04...................... 595,000 550,797 7.000%, due 06/15/28...................... 500,000 432,445 ----------- 7,981,134 ----------- U.S. Government Mortgage-Backed Securities -- 27.87% Fannie Mae, 6.375%, due 06/15/09........... 220,000 209,642 Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25...................... 115,854 119,655 Federal Home Loan Mortgage Corp., 7.000%, due 10/15/13...................... 492,125 468,587 7.238%, due 05/01/26...................... 12,320 12,366 Federal Home Loan Mortgage Corp. Gold, 8.000%, due 11/01/22...................... 86,371 87,384 9.000%, due 03/01/24...................... 65,048 68,101 Federal National Mortgage Assoc. Series 97-72, Class EG 0.000%, due 09/25/22...................... 264,180 228,900 Federal National Mortgage Association, 5.625%, due 03/15/01...................... 4,080,000 4,040,885 8.000%, due 08/01/08...................... 543,163 554,309 8.000%, due 12/18/11...................... 100,000 101,979 6.500%, due 03/01/19...................... 476,937 455,624 8.500%, due 07/01/22...................... 9,358 9,691 9.500%, due 08/01/22...................... 60,755 64,219 7.500%, due 12/01/23...................... 476,031 471,045 7.000%, due 12/01/24...................... 2,580,594 2,495,816 7.500%, due 01/01/28...................... 262,040 259,501 6.000%, due 03/01/28...................... 653,272 598,442 6.500%, due 06/01/28...................... 707,837 668,508 6.000%, due 08/01/28...................... 1,428,573 1,307,889 6.500%, due 09/01/28...................... 233,641 220,659 6.500%, due 02/01/29...................... 497,942 469,466 7.000%, due 03/01/29...................... 45,445 43,984 Federal National Mortgage Association Strips, 8.000%, due 08/01/23...................... 294,086 90,397 0.000%, due 02/01/28...................... 223,882 145,290 FNCI, 8.000%, due 02/01/13................. 169,684 173,113 Freddie Mac, 5.750%, due 06/15/01.......... 1,000,000 990,028
- -------------------------------------------------------------------------------- 65 U.S. Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value -------- ------- Government National Mortgage Association, 10.000%, due 09/15/00........................... 804 $ 838 10.000%, due 05/15/01........................... 1,105 1,152 9.000%, due 11/15/04............................ 7,096 7,294 9.000%, due 11/15/04............................ 2,859 2,939 8.000%, due 08/15/22............................ 41,039 41,673 7.500%, due 12/15/22............................ 207,917 207,069 7.500%, due 12/15/23............................ 862,804 858,581 7.500%, due 01/15/24............................ 57,259 56,934 6.500%, due 10/15/24............................ 7,016,059 6,671,397 7.500%, due 06/15/25............................ 72,430 72,057 7.000%, due 07/15/25............................ 84,595 82,395 ----------- 22,357,809 ----------- U.S. Government Agencies -- 2.64% Aid-Israel, Series 10-Z, 0.000%, due 02/15/03............................ 805,000 656,316 Jordan Aid, 8.750%, due 09/01/19.................. 1,357,58 1,459,788 ----------- 2,116,104 ----------- U.S. Government Obligations -- 10.79% U.S. Treasury Bond, 8.750%, due 05/15/17............................ $ 460,000 549,125 8.000%, due 11/15/21............................ 3,320,000 3,766,125 U.S. Treasury Inflation Indexed Note, 3.625%, due 04/15/28............................ 1,770,000 1,645,025 U.S. Treasury Note, 5.750%, due 08/15/03............................ 205,000 200,708 7.000%, due 07/15/06............................ 2,440,000 2,499,475 ----------- 8,660,458 ----------- Total Bonds (Cost $82,704,874).................... 79,237,057 ----------- Short-Term Investments -- 0.32% Investment Companies -- 0.32% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $259,361)................................. 259,361 259,361 ----------- Total Investments (Cost $82,964,235) -- 99.08% (a)................ 79,496,418 Cash and other assets, less liabilities -- 0.92%....................... 736,231 ----------- Net Assets -- 100%................................ $80,232,649 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $82,964,235; and net unrealized depreciation consisted of: Gross unrealized appreciation............... $ 281,821 Gross unrealized depreciation............... (3,749,638) Net unrealized depreciation................. $ (3,467,817)
(b) Non-income producing security. FRN: Floating rate note -- The rate disclosed is that in effect at December 31, 1999. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $8,978,479 or 11.19% of net assets. See accompanying notes to financial statement. - -------------------------------------------------------------------------------- 66 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $82,704,874).................................................... $79,237,057 Affiliated issuers (Cost $259,361)......................................................... 259,361 Receivables: Investment securities sold................................................................. 152 Interest................................................................................... 856,363 Other assets................................................................................. 1,842 ----------- TOTAL ASSETS........................................................................... 80,354,775 ----------- LIABILITIES: Payables: Investment advisory fees................................................................... 32,925 Due to custodian bank...................................................................... 86,328 Accrued expenses........................................................................... 2,873 ----------- TOTAL LIABILITIES...................................................................... 122,126 ----------- NET ASSETS..................................................................................... $80,232,649 =========== NET ASSETS CONSIST OF: Paid in capital.............................................................................. $86,614,032 Distributions in excess of net investment income............................................. (183,624) Accumulated net realized loss................................................................ (2,729,942) Net unrealized depreciation.................................................................. (3,467,817) ----------- NET ASSETS............................................................................. $80,232,649 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $74,460,691 and 7,628,122 shares issued and outstanding)................................. $ 9.76 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,133 and 116 shares issued and outstanding)............................................ $ 9.77 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,770,825 and 594,049 shares issued and outstanding).................................... $ 9.71 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 67 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends...................................................... $ 46,708 Interest....................................................... 3,685,825 ----------- TOTAL INCOME.......................................... 3,732,533 ----------- EXPENSES: Advisory....................................................... 283,873 Registration................................................... 20,800 Professional................................................... 20,529 Distribution................................................... 14,465 Other.......................................................... 20,526 ----------- TOTAL EXPENSES........................................ 360,193 Expenses deferred by Advisor.......................... (2,293) Earnings credits...................................... (1,659) ----------- NET EXPENSES.......................................... 356,241 ----------- NET INVESTMENT INCOME................................. 3,376,292 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss.............................................. (1,678,187) Change in net unrealized appreciation or depreciation.......... (964,402) ----------- Net realized and unrealized loss............................... (2,642,589) ----------- Net increase in net assets resulting from operations........... $ 733,703 ===========
See accompanying notes to financial statements. ================================================================================ 68 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ------------- OPERATIONS: Net investment income............................................................... $ 3,376,292 $ 4,517,147 Net realized loss................................................................... (1,678,187) (338,906) Change in net unrealized appreciation or depreciation............................... (964,402) (3,036,340) ------------ ------------- Net increase in net assets resulting from operations................................ 733,703 1,141,901 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions in excess of net investment income.................................... (4,521,037) (3,812,376) Distributions from net realized gain................................................ -- (55,782) Distributions in excess of net realized gain........................................ -- (1,051,755) ------------ ------------- Total distributions to shareholders*................................................ (4,521,037) (4,919,913) ------------ ------------- Capital share transactions: Shares sold......................................................................... 51,018,071 156,386,946 Shares issued in connection with the acquisition of UBS Bond Fund................... -- 15,177,263 Shares issued on reinvestment of distributions...................................... 4,378,710 4,271,987 Shares redeemed..................................................................... (69,422,381) (115,331,025) ------------ ------------- Net increase (decrease) in net assets resulting from capital share transactions..... (14,025,600) 60,505,171 ------------ ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS............................. (17,812,934) 56,727,159 ------------ ------------- NET assets: Beginning of period................................................................. 98,045,583 41,318,424 ------------ ------------- End of period (including undistributed net investment income of $(183,624) and $961,121, respectively)............................................................. $ 80,232,649 $ 98,045,583 ============ ============= *DISTRIBUTIONS BY CLASS: Distributions from net investment income: Brinson Class I............................................................. (4,175,208) (3,583,162) Brinson Class N............................................................. (61) (46) UBS Investment Funds Class.................................................. (345,768) (229,168) Distributions from and in excess of net realized gain: Brinson Class I............................................................. -- (1,038,553) Brinson Class N............................................................. -- (16) UBS Investment Funds Class.................................................. -- (68,968) ------------ ------------- Total distributions to shareholders................................................. (4,521,037) (4,919,913) ------------ -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 69 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended August 31, 1995* December 31, 1999 Year Ended June 30, Through ---------------------------------- Brinson Class I (Unaudited) 1999 1998 1997 June 30, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period..................... $ 10.28 $ 10.58 $ 10.24 $ 9.93 $ 10.00 ------- ------- ------- ------- ------- Income from investment operations: Net investment income................................ 0.31** 0.58** 0.53 0.51** 0.50 Net realized and unrealized gain (loss).............. (0.27) (0.26) 0.53 0.32 (0.14) ------- ------- ------- ------- ------- Total income from investment operations...... 0.04 0.32 1.06 0.83 0.36 ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income............. (0.56) (0.47) (0.58) (0.52) (0.40) Distributions in excess of net realized gain......... -- (0.15) (0.14) -- (0.03) ------- ------- ------- ------- ------- Total distributions.......................... (0.56) (0.62) (0.72) (0.52) (0.43) ------- ------- ------- ------- ------- Net asset value, end of period........................... $ 9.76 $ 10.28 $ 10.58 $ 10.24 $ 9.93 ======= ======= ======= ======= ======= Total return (non-annualized)............................ 0.36% 2.97% 10.60% 8.45% 3.60% Ratios/Supplemental data: Net assets, end of period (in 000s).................... $74,461 $92,030 $38,874 $22,421 $ 9,047 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits................................... 0.61%*** 0.61% 0.84% 1.65% 3.63%*** After expense reimbursement and earnings credits................................... 0.60%*** 0.60% 0.60% 0.60% 0.60%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits................................... 5.94%*** 5.42% 5.61% 5.14% 3.00%*** After expense reimbursement and earnings credits................................... 5.95%*** 5.43% 5.85% 6.19% 6.03%*** Portfolio turnover rate................................ 103% 260% 198% 410% 363%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 70 U.S. Bond Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
Six Months Ended December 31, 1999 Year Ended Year Ended Brinson Class N (Unaudited) June 30, 1999 June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period.............................. $ 10.30 $ 10.58 $ 10.24 ------- ------- ------- Income from investment operations: Net investment income......................................... 0.29* 0.57* 0.61 Net realized and unrealized gain (loss)....................... (0.27) (0.26) 0.42 ------- ------- ------- Total income from investment operations............... 0.02 0.31 1.03 Less distributions: Distributions from net investment income...................... (0.55) (0.44) (0.55) Distributions from net realized gain.......................... -- (0.15) (0.14) ------- ------- ------- Total distributions................................... (0.55) (0.59) (0.69) ------- ------- ------- Net asset value, end of period.................................... $ 9.77 $ 10.30 $ 10.58 ======= ======= ======= Total return (non-annualized)..................................... 0.14% 2.88% 10.30% Ratios/Supplemental data: Net assets, end of period (in 000s)............................. $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits............. 0.86%** 0.86% 1.09% After expense reimbursement and earnings credits.............. 0.85%** 0.85% 0.85% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits............. 5.69%** 5.17% 5.36% After expense reimbursement and earnings credits.............. 5.70%** 5.18% 5.60% Portfolio turnover rate......................................... 103% 260% 198%
* The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized See accompanying notes to financial statements. ================================================================================ 71 High Yield Fund - ------------------------------------------------------------------------------- [BRINSON LOGO] The Brinson High Yield Fund Class I has earned an annualized return of 6.66% since its inception on September 30, 1997, versus 3.48% for its benchmark, the Merrill Lynch High Yield Master Index. This performance was achieved with an annualized volatility of 6.32% versus 5.03% for the benchmark. The Fund's total return for 1999 was 4.85% versus 1.57% for the benchmark. This strong performance for the year was due mainly to credit and sector selection decisions. Due to continued strength in the U.S. economy, spreads (over U.S. Treasuries) in the high yield market tightened from 555 basis points at 1998 year-end to 453 basis points at 1999 year-end. However, an increase in the general level of U.S. interest rates raised the benchmark's yield-to-worst from 10.20% to 10.97% over the same one-year period. As the year progressed, the market became increasingly intolerant of poor financial results. Often when companies reported bad news their bond prices dropped by more than 15%. Conversely, when companies reported good news, their bond prices showed only modest gains. In September, default rates stood at 3.26% versus 1.32% a year earlier. As participants focused on higher default rates, the market's shrinking liquidity was exacerbated by the perception of potential business disruptions resulting from Y2K. In December, evidence suggested that the default rate had peaked and that Y2K concerns had been addressed. Liquidity improved and demand for new bond issuance increased. This firmed up the market, leading to solid performance in the fourth quarter. As in 1998, industry weightings helped to enhance returns. The Fund benefited from underweights in healthcare, textile and entertainment/film, which significantly underperformed the market, and from overweights in cable, broadcasting and publishing/printing, which performed well. Fund performance was hurt somewhat by an underweight in cyclicals, which significantly outperformed the broader market in 1999. ================================================================================ 72 High Yield Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return 6 months 1 year 9/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - ---------------------------------------------------------------------------- Brinson High Yield Fund Class I 1.89% 4.85% 6.66% - ---------------------------------------------------------------------------- Merrill Lynch High Yield Master Index -0.18 1.57 3.48 - ---------------------------------------------------------------------------- * Inception date of the Brinson High Yield Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson High Yield Fund Class I and the Merrill Lynch High Yield Master Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson High Yield Fund Class I vs. Merrill Lynch High Yield Master Index Wealth Value with Dividends Reinvested - ------------------------------------------------------------------------------ Label A B - ------------------------------------------------------------------------------ Merrill Lynch High Label Date Brinson High Yield Fund Class I Yield Master Index - ------------------------------------------------------------------------------ 1 9/30/97 1,000,000 1,000,000 2 10/31/97 995,405 1,006,640 3 11/30/97 1,005,534 1,016,173 4 12/31/97 1,023,434 1,025,816 5 1/31/98 1,047,259 1,041,091 6 2/28/98 1,054,152 1,045,391 7 3/31/98 1,066,777 1,054,402 8 4/30/98 1,068,387 1,059,410 9 5/31/98 1,070,928 1,066,784 10 6/30/98 1,081,780 1,072,064 11 7/31/98 1,098,343 1,078,175 12 8/31/98 1,042,275 1,031,652 13 9/30/98 1,057,065 1,033,715 14 10/31/98 1,049,791 1,016,742 15 11/30/98 1,109,624 1,063,035 16 12/31/98 1,102,713 1,063,388 17 1/31/99 1,129,231 1,073,905 18 2/28/99 1,134,755 1,065,711 19 3/31/99 1,146,909 1,074,897 20 4/30/99 1,163,483 1,091,709 21 5/31/99 1,140,280 1,084,132 22 6/30/99 1,134,755 1,082,094 23 7/31/99 1,133,616 1,083,685 24 8/31/99 1,127,919 1,082,685 25 9/30/99 1,124,501 1,068,566 26 10/31/99 1,124,501 1,062,315 27 11/30/99 1,147,288 1,074,468 28 12/31/99 1,156,238 1,080,109 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. ================================================================================ 73 High Yield Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Total Return 6 Months 12/31/98* ended to 12/31/99 12/31/99 - ------------------------------------------------------------------ Brinson High Yield Fund Class N 1.77% 4.53% - ------------------------------------------------------------------ Merrill Lynch High Yield Master Index -0.18 1.57 - ------------------------------------------------------------------ * Inception date of the Brinson High Yield Fund Class N. 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 High Yield Fund Class N and the Merrill Lynch High Yield Master Index if you had invested $1,000,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson High Yield Fund Class N vs. Merrill Lynch High Yield Master Index Wealth Value with Dividends Reinvested - -------------------------------------------------------------------------- Label A B - -------------------------------------------------------------------------- Merrill Lynch High Label Date Brinson High Yield Fund Class N Yield Master Index - -------------------------------------------------------------------------- 1 12/31/98 1,000,000 1,000,000 - -------------------------------------------------------------------------- 2 1/31 99 1,024,048 1,009,890 - -------------------------------------------------------------------------- 3 2/28/99 1,028,056 1,002,184 - -------------------------------------------------------------------------- 4 3/31/99 1,039,078 1,010,823 - -------------------------------------------------------------------------- 5 4/30/99 1,054,108 1,026,633 - -------------------------------------------------------------------------- 6 5/31/99 1,032,064 1,019,508 - -------------------------------------------------------------------------- 7 6/30/99 1,027,054 1,017,591 - -------------------------------------------------------------------------- 8 7/31/99 1,026,022 1,019,087 - -------------------------------------------------------------------------- 9 8/31/99 1,020,861 1,008,743 - -------------------------------------------------------------------------- 10 9/30/99 1,016,732 1,004,870 - -------------------------------------------------------------------------- 11 10/31/99 1,016,732 998,991 - -------------------------------------------------------------------------- 12 11/30/99 1,037,376 1,010,420 - -------------------------------------------------------------------------- 13 12/31/99 1,045,278 1,015,724 - -------------------------------------------------------------------------- Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. =============================================================================== 74 High Yield Fund - -------------------------------------------------------------------------------- [BRINSON LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Aerospace & Military............................... 0.69% Auto............................................... 1.24 Chemicals.......................................... 4.39 Construction....................................... 4.64 Consumer........................................... 3.21 Electronics and Electric Components................ 0.55 Energy............................................. 2.33 Financial Services................................. 1.34 Food & House Products.............................. 5.07 Health............................................. 3.06 Publishing......................................... 2.25 Radio Broadcasting................................. 3.14 Real Estate........................................ 0.83 Recreation......................................... 8.46 Retail............................................. 5.23 Services/Miscellaneous............................. 17.51 Telecommunications................................. 14.29% Television Broadcasting............................ 14.88 ------ Total U.S. Corporate Bonds................... 93.11 International Dollar Bonds............................ 2.39 ------ Total U.S. Bonds............................... 95.50 Warrants.............................................. 0.02 ------ SHORT-TERM INVESTMENTS................................ 2.57 ------ TOTAL INVESTMENTS.............................. 98.09 CASH AND OTHER ASSETS, LESS LIABILITIES.................................... 1.91 ------ NET ASSETS............................................ 100.00% ====== Top Ten U.S. Bond Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------- 1. Exodus Communications, Inc. 1.83% 2. Lyondell Chemical Co. 1.59 3. Paxson Communications Corp. 1.57 4. Dobson Sygnet Communications, Inc. 1.56 5. Microcell Telecommunications, Inc. 1.55 6. Group Maintenance America Corp. 1.50 7. Waterford Gaming 1.48 8. PSINet, Inc. 1.48 9. Verio, Inc. 1.46 10. Paxson Communications Corp. 1.44 - ------------------------------------------------- ================================================================================ 75 High Yield Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Face Amount Value ----------- ----------- U.S. Bonds - 95.50% U.S. Corporate Bonds - 93.11% Ackerley Group, Inc., Series B, 9.000%, due 01/15/09............................... $ 675,000 $ 658,125 Adelphia Communications Corp., 9.375%, due 11/15/09............................... 500,000 490,000 Allbritton Communications Co., Series B, 8.875%, due 02/01/08............................... 550,000 528,000 American Mobile Satellite Corp., 12.250%, due 04/01/08............................... 250,000 195,313 Avalon Cable Holdings, 9.375%, due 12/01/08............................... 600,000 606,000 Bally Total Fitness Corp., Series B, 9.875%, due 10/15/07............................... 500,000 485,000 Big City Radio, Inc., (c) 0.000%, due 03/15/05............................... 1,100,000 709,500 Budget Group, Inc., 9.125%, due 04/01/06............................... 500,000 465,000 Building Materials Corp., 7.750%, due 07/15/05............................... 650,000 591,500 Capstar Broadcasting Partners, Inc., (d) 0.000%, due 02/01/09............................... 500,000 445,000 Carmike Cinemas, Inc., 9.375%, due 02/01/09............................... 750,000 650,625 CB Richard Ellis Services, Inc., 8.875%, due 06/01/06............................... 525,000 467,250 Centennial Cellular, 10.750%, due 12/15/08............................... 500,000 535,000 Century Communications Corp., 0.000%, due 01/15/08............................... 425,000 186,469 8.375%, due 11/15/17............................... 300,000 265,500 Collins & Alkman Corp., 11.500%, due 04/15/06............................... 700,000 691,250 CSC Holdings, Inc., 7.625%, due 07/15/18............................... 600,000 558,000 Cumulus Media, Inc., 10.375%, due 07/01/08............................... 590,000 613,600 Dan River, Inc., Snr-Sub-Nts, 10.125%, due 12/15/03............................... 500,000 500,000 Dobson Sygnet Communications, Inc., 12.250%, due 12/15/08............................... 800,000 880,000 Eagle Family Foods, Series B, 8.750%, due 01/15/08............................... 750,000 577,500 Exodus Communications, Inc., 11.250%, due 07/01/08............................... 1,000,000 1,032,500 Falcon Holding Group, Series B, (e) 0.000%, due 04/15/10............................... 150,000 112,313 Fedders North America, 9.375%, due 08/15/07............................... 500,000 490,000 Federal-Mogul Corp., 7.500%, due 01/15/09............................... 250,000 222,691 Fox/Liberty Networks, Step, (f) 0.000%, due 08/15/07............................... $ 500,000 $ 402,500 Global Imaging Systems, Inc., 10.750%, due 02/15/07............................... 325,000 312,000 Golden Sky DBS, Inc., (g) 0.000%, due 03/01/07............................... 375,000 228,281 Gothic Production Corp., 11.125%, due 05/01/05 Series B...................... 500,000 425,000 Granite Broadcasting Corp., 10.375%, due 05/15/05............................... 400,000 408,000 Group Maintenance America Corp., 9.750%, due 01/15/09............................... 850,000 843,625 Harvey Casinos Resorts, 10.625%, due 06/01/06............................... 300,000 309,750 Hollinger International Publishing Corp., 9.250%, due 02/01/06............................... 750,000 742,500 ICN Pharmaceuticals, Inc., 9.250%, due 08/15/05............................... 400,000 394,000 Integrated Electrical Services, Inc., 9.375%, due 02/01/09............................... 750,000 735,937 Interep National Radio Sales, Series B, 10.000%, due 07/01/08............................... 650,000 622,375 Iron Mountain, Inc., 10.125%, due 10/01/06............................... 200,000 203,500 8.750%, due 09/30/09............................... 500,000 476,250 Isle of Capri Casinos, Inc., 8.750%, due 04/15/09............................... 500,000 460,000 ISP Holdings Inc., Series B, 9.000%, due 10/15/03............................... 630,000 614,250 J.H. Heafner Co., 10.000%, due 05/15/08.............. 525,000 475,125 Level 3 Communications, Inc., (h) 0.000%, due 12/01/08............................... 850,000 514,250 Liberty Group Operating, 9.375%, due 02/01/08............................... 850,000 756,500 LIN Holdings Corp., Step, (i) 0.000%, due 03/01/08............................... 1,000,000 673,750 Loral Space & Communications Ltd., 9.500%, due 01/15/06............................... 200,000 180,000 Lyondell Chemical Co., Series B, 9.875%, due 05/01/07............................... 880,000 897,600 Mail Well Corp., 8.750%, due 12/15/08................ 500,000 475,000 Merrill Corp., 12.000%, due 05/01/09................. 325,000 318,500 Metromedia Fiber Network, 10.000%, due 12/15/09............................... 600,000 615,000 Mohegan Tribal Gaming Authority, 8.750%, due 01/01/09............................... 600,000 591,000 MTS, Inc., 9.375%, due 05/01/05...................... 750,000 375,000 NationsRent, Inc., 10.375%, due 12/15/08............. 675,000 664,875 NBTY, Inc., Series B, 8.625%, due 09/15/07............................... 440,000 407,000
- -------------------------------------------------------------------------------- 76 High Yield Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Face Amount Value ----------- ----------- New World Pasta Co., 9.250%, due 02/15/09................................ $ 545,000 $ 490,500 Newpark Resources, Inc., Series B, 8.625%, due 12/15/07................................ 700,000 651,000 Nextel Communications, Inc., 144A, 9.375%, due 11/15/09................................ 305,000 298,900 Nextel Communications, Inc., Step, (j) 0.000%, due 09/15/07................................ 800,000 596,000 Nextlink Communications, 144A, 0.000%, due 12/01/09 (k)............................ 712,000 414,740 10.500%, due 12/01/09................................ 175,000 177,625 Nortex, Inc., 9.875%, due 03/01/04.................... 450,000 443,250 NTL Communications Corp., Series B, Step, (l) 0.000%, due 10/01/08................................ 900,000 636,750 Packaging Corp. of America, 9.625%, due 04/01/09................................ 220,000 224,675 Paxson Communications Corp., 11.625%, due 10/01/02................................ 850,000 884,000 Paxson Communications Corp. (b), 0.000%, due 10/31/06................................ 797 812,818 Pegasus Communication Corp., Class B, 144A, 12.500%, due 08/01/07......................... 550,000 599,500 Pegasus Communications Corp., Class B, 9.625%, due 10/15/05................................ 750,000 757,500 9.750%, due 12/01/06................................ 150,000 151,500 Perry Ellis International, Inc., 12.250%, due 04/01/03................................ 650,000 645,937 Phoenix Color, Inc., 10.375%, due 02/01/09................................ 600,000 576,000 Pilgrim's Pride Corp., Snr-Sub-Nts, 10.875%, due 08/01/03................................ 561,000 566,610 Pillowtex Corp., 10.000%, due 11/15/06................ 125,000 57,500 Plains Resources, Inc., 10.250%, due 03/15/06 Series B................................. 300,000 291,000 Premier Parks, Inc., Step, (m) 0.000%, due 04/01/08................................ 1,100,000 759,000 Protection One Alarm, Inc., 7.375%, due 08/15/05................................ 365,000 290,175 PSINet, Inc., 10.500%, due 12/01/06................................ 150,000 151,125 PSINet, Inc., 11.500%, due 11/01/08................................ 800,000 836,000 Qwest Communications International, Inc., (n) 0.000%, due 10/15/07................................ 500,000 405,000 R. H. Donnelly, Inc., 9.125%, due 06/01/08............ 750,000 735,000 Range Resources Corp., 8.750%, due 01/15/07................................ 650,000 596,375 Rayovac Corp., Series B, 10.250%, due 11/01/06................................ 600,000 612,000 RCN Corp., Step, (o) 0.000%, due 10/15/07................................ 450,000 316,125 Revlon Consumer Products, 8.125%, due 02/01/06................................ $ 400,000 $ 294,000 8.625%, due 02/01/08................................ 220,000 110,000 Scotts Co., 144A, 8.625%, due 01/15/09................ 500,000 485,000 Sequa Corp., 9.000%, due 08/01/09..................... 400,000 387,000 Simmons Co., 10.250%, due 03/15/09.................... 700,000 662,375 Sinclair Broadcast Group, 10.000%, due 09/30/05................................ 250,000 247,500 8.750%, due 12/15/07................................ 425,000 392,063 Sleepmaster Corp., 144A, 11.000%, due 05/15/09................................ 500,000 508,750 Speedway Motorsports, Inc., 8.500%, due 08/15/07................................ 700,000 679,000 T/SF Communications Corp., Series B, 10.375%, due 11/01/07................................ 550,000 528,000 Telecorp PCS, Inc., (p) 0.000%, due 04/15/09................................ 700,000 441,000 TeleWest Communications PLC, 144A, (q) 0.000%, due 04/15/09................................ 500,000 315,000 Trans-Resources, Inc., Series B, (r) 0.000%, due 03/15/08................................ 650,000 325,000 Tritel PCS, Inc., 144A, (s) 0.000%, due 05/15/09................................ 200,000 126,500 Triton PCS, Inc., (t) 0.000%, due 05/01/08................................ 1,125,000 795,937 Twin Labs, Inc., 10.250%, due 05/15/06................ 500,000 517,500 U.S. Unwired, Inc., 144A, (u) 0.000%, due 11/01/09................................ 800,000 468,000 United Industries Corp., 9.875%, due 04/01/09................................ 700,000 638,750 United Rentals, Inc., Series B, 9.500%, due 06/01/08................................ 625,000 610,937 9.250%, due 01/15/09................................ 370,000 355,200 Verio, Inc., 13.500%, due 06/15/04.................... 750,000 823,125 Voicestream Wire, 144A, 10.375%, due 11/15/09................................ 225,000 231,750 Waterford Gaming, 144A, 9.500%, due 03/15/10.......................................... 850,000 837,250 Williams Communications Group, Inc., 10.875%, due 10/01/09................................ 635,000 663,575 ----------- 52,497,521 ----------- International Dollar Bonds - 2.39% Imax, Corp., 7.875%, due 12/01/05..................... 500,000 472,500 Microcell Telecommunications, Inc., Series B, 0.000%, due 06/01/06...................... 990,000 873,675 ----------- 1,346,175 ----------- Total U.S. Bonds (Cost $56,267,269)................... 53,843,696 -----------
- -------------------------------------------------------------------------------- 77 High Yield Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Warrants Value ----------- ----------- Warrants - 0.02% American Mobile Satellite Corp., 144A, Warrants (Cost $11,250) (b)........................ 250 $ 10,000 ----------- Shares ----------- Short-Term Investments - 2.57% Investment Companies - 2.57% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,449,925).................................. 1,449,925 1,449,925 ----------- Total Investments (Cost $57,728,444) - 98.09% (a).................... 55,303,621 Cash and other assets, less liabilities - 1.91%........................... 1,078,599 ----------- Net Assets - 100%.................................... $56,382,220 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $57,728,444; and net unrealized depreciation consisted of: Gross unrealized appreciation....... $ 438,489 Gross unrealized depreciation....... (2,863,312) ----------- Net unrealized depreciation......... $(2,424,823) ===========
(b) Non-income producing security. (c) Interest rate 0.000% until 03/15/01, then 11.125% to maturity (d) Interest rate 0.000% until 02/01/02, then 12.750% to maturity (e) Interest rate 0.000% until 04/15/03, then 9.285% to maturity (f) Interest rate 0.000% until 08/15/02, then 9.750% to maturity (g) Interest rate 0.000% until 03/01/04, then 13.500% to maturity (h) Interest rate 0.000% until 12/01/03, then 10.500% to maturity (i) Interest rate 0.000% until 03/01/03, then 10.000% to maturity (j) Interest rate 0.000% until 09/15/02, then 10.650% to maturity (k) Interest rate 0.000% until 12/01/04, then 12.125% to maturity (l) Interest rate 0.000% until 10/01/03, then 12.375% to maturity (m) Interest rate 0.000% until 04/01/03, then 10.000% to maturity (n) Interest rate 0.000% until 10/15/02, then 9.470% to maturity (o) Interest rate 0.000% until 10/15/02, then 11.125% to maturity (p) Interest rate 0.000% until 04/15/04, then 11.625% to maturity (q) Interest rate 0.000% until 04/15/04, then 9.250% to maturity (r) Interest rate 0.000% until 03/15/03, then 12.000% to maturity (s) Interest rate 0.000% until 05/15/04, then 12.750% to maturity (t) Interest rate 0.000% until 05/01/03, then 11.000% to maturity (u) Interest rate 0.000% until 11/01/04, then 13.375% to maturity 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $4,473,015 or 7.93% of net assets. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 78 High Yield Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $56,278,519)............................................ $ 53,853,696 Affiliated issuers (Cost $1,449,925)............................................... 1,449,925 Receivables: Investment securities sold......................................................... 308,735 Interest........................................................................... 1,153,641 ------------- TOTAL ASSETS.................................................................... 56,765,997 ============= LIABILITIES: Payables: Investment advisory fees........................................................... 25,035 Due to custodian bank.............................................................. 308,042 Accrued expenses................................................................... 50,700 ------------- TOTAL LIABILITIES............................................................... 383,777 ------------- NET ASSETS............................................................................. $ 56,382,220 ============= NET ASSETS CONSIST OF: Paid in capital...................................................................... $ 59,825,015 Accumulated undistributed net investment income...................................... 558,849 Distributions in excess of net realized gain......................................... (1,576,821) Net unrealized depreciation.......................................................... (2,424,823) ------------- NET ASSETS............................................................................. $ 56,382,220 ============= OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $53,461,003 and 5,563,579 shares issued and outstanding). $ 9.61 ============= Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,046 and 109 shares issued and outstanding)............ $ 9.60 ============= UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $2,920,171 and 304,104 shares issued and outstanding).... $ 9.60 =============
See accompanying notes to financial statements. ================================================================================ 79 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Interest...................................................... $ 3,208,339 ------------ TOTAL INCOME................................................ 3,208,339 ------------ EXPENSES: Advisory...................................................... 192,673 Distribution.................................................. 26,035 Professional.................................................. 20,107 Registration.................................................. 15,506 Other......................................................... 39,774 ------------ TOTAL EXPENSES.............................................. 294,095 Expenses deferred by Advisor................................ (40,895) Earnings credits............................................ (1,756) ------------ NET EXPENSES................................................ 251,444 ------------ NET INVESTMENT INCOME....................................... 2,956,895 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss on investments.............................. (1,508,313) Change in net unrealized appreciation or depreciation......... (280,354) ------------ Net realized and unrealized loss.............................. (1,788,667) ------------ Net increase in net assets resulting from operations.......... $ 1,168,228 ============ See accompanying notes to financial statements. ================================================================================ 80 High Yield Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ------------- ------------- OPERATIONS: Net investment income............................................................ $ 2,956,895 $ 2,487,185 Net realized gain (loss)......................................................... (1,508,313) 420,129 Change in net unrealized appreciation or depreciation............................ (280,354) (1,916,114) ------------- ------------- Net increase in net assets resulting from operations............................. 1,168,228 991,200 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.................................................................. (2,747,919) (1,845,754) Brinson Class N................................................................ (48) (30) UBS Investment Funds Class..................................................... (261,823) (167,575) Distributions from and in excess of net realized gain: Brinson Class I.................................................................. (384,243) -- Brinson Class N................................................................ (7) -- UBS Investment Funds Class..................................................... (40,374) -- ------------- ------------- Total distributions to shareholders.............................................. (3,434,414) (2,013,359) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................................................... 7,261,164 52,695,849 Shares issued on reinvestment of distributions................................... 3,052,216 1,797,826 Shares redeemed.................................................................. (18,002,121) (22,036,291) ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions.. (7,688,741) 32,457,384 ------------- ------------- TOTAL INCREASE (Decrease) IN NET ASSETS........................................ (9,954,927) 31,435,225 ------------- ------------- NET ASSETS: Beginning of period................................................................ 66,337,147 34,901,922 ------------- ------------- End of period (including accumulated undistributed net investment income of $558,849 and $611,744, respectively)..................................... $ 56,382,220 $ 66,337,147 ============= =============
*Reflects the Fund's change in fiscal year end from December 31 to June 30 See accompanying notes to financial statements. ================================================================================ 81 High Yield Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Six Months September 30, 1997/1/ December 31, Ended/2/ Year Ended through 1999 June 30, December 31, December 31, Brinson Class I (Unaudited) 1999 1998/3/ 1997 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period........................... $ 9.96 $ 9.98 $ 10.05 $ 10.00 --------- --------- --------- --------- Income from investment operations: Net investment income..................................... 0.46/4/ 0.44/4/ 7.30 0.18 Net realized and unrealized gain (loss)................... (0.27) (0.15) 0.02 0.05 --------- --------- --------- --------- Total income from investment operations................. 0.19 0.29 7.32 0.23 --------- --------- --------- --------- Less distributions: Distributions from net investment income.................. (0.47) (0.31) (7.33) (0.18) Distributions from and in excess of net realized gain..... (0.07) -- (0.06) -- --------- --------- --------- --------- Total distributions..................................... (0.54) (0.31) (7.39) (0.18) --------- --------- --------- --------- Net asset value, end of period................................. $ 9.61 $ 9.96 $ 9.98 $ 10.05 ========= ========= ========= ========= Total return (non-annualized).................................. 1.89% 2.91% 7.75% 2.34% Ratios/Supplemental Data: Net assets, end of period (in 000s).......................... $ 53,461 $ 60,044 $ 34,900 $ 7,861 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits......... 0.83%/5/ 0.83%/5/ 1.59% 4.98%/5/ After expense reimbursement and earnings credits.......... 0.70%/5/ 0.70%/5/ 0.89% 0.90%/5/ Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits............ 9.14%/5/ 8.54%/5/ 7.38% 3.15%/5/ After expense reimbursement and earnings credits.......... 9.27%/5/ 8.67%/5/ 8.08% 7.23%/5/ Portfolio turnover rate...................................... 29% 77% N/A N/A
/1/ Commencement of investment operations /2/ Reflects the Fund's change in fiscal year end from December 31 to June 30 /3/ Reflects 10 for 1 share split effective December 9, 1998 /4/ The net investment income per share data was determined by using average shares outstanding throughout the period /5/ Annualized N/A = Information is not available for periods prior to reorganization, as described in notes to financial statements See accompanying notes to financial statements. ================================================================================ 82 High Yield Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Period Ended Brinson Class N (Unaudited) June 30, 1999* - ---------------------------------------------------------------------------------------- Net asset value, beginning of period.................. $ 9.95 $ 9.98 --------- --------- Income from investment operations: Net investment income............................. 0.45** 0.42** Net realized and unrealized loss.................. (0.27) (0.15) --------- --------- Total income from investment operations......... 0.18 0.27 --------- --------- Less distributions: Distributions from net investment income.......... (0.46) (0.30) Distributions from net realized gain.............. (0.07) -- --------- --------- Total distributions............................. (0.53) (0.30) --------- --------- Net asset value, end of period........................ $ 9.60 $ 9.95 ========= ========= Total return (non-annualized)......................... 1.77% 2.71% Ratios/Supplemental Data: Net assets, end of period (in 000s)................. $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits................................. 1.08%*** 1.08%*** After expense reimbursement and earnings credits................................. 0.95%*** 0.95%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits................................. 8.89%*** 8.29%*** After expense reimbursement and earnings credits................................. 9.02%*** 8.42%*** Portfolio turnover rate............................. 29% 77%
* Commencement of Brinson Class N was December 31, 1998 ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 83 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 eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (each a "Fund' and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The financial highlights of the UBS Investment Funds Class are presented separately. Prior to December 19, 1998, the U.S. Large Capitalization Growth Fund (formerly, UBS Large Cap Growth Fund), U.S. Small Capitalization Growth Fund (formerly, UBS Small Cap Fund), High Yield Fund (formerly, UBS High Yield Bond Fund), UBS Value Equity Fund and UBS Bond Fund sought to achieve their investment objectives by investing substantially all of their investable assets in a corresponding portfolio of UBS Investor Portfolios Trust (each a "Portfolio" and collectively, the "Portfolios"), an open-end management investment company that had the same investment objective. On October 20, 1998, the Board of Directors approved a tax-free plan of reorganization (the "Reorganization"). Pursuant to the Reorganization, the net assets of the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were withdrawn from their corresponding Portfolio and thereafter each began to operate, under its new name, as a separate Fund in the Trust. In addition, the net assets of the UBS Value Equity Fund and UBS Bond Fund were withdrawn from their corresponding Portfolio and acquired by the U.S. Equity Fund and U.S. Bond Fund, respectively, in a tax-free exchange solely for Brinson Class I shares of each Fund. The UBS Value Equity Fund and UBS Bond Fund were then dissolved. Shares issued in exchange, net asset value and corresponding net unrealized appreciation at December 18, 1998, were as follows: Net Net Unrealized Fund Shares Asset Value Appreciation - ---- ------ ----------- ------------ UBS Value Equity Fund.............. 1,233,797 $23,269,419 $774,047 UBS Bond Fund...................... 1,429,121 15,177,263 27,192 The aggregate net assets of the U.S. Equity Fund and U.S. Bond Fund immediately before the mergers were $729,679,727 and $80,523,890, respectively. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund 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. Equity securities traded over-the-counter are valued at the most recent bid price. 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. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. 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. ================================================================================ 84 The Brinson Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- D. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1999, therefore, no federal income tax provision was required. E. Distributions to Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. F. Income and Expense Allocations: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds 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. H. Earnings Credits: The Funds have entered into an agreement with their custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. This amount is reflected in the statement of operations. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized operating expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions for the six months ended December 31, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fees Fund Fee Expense Cap Expense Cap Expense Cap Fees Deferred - ---- -------- --------------- --------------- -------------- -------- -------- U.S. Balanced Fund............................ 0.70% 0.80% 1.05% 1.30% $ 131,459 $28,977 U.S. Equity Fund.............................. 0.70 0.80 1.05 1.32 2,275,632 -- U.S. Large Capitalization Equity Fund......... 0.70 0.80 1.05 1.32 85,880 46,252 U.S. Large Capitalization Growth Fund......... 0.70 0.80 1.05 1.57 31,958 56,260 U.S. Small Capitalization Growth Fund......... 1.00 1.15 1.40 1.92 197,692 37,437 U.S. Bond Fund................................ 0.50 0.60 0.85 1.07 283,873 2,293 High Yield Fund............................... 0.60 0.70 0.95 1.55 192,673 40,895
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 six months ended December 31, 1999 were as follows: U.S. Balanced Fund.................................................... $2,244 U.S. Equity Fund...................................................... 9,914 U.S. Large Capitalization Equity Fund................................. 2,244 U.S. Large Capitalization Growth Fund................................. 1,834 U.S. Small Capitalization Growth Fund................................. 1,919 U.S. Bond Fund........................................................ 2,186 High Yield Fund....................................................... 2,181 The following Funds invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the ================================================================================ 85 The Brinson Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments for the six months ended December 31, 1999, were as follows:
% of Sales Interest Net Fund Purchases Proceeds Income Value Assets - ---- --------- ---------- -------- ------- -------- U.S. Balanced Fund......................... $ 11,136,330 $ 10,864,712 $ 26,452 $ 507,697 1.51% U.S. Equity Fund........................... 157,878,579 177,825,076 489,563 17,738,488 3.52 U.S. Large Capitalization Equity Fund...... 33,397,905 33,912,604 31,884 1,018,306 3.43 U.S. Large Capitalization Growth Fund...... -- -- -- -- -- U.S. Small Capitalization Growth Fund...... 18,471,553 17,818,667 59,423 2,787,103 5.89 U.S. Bond Fund............................. 54,290,733 59,535,749 216,321 259,361 0.32 High Yield Fund............................ 22,196,646 22,992,870 82,908 1,449,925 2.57
3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1999, excluding short-term investments, were as follows:
Proceeds Fund Purchases From Sales - ---- ----------- ------------ U.S. Balanced Fund......................... $ 14,920,499 $ 16,406,156 U.S. Equity Fund........................... 164,908,312 352,962,708 U.S. Large Capitalization Equity Fund...... 28,374,811 19,896,891 U.S. Large Capitalization Growth Fund...... 5,102,225 3,978,343 U.S. Small Capitalization Growth Fund...... 25,658,441 26,524,897 U.S. Bond Fund............................. 104,061,479 112,194,288 High Yield Fund............................ 17,141,344 25,158,957
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 distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, total 0.50%, 0.52%, 0.52%, 0.77%, 0.77%, 0.47%, and 0.85% of the average daily net assets of the UBS Investment Funds Class of the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund, respectively. 6. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds rate plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the six months ended December 31, 1999, the Funds had no borrowings under the agreement. ================================================================================ 86 The Brinson Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. Balanced Fund --------------------------------------------------------- Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 --------------------------- --------------------------- Shares Value Shares Value ------------ ------------ ------------ ------------ Sales: Brinson Class I................... 616,573 $ 5,599,982 1,174,303 $ 12,704,822 Brinson Class N................... - - 1,652 15,306 UBS Investment Funds Class........ 8,273 75,774 135,474 1,464,212 ------------ ------------ ------------ ------------ Total Sales.................... 624,846 $ 5,675,756 1,311,429 $ 14,184,340 ============ ============ ============ ============ Dividend Reinvestment: Brinson Class I................... 109,872 $ 936,112 1,235,079 $ 11,512,192 Brinson Class N................... 4 30 33 311 UBS Investment Funds Class........ 4,112 34,830 56,474 523,561 ------------ ------------ ------------ ------------ Total Dividend Reinvestment.... 113,988 $ 970,972 1,291,586 $ 12,036,064 ============ ============ ============ ============ Redemptions: Brinson Class I................... 895,496 $ 8,000,958 4,977,791 $ 56,107,946 Brinson Class N................... 11 96 1,641 15,210 UBS Investment Funds Class........ 31,085 274,280 154,266 1,558,776 ------------ ------------ ------------ ------------ Total Redemptions.............. 926,592 $ 8,275,334 5,133,698 $ 57,681,932 ============ ============ ============ ============ U.S. Equity Fund --------------------------------------------------------- Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 --------------------------- --------------------------- Shares Value Shares Value ------------ ------------ ------------ ------------ .................................... Sales: Brinson Class I................... 3,518,151 $ 65,942,440 14,157,093* $272,587,287 Brinson Class N................... 208,641 3,860,847 417,980 8,022,220 UBS Investment Funds Class........ 34,158 710,292 1,317,474 26,390,598 ------------ ------------ ------------ ------------ Total Sales.................... 3,760,950 $ 70,513,579 15,892,547 $307,000,105 ============ ============ ============ ============ Dividend Reinvestment: Brinson Class I................... 2,790,780 $ 46,438,462 2,164,601 $ 40,726,871 Brinson Class N................... 2,356 39,033 12,904 239,980 UBS Investment Funds Class........ 116,996 1,938,596 89,839 1,678,518 ------------ ------------ ------------ ------------ Total Dividend Reinvestment.... 2,910,132 $ 48,416,091 2,267,344 $ 42,645,369 ============ ============ ============ ============ Redemptions: Brinson Class I................... 13,026,509 $240,364,538 13,543,224 $265,910,621 Brinson Class N................... 78,672 1,434,023 90,831 1,768,705 UBS Investment Funds Class........ 353,070 6,595,135 950,265 18,175,221 ------------ ------------ ------------ ------------ Total Redemptions.............. 13,458,251 $248,393,696 14,584,320 $285,854,547 ============ ============ ============ ============
*Includes shares issued in connection with the acquisition of the UBS Value Equity Fund. - -------------------------------------------------------------------------------- 87 The Brinson Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Large Capitalization Equity Fund ------------------------------------------------------------------ Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 --------------------------- ------------------------------ Shares Value Shares Value ------------- ------------ --------------- ------------- Sales: Brinson Class I................................... 2,008,094 $ 17,027,675 2,384,176 $ 24,164,112 Brinson Class N................................... 622 20,926 61,091 684,700 UBS Investment Funds Class........................ 8,148 76,424 427 4,617 ------------- ------------ --------------- ------------- Total Sales..................................... 2,016,864 $ 17,125,025 2,445,694 $ 24,853,429 ============ ============ =============== ============= Dividend Reinvestment: Brinson Class I................................... 223,565 $ 1,819,816 7,506 $ 77,433 Brinson Class N................................... 8,631 70,518 7,094 69,880 UBS Investment Funds Class........................ 836 6,755 1 11 ------------- ------------ --------------- ------------- Total Dividend Reinvestment..................... 233,032 $ 1,897,089 14,601 $ 147,324 ============= ============ =============== ============= Redemptions: Brinson Class I................................... 699,059 $ 6,228,716 370,824 $ 3,862,037 Brinson Class N................................... 277,962 2,546,271 1,369,240 13,638,399 UBS Investment Funds Class........................ -- -- -- -- ------------- ------------ --------------- ------------- Total Redemptions............................... 977,021 $ 8,774,987 1,740,064 $ 17,500,436 ============= ============ =============== =============
U.S. Large Capitalization Growth Fund ------------------------------------------------------------------ Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 --------------------------- ------------------------------ Shares Value Shares Value ------------- ------------ --------------- ------------- Sales: Brinson Class I................................... 89,568 $ 1,215,511 35,111 $ 451,776 Brinson Class N................................... -- -- -- -- UBS Investment Funds Class........................ 223,049 3,027,579 372,727 4,781,902 ------------- ------------ --------------- ------------- Total Sales..................................... 312,617 $ 4,243,090 407,838 $ 5,233,678 ============ ============ =============== ============= Dividend Reinvestment: Brinson Class I................................... 15,996 $ 217,385 -- -- Brinson Class N................................... 6 80 -- -- UBS Investment Funds Class........................ 27,906 376,172 -- -- ------------- ------------ --------------- ------------- Total Dividend Reinvestment..................... 43,908 $ 593,637 -- $ -- ============= ============ =============== ============= Redemptions: Brinson Class I................................... 60,955 $ 851,942 173,449 $ 2,143,629 Brinson Class N................................... -- -- -- -- UBS Investment Funds Class........................ 135,539 1,935,865 1,853 26,217 ------------- ------------ --------------- ------------- Total Redemptions............................... 196,494 $ 2,787,807 175,302 $ 2,169,846 ============= ============ =============== =============
*Reflects the Fund's change in fiscal year end from December 31 to June 30 - -------------------------------------------------------------------------------- 88 The Brinson Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Small Capitalization Growth Fund --------------------------------------------------------------- Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ------------------------------ ----------------------------- Shares Value Shares Value ------------- -------------- ------------- ------------- Sales: Brinson Class I............................................ 1,361,057 $ 14,001,883 2,641,837 $ 22,702,120 Brinson Class N............................................ -- -- -- -- UBS Investment Funds Class................................. 51,364 544,776 99,579 858,153 ------------- -------------- ------------- ------------- Total Sales.............................................. 1,412,421 $ 14,546,659 2,741,416 $ 23,560,273 ============= ============== ============= ============= Redemptions: Brinson Class I............................................ 1,515,520 $ 15,555,524 1,375,470 $ 11,346,801 Brinson Class N............................................ -- -- -- -- UBS Investment Funds Class................................. 9,951 102,784 29,703 240,000 ------------- -------------- ------------- ------------- Total Redemptions........................................ 1,525,471 $ 15,658,308 1,405,173 $ 11,586,801 ============= ============== ============= =============
*Reflects the Fund's change in fiscal year end from December 31 to June 30
U.S. Bond Fund --------------------------------------------------------------- Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 ------------------------------ ----------------------------- Shares Value Shares Value ------------- -------------- ------------- ------------- Sales: Brinson Class I............................................ 4,864,653 $49,803,731 15,463,879** $165,316,122 Brinson Class N............................................ -- -- 2,379 25,964 UBS Investment Funds Class................................. 118,531 1,214,340 582,475 6,222,123 ------------- -------------- ------------- ------------- Total Sales.............................................. 4,983,184 $51,018,071 16,048,733 $171,564,209 ============= ============== ============= ============ Dividend Reinvestment: Brinson Class I............................................ 414,708 $ 4,089,021 386,462 $ 4,042,561 Brinson Class N............................................ 6 61 6 62 UBS Investment Funds Class................................. 29,524 289,628 22,041 229,364 ------------- -------------- ------------- ------------- Total Dividend Reinvestment.............................. 444,238 $ 4,378,710 408,509 $ 4,271,987 ============= ============== ============= ============= Redemptions: Brinson Class I............................................ 6,607,127 $68,012,603 10,568,875 $112,692,202 Brinson Class N............................................ -- -- 2,379 25,905 UBS Investment Funds Class................................. 141,723 1,409,778 248,522 2,612,918 ------------- -------------- ------------- ------------- Total Redemptions........................................ 6,748,850 $69,422,381 10,819,776 $115,331,025 ============= ============== ============= ============
**Includes shares issued in connection with the acquisition of the UBS Bond Fund. - -------------------------------------------------------------------------------- 89 The Brinson Fund -- Notes To Financial Statements - --------------------------------------------------------------------------------
High Yield Fund ------------------------------------------------------------- Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 --------------- ------------- ------------ ------------- Shares Value Shares Value --------------- ------------- ------------ ------------- Sales: Brinson Class I.............................................. 704,855 $ 6,981,404 4,509,034 $ 46,327,741 Brinson Class N.............................................. -- -- -- -- UBS Investment Funds Class................................... 28,339 279,760 620,093 6,368,108 --------------- ------------- ------------ ------------- Total Sales................................................ 733,194 $ 7,261,164 5,129,127 $ 52,695,849 =============== ============= ============ ============= Dividend Reinvestment: Brinson Class I.............................................. 291,880 $ 2,802,047 166,520 $ 1,658,538 Brinson Class N.............................................. 6 54 3 30 UBS Investment Funds Class................................... 26,054 250,115 13,996 139,258 --------------- ------------- ------------ ------------- Total Dividend Reinvestment................................ 317,940 $ 3,052,216 180,519 $ 1,797,826 =============== ============= ============ ============= Redemptions: Brinson Class I.............................................. 1,462,323 $ 14,308,185 2,144,630 $ 22,018,291 Brinson Class N.............................................. -- -- -- -- UBS Investment Funds Class................................... 382,724 3,693,936 1,754 18,000 --------------- ------------- ------------ ------------- Total Redemptions.......................................... 1,845,047 $ 18,002,121 2,146,384 $ 22,036,291 =============== ============= ============ =============
*Reflects the Fund's change in fiscal year end from December 31 to June 30 - -------------------------------------------------------------------------------- 90 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. - -------------------------------------------------------------------------------- [BRINSON The Brinson Funds LOGO --------------------------------------------------------------------- APPEARS Australia . Bahrain . Brazil . China . France . Germany . Japan HERE] Singapore . Switzerland . United Kingdom . United States 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 The Brinson Funds ----------------- Brinson Global Fund Brinson Global Equity Fund Brinson Global Bond Fund Semi-Annual Report December 31, 1999 [Logo Brinson] Institutional Asset Management ------------------------------ Trustees and Officers [Logo Brinson] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Chairman of the Board E. Thomas McFarlan President Thomas J. Digenan, CFA, CPA Vice President Debra L. Nichols Vice President Carolyn M. Burke, CPA Secretary and Treasurer David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary 1 The Funds' Advisor -- Brinson Partners, Inc. [Brinson Logo] Since the founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with individualized client relationships of the highest quality. Now, in 2000, more than 1,200 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, and a recognized leader in our industry. In North America, we make our investment capabilities available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are no-load, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and capabilities. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios--balancing considerations for both risk and return. Brinson Partners, Inc. is a member of UBS Asset Management, the institutional asset management division of UBS AG. 2 Table of Contents [BRINSON LOGO]
Shareholder Letter......................................... 4 Global Economic and Market Highlights...................... 5 Global Fund................................................ 6 Schedule of Investments................................ 11 Financial Statements................................... 18 Financial Highlights................................... 22 Global Equity Fund......................................... 24 Schedule of Investments................................ 29 Financial Statements................................... 32 Financial Highlights................................... 35 Global Bond Fund........................................... 37 Schedule of Investments................................ 41 Financial Statements................................... 44 Financial Highlights................................... 47 The Brinson Funds--Notes to Financial Statements........... 49
3 Shareholder Letter [Logo Brinson] January 27, 2000 Dear Shareholder: We are pleased to present the semi-annual report for The Brinson Funds for the six-month period ending December 31, 1999. This report will provide a discussion on the current U.S. and International Economic outlook. We will also provide our current portfolio strategies and performance updates for our three Global Mutual Funds. The decade of the 1990s ended with a particularly challenging year. We continued to apply our proven value-based investment process across all of our portfolios, but our investment results varied substantially. In some areas, such as fixed income, our performance was excellent relative to both the market and our peers. In other areas, most notably multi-asset and equity portfolios, results were disappointing. Throughout 1999, our asset allocation strategies continued to focus on reducing exposure to the risks presented by equity prices that have been driven far above even optimistic estimates of underlying value. While the risk hedge in balanced portfolios had little net effect on performance through most of the year, the surge in equity prices late in the year hampered the returns relative to the benchmarks. The broad array of our equity portfolios, with the exception of the growth portfolios, significantly lagged their benchmarks in 1999. Some degree of underperformance was unavoidable as the U.S. market was increasingly driven by momentum, which in turn focused more tightly on narrow technology and e-commerce stocks. In such a market, the fundamental price/value discrepancies that are the core of our investment process are effectively ignored in the market. In addition, our stock selection was uncharacteristically weak and a meaningful source of the underperformance of our U.S. and Global Equity portfolios. In fixed income our U.S. Bond and High Yield portfolios outpaced the market and ranked highly in their respective universes of active managers. However, outside the U.S., our Global Bond portfolio generally underperformed, due almost entirely to strength in both the Japanese bond market and the yen, where we are underweighted. Our fundamental assessments across markets have been both accurate and perceptive, but momentum rather than the reality of fundamental value has continued to drive equity markets, particularly in the U.S. We have seen this phenomenon historically and it has always proven to be a sign of danger, that ultimately ends badly for the market in general and the momentum players in particular. Over time, these styles ebb and flow but momentum driven approaches have no lasting link to underlying fundamentals and always fail to deliver when viewed over meaningful horizons. It is these concerns which underlie our current asset allocation and equity portfolio strategies. 2000 will be a challenging year, but we are confident that remaining true to our investment disciplines will in the long run accrue to our shareholders' benefit. As always, we welcome your thoughts and comments, and appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /s/ Gary P. Brinson Gary P. Brinson Chairman and Chief Investment Officer Brinson Partners, Inc. 4 Global Economic and Market Highlights [Logo Brinson] As the negative effects of the Asian crisis gradually wane and domestic demand continues to remain robust, the expansion in Euroland gains speed. In late December 1999, the German government announced cuts in corporate and personal tax rates, and initiated cross-party talks about reforms of the country's burdened pension system. So far, however, neither the ruling coalition parties nor the opposition has managed to communicate its position in the pension debate in a transparent way, as the political system is being absorbed by allegations of funding fraud against the Christian democrats. As in the United States, pan- European inflation has accelerated in the wake of surging energy prices, whereas inflation excluding food and energy has moved sideways. While headline inflation figures will be heavily impacted by energy prices, core inflation is unlikely to accelerate much, given economy-wide over-capacities and disinflationary forces arising from continued deregulation of utility and telecom sectors. In Japan, real GDP declined in the third quarter of 1999, largely as a result of a phasing out of public spending programs, weak private capital expenditures and stagnating consumer spending. A sustainable recovery will hinge on healthy gains in private demand. Should the trend in economic growth continue to be disappointing, the government may adopt additional stimulative fiscal measures. The Bank of Japan has sterilized, and will probably continue to sterilize, expansionary foreign exchange market operations. Hopes that meaningful quantitative easing steps are around the corner remain premature.
Global Environment 6 months 1 year 3 years 5 years 8/31/92* Major Markets ended ended ended ended to Total Return in U.S. Dollars 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------------------ U.S. Equity 10.45% 23.56% 26.04% 27.06% 20.80% Global (Ex-U.S.) Equities (currency unhedged) 22.45 27.77 15.67 13.12 13.19 Global (Ex-U.S.) Equities (currency hedged) 19.89 36.98 21.89 18.43 16.24 U.S. Bonds 0.55 -0.84 5.72 7.74 6.37 Global (Ex-U.S.) Bonds (currency unhedged) 4.44 -5.09 2.29 5.90 6.00 Global (Ex-U.S.) Bonds (currency hedged) 1.66 2.88 8.42 10.94 9.23 U.S. Cash Equivalents 2.79 5.31 5.58 5.69 5.06 - ------------------------------------------------------------------------------------------------------------ 6 months 1 year 3 years 5 years 8/31/92* Major Currencies ended ended ended ended to Percent Change Relative to U.S. Dollars 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------------------ Yen 18.26% 10.20% 4.28% -0.51% 2.57% Pound 2.25 -3.13 -1.98 0.60 -2.78 Euro** -2.80 -14.64 -7.56 -4.28 -4.85 Canadian Dollar 1.98 5.84 -1.89 -0.68 -2.60 - ------------------------------------------------------------------------------------------------------------
* Inception date of the Brinson Global Fund Class I ** Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized returns. 5 Global Fund [Brinson Logo] Since its inception on August 31, 1992, the Brinson Global Fund Class I has provided an annualized return of 9.51% versus the 14.07% return of its index, the Global Securities Markets Mutual Fund Index (Unhedged). The annualized volatility of the Fund over this period was 6.55%, almost 25% less than the 8.52% volatility of the benchmark. The Fund's 1999 return of 1.49% fell substantially short of the benchmark return of 16.85%. While these results are disappointing, we remain committed to our long-term value-oriented investment philosophy. Security selection in U.S. equity and Japanese equity markets contributed negatively to the added value while issue selection in U.S. bonds made a positive contribution. The large underweight in developed equity markets and the corresponding overweight in nominal and real bond markets detracted significantly from the Fund's added value as equity markets enjoyed another stellar year. It was a difficult year for developed bond markets with the notable exception of the Japanese market. Yields rose and most returns were negative when the currency effects were removed. The slightly long duration positions maintained in most developed bond markets hurt the Fund's relative performance as did the significant underweight and short duration strategy in Japanese bonds and the allocation to U.S. Treasury Inflation Protected Securities (TIPS). The overweighting in emerging debt, as well as the active management within this category, made a positive contribution. Emerging and developed equity markets performed very strongly as inflation remained in check while industry consolidation and restructuring reached record levels. Technology and telecommunications shares provided exceptional returns, pushing their valuations significantly higher from already lofty levels. The yen strengthened during the year, which detracted from the Global Fund's performance, as did the euro's weakness. On the positive side, the relative strength of the Australian dollar, and our decision to overweight that currency, added value to the Fund. Going into 2000, the Global Fund remains significantly underweight in the developed equity markets with an offsetting overweight in bond markets. The gains in developed equity markets have led to a very high level of overpricing, making bond markets increasingly attractive on a relative basis. The Fund is also maintaining a large underweight in the yen as this currency has again become significantly overvalued in the world markets--particularly compared with continental European currencies. Along with the yen underweight, the strategy includes sterling and U.S. dollar underweights counterbalanced by overweights in the euro, Australian dollar and the Swedish krona. 6 Global Fund [BRINSON LOGO]
Total Return 6 months 1 year 3 years 5 years 8/31/92* ended ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - --------------------------------------------------------------------------------------------------- Brinson Global Fund Class I -1.19% 1.49% 6.86% 11.56% 9.51% - --------------------------------------------------------------------------------------------------- GSMI Mutual Fund Index** 10.41 16.85 15.86 17.03 14.07 - --------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 15.25 25.12 21.81 20.09 17.22 - --------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't. Bond Index 3.13 -4.26 3.43 6.42 6.06 - ---------------------------------------------------------------------------------------------------
* Inception date of the Brinson Global Fund Class I. ** An unmanaged index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI World ex USA (Free) Index; 21% Salomon Smith Barney BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% MSCI Emerging Markets Free Index; and 3% Merrill Lynch High Yield Master Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Fund Class I, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and the Salomon Smith Barney World Government Bond Index if you had invested $1,000,000 on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Fund Class I vs. GSMI Mutual Fund Index, MSCI World Equity (Free) Index and Salomon Smith Barney World Gov't. Bond Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Brinson Global Fund GSMI Mutual Fund MSCI World Equity Salomon Smith Barney Class I Index (Free) Index World Gov't. Bond Index ------------------- ---------------- ----------------- ----------------------- 12/31/92 $1,032,925 $1,030,790 $990,218 $972,746 12/31/93 $1,148,054 $1,179,801 $1,216,971 $1,101,932 12/31/94 $1,126,372 $1,196,582 $1,283,697 $1,127,585 12/31/95 $1,398,239 $1,500,615 $1,557,008 $1,342,275 12/31/96 $1,595,424 $1,688,579 $1,773,715 $1,391,033 12/31/97 $1,770,868 $1,930,073 $2,056,062 $1,394,399 12/31/98 $1,918,264 $2,247,617 $2,562,162 $1,607,603 12/31/99 $1,946,875 $2,626,332 $3,205,905 $1,539,087
8/31/92 = $1,000,000 Data through 12/31/99 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 [BRINSON LOGO] Total Return
6 months 1 year 6/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - ---------------------------------------------------------------------------- Brinson Global Fund Class N -1.33% 1.18% 4.34% - ---------------------------------------------------------------------------- GSMI Mutual Fund Index** 10.41 16.85 14.58 - ---------------------------------------------------------------------------- MSCI World Equity (Free) Index 15.25 25.12 19.61 - ---------------------------------------------------------------------------- Salomon Smith Barney World Gov't. Bond Index 3.13 -4.26 4.65 - ----------------------------------------------------------------------------
* Inception date of the Brinson Global Fund Class N. ** An unmanaged index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI World ex USA (Free) Index; 21% Salomon Smith Barney BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% MSCI Emerging Markets Free Index; and 3% Merrill Lynch High Yield Master Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Fund Class N, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and the Salomon Smith Barney World Government Bond Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Fund Class N vs. GSMI Mutual Fund Index, MSCI World Equity (Free) Index and Salomon Smith Barney World Gov't. Bond Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Brinson Global Fund MSCI World Equity Salomon Smith Barney Class N GSMI Mutual Fund Index (Free) Index World Govt. Bond Index ------------------- ---------------------- ----------------- ---------------------- 12/31/97 $1,017,857 $1,032,657 $1,003,556 $1,014,920 6/30/98 $1,079,019 $1,137,610 $1,171,793 $1,043,156 12/31/98 $1,099,252 $1,202,555 $1,250,581 $1,170,101 6/30/99 $1,127,275 $1,272,722 $1,357,727 $1,086,238 12/31/99 $1,112,241 $1,405,180 $1,564,789 $1,120,231
6/30/97 = $1,000,000 Data through 12/31/99 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 [BRINSON LOGO] Asset Allocation As of December 31, 1999 (Unaudited)
Current Benchmark Strategy - ------------------------------------------------- U.S. Equities 40.0% 19.9% Global (Ex-U.S.) Equities 22.0 17.1 Emerging Markets Equities 3.0 3.0 Dollar Bonds 21.0 41.0 High Yield Bonds 3.0 3.0 Global (Ex-U.S.) Bonds 9.0 11.0 Emerging Markets Debt 2.0 5.0 Cash Equivalents 0.0 0.0 - ------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited)
Percent of Net Assets - ------------------------------------------------- 1. FDX Corp. 1.18% 2. Electronic Data Systems Corp. 1.13 3. Burlington Northern Santa Fe Corp. 0.94 4. General Instrument Corp. 0.82 5. CIGNA Corp. 0.76 6. Allergan, Inc. 0.69 7. Compuware Corp. 0.69 8. Compaq Computer Corp. 0.65 9. Nextel Communications, Inc. 0.65 10. First Data Corp. 0.63 - -------------------------------------------------
Currency Allocation As of December 31, 1999 (Unaudited)
Current Benchmark Strategy - ------------------------------------------------- U.S. 66.0% 62.5% Japan 9.4 1.4 U.K. 4.8 0.0 Euro 11.7 18.5 Other Europe 2.5 6.5 Canada 1.3 1.3 Emerging Markets 3.0 3.0 Asia (Ex-Japan) 0.7 0.2 Australia/New Zealand 0.6 6.6 - ------------------------------------------------- 100.0% 100.0%
Top Ten Global (Ex-U.S.) Equity Holdings As of December 31, 1999 (Unaudited)
Percent of Net Assets - ----------------------------------------------------- 1. Fujitsu 0.56% 2. Sony Corp. 0.56 3. Nippon Telegraph & Telephone Corp. 0.48 4. Fanuc 0.34 5. Toyota Motor Corp. 0.32 6. Orix Corp. 0.30 7. Secom Co., Ltd. 0.26 8. NTT Mobile Communications Network, Inc. 0.24 9. Canon, Inc. 0.24 10. NEC Corp. 0.23 - -----------------------------------------------------
9 Global Fund [BRINSON LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) U.S. EQUITIES Energy..................................... 0.18% Capital Investment Capital Goods............................ 1.22 Technology............................... 4.77 ------ 5.99 Basic Industries Chemicals................................ 1.27 Housing/Paper............................ 2.80 Metals................................... 1.40 ------ 5.47 Consumer Non-Durables............................. 0.63 Retail/Apparel........................... 1.75 Autos/Durables........................... 1.00 Health: Drugs............................ 1.78 Health: Non-Drugs........................ 1.57 ------ 6.73 Financial Banks.................................... 2.22 Non-Banks................................ 2.40 ------ 4.62 Utilities Electric................................. 2.12 Telephone................................ 1.09 ------ 3.21 Transportation............................. 2.50 Services/Misc.............................. 1.91 Post Venture............................... 2.32 ------ Total U.S. Equities.................... 32.93* GLOBAL (EX-U.S.) EQUITIES Aerospace & Military....................... 0.08 Airlines................................... 0.04 Appliances & Households.................... 0.85 Autos/Durables............................. 0.61 Banking.................................... 1.64 Beverages & Tobacco........................ 0.37 Broadcasting & Publishing.................. 0.44 Building Materials......................... 0.09 Business & Public Service.................. 0.76 Chemicals.................................. 0.39 Construction............................... 0.09 Data Processing............................ 0.80 Electric Components........................ 0.91 Electronics................................ 1.13 Energy..................................... 0.50 Financial Services......................... 1.06 Food & House Products...................... 0.42 Forest Products............................ 0.13 Health: Drugs.............................. 0.91 Industrial Components...................... 0.32 Insurance.................................. 0.63 Leisure & Tourism.......................... 0.02 Machinery & Engineering.................... 0.04 Merchandising.............................. 0.51 Metals--Steel.............................. 0.11 Multi-Industry............................. 0.13 Non-Ferrous Metals......................... 0.17 Real Estate................................ 0.18 Recreation................................. 0.20 Telecommunications......................... 1.86 Transportation............................. 0.39 Utilities.................................. 0.51 Wholesale & International Trade............ 0.06 ------ Total Global (Ex-U.S.) Equities........ 16.35 EMERGING MARKETS EQUITIES.................. 5.49 ------ TOTAL EQUITIES............................. 54.77 U.S. BONDS Corporate Bonds Airlines................................. 0.05 Asset-Backed............................. 0.53 Autos/Durables........................... 0.18 Consumer................................. 0.14 Financial Services....................... 0.64 Health................................... 0.18 Services/Miscellaneous................... 0.47 Telecommunications....................... 0.21 Utilities................................ 0.18 ------ 2.58 International Dollar Bonds................. 1.68 Corporate Mortgage-Backed Securities....... 2.03 U.S. Government Mortgage-Backed Securities. 2.49 U.S. Government Obligations................ 15.29 ------ Total U.S. Bonds...................... 24.07* HIGH YIELD BONDS........................... 2.55 GLOBAL (EX-U.S.) BONDS Foreign Financial Bonds.................... 0.78 Foreign Government Bonds................... 8.41 ------ Total Global (Ex-U.S.) Bonds.......... 9.19 EMERGING MARKETS BONDS..................... 7.19 SHORT-TERM INVESTMENTS..................... 20.60* ------ TOTAL INVESTMENTS..................... 118.37 LIABILITIES, LESS CASH AND OTHER ASSETS............................. (18.37) ------ NET ASSETS............................ 100.00% ======
* The Fund held a long position in U.S. Treasury futures on December 31, 1999 which increased U.S. Bond exposure from 24.07% to 39.23%. The Fund held a short position in stock index futures on December 31, 1999 which reduced U.S. Equity exposure from 32.93% to 19.70%. These adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 20.60% to 18.67%. 10 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Shares Value -------- ----------- Equities -- 54.77% U.S. Equities -- 32.93% Advanced Micro Devices, Inc. (b).................. 54,600 $ 1,579,987 Allergan, Inc. (b)................................ 46,600 2,318,350 Alza Corp. (b).................................... 22,200 768,675 American Standard Cos., Inc. (b).................. 26,600 1,220,275 AmSouth Bancorp................................... 31,087 600,368 Aon Corp.......................................... 29,447 1,177,880 Armstrong World Industries, Inc................... 7,000 233,625 Baxter International, Inc......................... 28,400 1,783,875 Brinson Post-Venture Fund (b)..................... 397,192 7,740,955 Burlington Northern Santa Fe Corp................. 129,600 3,142,800 Central & South West Corp......................... 70,300 1,406,000 Centaur Funding Corp., 144A....................... 750 765,938 Centaur Funding Corp., 144A....................... 1,430 219,476 Champion Enterprises, Inc. (b).................... 22,800 195,225 Champion International Corp....................... 8,000 495,500 Chase Manhattan Corp.............................. 22,400 1,740,200 CIGNA Corp........................................ 31,400 2,529,662 Circuit City Stores-Circuit City Group............ 21,300 959,831 CMS Energy Corp................................... 23,900 745,381 CommScope, Inc. (b)............................... 9,733 392,362 Compaq Computer Corp.............................. 80,300 2,173,119 Computer Sciences Corp. (b)....................... 17,700 1,674,862 Compuware Corp.................................... 61,800 2,302,050 Consolidated Stores Corp. (b)..................... 31,900 518,375 Corning, Inc...................................... 8,600 1,108,863 Covance, Inc. (b)................................. 17,572 189,997 Delhaize America, Inc............................. 16,167 328,392 Dial Corp......................................... 18,000 437,625 Dominion Resources, Inc........................... 35,600 1,397,300 Eastman Chemical Co............................... 14,300 681,931 Electronic Data Systems Corp...................... 56,100 3,755,194 Eli Lilly and Co.................................. 12,100 804,650 Emerson Electric Co............................... 32,300 1,853,212 Entergy Corp...................................... 34,000 875,500 FDX Corp. (b)..................................... 95,800 3,921,812 Federal-Mogul Corp................................ 36,000 724,500 Federated Department Stores, Inc.................. 9,300 470,231 First Data Corp................................... 42,330 2,087,398 Fleet Boston Financial Corp....................... 49,115 1,709,816 Fleetwood Enterprises, Inc........................ 16,500 340,313 Fort James Corp................................... 44,800 1,226,400 Gateway, Inc...................................... 11,300 814,306 GATX Corp......................................... 10,400 351,000 General Instrument Corp. (b)...................... 32,000 2,720,000 Genzyme Corp. (b)................................. 17,100 769,500 GreenPoint Financial Corp......................... 49,700 1,183,481 Hibernia Corp..................................... 37,700 400,563 Household International, Inc...................... 41,900 1,560,775 Illinois Tool Works, Inc.......................... 29,200 1,972,825 IMC Global, Inc................................... 55,200 903,900 Johnson Controls, Inc............................. 15,200 864,500 Kimberly-Clark Corp............................... 28,500 1,859,625 Kroger Co......................................... 21,500 405,813 Lafarge Corp...................................... 20,700 571,838 Lear Corp. (b).................................... 31,000 992,000 Lexmark International Group, Inc.................. 6,200 561,100 Lincoln National Corp............................. 12,700 508,000 Lockheed Martin Corp.............................. 45,846 1,002,881 Lyondell Chemical Co.............................. 37,300 475,575 Martin Marietta Materials, Inc.................... 15,484 634,844 Masco Corp........................................ 80,800 2,050,300 Mattel, Inc....................................... 81,400 1,068,375 Mead Corp......................................... 16,600 721,063 Monsanto Co....................................... 27,200 969,000 National Service Industries, Inc.................. 12,700 374,650 New York Times Co................................. 22,500 1,105,313 Newell Rubbermaid, Inc............................ 52,600 1,525,400 Nextel Communications, Inc. (b)................... 20,900 2,155,312 Norfolk Southern Corp............................. 45,900 940,950 Owens-Illinois, Inc............................... 12,000 300,750 Peco Energy Co.................................... 23,300 809,675 Pentair, Inc...................................... 17,596 677,446 Philip Morris Companies, Inc...................... 41,100 953,006 PNC Bank Corp..................................... 21,100 938,950 Praxair, Inc...................................... 11,700 588,656 Raytheon Co., Class B............................. 48,300 1,282,969 Reliaster Financial Corp.......................... 12,700 497,681 SBC Communications, Inc........................... 30,400 1,482,000 Southdown, Inc.................................... 17,836 920,784 St. Jude Medical, Inc. (b)........................ 36,600 1,123,162 Torchmark Corp.................................... 17,300 502,781 Tyson Foods, Inc.................................. 44,698 726,343 U.S. Bancorp...................................... 33,180 790,099 Ultramar Diamond Shamrock Corp.................... 26,702 605,802 Unisys Corp....................................... 20,900 667,494 United Healthcare Corp............................ 25,900 1,375,937 USG Corp.......................................... 11,900 560,788 Viad Corp......................................... 25,400 708,025 W.W. Grainger, Inc................................ 15,700 750,656 Watson Pharmaceutical Co.......................... 30,100 1,077,956 Wells Fargo and Co................................ 45,200 1,827,775 Westvaco Corp..................................... 21,000 685,125 Xerox Corp........................................ 62,900 1,427,044 York International Corp........................... 19,500 535,031 ----------- Total U.S. Equities............................... 109,876,729 ----------- Global (Ex-U.S.) Equities -- 16.35% Australia -- 0.69% Amcor Ltd......................................... 9,420 43,977 Amp Ltd........................................... 10,300 113,439 Boral Ltd......................................... 30,000 46,331 Brambles Industries Ltd........................... 2,670 73,599 Broken Hill Proprietary Co., Ltd.................. 15,310 200,387 CSR Ltd........................................... 26,070 63,123 Lend Lease Corp., Ltd............................. 8,732 121,941 National Australia Bank Ltd....................... 16,727 255,045 News Corp., Ltd................................... 27,389 265,086 News Corp., Ltd., Preferred....................... 10,036 85,707 Qantas Airways Ltd................................ 12,937 32,171 QBE Insurance Group Ltd........................... 18,241 84,752 Rio Tinto Ltd..................................... 6,845 146,569 Santos Ltd........................................ 21,990 59,720 Telstra Corp. Ltd................................. 65,000 352,198 Westpac Banking Corp., Ltd........................ 31,528 216,779 WMC Ltd........................................... 9,740 53,540 Woolworth's Ltd................................... 22,660 77,702 ----------- 2,292,066 -----------
Global Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Shares Value ---------- ---------- Austria -- 0.02% Austria Tabakwerke AG................................. 1,400 $ 67,361 ---------- Belgium -- 0.12% Electrabel S.A........................................ 370 120,538 Fortis B.............................................. 8,027 288,216 ---------- 408,754 ---------- Canada -- 0.30% Agrium, Inc........................................... 7,140 55,101 Alcan Aluminum Ltd.................................... 2,420 99,048 Bank of Montreal...................................... 1,520 51,634 Canadian National Railway Co.......................... 2,920 76,858 Canadian Pacific Ltd.................................. 4,473 95,698 Hudson's Bay Co....................................... 6,410 75,968 Imasco, Ltd........................................... 2,390 65,790 Imperial Oil Ltd...................................... 2,110 45,070 Magna International, Inc., Class A.................... 1,360 57,631 Newbridge Networks Corp. (b).......................... 3,560 79,844 Nova Chemicals Corp................................... 2,704 52,634 Potash Corporation of Saskatchewan, Inc............... 860 40,887 Royal Bank of Canada.................................. 2,370 103,697 Shaw Communications, Inc., Class B.................... 1,980 65,009 TransCanada Pipelines Ltd............................. 1,890 16,278 Westcoast Energy, Inc................................. 1,350 21,534 ---------- 1,002,681 ---------- Denmark -- 0.06% Tele Danmark A/S...................................... 2,620 193,737 ---------- Finland -- 0.37% Merita Ltd., Class A.................................. 36,330 213,040 Nokia Oyj............................................. 3,060 552,119 Sampo Insurance Co., Ltd., Series A................... 6,000 208,699 UPM-Kymmene Corp...................................... 6,270 251,401 ---------- 1,225,259 ---------- France -- 1.11% Air France (b)........................................ 6,260 119,225 Air Liquide........................................... 1,645 274,054 Alcatel Alsthom....................................... 820 187,408 Axa................................................... 840 116,534 Banque Nationale de Paris............................. 4,889 448,905 Carrefour S.A......................................... 910 167,020 Cie de Saint Gobain................................... 1,037 194,072 CSF Thomson (b)....................................... 6,300 207,072 France Telecom S.A.................................... 4,240 558,046 Groupe Danone......................................... 740 173,575 Michelin, Class B..................................... 1,879 73,457 Rhone-Poulenc, Class A................................ 3,864 223,487 Schneider S.A......................................... 1,860 145,334 Societe Generale...................................... 1,155 267,444 Total Fina S.A., Class B (b).......................... 2,952 392,077 Vivendi............................................... 1,790 160,858 ---------- 3,708,568 ---------- Germany -- 0.90% Allianz AG............................................ 780 260,753 Bayer AG.............................................. 8,080 382,290 Bayerische Motoren Werke AG........................... 4,250 129,722 Continental AG........................................ 4,850 96,989 DaimlerChrysler AG (b)................................ 2,606 203,494 Deutsche Bank AG...................................... 2,940 247,109 Deutsche Telekom AG................................... 3,760 263,265 Dresdner Bank AG...................................... 2,870 155,064 Mannesmann AG......................................... 1,380 332,547 SAP AG................................................ 270 132,076 Siemens AG............................................ 4,250 541,043 Veba AG............................................... 5,039 244,977 ---------- 2,989,329 ---------- Hong Kong -- 0.02% Henderson Land Development Co., Ltd................... 12,000 77,031 ---------- Italy -- 0.34% Assicurazioni Generali................................ 4,800 157,817 Beni Stabili Spa...................................... 24,511 8,599 ENI Spa............................................... 19,000 103,989 ENI Spa ADR........................................... 3,070 169,234 La Rinascente Spa..................................... 12,740 81,348 San Paolo-imi Spa..................................... 13,511 182,700 Telecom Italia Mobile Spa............................. 22,000 244,565 Telecom Italia Spa.................................... 12,000 168,402 ---------- 1,116,654 ---------- Japan -- 8.32% Acom Co., Ltd......................................... 3,900 381,408 Asahi Bank Ltd........................................ 39,000 240,047 Bank of Tokyo-Mitsubushi Ltd.......................... 40,000 556,494 Benesse Corp.......................................... 1,300 312,442 Bridgestone Corp...................................... 13,000 285,770 Canon, Inc............................................ 20,000 793,317 Dai Nippon Printing Co., Ltd.......................... 14,000 222,949 Dai-Ichi Kangyo Bank.................................. 24,000 223,926 Daiichi Pharmaceutical Co., Ltd....................... 10,000 129,842 Daikin Industries Ltd................................. 11,000 149,382 Denso Corp............................................ 11,000 262,225 East Japan Railway Co................................. 70 376,826 Fanuc................................................. 8,900 1,131,249 Fuji Bank Ltd......................................... 18,000 174,627 Fujitsu............................................... 41,000 1,866,641 Honda Motor Co........................................ 17,000 631,137 Hoya Corp............................................. 5,000 393,239 Ito Yokado Co., Ltd................................... 4,000 433,784 Kamigumi Co., Ltd..................................... 30,000 126,032 Kao Corp.............................................. 13,000 370,231 Kirin Brewery Co., Ltd................................ 27,000 283,572 Kokuyo................................................ 6,000 79,722 Kuraray Co., Ltd...................................... 25,000 252,797 Matsushita Electric Industrial Co..................... 25,000 691,222 Mitsubishi Corp....................................... 25,000 192,712 Mitsubishi Estate Co., Ltd............................ 40,000 389,624 Murata Manufacturing Co., Inc......................... 1,000 234,478 NEC Corp.............................................. 32,000 761,272 NGK Insulators........................................ 25,000 185,384 Nintendo Corp., Ltd................................... 4,000 663,573 Nippon Steel Co....................................... 163,000 380,607 Nippon Telegraph & Telephone Corp..................... 93 1,590,054 Nissin Food Products Co............................... 7,000 164,477
12 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Shares Value ---------- ----------- Nomura Securities Co., Ltd........................... 41,000 $ 739,045 NTT Mobile Communications............................ 21 806,311 Obayashi Corp........................................ 34,000 160,442 Orix Corp............................................ 4,500 1,012,066 Osaka Gas Co......................................... 92,000 221,113 Rohm Co.............................................. 1,000 410,337 Sankyo Co., Ltd...................................... 18,000 369,303 Santen Pharmaceutical Co., Ltd....................... 8,000 131,698 Secom Co., Ltd....................................... 8,000 879,293 Sekisui House Ltd.................................... 16,000 141,468 Seven-Eleven Japan Co., Ltd.......................... 3,000 474,818 Softbank Corp........................................ 700 668,849 Sony Corp............................................ 6,300 1,864,980 Sumitomo Bank........................................ 28,000 382,707 Sumitomo Chemical Co................................. 53,000 248,547 Sumitomo Electric Industries......................... 10,000 115,383 Takeda Chemical Industries........................... 15,000 740,071 Takefuji Corp........................................ 1,900 237,419 TDK Corp............................................. 5,000 689,268 Tokio Marine & Fire Insurance Co..................... 22,000 256,851 Tokyo Electric Power................................. 9,700 259,665 Tokyo Electron Ltd................................... 3,000 410,337 Toyota Motor Corp.................................... 22,000 1,063,944 Yamato Transport Co., Ltd............................ 14,000 541,644 ----------- 27,756,621 ----------- Netherlands -- 0.55% ABN AMRO Holdings NV................................. 7,029 174,737 Elsevier NV.......................................... 18,470 219,579 ING Groep NV......................................... 8,536 512,873 Koninklijke KPN NV................................... 4,364 423,885 Royal Dutch Petroleum Co............................. 3,590 218,975 TNT Post Group NV.................................... 4,600 131,183 Unilever NV.......................................... 2,523 138,693 ----------- 1,819,925 ----------- New Zealand -- 0.06% Auckland International Airport Ltd................... 17,350 26,239 Carter Holt Harvey Ltd............................... 26,940 35,123 Lion Nathan Ltd...................................... 20,220 46,924 Telecom Corp. of New Zealand Ltd..................... 17,910 84,061 ----------- 192,347 ----------- Norway -- 0.03% Norske Skogindustrier ASA............................ 2,050 106,617 ----------- Portugal -- 0.08% DP Electricidade de Portugal S.A..................... 7,600 132,023 Portugal Telecom..................................... 13,400 146,276 ----------- 278,299 ----------- Singapore -- 0.14% Singapore Press Holdings Ltd......................... 8,820 191,118 United Overseas Bank................................. 30,116 265,729 ----------- 456,847 ----------- Spain -- 0.41% Banco Popular S.A.................................... 3,627 235,411 Banco Santander Central Hispano, S.A................. 19,346 217,970 Endesa S.A........................................... 6,245 123,384 Tabacalera S.A....................................... 32,997 469,680 Telefonica S.A....................................... 13,223 328,716 ----------- 1,375,161 ----------- Sweden -- 0.36% Electrolux AB, B Shares.............................. 11,690 292,832 Ericsson, B Shares................................... 8,240 527,599 Investor AB, B Shares................................ 11,100 155,917 Nordbanken Holding AB................................ 14,590 85,392 Swedish Match AB..................................... 42,080 146,292 ----------- 1,208,032 ----------- Switzerland -- 0.43% Adecco S.A........................................... 207 160,355 Nestle S.A. (Reg.)................................... 165 300,684 Novartis AG (Reg.)................................... 254 370,995 Roche Holding AG (Gen.).............................. 32 377,835 Swisscom AG (Reg.)................................... 588 236,566 ----------- 1,446,435 ----------- United Kingdom -- 2.04% Allied Zurich PLC (b)................................ 13,052 153,458 AstraZeneca PLC...................................... 4,002 165,637 Barclays PLC......................................... 6,050 173,760 BP Amoco PLC......................................... 46,946 471,003 British Aerospace PLC................................ 11,302 74,684 British Airways PLC.................................. 17,000 110,692 British Telecommunications PLC....................... 20,000 487,703 Charter PLC.......................................... 27,676 118,205 Diageo PLC........................................... 27,209 218,388 FKI PLC.............................................. 67,040 259,317 Glaxo Wellcome PLC................................... 13,260 373,997 Greenalls Group PLC.................................. 17,358 82,529 House of Fraser PLC.................................. 30,780 37,702 HSBC Holdings PLC.................................... 13,000 180,817 Lloyds TSB Group PLC................................. 32,969 411,541 Marconi PLC.......................................... 26,360 465,419 Marks & Spencer PLC.................................. 32,060 152,301 National Power PLC................................... 33,500 193,562 Nycomed Amersham PLC................................. 22,844 141,933 Peninsular & Oriental Steam Navigation Co............ 7,540 125,533 Powergen PLC......................................... 18,000 129,098 Prudential Corp. PLC................................. 16,540 325,223 Reckitt & Colman PLC................................. 10,000 93,560 Reed International PLC............................... 28,010 209,242 Rio Tinto Ltd........................................ 11,190 269,623 RJB Mining PLC....................................... 26,590 13,714 Royal & Sun Alliance Insurance Group PLC............. 17,884 135,904 Scottish & Southern Energy PLC....................... 27,880 222,088 Tesco PLC............................................ 70,190 212,959 Thames Water PLC..................................... 8,997 111,944 Trinity Mirror PLC................................... 16,315 173,810 Unilever PLC......................................... 20,000 146,827 United News & Media PLC.............................. 19,490 247,842 Yorkshire Water PLC.................................. 22,080 124,553 ----------- 6,814,568 ----------- Total Global (Ex-U.S.) Equities...................... 54,536,292 ----------- Emerging Markets Equities -- 5.49% Brinson Emerging Markets Equity Fund (b)............. 1,580,129 18,326,811 ----------- Total Equities (Cost $169,721,051)................... 182,739,832 -----------
13 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Face Amount Value ---------- ----------- Bonds -- 43.00% U.S. Bonds -- 24.07% U.S. Corporate Bonds -- 2.58% Avon Products, Inc., 6.900%, due 11/15/04....... $ 150,000 $ 146,710 Bell Atlantic Corp., 8.000%, due 10/15/29....... 78,000 79,183 Bombardier Capital, Inc., MTN, 7.300%, due 12/15/02.................................. 565,000 558,974 Cendant Corp., 7.750%, due 12/01/03............. 640,000 639,058 Daimlerchrysler NA Hldg, 7.200%, due 09/01/09.................................. 600,000 589,084 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03................. 1,055,000 1,044,672 GATX Capital Corp., Series F, MTN, 6.923%, due 04/25/01.................................. 1,000,000 1,000,118 Monsanto Co., 144A, 6.600%, due 12/01/28........ 545,000 468,374 Newcourt Credit Group 144A, 6.875%, due 02/16/05.................................. 600,000 592,080 Noram Energy Corp., 6.375%, due 11/01/03........ 615,000 584,948 PanAmSat Corp., 6.000%, due 01/15/03............ 225,000 209,398 PanAmSat Corp., 6.375%, due 01/15/08............ 500,000 423,820 Service Corp., International, 6.000%, due 12/15/05.................................. 500,000 371,595 TIme Warner, Inc., 6.625%, due 05/15/29......... 550,000 468,097 UCFC Home Equity Loan 97-C, Class A8, FRN, 0.000%, due 09/15/27..................... 724,000 724,840 US Airways, Inc., 8.360%, due 07/20/20.......... 160,000 155,006 Waste Management, Inc., 6.875%, due 05/15/09.................................. 640,000 541,069 ----------- 8,597,026 ----------- Corporate Mortgage- Backed Securities -- 2.03% Asset Securitization Corp., 96-D, Class A1B, 7.210%, due 10/13/26.......................... 1,000,000 990,780 Norwest Asset Securities Corp., 96-2, Class A9, 7.000%, due 09/25/11.......................... 435,000 421,106 Prudential Home Mortgage Securities, 94-3, Class A10, 6.500%, due 02/25/24............... 730,000 698,186 Residential Asset Securitization Trust, 7.500%, due 07/25/11.......................... 666,645 668,172 Residential Asset Securitization Trust, 97-A11, Class A2, 7.000%, due 01/25/28................ 22,416 22,354 Residential Asset Securitization Trust, 97-A7, Class A1, 7.250%, due 12/25/27................ 1,080,000 1,036,325 Residential Asset Securitization Trust, 97-A7, Class A1, 7.500%, due 09/25/27................ 182,332 182,135 Structured Asset Securities Corp., 98-RF1, Class A, 8.712%, due 03/15/27................. 1,006,602 1,037,114 Thrift Financial Corp., 11.250%, due 01/01/16... 51,564 53,115 Vendee Mortgage Trust, 98-2, Class 1G, 6.750%, due 06/15/28.......................... 1,760,000 1,624,621 ----------- 6,733,908 ----------- International Dollar Bonds -- 1.68% Banco Santiago S.A., 7.000%, due 07/18/07....... 650,000 583,195 Banque Centrale de Tunisie, 8.250%, due 09/19/27.................................. 785,000 638,794 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14.................... 1,000,000 939,270 Tyco International Corp., 144A, 6.821%, due 03/05/01.................................. 3,500,000 3,499,346 ----------- 5,660,605 ----------- U.S. Government Mortgage- Backed Securities -- 2.49% Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25................. 18,814 19,431 Federal Home Loan Mortgage Corp., 7.238%, due 05/01/26.......................... 102,664 103,052 Federal Home Loan Mortgage Corp. Gold 8.000%, due 11/01/22.......................... 65,126 65,890 8.000%, due 05/01/23.......................... 682,266 690,269 9.000%, due 03/01/24.......................... 463,466 485,216 Federal National Mortgage Association 6.375%, due 06/15/09.......................... 2,380,000 2,267,942 6.500%, due 03/01/19.......................... 279,418 266,932 8.500%, due 07/01/22.......................... 280,887 290,894 7.000%, due 10/01/28.......................... 936,705 905,932 7.000%, due 03/01/29.......................... 259,036 250,708 Federal National Mortgage Association Strips 8.000%, due 08/01/23.......................... 1,250,698 384,444 0.000%, due 02/01/28.......................... 950,639 616,926 FNCI, 8.000%, due 02/01/13...................... 499,070 509,155 Freddie Mac Series 194 Class PO, 0.000%, due 04/01/28.................................. 710,398 439,332 Government National Mortgage Association 10.000%, due 09/15/00......................... 912 951 10.000%, due 05/15/01......................... 1,255 1,309 9.000%, due 11/15/04.......................... 11,291 11,606 8.000%, due 08/15/22.......................... 274,129 278,367 8.000%, due 11/15/22.......................... 204,231 207,477 7.000%, due 06/15/27.......................... 513,887 496,597 ----------- 8,292,430 ----------- U.S. Government Obligations -- 15.29% U.S. Treasury Bond 8.000%, due 11/15/21.......................... 435,000 493,453 8.750%, due 05/15/17.......................... 300,000 358,125 U.S. Treasury Inflation Indexed Note 3.625%, due 04/15/28.......................... 33,965,000 31,566,833 3.875%, due 04/15/29.......................... 18,530,000 17,708,009 U.S. Treasury Note 6.625%, due 05/15/07.......................... 400,000 401,625 6.625%, due 07/31/01.......................... 500,000 503,282 ----------- 51,031,327 ----------- Total U.S. Bonds................................ 80,315,296 ----------- Shares ---------- High Yield Bonds -- 2.55% Brinson High Yield Fund (b)..................... 617,548 8,501,106 ----------- Face Amount ---------- Global (Ex-U.S.) Bonds -- 9.19% Australia -- 0.68% Queensland Treasury Corp. Global Notes 6.500%, due 06/14/05.....................AUD 2,600,000 1,664,856 8.000%, due 09/14/07........................ 900,000 618,466 ----------- 2,283,322 -----------
14 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Face Amount Value ---------- ----------- Canada -- 0.95% Government of Canada 7.000%, due 12/01/06......................CAD 1,290,000 $ 924,324 6.000%, due 06/01/08......................... 700,000 478,816 4.250%, due 12/01/21......................... 2,200,000 1,767,215 ----------- 3,170,355 ----------- Denmark -- 0.82% Depfa Pfandbrief Bank, 5.750%, due 03/04/09......................EUR 850,000 863,113 Kingdom of Denmark 7.000%, due 11/10/24......................DKK 2,350,000 351,974 7.000%, due 12/15/04......................... 5,480,000 791,546 9.000%, due 11/15/00......................... 3,800,000 532,299 8.000%, due 03/15/06......................... 1,200,000 182,673 ----------- 2,721,605 ----------- France -- 1.22% Government of France (OAT) 9.500%, due 01/25/01......................EUR 1,500,000 1,575,465 4.000%, due 10/25/09......................... 725,000 647,198 8.500%, due 12/26/12......................... 1,199,999 1,525,725 5.500%, due 04/25/29......................... 330,000 309,620 ----------- 4,058,008 ----------- Germany -- 0.90% Deutscheland Republic Series 96, 6.250%, due 04/26/06......................... 125,000 133,106 Bundesrepublik Deutscheland 8.375%, due 05/21/01......................... 1,535,000 1,625,459 6.250%, due 01/04/24......................... 750,000 779,989 DePfa Deutsche Pfandbriefbank AG, 4.750%, due 03/20/03......................... 480,000 479,803 ----------- 3,018,357 ----------- Italy -- 0.38% Buoni Poliennali Del Tes, 5.000%, due 05/01/08......................... 740,000 721,374 Republic of Italy (BTP), 12.000%, due 09/01/02........................ 470,000 541,795 ----------- 1,263,169 ----------- Japan -- 1.18% Government of Japan 3.000%, due 09/20/05......................JPY 90,000,000 970,264 4.600%, due 09/20/04......................... 260,000,000 2,970,313 ----------- 3,940,577 ----------- Netherlands -- 0.75% Government of Netherlands 3.000%, due 02/15/02......................EUR 1,330,000 1,297,190 5.500%, due 01/15/28......................... 360,000 336,324 7.500%, due 04/15/10......................... 550,000 634,842 7.750%, due 03/01/05......................... 200,000 224,838 ----------- 2,493,194 ----------- Spain -- 0.60% Government of Spain 6.150%, due 01/31/13......................... 400,001 415,083 3.250%, due 01/31/05......................... 1,720,000 1,577,484 ----------- 1,992,567 ----------- Sweden -- 0.90% Government of Sweden 6.750%, due 05/05/14......................SEK 8,800,000 1,108,105 10.250%, due 05/05/03........................ 14,000,000 1,881,598 ----------- 2,989,703 ----------- United Kingdom -- 0.82% Halifax PLC, Series EMTN, 8.750%, due 07/10/06..............................GBP 720,000 1,257,385 U.K. Treasury, 5.750%, due 12/07/09......................... 600,000 987,332 7.250%, due 12/07/07......................... 270,000 474,761 ----------- 2,719,478 ----------- Total Global (Ex-U.S.) Bonds................... 30,650,335 ----------- Shares ---------- Emerging Markets Bonds -- 7.19% Brinson Emerging Markets Debt Fund (b)......... 1,039,012 23,996,711 ----------- Total Bonds (Cost $138,116,867)................ 143,463,448 ----------- Short-Term Investments -- 20.60% Investment Companies -- 3.60% Brinson Supplementary Trust U.S. Cash Management Prime Fund........................ 12,006,635 12,006,635 ---------- Face Amount ----------- U.S. Corporate Bonds -- 11.11% Centex Corp., Series A, MTN 6.684%, due 06/30/00......................... $5,000,000 5,000,000 Conagra, Inc., 144A 6.320%, due 06/12/00......................... 1,300,000 1,299,350 Enron Corp. 6.634%, due 03/30/00............... 5,000,000 5,000,000 GATX Capital Corp. 6.500%, due 11/01/00........ 1,500,000 1,506,478 General Motors Corporate Notes 9.375%, due 04/01/00......................... 2,000,000 2,019,442 Hertz Corp. 6.625%, due 07/15/00............... 2,500,000 2,512,990 Kroger Co. 7.063%, due 10/01/00................ 5,000,000 4,999,757 NorAm Energy Corp. 7.500%, due 08/01/00......................... 2,000,000 2,013,165 Raytheon Co. 6.300%, due 08/15/00.............. 3,000,000 3,015,108 Safeway, Inc. 5.750%, due 11/15/00............. 4,000,000 3,981,669 Supevalue Stores, Inc., Series A, MTN 6.500%, due 10/06/00......................... 2,000,000 2,004,250 Union Pacific Corp., Series E, MTN 9.680%, due 04/12/00......................... 1,200,000 1,211,397 Vastar Resources, Inc. 6.000%, due 04/20/00......................... 2,500,000 2,503,213 ----------- 37,066,819 ----------- U.S. Government Obligations -- 1.12% U.S. Treasury Bill, 0.00%, due 02/03/00........ 3,765,000 3,748,694 ----------- Commercial Paper -- 4.77% Arrow Electronics, Inc. 5.500%, due 01/03/00......................... 2,300,000 2,299,297 Dynegy, Inc. 5.500%, due 01/03/00.............. 4,574,000 4,572,603 FMC Corp. 5.750%, due 01/03/00................. 5,000,000 4,998,403 Safeway, Inc. 5.500%, due 01/03/00............. 4,044,000 4,042,764 ----------- 15,913,067 -----------
15 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Face Amount Value ---------- ------------ Total Short-Term Investments (Cost $73,082,365)........................... $ 68,735,215 ------------ Total Investments (Cost $380,920,283) -- 118.37% (a)........... 394,938,495 Liabilities, less cash and other assets -- (18.37%)..................... (61,291,344) ------------ Net Assets -- 100%............................. $333,647,151 ============
See accompanying notes to schedule of investments. 16 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $380,920,283; and net unrealized appreciation consisted of: Gross unrealized appreciation............................... $ 35,127,094 Gross unrealized depreciation............................... (21,108,882) ------------ Net unrealized appreciation............................... $ 14,018,212 ============ (b) Non-income producing security. FRN: Floating Rate Note -- The rate disclosed is that in effect at December 31, 1999. TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $4,231,891 or 1.27% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Fund had the following open forward foreign currency contracts as of December 31, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ------------ ------------ ------------ ------------- Forward Foreign Currency Buy Contracts Australian Dollar..................................... 02/08/00 33,300,000 $21,803,182 $ 48,316 British Pound......................................... 02/08/00 11,550,000 18,615,821 (219,353) Canadian Dollar....................................... 02/08/00 4,600,000 3,172,414 50,108 Danish Krone.......................................... 02/08/00 18,000,000 2,430,984 (181,157) Euro.................................................. 02/08/00 40,000,000 40,213,534 (2,899,481) Japanese Yen.......................................... 02/08/00 578,000,000 5,682,558 90,963 Swedish Krona......................................... 02/08/00 112,800,000 13,239,903 (695,100) Swiss Franc........................................... 02/08/00 5,500,000 3,451,673 (310,940) Forward Foreign Currency Sale Contracts Australian Dollar..................................... 02/08/00 6,700,000 4,386,826 (113,968) British Pound......................................... 02/08/00 17,200,000 27,722,362 202,368 Canadian Dollar....................................... 02/08/00 4,600,000 3,172,414 (111,461) Danish Krone.......................................... 02/08/00 30,000,000 4,051,640 308,826 Euro.................................................. 02/08/00 8,250,000 8,294,041 497,671 Japanese Yen.......................................... 02/08/00 3,277,000,000 32,217,550 (1,851,820) Swedish Krona......................................... 02/08/00 17,500,000 2,054,063 86,741 ------------ Total.............................................. $ (5,098,287) =============
FUTURES CONTRACTS The Brinson Global Fund had the following open futures contracts as of December 31, 1999:
Expiration Cost/ Current Unrealized Date Proceeds Value Loss ---------- ------------ ------------ ------------ U.S. Interest Rate Futures Buy Contracts 5 Year U.S. Treasury Notes, 385 contracts............. March 2000 $38,111,273 $37,742,031 $ (369,242) 10 Year U.S. Treasury Notes, 74 contracts............. March 2000 7,212,627 7,093,593 (119,034) 30 Year U.S. Treasury Notes, 63 contracts............. March 2000 5,872,691 5,729,062 (143,629) Index Future Sale Contracts S&P 500 Index, 119 contracts.......................... March 2000 42,843,542 44,154,950 (1,311,408) ----------- Total............................................. $(1,943,313) ===========
The market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $3,748,694. See accompanying notes to financial statements. 17 Global Fund -- Financial Statements STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $319,565,037)..................... $324,366,271 Affiliated issuers (Cost $61,355,246)........................ 70,572,224 Foreign currency, at value (Cost $152,313)..................... 151,741 Receivables: Investment securities sold................................... 251,690 Dividends.................................................... 257,093 Interest..................................................... 1,604,830 ------------ TOTAL ASSETS............................................... $397,203,849 ------------ LIABILITIES: Payables: Securities loaned............................................ 57,479,350 Investment advisory fees..................................... 228,226 Due to custodian bank........................................ 279,049 Variation margin............................................. 277,007 Accrued expenses............................................. 194,779 Net unrealized depreciation on forward foreign currency contracts........................................... 5,098,287 ------------ TOTAL LIABILITIES.......................................... 63,556,698 ------------ NET ASSETS....................................................... $333,647,151 ============ NET ASSETS CONSIST OF: Paid in capital................................................ $324,670,999 Accumulated distribution in excess of net investment income.... (411,874) Accumulated net realized gain.................................. 2,448,747 Net unrealized appreciation.................................... 6,939,279 ------------ NET ASSETS..................................................... $333,647,151 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $318,094,279 and 28,489,881 shares issued and outstanding)............................. $ 11.17 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,331,490 and 119,546 shares issued and outstanding)............................. $ 11.14 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $14,221,382 and 1,279,339 shares issued and outstanding)............................. $ 11.12 ============
See accompanying notes to financial statements. 18 Global Fund -- Financial Statements STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
INVESTMENT INCOME: Interest (net of $4,739 for foreign taxes withheld; including securities lending income of $155,319)............. $ 4,674,023 Dividends (net of $28,430 for foreign taxes withheld).......... 1,427,928 ------------ TOTAL INCOME............................................... 6,101,951 ------------ EXPENSES: Advisory....................................................... 1,641,535 Administration................................................. 143,881 Professional................................................... 77,412 Printing....................................................... 66,934 Distribution................................................... 66,831 Custodian...................................................... 48,131 Other.......................................................... 52,368 ------------ TOTAL EXPENSES............................................. 2,097,092 Earnings credits........................................... (1,963) ------------ NET EXPENSES............................................... 2,095,129 ------------ NET INVESTMENT INCOME...................................... 4,006,822 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................. 10,602,009 Futures contracts............................................ (3,838,627) Foreign currency transactions................................ 144,805 ------------ Net realized gain.......................................... 6,908,187 ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency............................. (11,930,745) Futures contracts............................................ 697,060 Forward contracts............................................ (6,506,307) Translation of other assets and liabilities denominated in foreign currency........................................ 16,926 ------------ Change in net unrealized appreciation or depreciation........ (17,723,066) ------------ Net realized and unrealized loss............................. (10,814,879) ------------ Net decrease in net assets resulting from operations........... $ (6,808,057) ============
See accompanying notes to financial statements. 19 Global Fund -- Financial Statements STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: Net decrease in net assets resulting from operations.......... $ (6,808,057) Adjustments to reconcile net decrease in net assets resulting from operations to net cash used for operating activities: Net realized and unrealized loss on investments............. 10,814,879 Decrease in receivable for investment securities sold....... 8,642,091 Decrease in dividends and interest receivable............... 1,372,338 Decrease in payable for securities purchased................ (25,213,162) Decrease in payable for investment advisory fee............. (93,085) Increase in payable to Fund custodian....................... 279,049 Decrease in accrued expenses................................ (10,753) Decrease in variation margin................................ (248,118) Net amortization of premium................................. 385,052 ------------- Net cash used for operating activities.................... (10,879,766) ------------- CASH FLOWS USED FOR FINANCING ACTIVITIES: Purchases of investments...................................... (321,094,569) Proceeds from sales of investments............................ 524,162,878 Net realized loss on futures contracts........................ (3,838,627) Net realized gain on foreign currency transactions............ 144,805 Change in net unrealized appreciation or depreciation on futures contracts........................................... 697,060 Change in net unrealized appreciation or depreciation on other assets and liabilities................................ 16,926 Net decrease in foreign currency.............................. 2,223,501 ------------- Net cash provided by investing activities................. 202,311,974 ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net capital shares transactions............................... (151,332,750) Net decrease from securities lending.......................... (39,994,824) Dividends and capital gain distributions paid................. (1,895,987) ------------- Net cash used for financing activities.................... (193,223,561) ------------- Net decrease in cash............................................ (1,791,353) CASH AT BEGINNING OF PERIOD..................................... 1,791,353 ------------- CASH AT END OF PERIOD........................................... $ -- =============
See accompanying notes to financial statements. 20 Global Fund -- Financial Statements STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 ---------------- --------------- OPERATIONS: Net investment income............................................... $ 4,006,822 $ 12,109,444 Net realized gain................................................... 6,908,187 44,693,620 Change in net unrealized appreciation or depreciation............... (17,723,066) (37,993,047) ------------- ------------- Net increase (decrease) in net assets resulting from operations..... (6,808,057) 18,810,017 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income............................ (4,006,822) (12,109,444) Distributions in excess of net investment income.................... (1,164,990) (6,197,274) Distributions from net realized gain................................ (15,248,821) (33,009,121) ------------- ------------- Total distributions to shareholders*................................ (20,420,633) (51,315,839) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold......................................................... 155,204,510 410,521,495 Shares issued on reinvestment of distributions...................... 18,524,646 47,914,179 Shares redeemed..................................................... (305,569,570) (632,556,320) ------------- ------------- Net decrease in net assets resulting from capital share transactions................................................ (131,840,414) (174,120,646) ------------- ------------- TOTAL DECREASE IN NET ASSETS...................................... (159,069,104) (206,626,468) ------------- ------------- NET ASSETS: Beginning of period................................................. 492,716,255 699,342,723 ------------- ------------- End of period (including undistributed net investment income of $(411,874) and $753,116, respectively)............................ $ 333,647,151 $ 492,716,255 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income: Brinson Class I..................................................... $ (4,971,880) $(17,500,696) Brinson Class N..................................................... (18,730) (753,377) UBS Investment Funds Class.......................................... (181,202) (52,645) Distributions from net realized gain: Brinson Class I..................................................... (14,468,448) (31,201,392) Brinson Class N..................................................... (59,854) (1,710,286) UBS Investment Funds Class.......................................... (720,519) (97,443) ------------- ------------ Total distributions to shareholders................................... $ (20,420,633) $(51,315,839) ============= ============
See accompanying notes to financial statements. 21 Global Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year Ended June 30, December 31, 1999 -------------------------------------------------------------- Brinson Class I (Unaudited) 1999 1998 1997 1996 1995 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 12.02 $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43 -------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income..................... 0.12* 0.30 0.37 0.38 0.44 0.43 Net realized and unrealized gain (loss)... (0.27) 0.25 0.62 1.79 1.37 0.86 -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations................ (0.15) 0.55 0.99 2.17 1.81 1.29 -------- -------- -------- -------- -------- -------- Less distributions: Distributions from and in excess of net investment income....................... (0.18) (0.46) (0.65) (0.61) (0.62) (0.27) Distributions from and in excess of net realized gains.......................... (0.52) (0.84) (0.70) (0.65) (0.32) (0.10) -------- -------- -------- -------- -------- -------- Total distributions.................. (0.70) (1.30) (1.35) (1.26) (0.94) (0.37) -------- -------- -------- -------- -------- -------- Net asset value, end of period................ $ 11.17 $ 12.02 $ 12.77 $ 13.13 $ 12.22 $ 11.35 ======== ======== ======== ======== ======== ======== Total return (non-annualized)................. (1.19)% 4.76% 8.28% 18.79% 16.38% 12.57% Ratios/Supplemental data: Net assets, end of period (in 000s)......... $318,094 $469,080 $667,745 $586,667 $457,933 $365,678 Ratio of gross expenses to average net assets................................ 0.99%** 0.96% 0.94% 0.99% 1.04% 1.09% Ratio of net investment income to average net assets................................ 1.98%** 2.23% 2.70% 3.03% 3.69% 4.27% Portfolio turnover rate..................... 36% 105% 88% 150% 142% 238%
* The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized 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 the period presented.
Six Months Ended December 31, 1999 Year Ended Year Ended Brinson Class N (Unaudited) June 30, 1999 June 30, 1998 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period.................................... $11.99 $12.75 $13.13 ------ ------ ------ Income (loss) from investment operations: Net investment income............................................... 0.10* 0.27 0.63 Net realized and unrealized gain (loss)............................. (0.27) 0.25 0.32 ------ ------ ------ Total income (loss) from investment operations................... (0.17) 0.52 0.95 ------ ------ ------ Less distributions: Distributions from and in excess of net investment income........... (0.16) (0.44) (0.63) Distributions from net realized gain................................ (0.52) (0.84) (0.70) ------ ------ ------ Total distributions.............................................. (0.68) (1.28) (1.33) ------ ------ ------ Net asset value, end of period.......................................... $11.14 $11.99 $12.75 ====== ====== ====== Total return (non-annualized)........................................... (1.33)% 4.47% 7.90% Ratios/Supplemental data: Net assets, end of period (in 000s)................................... $1,331 $1,576 $1,163 Ratio of gross expenses to average net assets......................... 1.23%** 1.21% 1.19% Ratio of net investment income to average net assets.................. 1.73%** 1.98% 2.45% Portfolio turnover rate............................................... 36% 105% 88%
* The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized See accompanying notes to financial statements. 23 Global Equity Fund [INSERT BRINSON LOGO] The Brinson Global Equity Fund Class I has provided an annualized return of 11.94% since its inception on January 31, 1994. Over the same period, the annualized return of the benchmark, the MSCI World Equity (Free) Index, was 16.52%. The Fund's performance was achieved with a volatility of 10.76%, somewhat less risk than its benchmark's volatility of 12.64%. For the full year the Fund increased 12.87%, lagging the index's unhedged return of 25.12%. Most regions experienced strong performance in dollar-hedged terms, led by Asia (Ex-Japan) and Japan and followed by Europe (Ex-U.K.). We gained from our mid- year decision to increase Japan to neutral and then to an overweight. European market allocation also added value, as did the underweight to North America. The overweights to the U.K. and Australia and underweight of Asia (Ex-Japan) detracted. Our currency management also reduced returns, due to the yen's strength and euro's weakness. Global returns in the latter part of the year were largely fueled by investor enthusiasm for technology and telecommunications stocks, especially those with an Internet connection. By year-end, growth stocks had significantly overtaken value stocks on a global basis. In our view, many of these stocks have been bid up to levels that far exceed underlying value. Thus, the U.S. portion of the Fund is positioned in industries and stocks that enjoy less lofty valuations and offer greater upside potential. The Pacific (Ex-Japan) region has begun to rebound from last year's currency and banking crises. Japan has shown tentative signs of an economic revival, fueled by government spending packages and extremely low interest rates. There are also encouraging signs of restructuring, as well as consolidation in the banking and financial sectors, easing the fears of a financial meltdown that has weighed down investor sentiment for much of the decade. Our strategies position us to take advantage of current valuation discrepancies. Our largest underweight is to North America and largest overweight to Japan, while Europe and the U.K. are neutral. Our currency strategy, unsuccessful this year, maintains an underweight to the expensive yen and pound sterling, with overweights in the very cheap Euro and the Australian dollar. We are overweight industrials and materials, where values are most compelling. Our most important underweights are in those sectors that have risen significantly: information technology, energy and telecommunications services. 24 Global Equity Fund [BRINSON LOGO]
Total Return - ---------------------------------------------------------------------------------------------------------------------- 6 months 1 year 3 years 5 years 1/31/94* ended ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - ---------------------------------------------------------------------------------------------------------------------- Brinson Global Equity Fund Class I 5.41% 12.87% 12.53% 15.29% 11.94% - ---------------------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 15.25 25.12 21.81 20.09 16.52 - ----------------------------------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Equity Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 - -------------------------------------------------------------------------------- This chart shows the growth in the value of an investment in the Brinson Global Equity Fund Class I and the MSCI World Equity (Free) Index if you had invested $1,000,000 on January 31, 1994, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Equity Fund Class I vs. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested [PERFORMANCE GRAPH]
Brinson Global Equity MSCI World Equity --------------------- ----------------- 12/31/94........ $ 956,520 $ 989,551 12/31/95........ 1,166,324 1,200,236 12/31/96........ 1,367,688 1,367,286 12/31/97........ 1,514,304 1,584,937 12/31/98........ 1,726,828 1,975,069 12/31/99........ 1,949,056 2,471,305
1/31/94 = $1,000,000 Data through 12/31/99 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. 25 Global Equity Fund [BRINSON FUND]
Total Return - ------------------------------------------------------------------------------- 6 months 1 year 6/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------- Brinson Global Equity Fund Class N 5.29% 12.59% 9.51% - ------------------------------------------------------------------------------- MSCI World Equity (Free) Index 15.25 25.12 19.61 - -------------------------------------------------------------------------------
*Inception date of the Brinson Global Equity Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 - ------------------------------------------------------------------------------- This chart shows the growth in the value of an investment in the Brinson Global Equity Fund Class N and the MSCI World Equity (Free) Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Equity Fund Class N vs. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested [PERFORMANCE GRAPH]
Brinson Global Equity MSCI World Equity Fund Class N (Free) Index 12/31/97.......... $ 981,339 $1,003,556 6/30/98.......... 1,085,985 1,171,793 12/31/98.......... 1,115,067 1,250,581 6/30/99.......... 1,192,373 1,357,727 12/31/99.......... 1,255,095 1,564,789
6/30/97 = $1,000,000 Data through 12/31/99 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. 26 Global Equity Fund [BRINSON LOGO] Market Allocation As of December 31, 1999 (Unaudited)
Current Benchmark Strategy - ---------------------------------------------- U.S. 49.0% 38.0% Australia 1.2 3.8 Austria 0.1 0.0 Belgium 0.4 0.7 Canada 2.1 1.2 Denmark 0.4 0.3 Finland 1.5 1.9 France 5.0 5.8 Germany 5.1 4.1 Hong Kong 1.1 0.2 Ireland 0.2 0.0 Italy 2.1 1.4 Japan 13.4 23.1 Netherlands 2.6 2.0 New Zealand 0.1 0.0 Norway 0.2 0.0 Portugual 0.2 0.2 Singapore 0.5 0.7 Spain 1.3 2.6 Sweden 1.3 2.6 Switzerland 2.8 1.9 United Kingdom 9.4 9.5 Cash Reserves 0.0 0.0 - -------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited)
Percent of Net Assets - ------------------------------------------------------ 1. New York Times Co. 1.79% 2. CIGNA Corp. 1.75 3. First Data Corp. 1.54 4. FDX Corp. 1.41 5. General Instrument Corp. 1.37 6. Compuware Corp. 1.34 7. Burlington Northern Santa Fe Group 1.29 8. St. Jude Medical, Inc. 1.10 9. Electronic Data Systems Corp. 1.07 10. Allergan, Inc. 0.99 - ------------------------------------------------------
Currency Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ------------------------------------------------ U.S. 49.0% 46.1% Australia 1.2 7.3 Canada 2.1 2.1 Denmark 0.4 0.4 Euro 18.5 28.5 Hong Kong 1.1 0.0 Japan 13.4 5.4 New Zealand 0.1 0.0 Norway 0.2 0.2 Singapore 0.5 0.5 Sweden 1.3 5.3 Switzerland 2.8 2.8 United Kingdom 9.4 1.4 - ------------------------------------------------ 100.0% 100.0%
Top Ten Global (Ex-U.S.) Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------ 1. Sony Corp. 2.39% 2. Fujitsu 1.54 3. Banque Nationale de Paris 1.53 4. Seven-Eleven Japan Co., Ltd. 1.33 5. TDK Corp. 1.33 6. Nippon Telegraph & Telephone Corp. 1.24 7. Bayer AG 1.22 8. Orix Corp. 1.16 9. Murata Manufacturing Co., Ltd. 1.13 10. Siemens AG 1.09 - ------------------------------------------------
27 Global Equity Fund [BRINSON LOGO] Industry Diversification
As a Percent of Net Assets As of December 31, 1999 (Unaudited) - --------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods....................... 1.81% Technology.......................... 6.37 ------ 8.18 Basic Industries Chemicals........................... 0.80 Housing/Paper....................... 3.04 Metals.............................. 1.39 ------ 5.23 Consumer Non-Durables........................ 0.84 Retail/Apparel...................... 1.22 Autos/Durables...................... 1.45 Health: Drugs....................... 2.83 Health: Non-Drugs................... 2.25 ------ 8.59 Financial Banks............................... 2.58 Non-Banks........................... 2.52 ------ 5.10 Utilities Electric............................ 2.87 Telephone........................... 1.62 ------ 4.49 Transportation........................ 2.70 Services/Misc......................... 3.97 ------ Total U.S. Equities............... 38.26* GLOBAL (EX-U.S.) EQUITIES Aerospace & Military.................. 0.36% Airlines.............................. 0.43 Appliances & Households............... 2.91 Autos/Durables........................ 1.07 Banking............................... 7.41 Beverages and Tobacco................. 1.32 Broadcasting & Publishing............. 2.88 Building Materials.................... 0.23 Business & Public Service............. 3.45 Chemicals............................. 2.20 Data Processing....................... 2.40 Electric Components................... 2.78 Electronics........................... 5.26 Energy................................ 0.86 Financial Services.................... 3.31 Food & House Products................. 1.80 Forest Products....................... 0.99 Health & Personal Care................ 3.33 Industrial Components................. 0.61 Insurance............................. 1.40 Merchandising......................... 2.11 Multi-Industry........................ 0.28 Non-Ferrous Metals.................... 0.30 Real Estate........................... 0.88 Recreation............................ 0.98 Telecommunications.................... 6.16 Transportation........................ 1.64 Utilities............................. 2.53 ------ Total Global (Ex-U.S.) Equities... 59.88 SHORT-TERM INVESTMENTS................ 0.49* ------ TOTAL INVESTMENTS................. 98.63 CASH AND OTHER ASSETS, LESS LIABILITIES..................... 1.37 ------ NET ASSETS........................ 100.00% ====== - ---------------------------------------------
*The Fund held a long position in stock index futures on December 31, 1999 which increased U.S. Equity exposure from 38.26% to 39.15%. This adjustment resulted in a net decrease in the Fund's exposure to Short-Term Investments from 0.49% to (0.40)%. 28 Global Equity Fund--Schedule of Investments December 31, 1999 (Unaudited)
Shares Value ------ ----------- Equities--98.14% U.S. Equities--38.26% Advanced Micro Devices, Inc. (b)............ 9,000 $ 260,438 Allergan, Inc. (b).......................... 16,600 825,850 Alza Corp. (b).............................. 6,800 235,450 American Standard Cos., Inc. (b)............ 9,100 417,463 Baxter International, Inc................... 9,500 596,719 Burlington Northern Santa Fe Corp........... 44,300 1,074,275 Central & South West Corp................... 31,600 632,000 Champion International Corp................. 7,600 470,725 CIGNA Corp.................................. 18,000 1,450,125 Compaq Computer Corp........................ 27,300 738,806 Computer Sciences Corp. (b)................. 8,500 804,312 Compuware Corp.............................. 29,800 1,110,050 Corning, Inc................................ 4,400 567,325 Delhaize America, Inc....................... 33 670 Dial Corp................................... 15,100 367,119 Dominion Resources, Inc..................... 12,800 502,400 Electronic Data Systems Corp................ 13,300 890,269 Eli Lilly and Co............................ 3,500 232,750 Emerson Electric Co......................... 12,600 722,925 FDX Corp. (b)............................... 28,500 1,166,719 Federal-Mogul Corp.......................... 16,900 340,113 Federated Department Stores, Inc............ 4,500 227,531 First Data Corp............................. 26,004 1,282,322 Fleet Boston Financial Corp................. 16,829 585,860 Fort James Corp............................. 15,300 418,838 Gateway, Inc................................ 5,400 389,138 General Instrument Corp. (b)................ 13,400 1,139,000 Genzyme Corp. (b)........................... 3,600 162,000 GreenPoint Financial Corp................... 14,200 338,138 Household International, Inc................ 14,300 532,675 Illinois Tool Works, Inc.................... 10,600 716,162 Kimberly-Clark Corp......................... 12,500 815,625 Lafarge Corp................................ 4,800 132,600 Lear Corp. (b).............................. 10,600 339,200 Lexmark International Group, Inc............ 2,900 262,450 Lincoln National Corp....................... 6,200 248,000 Lockheed Martin Corp........................ 12,902 282,231 Masco Corp.................................. 17,300 438,987 Mattel, Inc................................. 19,200 252,000 Monsanto Co................................. 12,100 431,063 New York Times Co........................... 30,200 1,483,575 Newell Rubbermaid, Inc...................... 9,100 263,900 Nextel Communications, Inc. (b)............. 5,700 587,812 Peco Energy Co.............................. 15,110 525,072 Pentair, Inc................................ 4,700 180,950 Philip Morris Companies, Inc................ 14,100 326,944 PNC Bank Corp............................... 7,200 320,400 Praxair, Inc................................ 8,100 407,531 Raytheon Co., Class B....................... 17,900 475,469 Reliaster Financial Corp.................... 4,000 156,750 SBC Communications, Inc..................... 15,700 765,375 Southdown, Inc.............................. 5,176 267,211 St. Jude Medical, Inc. (b).................. 29,700 911,419 Torchmark Corp.............................. 8,200 238,313 U.S. Bancorp................................ 11,363 270,581 Unisys Corp................................. 6,700 213,981 United Healthcare Corp...................... 3,700 196,563 W.W. Grainger, Inc.......................... 11,000 525,937 Watson Pharmaceutical Co.................... 17,400 623,137 Wells Fargo and Co.......................... 15,500 626,781 ----------- Total U.S. Equities......................... 31,768,024 ----------- Global (Ex-U.S.) Equities--59.88% Australia--3.46% Broken Hill Proprietary Co., Ltd............ 32,150 420,800 Lend Lease Corp., Ltd....................... 12,394 173,081 National Australia Bank Ltd................. 40,875 623,241 News Corp., Ltd............................. 69,640 674,015 QBE Insurance Group Ltd..................... 28,778 133,709 Rio Tinto Ltd............................... 11,763 251,876 Westpac Banking Corp., Ltd.................. 70,045 481,613 Woolworth's Ltd............................. 32,600 111,787 ----------- 2,870,122 ----------- Belgium--0.71% Electrabel S.A.............................. 1,170 381,161 Fortis B.................................... 5,752 206,530 ----------- 587,691 ----------- Canada--1.30% Agrium, Inc................................. 6,200 47,847 Canadian National Railway Co................ 9,000 236,891 Newbridge Networks Corp. (b)................ 16,900 379,036 Potash Corporation of Saskatchewan, Inc..... 3,000 142,631 Shaw Communications, Inc., Class B.......... 8,400 275,794 ----------- 1,082,199 ----------- Denmark--0.30% Tele Danmark A/S............................ 3,400 251,414 ----------- Finland--1.81% Nokia Oyj................................... 2,500 451,078 Sampo Insurance Co., Ltd., Series A......... 6,500 226,090 UPM-Kymmene Corp............................ 20,600 825,974 ----------- 1,503,142 ----------- France--5.28% Accor S.A. Air Liquide................................. 1,478 246,232 Alcatel Alsthom............................. 420 95,989 Banque Nationale de Paris................... 13,792 1,266,374 Carrefour S.A............................... 1,360 249,613 Cie de Saint Gobain......................... 1,026 192,013 CSF Thomson (b)............................. 9,095 298,940 France Telecom S.A.......................... 5,480 721,248 Groupe Danone............................... 1,110 260,362 Michelin, Class B........................... 2,741 107,155 Rhone-Poulenc, Class A...................... 7,110 411,230 Total Fina S.A., Class B (b)................ 2,209 293,394 Vivendi..................................... 2,719 244,342 ----------- 4,386,892 ----------- Germany--3.89% Bayer AG.................................... 21,390 1,012,027 Continental AG.............................. 19,950 398,956 DaimlerChrysler AG (b)...................... 2,325 181,552 Mannesmann AG............................... 1,450 349,415
29 GLOBAL EQUITY FUND--SCHEDULE OF INVESTMENTS December 31, 1999 (Unaudited)
Shares Value ------ ----------- Siemens AG.................................. 7,120 $ 906,406 Veba AG..................................... 7,910 384,554 ----------- 3,232,910 ----------- Hong Kong--0.19% Henderson Land Development Co., Ltd......... 25,000 160,481 ----------- Italy--1.12% San Paolo-imi Spa........................... 17,811 240,846 Telecom Italia Mobile Spa................... 42,800 475,789 Telecom Italia Spa.......................... 15,000 210,503 ----------- 927,138 ----------- Japan--23.94% Acom Co., Ltd............................... 4,500 440,086 Bank of Tokyo-Mitsubushi Ltd................ 36,000 500,845 Benesse Corp................................ 2,400 576,816 Canon, Inc.................................. 18,000 713,986 Dai-Ichi Kangyo Bank........................ 47,000 438,523 East Japan Railway Co....................... 51 274,545 Fanuc....................................... 7,000 889,747 Fujitsu..................................... 28,000 1,274,779 Honda Motor Co.............................. 19,000 705,388 Hoya Corp................................... 4,000 314,591 Kao Corp.................................... 17,000 484,148 Mitsubishi Estate Co., Ltd.................. 41,000 399,365 Murata Manufacturing Co., Inc............... 4,000 937,912 NEC Corp.................................... 35,000 832,641 Nintendo Corp., Ltd......................... 4,900 812,877 Nippon Telegraph & Telephone Corp........... 60 1,025,841 Nomura Securities Co., Ltd.................. 37,000 666,944 NTT Mobile Communications................... 10 383,958 Orix Corporation............................ 4,300 967,085 Santen Pharmaceutical Co., Ltd.............. 14,000 230,472 Secom Co., Ltd.............................. 6,000 659,470 Seven-Eleven Japan Co., Ltd................. 7,000 1,107,909 Softbank Corp............................... 400 382,199 Sony Corp................................... 6,700 1,983,391 Sumitomo Chemical Co........................ 80,000 375,165 Takeda Chemical Industries.................. 15,000 740,071 TDK Corp.................................... 8,000 1,102,828 Yamato Transport Co., Ltd................... 17,000 657,711 ----------- 19,879,293 ----------- Netherlands--1.85% ING Groep NV................................ 11,220 674,138 Koninklijke KPN NV.......................... 5,313 516,063 TNT Post Group NV........................... 12,000 342,218 ----------- 1,532,419 ----------- Portugal--0.22% EDP Electricidade de Portugal S.A........... 10,400 180,664 ----------- Singapore--0.72% Singapore Press Holdings Ltd................ 16,046 347,695 United Overseas Bank........................ 28,512 251,577 ----------- 599,272 ----------- Spain--2.49% Banco Popular S.A........................... 8,673 562,922 Banco Santander Central Hispano, S.A........ 29,081 327,653 Endesa S.A.................................. 9,397 185,659 Tabacalera S.A.............................. 35,268 502,005 Telefonica S.A.............................. 19,674 489,094 ----------- 2,067,333 ----------- Sweden--2.31% Electrolux AB, B Shares..................... 17,250 432,108 Ericsson, B Shares.......................... 7,490 479,578 Investor AB, B Shares....................... 16,510 231,909 Nordbanken Holding AB....................... 94,570 553,494 Swedish Match AB............................ 62,670 217,874 ----------- 1,914,963 ----------- Switzerland--1.82% Adecco S.A.................................. 852 660,011 Nestle S.A. (Reg.).......................... 175 318,907 Novartis AG (Reg.).......................... 249 363,692 Roche Holding AG (Gen.)..................... 14 165,303 ----------- 1,507,913 ----------- United Kingdom--8.47% Allied Zurich PLC (b)....................... 13,975 164,310 AstraZeneca PLC............................. 4,639 192,002 British Airways PLC......................... 55,000 358,121 British Telecommunications PLC.............. 24,000 585,243 Diageo PLC.................................. 46,630 374,267 FKI PLC..................................... 98,405 380,640 Glaxo Wellcome PLC.......................... 9,620 271,331 HSBC Holdings PLC........................... 29,000 403,362 Lloyds TSB Group PLC........................ 40,220 502,053 National Power PLC.......................... 54,500 314,900 Nycomed Amersham PLC........................ 63,000 391,427 Peninsular & Oriental Steam Navigation Co... 11,475 191,047 Powergen PLC................................ 33,000 236,679 Prudential Corp. PLC........................ 22,000 432,582 Reckitt & Colman PLC........................ 14,000 130,984 Reed International PLC...................... 73,000 545,329 Scottish & Southern Energy PLC.............. 52,650 419,403 Tesco PLC................................... 93,250 282,924 Trinity Mirror PLC.......................... 17,175 182,972 Unilever PLC................................ 41,000 300,994 United News & Media PLC..................... 29,000 368,775 ----------- 7,029,345 ----------- Total Global (Ex-U.S.) Equities............. 49,713,191 ----------- Total Equities (Cost $65,016,878)........... 81,481,215 -----------
30 Global Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Shares Value -------- ------------ Short-Term Investments -- 0.49% Investment Companies -- 0.49% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $411,539)....................... 411,539 $ 411,539 ------------ Total Investments (Cost $65,428,417) -- 98.63% (a)...... 81,892,754 Cash and other assets, less liabilities -- 1.37%............. 1,134,027 ------------ Net Assets -- 100%...................... $ 83,026,781 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $65,428,417; and net unrealized appreciation consisted of: Gross unrealized appreciation............................................................................ $ 20,104,252 Gross unrealized depreciation............................................................................ (3,639,915) ------------ Net unrealized appreciation......................................................................... $ 16,464,337 ============
(b) Non-income producing security. (c) Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS
The Global Equity Fund had the following open forward foreign currency contracts as of December 31, 1999: Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- -------------- ---------- ----------- Forward Foreign Currency Buy Contracts British Pound............................... 06/02/00 4,250,000 6,847,880 (46,945) Japanese Yen................................ 06/02/00 1,290,000,000 12,922,930 94,245 Forward Foreign Currency Sale Contracts Australian Dollar........................... 06/02/00 5,200,000 3,407,311 92,050 British Pound............................... 06/02/00 700,000 1,127,886 (1,802) Canadian Dollar............................. 06/02/00 800,000 553,235 7,979 Euro........................................ 06/02/00 5,800,000 5,880,564 (29,007) Swedish Krona............................... 06/02/00 24,200,000 2,860,950 (9,921) Swiss Franc................................. 06/02/00 1,200,000 763,174 (5,318) -------- Total.................................. $101,281 ========
FUTURES CONTRACTS The Brinson Global Equity Fund had the following open futures contracts as of December 31, 1999: Expiration Current Unrealized Date Cost Value Gain ---------- -------- -------- ---------- Index Futures Buy Contracts S&P 500 Index, 2 contracts.................................... March 2000 $714,839 $742,100 $27,261 The market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $75,000.
See accompanying notes to financial statements. 31 Global Equity Fund -- Financial Statements STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited)
ASSETS: Investments, at value: Unaffiliated issuers (Cost $65,016,878)....................... $81,481,215 Affiliated issuers (Cost $411,539)............................ 411,539 Foreign currency, at value (Cost $972,985)...................... 970,107 Cash............................................................ 75,727 Receivables: Dividends..................................................... 99,356 Interest...................................................... 3,394 Variation margin.............................................. 1,340 Net unrealized appreciation on forward foreign currency contracts............................................ 101,281 ----------- TOTAL ASSETS................................................ 83,143,959 ----------- LIABILITIES: Payables: Investment advisory fees...................................... 49,888 Accrued expenses.............................................. 67,290 ----------- TOTAL LIABILITIES........................................... 117,178 ----------- NET ASSETS........................................................ $83,026,781 =========== NET ASSETS CONSIST OF: Paid in capital................................................. $65,630,618 Accumulated undistributed net investment income................. 8,384 Accumulated net realized gain................................... 799,117 Net unrealized appreciation..................................... 16,588,662 ----------- NET ASSETS.................................................. $83,026,781 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $40,734,080 and 3,182,445 shares issued and outstanding)................ $ 12.80 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $231,676 and 18,131 shares issued and outstanding)....................... $ 12.78 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $42,061,025 and 3,291,032 shares issued and outstanding).............................. $ 12.78 ===========
See accompanying notes to financial statements. 32 Global Equity Fund -- Financial Statements
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends (net of $23,473 for foreign taxes withheld)................................ $ 571,589 Interest............................................................................. 25,947 ------------ TOTAL INCOME..................................................................... 597,536 ------------ EXPENSES: Advisory............................................................................. 335,604 Distribution......................................................................... 161,840 Printing............................................................................. 37,929 Professional......................................................................... 17,780 Other................................................................................ 49,361 ------------ TOTAL EXPENSES................................................................... 602,514 ------------ Expenses deferred by Advisor..................................................... (18,447) Earnings credits................................................................. (1,001) ------------ NET EXPENSES..................................................................... 583,066 ------------ NET INVESTMENT INCOME............................................................ 14,470 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments........................................................................ 5,365,679 Futures contracts.................................................................. 28,781 Foreign currency transactions...................................................... (1,663,061) ------------ Net realized gain................................................................ 3,731,399 ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................................... 230,903 Futures contracts.................................................................. 27,261 Forward contracts.................................................................. (29,467) Translation of other assets and liabilities denominated in foreign currency........ 1,575 ------------ Change in net unrealized appreciation or depreciation............................ 230,272 ------------ Net realized and unrealized gain..................................................... 3,961,671 ------------ Net increase in net assets resulting from operations................................. $ 3,976,141 ============
See accompanying notes to financial statements. 33 Global Equity Fund -- Financial Statements STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ------------- OPERATIONS: Net investment income.................................................................. $ 14,470 $ 497,109 Net realized gain...................................................................... 3,731,399 5,596,677 Change in net unrealized appreciation or depreciation.................................. 230,272 1,132,303 ----------------- ------------- Net increase in net assets resulting from operations................................... 3,976,141 7,226,089 ----------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I...................................................................... (229,745) (384,423) Brinson Class N...................................................................... (985) (2,181) UBS Investment Funds Class........................................................... (77,667) (219,326) Distributions from net realized gain: Brinson Class I...................................................................... (3,607,591) (352,100) Brinson Class N...................................................................... (19,859) (2,950) UBS Investment Funds Class........................................................... (3,756,305) (713,059) ----------------- ------------- Total distributions to shareholders.................................................. (7,692,152) (1,674,039) ----------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold............................................................................ 7,577,518 34,808,631 Shares issued on reinvestment of distributions......................................... 6,445,851 1,462,446 Shares redeemed........................................................................ (13,648,784) (37,326,928) ----------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions........ 374,585 (1,055,851) ----------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS............................................ (3,341,426) 4,496,199 ----------------- ------------- NET ASSETS: Beginning of period.................................................................... 86,368,207 81,872,008 ----------------- ------------- End of period (including accumulated undistributed net investment income of $8,384 and $302,311, respectively)................................................... $ 83,026,781 $ 86,368,207 ================= =============
See accompanying notes to financial statements. 34 Global Equity Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year Ended June 30, December 31, 1999 --------------------------------------------------- Brinson Class I (Unaudited) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period................. $ 13.42 $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49 ------- ------- ------- ------- ------- ------- Income from investment operations: Net investment income............................ 0.03* 0.14* 0.22 0.16 0.18 0.18 Net realized and unrealized gain................. 0.64 1.09 0.78 2.14 2.29 0.39 ------- ------- ------- ------- ------- ------- Total income from investment operations................................... 0.67 1.23 1.00 2.30 2.47 0.57 ------- ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income......................................... (0.08) (0.17) (0.17) (0.12) (0.14) (0.04) Distributions from and in excess of net realized gain.................................. (1.21) (0.18) (1.05) (0.99) (0.69) (0.09) ------- ------- ------- ------- ------- ------- Total distributions............................ (1.29) (0.35) (1.22) (1.11) (0.83) (0.13) ------- ------- ------- ------- ------- ------- Net asset value, end of period....................... $ 12.80 $ 13.42 $ 12.54 $ 12.76 $ 11.57 $ 9.93 ======= ======= ======= ======= ======= ======= Total return (non-annualized)........................ 5.41% 10.14% 8.99% 21.26% 25.66% 6.06% Ratios/Supplemental data: Net assets, end of period (in 000s)................ $40,734 $42,106 $22,724 $48,054 $27,126 $20,706 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits............................... 1.05%** 1.05% 1.02% 1.25% 1.77% 2.06% After expense reimbursement and earnings credits............................... 1.00%** 1.00% 1.00% 1.00% 1.00% 1.00% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits............................... 0.37%** 1.05% 1.29% 1.35% 0.57% 0.71% After expense reimbursement and earnings credits............................... 0.42%** 1.10% 1.31% 1.60% 1.34% 1.77% Portfolio turnover rate............................ 57% 86% 46% 32% 74% 36% * The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized
See accompanying notes to financial statements. 35 Global Equity Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Year Ended Year Ended Brinson Class N (Unaudited) June 30, 1999 June 30, 1998 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period...................................... $13.40 $12.53 $12.76 ------ ------ ------ Income from investment operations: Net investment income................................................. 0.01 0.10* 0.13 Net realized and unrealized gain...................................... 0.64 1.09 0.82 ------ ------ ------ Total income from investment operations............................. 0.65 1.19 0.95 ------ ------ ------ Less distributions: Distributions from net investment income.............................. (0.06) (0.14) (0.13) Distributions from net realized gain.................................. (1.21) (0.18) (1.05) ------ ------ ------ Total distributions................................................. (1.27) (0.32) (1.18) ------ ------ ------ Net asset value, end of period............................................ $12.78 $13.40 $12.53 ====== ====== ====== Total return (non-annualized)............................................. 5.29% 9.80% 8.60% Ratios/Supplemental data: Net assets, end of period (in 000s)..................................... $ 232 $ 220 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits..................... 1.30%** 1.30% 1.27% After expense reimbursement and earnings credits...................... 1.25%** 1.25% 1.25% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits..................... 0.12%** 0.80% 1.04% After expense reimbursement and earnings credits...................... 0.17%** 0.85% 1.06% Portfolio turnover rate................................................. 57% 86% 46% * The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized
See accompanying notes to financial statements. 36 Global Bond Fund [BRINSON LOGO] Since its performance inception on July 31, 1993, the Brinson Global Bond Fund Class I has recorded an annualized return of 5.45%, versus the 6.02% return of its benchmark, the Salomon Smith Barney World Government Bond Index. This performance record was achieved with significantly less risk or volatility than the benchmark; 4.69% versus 5.64%, respectively. In calendar year 1999 the Fund posted a decline of 6.27% compared to the benchmark's decline of 4.26%. 1999 proved to be the worst year for global government bonds since 1994. Yields rose (and prices therefore fell) in every major market, apart from Japan, by up to 200 basis points. The main factor behind this development was the growing momentum of world economic growth, led by the continuing strength of economic activity in the U.S. As well as encouraging investors to look for higher real returns, this also gave rise to fears (which were ultimately fulfilled) that central banks would raise official rates to counter rising inflation risks. The weakness in government bonds was accentuated by the unwinding of last year's move to low-risk investments in the aftermath of the Russian default. The main reason for the relative underperformance of the Fund was market allocation strategy, specifically a large underweight to the Japanese market. Despite very low nominal yields, Japanese government bond prices were supported by the Bank of Japan's "zero interest rate" policy, an attempt to stimulate the lackluster domestic economy and limit the strength of the yen. In currencies, underweights to the yen and the pound sterling also hurt performance. However, active bond management helped, with positions in inflation-linked bonds in Canada and good relative performance from non-government bonds in the U.S. component of the Fund. 37 Global Bond Fund
Total Return 6 months 1 year 3 years 5 years 7/31/93* ended ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - ----------------------------------------------------------------------------------------------- Brinson Global Bond Fund Class I 0.10% -6.27% 2.18% 7.00% 5.45% - ----------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index 3.13 -4.26 3.43 .42 6.02 - -----------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Bond Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund Class I and the Salomon Smith Barney World Government Bond Index if you had invested $1,000,000 on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Bond Fund Class I vs. Salomon Smith Barney World Gov't Bond Index Wealth Value with Dividends Reinvested [PERFORMANCE GRAPH]
Brinson Global Salomon Smith Bond Fund Barney World Class I Gov't Bond Index 12/31/93 $1,038,591 $1,041,929 12/31/94 $1,002,396 $1,066,185 12/31/95 $1,206,119 $1,269,184 12/31/96 $1,318,299 $1,315,287 12/31/97 $1,339,835 $1,318,469 12/31/98 $1,500,412 $1,520,063 12/31/99 $1,406,271 $1,455,279
7/31/93 = $1,000,000 Data through 12/31/99 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. 38 Global Bond Fund [LOGO OF BRINSON] Total Return 6 months 1 year 6/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------- Brinson Global Bond Fund Class N 0.00% -6.58% 2.09% - -------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index 3.13 -4.26 4.65 - -------------------------------------------------------------------------------- *Inception date of the Brinson Global Bond Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund Class N and the Salomon Smith Barney World Government Bond Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Bond Fund Class N vs. Salomon Smith Barney World Gov't Bond Index Wealth Value with Dividends Reinvested [Performance Graph] Salomon Smith Brinson Global Barney World Gov't Bond Fund Class N Bond Index - ------------------------------------------------------------------------ 12/31/97 $1,008,216 $1,014,920 6/30/98 $1,023,719 $1,043,156 12/31/98 $1,127,443 $1,170,101 6/30/99 $1,053,324 $1,086,238 12/31/99 $1,053,273 $1,120,231 6/30/97 = $1,000,000 Data through 12/31/99 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 BRINSON LOGO Asset Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ---------------------------------------------------------- U.S. 27.1% 33.1% Australia 0.6 5.1 Austria 0.9 0.0 Belgium 2.4 0.0 Canada 2.9 5.0 Denmark 1.2 4.2 Finland 0.7 0.0 France 7.5 9.2 Germany 7.9 5.7 Ireland 0.3 0.0 Italy 8.1 2.8 Japan 26.6 7.6 Netherlands 2.6 5.6 Portugal 0.4 0.0 Spain 3.3 4.4 Sweden 1.3 6.8 Switzerland 0.4 0.0 TIPS 0.0 1.8 U.K. 5.8 5.8 Euro 0.0 2.9 - ---------------------------------------------------------- 100.0% 100.0% Currency Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ---------------------------------------------------------- U.S. 27.1% 23.1% Australia 0.6 6.6 Canada 2.9 2.9 Denmark 1.2 1.2 Euro 34.0 41.9 Japan 26.6 18.6 Sweden 1.3 5.3 Switzerland 0.4 0.4 U.K. 5.9 0.0 - ---------------------------------------------------------- 100.0% 100.0% Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - ---------------------------------------------------------- U.S. BONDS Corporate Bonds Airlines.................................. 0.84% Asset-Backed.............................. 2.51 Consumer.................................. 1.10 Financial Services........................ 1.44 Food and Housing Products................. 0.31 Publishing................................ 0.65 Services/Miscellaneous.................... 0.95 Utilities................................. 0.09 ------ 7.89 ------ International Dollar Bonds................ 4.01 Corporate Mortgage-Backed Securities...... 8.12 U.S. Government Agencies.................. 1.12 U.S. Gov't Mortgage-Backed Securities..... 5.70 U.S. Government Obligations............... 5.48 ------ 24.43 ------ Total U.S. Bonds.................. 32.32 ------ GLOBAL (EX-U.S.) BONDS Foreign Financial Bonds........................ 7.21 Foreign Government Bonds....................... 56.20 ------ Total Global (Ex-U.S.) Bonds...... 63.41 SHORT-TERM INVESTMENTS......................... 0.58 ------ TOTAL INVESTMENTS................. 96.31 ------ CASH AND OTHER ASSETS, LESS LIABILITIES.......................... 3.69 ------ NET ASSETS........................ 100.00% ====== 40 Global Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Face Amount Value -------- ---------- Bonds -- 95.73% U.S. Bonds -- 32.32% U.S. Corporate Bonds -- 7.89% Cendant Corp., 7.750%, due 12/01/03.................. $500,000 $ 499,264 Centaur Funding Corp., 144A, 0.000%, due 01/01/80............................... 1,021 398,288 Centaur Funding Corp., 144A, 9.080%, due 01/01/80............................... 153 115,110 Chase Manhattan Auto Owner Trust, Series 96-C, Class A4, 6.150%, due 03/15/02............................... 125,000 124,798 Comed Transitional Funding Trust, Series 98-1, Class A7, 5.740%, due 12/25/10............................... 370,000 333,614 Continental Airlines, Inc., Series 99-2, 7.056%, due 09/15/09.................. 710,000 675,750 Countrywide Capital, Inc., 8.000%, due 12/15/26............................... 250,000 224,977 Fidelity Investments, 7.570%, due 06/15/29............................... 450,000 432,660 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03................ 240,000 237,650 Lilly Del Mar, 144A, 7.17%, due 08/01/29................................ 350,000 348,314 News America Holdings, 7.750%, due 12/01/45............................... 575,000 524,273 Noram Energy Corp., 6.375%, due 11/01/03............................... 75,000 71,335 Peco Energy Transition Trust, 6.130%, due 03/01/09............................... 540,000 496,876 Premier Auto Trust, Series 96-3, Class A4, 6.750%, due 11/06/00..................... 163,308 163,434 Safeway Inc, 7.250%, due 09/15/04.................... 250,000 248,528 The Money Store, Series 98-B, Class AF2, 6.115%, due 05/15/10............................... 4,089 4,089 Time Warner Cos., Inc., 7.570%, due 02/01/24............................... 560,000 538,668 UCFC Home Equity Loan, Series 97-C, Class A8, FRN, 5.6375%, due 09/15/27......................... 78,696 78,787 USA Waste Services, 7.000%, due 10/01/04............................... 300,000 270,446 Vanderbilt Mortgage Finance, 98-B, Class 1A2, 6.120%, due 05/07/09.................... 600,000 593,694 ---------- 6,380,555 ---------- Corporate Mortgage-Backed Securities -- 8.12% ABN Amro Mortgage Corp., Series 99-2 IA2, 6.300%, due 04/25/29............................... 345,000 328,302 Bear Stearns Mortgage Securities, Inc., 96-7, Class A4, 6.000%, due 01/28/09..................... 200,000 191,924 First Union Lehman Brothers, 97-C2, Class A2, 6.600%, due 05/18/07..................... 240,000 230,009 GE Capital Mortgage Services, Inc., 93-7F, Class FA3, 6.500%, due 09/25/08.................... 145,184 144,352 Heller Financial Commercial Mortgage Assets, Series 99-PH1 A1, 6.500%, due 05/15/61............................... 399,560 386,446 LB Commercial Conduit Mortgage Trust, Series 99-C1 A1, 6.410%, due 08/15/07............................... 548,619 528,583 Norwest Asset Securities Corp., Series 98-25, Class A5, 6.000%, due 12/25/28............................... 965,000 906,048 PNC Mortgage Securities Corp., Series 94-3, Class A8, 7.500%, due 07/25/24............................... 190,000 182,210 Prudential Home Mortgage Securities Series 96-7, Class A4, 6.750%, due 06/25/11............................... 150,000 143,793 Series 93-43, Class A9, 6.750%, due 10/25/23............................... 201,221 193,428 Residential Accredit Loans, Inc. Series 98-QS4, Class AI5, 7.000%, due 03/25/28....................................... 625,000 623,656 Series 96-QS4, Class Al10, 7.900%, due 08/25/26............................... 400,000 377,052 Residential Asset Securitization Trust Series 97-A11, Class A2, 7.000%, due 01/25/28............................... 32,378 32,288 Series 97-A11, Class A6, 7.000%, due 01/25/28............................... 430,000 405,339 Series 98-A1, Class A1, 7.000%, due 03/25/28............................... 72,972 72,562 Series 97-A7, Class A1, 7.250%, due 12/25/27............................... 335,000 321,453 Series 97-A7, Class A1, 7.500%, due 09/25/27............................... 56,102 56,041 Structured Asset Securities Corp. Series 98-RF2, 144A, 8.582%, due 07/15/27............................... 315,780 324,464 Series 98-RF1, Class A, 8.712%, due 03/15/27............................... 208,384 214,701 Structured Mortgage Asset Residential Trust, Series 96-5C, Class CI, 7.150%, due 03/25/23............................... 925,000 904,363 ---------- 6,567,014 ---------- International Dollar Bonds -- 4.01% National Australia Bank, FRN, 6.40%, due 12/10/07................................ 640,000 623,858 Petroleos de Venezuela S.A., 8.750%, due 02/15/04............................... 500,000 488,159 Banco Santiago S.A., 7.000%, due 07/18/07............................... 400,000 358,889 Empresa National Electric, 7.875%, due 10/01/69............................... 500,000 385,159 Korea Development Bank, 7.125%, due 09/17/01............................... 300,000 297,672 Banque Centrale de Tunisie, 8.250%, due 09/19/27............................... 400,000 325,500 Credit Suisse-London, 144A, 7.900%, Resettable Perpetual Preferred, 7.900%, due 05/01/07............................... 500,000 475,729 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49............................... 300,000 286,081 ---------- 3,241,047 ----------
41 Global Bond Fund--Schedule of Investments December 31, 1999 (Unaudited) Face Amount Value ------------- ----------- U.S. Gov't Mortgage-Backed Securities--5.70% Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25........... $ 8,912 $ 9,204 Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13........... 68,215 64,952 7.238%, due 05/01/26........... 17,453 17,519 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23........... 42,505 43,004 9.000%, due 03/01/24........... 116,158 121,609 Federal National Mortgage Association 6.000%, due 01/01/29........... 155,793 142,632 6.500%, due 03/01/19........... 120,439 115,057 6.500%, due 02/01/29........... 593,700 559,748 7.000%, due 12/01/24........... 402,571 389,346 7.000%, due 03/01/29........... 27,267 26,390 7.500%, due 07/01/10........... 762,377 768,657 7.500%, due 12/01/23........... 317,354 314,030 7.500%, due 05/18/25........... 250,000 246,780 7.500%, due 12/01/27........... 638,881 632,189 7.890%, due 04/01/26........... 175,960 178,991 8.000%, due 03/01/11........... 68,243 69,622 8.500%, due 07/01/22........... 7,930 8,213 Federal National Mortgage Association Strips, 0.000%, due 02/01/28........... 141,218 91,645 8.000%, due 08/01/23........... 185,330 56,967 FNCI, 8.000%, due 02/01/13....... 72,365 73,827 Government National Mortgage Association, 7.000%, due 08/15/24........... 352,905 343,816 7.000%, due 07/15/25........... 49,590 48,300 7.500%, due 08/15/23........... 60,521 60,204 7.500%, due 12/15/23........... 94,179 93,718 7.500%, due 01/15/24........... 65,741 65,368 ----------- 4,541,788 ----------- U.S. Government Agencies--1.12% Jordan Aid, 8.750%, due 09/01/19. 452,530 486,597 Tennesse Valley Authority, 6.375%, due 06/15/05........... 500,000 481,834 ----------- 968,431 ----------- U.S. Government Obligations--5.48% U.S. Treasury Bond, 8.000%, due 11/15/21........... 1,985,000 2,251,734 8.750%, due 05/15/17........... 300,000 358,125 U.S. Treasury Inflation Indexed Note, 3.625%, due 04/15/28........... 570,000 529,754 U.S. Treasury Note 5.625%, due 05/15/08........... 640,000 602,000 5.750%, due 08/15/03........... 700,000 685,344 ----------- 4,426,957 ----------- Total U.S. Bonds................. 26,125,792 ----------- Global (Ex-U.S.) Bonds--63.41% Australia-5.19% International Bank for Recon & Dev 5.500%, due 05/14/03...........AUD 1,800,000 1,131,331 Queensland Treasury Corp.- Global Note 6.500%, due 06/14/05........... 1,130,000 723,572 8.000%, due 09/14/07........... 3,400,000 2,338,654 ----------- 4,193,557 ----------- Canada--6.85% Government of Canada 4.250%, due 12/01/21...........CAD 3,730,000 2,996,234 6.000%, due 06/01/08........... 2,030,000 1,378,316 Province of Ontario, 7.500%, due 01/19/06........... 1,600,000 1,161,056 ----------- 5,535,606 ----------- Denmark--6.66% City of Copenhagen, 6.250%, due 03/15/01...........DKK 2,400,000 329,368 Depfa Pfandbrief Bank, 5.750%, due 03/04/09...........EUR 2,250,000 2,284,710 Great Belt, 7.000%, due 09/02/03.DKK 3,650,000 515,097 Kingdom of Denmark 7.000%, due 11/15/07........... 1,400,000 206,067 7.000%, due 11/10/24........... 4,800,000 718,927 8.000%, due 11/15/01........... 9,300,000 1,326,531 ----------- 5,380,700 ----------- France--7.74% Government of France (BTAN), 7.750%, due 04/12/00...........EUR 609,796 618,470 Government of France (OAT) 4.000%, due 10/25/09........... 200,000 178,537 6.000%, due 10/25/25........... 400,000 403,364 7.500%, due 04/25/05........... 902,368 1,005,385 7.500%, due 04/25/05........... 1,097,632 1,222,942 8.500%, due 04/25/23........... 1,350,000 1,786,540 9.500%, due 01/25/01........... 990,000 1,039,807 ----------- 6,255,045 ----------- Germany--6.09% Bundesrepublik Deutschland, 5.250%, due 02/21/01........... 390,000 396,838 5.625%, due 01/04/28........... 380,000 362,817 6.250%, due 04/26/06........... 1,850,000 1,969,963 International Bank of Recon & Dev, 7.125%, due 04/12/05........... 2,019,603 2,196,114 ----------- 4,925,732 ----------- Italy--2.07% Republic of Italy (BTP), 7.750%, due 11/01/06........... 930,000 1,053,475 9.000%, due 10/01/03........... 550,001 617,477 ----------- 1,670,952 ----------- Japan--7.28% Government of Japan 3.000%, due 09/20/05...........JPY 110,000,000 1,175,712 4.600%, due 09/20/04........... 415,000,000 4,712,564 ----------- 5,888,276 ----------- 42 GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS December 31, 1999 (Unaudited)
Face Amount Value ------------------------- Netherlands--5.70% LKB Baden-Wuerttemberg Finance, 6.500%, due 09/15/08............EUR 818,067 $ 861,807 Netherlands Government 3.000%, due 02/15/02............... 2,650,000 2,584,627 5.500%, due 01/15/28............... 1,050,000 980,945 7.500%, due 04/15/10............... 160,000 184,681 ----------- 4,612,060 Spain--3.90% ----------- Bonos Y Oblig Del Estado, 3.250%, due 01/31/05............... 1,400,000 1,283,999 Government of Spain, 7.350%, due 03/31/07............... 1,670,000 1,871,762 ----------- 3,155,761 ----------- Sweden--6.32% Government of Sweden 6.000%, due 02/09/05............SEK 3,500,000 419,113 6.750%, due 05/05/14............... 12,400,000 1,561,420 10.250%, due 05/05/03.............. 23,300,000 3,131,517 ----------- 5,112,050 ----------- United Kingdom--5.61% Abbey National Treasury Service, 6.500%, due 03/05/04............GBP 450,000 712,141 British Gas PLC, 8.125%, due 03/31/03............... 195,000 320,537 UK Treasury 7.250%, due 12/07/07............... 820,000 1,441,866 5.750%, due 12/07/09............... 1,250,000 2,056,942 ----------- 4,531,486 ----------- Total Global (Ex-U.S.) Bonds.......... 51,261,225 ----------- Total Bonds (Cost $82,090,416)........ 77,387,017 ----------- Shares Short-Term Investments--0.58% -------- Investment Companies--0.58% Brinson Supplementary Trust U.S. Cash Management Prime Fund......... (Cost $469,060).................... 469,060 $ 469,060 ----------- Total Investments (Cost $82,559,476)--96.31%........ 77,856,077 Cash and other assets, less liabilities--3.69%........... 2,986,424 ----------- Net Assets--100%...................... $80,842,501 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $82,559,476; and net unrealized depreciation consisted of: Gross unrealized appreciation.................... $ 331,039 Gross unrealized depreciation.................... (5,034,438) ----------- Net unrealized depreciation................. $(4,703,399)
=========== (b) Non-income producing security. FRN: Floating Rate Note TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 1999, the value of these securities amounted to $2,094,881 or 2.59% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Bond Fund had the following open forward foreign currency contracts as of December 31, 1999: Expiration Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ---------- ----------- ------------ Forward Foreign Currency Buy Contracts British Pound......... 03/01/00 5,650,000 $ 9,106,441 $ (57,066) Canadian Dollar....... 03/01/00 4,700,000 510,169 (86,143) Danish Kroner......... 03/01/00 19,500,000 2,637,430 152,269 Euro.................. 03/01/00 3,200,000 3,222,298 108,261 Japanese Yen.......... 03/01/00 650,000,000 7,249,634 (62,649) Swedish Krona......... 03/01/00 12,000,000 1,410,533 51,099 Forward Foreign Currency Sale Contracts Australian Dollar..... 03/01/00 2,200,000 1,440,724 23,329 British Pound......... 03/01/00 2,850,000 4,593,514 (16,514) Euro.................. 03/01/00 13,10,000 13,191,284 (769,386) Japanese Yen.......... 03/01/00 1,620,000,000 28,187,534 1,021,604 ---------- Total............. $ 364,804 ==========
See accompanying notes to financial statements. 43 Global Bond Fund -- Financial Statements STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited)
ASSETS: Investments, at value: Unaffiliated issuers (Cost $82,090,416)..................... $ 77,387,017 Affiliated issuers (Cost $469,060).......................... 469,060 Cash.......................................................... 931 Foreign currency, at value (Cost $893,716).................... 887,157 Receivables: Investment securities sold.................................. 14,677 Interest.................................................... 1,786,202 Net unrealized appreciation on forward foreign currency contracts................................................... 364,804 ------------ TOTAL ASSETS.............................................. 80,909,848 ------------ LIABILITIES: Payables: Investment advisory fees.................................... 44,481 Accrued expenses............................................ 22,866 ------------ TOTAL LIABILITIES......................................... 67,347 ------------ NET ASSETS...................................................... $ 80,842,501 ============ NET ASSETS CONSIST OF: Paid in capital............................................... $ 88,899,967 Accumulated undistributed net investment income............... 1,916,511 Accumulated net realized loss................................. (5,588,837) Net unrealized depreciation................................... (4,385,140) ------------ NET ASSETS................................................ $ 80,842,501 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $77,217,107 and 8,533,100 shares issued and outstanding).................. $ 9.05 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,162 and 127 shares issued and outstanding)............................ $ 9.15 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $3,624,232 and 401,023 shares issued and outstanding).................... $ 9.04 ============
See accompanying notes to financial statements. 44 Global Bond Fund -- Financial Statements STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
INVESTMENT INCOME: Interest (net of $32,604 for foreign taxes withheld)............ $ 2,338,848 Dividends....................................................... 25,477 ----------- TOTAL INCOME................................................ 2,364,325 ----------- EXPENSES: Advisory........................................................ 339,912 Registration.................................................... 39,560 Professional.................................................... 25,362 Distribution.................................................... 11,340 Other........................................................... 42,182 ----------- TOTAL OPERATING EXPENSES.................................... 458,356 Expenses deferred by Advisor................................ (38,065) Earnings credits............................................ (63) ----------- NET OPERATING EXPENSES...................................... 420,228 Interest Expense............................................ 27,240 ----------- NET INVESTMENT INCOME....................................... 1,916,857 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss on: Investments................................................... (1,315,340) Foreign currency transactions................................. (2,284,183) ----------- Net realized loss........................................... (3,599,523) ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency.............................. 298,082 Forward contracts............................................. 1,689,713 Translation of other assets and liabilities denominated in foreign currency......................................... 7,206 ----------- Change in net unrealized appreciation or depreciation....... 1,995,001 ----------- Net realized and unrealized loss................................ (1,604,522) ----------- Net increase in net assets resulting from operations............ $ 312,335 ===========
See accompanying notes to financial statements. 45 Global Bond Fund -- Financial Statements STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- -------------- OPERATIONS: Net investment income....................................................... $ 1,916,857 $ 5,139,936 Net realized gain (loss).................................................... (3,599,523) 1,499,627 Change in net unrealized appreciation or depreciation....................... 1,995,001 (6,052,418) ------------ ------------- Net increase in net assets resulting from operations........................ 312,335 587,145 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I........................................................... (1,118,349) (5,705,972) Brinson Class N........................................................... -- (13,166) UBS Investment Funds Class................................................ (43,991) (180,397) Distributions from net realized gain: Brinson Class I........................................................... (82,557) (925,451) Brinson Class N........................................................... (1) (811) UBS Investment Funds Class................................................ (4,026) (35,005) ------------ ------------- Total distributions to shareholders......................................... (1,248,924) (6,860,802) ------------ ------------- Capital share transactions: Shares sold................................................................. 10,208,441 115,882,090 Shares issued on reinvestment of distributions.............................. 1,080,310 4,872,310 Shares redeemed............................................................. (27,855,393) (111,795,220) ------------ ------------- Net increase (decrease) in net assets resulting from capital share transactions........................................................ (16,566,642) 8,959,180 ------------ ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS................................. (17,503,231) 2,685,523 ------------ ------------- NET assets: Beginning of period......................................................... 98,345,732 95,660,209 ------------ ------------- End of period (including accumulated undistributed net investment income of $1,916,511 and $1,161,994, respectively)............................... $ 80,842,501 $ 98,345,732 ------------ -------------
See accompanying notes to financial statements. 46 Global Bond Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year Ended June 30, December 31, 1999 ------------------------------------------------- Brinson Class I (Unaudited) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period................... $ 9.18 $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55 ------- ------- ------- ------- -------- -------- Income from investment operations: Net investment income.............................. 0.20* 0.39* 0.43* 0.67 0.84 0.50 Net realized and unrealized gain (loss)....................................... (0.19) (0.07) (0.18) 0.08 0.31 0.58 ------- ------- ------- ------- -------- -------- Total income from investment operations..................................... 0.01 0.32 0.25 0.75 1.15 1.08 ------- ------- ------- ------- -------- -------- Less distributions: Distributions from and in excess of net investment income............................. (0.13) (0.47) (0.31) (0.96) (1.40) (0.24) Distributions from net realized gain................ (0.01) (0.08) (0.17) (0.19) (0.10) -- ------- ------- ------- ------- -------- -------- Total distributions.............................. (0.14) (0.55) (0.48) (1.15) (1.50) (0.24) ------- ------- ------- ------- -------- -------- Net asset value, end of period......................... $ 9.05 $ 9.18 $ 9.41 $ 9.64 $ 10.04 $ 10.39 ======= ======= ======= ======= ======== ======== Total return (non-annualized).......................... 0.10% 3.13% 2.69% 7.71% 11.50% 11.34% Ratios/Supplemental data: Net assets, end of period (in 000s).................. $77,217 $92,832 $91,274 $54,157 $41,066 $51,863 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.................................. 1.04%** 0.90% 0.96% 1.32% 1.65% 1.43% After expense reimbursement, and earnings credits***............................... 0.96%** N/A 0.90% 0.90% 0.90% 0.90% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits.................................. 4.16%** 4.05% 4.47% 4.90% 4.98% 5.53% After expense reimbursement and earnings credits.................................. 4.24%** N/A 4.53% 5.32% 5.73% 6.06% Portfolio turnover rate............................. 35% 138% 151% 235% 184% 199%
* The net investment income per share data was determined by using average shares outstanding throughout the year ** Annualized *** The ratio of net operating expenses to average net assets for the six months ended December 31, 1999, was 0.90%. N/A = Not Applicable See accompanying notes to financial statements. 47 Global Bond Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Year Ended Year Ended Brinson Class N (Unaudited) June 30, 1999 June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period................................... $ 9.16 $ 9.40 $ 9.64 ------ ------ ------ Income from investment operations: Net investment income.............................................. 0.19* 0.37* 0.42* Net realized and unrealized loss................................... (0.19) (0.07) (0.20) ------ ------ ------ Total income from investment operations.......................... -- 0.30 0.22 ------ ------ ------ Less distributions: Distributions from and in excess of net investment income.......... -- (0.46) (0.29) Distributions from net realized gain............................... (0.01) (0.08) (0.17) ------ ------ ------ Total distributions.............................................. (0.01) (0.54) (0.46) ------ ------ ------ Net asset value, end of period......................................... $ 9.15 $ 9.16 $ 9.40 ====== ====== ====== Total return (non-annualized).......................................... 0.00% 2.89% 2.37% Ratios/Supplemental Data: Net assets, end of period (in 000s).................................. $ 1 $1,085 $ 9 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.................. 1.29%** 1.15% 1.21% After expense reimbursement and earnings credits***.............. 1.21%** N/A 1.15% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits................. 3.91%** 3.80% 4.22% After expense reimbursement and earnings credits.................. 3.99%** N/A 4.28% Portfolio turnover rate.............................................. 35% 138% 151%
* The net investment income per share data was determined by using average shares outstanding throughout the year ** Annualized *** The ratio of net operating expenses to average net assets for the six months ended December 31, 1999, was 1.15%. N/A = Not Applicable See accompanying notes to financial statements. 48 The Brinson Funds -- Notes To Financial Statements 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The financial highlights of the UBS Investment Funds Class are presented separately. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund in the preparation of their financial statements. A. Investment Valuation: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. U.S. equity securities traded over-the-counter are priced at the most recent bid price. 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 respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing 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 of the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C. Investment Transactions: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1999, therefore, no federal income tax provision was required. F. Distributions to Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. G. Income and Expense Allocation: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. 49 The Brinson Funds -- Notes To Financial Statements 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. I. Earnings Credits: The Funds have entered into an arrangement with their custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. This amount is reflected in the statement of operations. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized operating expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees for the six months ended December 31, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fees Fee Expense Cap Expense Cap Expense Cap Fees Deferred -------- --------------- --------------- -------------- ---------- -------- Global Fund............... 0.80% 1.10% 1.35% 1.75% $1,641,535 $ -- Global Equity Fund........ 0.80 1.00 1.25 1.76 335,604 18,447 Global Bond Fund.......... 0.75 0.90 1.15 1.39 339,912 38,065
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 six months ended December 31, 1999 were $4,268, $2,230 and $2,208 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. The Global Fund invests in shares of certain affiliated investment companies also sponsored by the Advisor. These investments represented 21.15% of the Fund's total net assets at December 31, 1999. Activity for the six months ended December 31, 1999 was as follows:
Net Change in Sales Realized Net Unrealized Interest Affiliates Purchases Proceeds Gain/(Loss) Gain/(Loss) Income Value - ---------- ------------ ------------ ------------- -------------- --------- ----------- Brinson Post-Venture Fund................. $ -- $ -- $ -- $ 80,510 $ -- $ 7,740,955 Brinson High Yield Fund................... -- 6,000,000 1,029,066 (749,294) -- 8,501,106 Brinson Emerging Markets Equity Fund...... -- 2,728,450 (620,659) 4,132,636 -- 18,326,811 Brinson Emerging Markets Debt Fund........ -- 4,000,000 769,030 2,514,137 -- 23,996,711 Brinson Supplementary Trust U.S. Cash Management Prime Fund................... 214,667,924 234,755,971 -- -- 300,209 12,006,635
The Global Equity Fund and Global Bond Fund also invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor and is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income in the statement of operations. Amounts relating to those investments at the six months ended December 31, 1999 were as follows:
% of Sales Interest Net Affiliates Purchases Proceeds Income Value Assets - ---------- ---------- ----------- -------- -------- ------ Global Equity Fund........... $15,177,471 $15,788,120 $24,988 $411,539 0.49% Global Bond Fund............. 20,533,527 26,203,701 45,065 469,060 0.58
50 The Brinson Funds--Notes To Financial Statements 3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales ------------ ------------ Global Fund................................. $142,746,662 $283,169,079 Global Equity Fund.......................... 47,047,973 56,616,119 Global Bond Fund............................ 31,227,121 62,903,677
4. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the six months ended December 31, 1999, was an affiliate of 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 net 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. SECURITY LENDING The Global Fund loaned securities to certain brokers, with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. Securities loaned are recorded at the amount of cash collateral received. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 102% of the value of domestic securities loaned and 105% of the value of non-U.S. securities loaned. The cash collateral received is invested in interest-bearing securities and is included in the schedule of investments. The value of loaned securities and related collateral outstanding at December 31, 1999 were as follows: Value of Loaned Cash Collateral Securities Received --------------- --------------- Global Fund................................. $56,204,165 $57,479,350 =========== =========== 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the UBS Investment Funds Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364-day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds Rate 51 The Brinson Funds -- Notes to Financial Statements plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the six months ended December 31, 1999, the Global Fund and Global Bond Fund had total borrowings of $9,500,000 and $31,000,000 outstanding for two days and six days under the agreement, respectively. The Global Equity Fund had no borrowings under the agreement. 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Global Fund ------------------------------------------------------------------ Six Months Ended Year Ended December 31, 1999 June 30, 1999 --------------------------- ---------------------------- Shares Value Shares Value ---------- ----------- ---------- ------------ Sales: Brinson Class I...................... 13,313,712 $154,829,980 33,634,272 $404,497,836 Brinson Class N...................... 5,699 67,133 31,878 401,372 UBS Investment Funds Class........... 26,354 307,397 469,115 5,622,287 ---------- ------------ ---------- ------------ Total Sales.................. 13,345,765 $155,204,510 34,135,265 $410,521,495 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I...................... 1,590,665 $ 17,592,753 3,914,936 $ 45,438,730 Brinson Class N...................... 6,165 68,059 12,826 148,599 UBS Investment Funds Class........... 78,388 863,834 201,293 2,326,850 ---------- ------------ ---------- ------------ Total Dividend Reinvestment.. 1,675,218 $ 18,524,646 4,129,055 $ 47,914,179 ========== ============ ========== ============ Redemptions: Brinson Class I...................... 25,452,650 $297,617,004 50,809,625 $617,784,220 Brinson Class N...................... 23,828 280,466 4,388 53,226 UBS Investment Funds Class........... 670,655 7,672,100 1,220,493 14,718,874 ---------- ------------ ---------- ------------ Total Redemptions............ 26,147,133 $305,569,570 52,034,506 $632,556,320 ========== ============ ========== ============ Global Equity Fund ------------------------------------------------------------------ Six Months Ended Year Ended December 31, 1999 June 30, 1999 --------------------------- ---------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I...................... 415,195 $ 5,374,301 2,413,314 $ 30,206,170 Brinson Class N...................... -- -- 15,911 200,000 UBS Investment Funds Class........... 169,249 2,203,217 352,164 4,402,461 ---------- ------------ ---------- ------------ Total Sales.................. 584,444 $ 7,577,518 2,781,389 $ 34,808,631 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I...................... 257,009 $ 3,143,195 54,126 $ 661,376 Brinson Class N...................... 1,707 20,844 426 5,130 UBS Investment Funds Class........... 268,571 3,281,812 66,261 795,940 ---------- ------------ ---------- ------------ Total Dividend Reinvestment.. 527,287 $ 6,445,851 120,813 $ 1,462,446 ========== ============ ========== ============ Redemptions: Brinson Class I...................... 626,264 $ 8,104,601 1,142,595 $ 14,484,716 Brinson Class N...................... -- -- -- -- UBS Investment Funds Class........... 432,319 5,544,183 1,860,700 22,842,212 ---------- ------------ ---------- ------------ Total Redemptions............ 1,058,583 $ 13,648,784 3,003,295 $ 37,326,928 ========== ============ ========== ============
52 The Brinson Funds -- Notes To Financial Statements
Global Bond Fund --------------------------------------------------- Six Months Ended Year Ended December 31, 1999 June 30, 1999 ---------------------- ------------------------- Shares Value Shares Value --------- ------------ ---------- ------------ Sales: Brinson Class I............................................................ 1,096,853 $10,137,515 11,338,295 $110,539,879 Brinson Class N............................................................ 129 1,195 117,021 1,120,104 UBS Investment Funds Class................................................. 7,546 69,731 432,357 4,222,107 --------- ----------- ---------- ------------ Total Sales........................................................ 1,104,528 $10,208,441 11,887,673 $115,882,090 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class I............................................................ 113,380 $ 1,041,959 484,490 $ 4,679,150 Brinson Class N............................................................ -- 1 579 5,581 UBS Investment Funds Class................................................. 4,178 38,350 19,366 187,579 --------- ----------- ---------- ------------ Total Dividend Reinvestment........................................ 117,558 $ 1,080,310 504,435 $ 4,872,310 ========= =========== ========== ============ Redemptions: Brinson Class I............................................................ 2,795,101 $25,880,953 11,403,020 $107,591,860 Brinson Class N............................................................ 118,466 1,105,323 90 871 UBS Investment Funds Class................................................. 94,125 869,117 434,492 4,202,489 --------- ----------- ---------- ------------ Total Redemptions.................................................. 3,007,692 $27,855,393 11,837,602 $111,795,220 ========= =========== ========== ============
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. [Logo Brinson] The Brinson Funds - ------------------------------------------------------------------------------- Australia * Bahrain * Brazil * China * France * Germany * Japan * Singapore Switzerland * United Kingdom * United States 209 South LaSalle Street * Chicago, Illinois 60604-1295 * Tel: (800) 448-2430 ------------------- THE BRINSON FUNDS BRINSON GLOBAL (EX-U.S.) EQUITY FUND SEMI-ANNUAL REPORT DECEMBER 31, 1999 [GRAPHIC] INSTITUTIONAL ASSET MANAGEMENT --------------------------- - -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Secretary and Treasurer E. Thomas McFarlan David E. Floyd, CPA President Assistant Secretary Thomas J. Digenan, CFA, CPA Mark F. Kemper Vice President Assistant Secretary Debra L. Nichols Vice President - -------------------------------------------------------------------------------- 1 - -------------------------------------------------------------------------------- THE FUND'S ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- [GRAPHIC] - -------------------------------------------------------------------------------- Since the founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with individualized client relationships of the highest quality. Now, in 2000, more than 1,200 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, and a recognized leader in our industry. In North America, we make our investment capabilities available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are no-load, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and capabilities. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios--balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Asset Management, the institutional asset management division of UBS AG. - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC] Shareholder Letter ...................................................... 4 Global Economic and Market Highlights ................................... 5 Global (Ex-U.S.) Equity Fund ............................................ 6 Schedule of Investments ................................................. 10 Financial Statements .................................................... 14 Financial Highlights .................................................... 17 Notes to Financial Statements ........................................... 19 - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- SHAREHOLDER LETTER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC] January 27, 2000 Dear Shareholder: We are pleased to present the semi-annual report for The Brinson Funds for the six-month period ending December 31, 1999. This report will provide a discussion on the current U.S. and International Economic outlook. We will also provide our current portfolio strategies and performance updates for our international mutual fund. The decade of the 1990s ended with a particularly challenging year. We continued to apply our proven value-based investment process across all of our portfolios, but our investment results varied substantially. In some areas, such as fixed income, our performance was excellent relative to both the market and our peers. In other areas, most notably multi-asset and equity portfolios, results were disappointing. Throughout 1999, our asset allocation strategies continued to focus on reducing exposure to the risks presented by equity prices that have been driven far above even optimistic estimates of underlying value. While the risk hedge in balanced portfolios had little net effect on performance through most of the year, the surge in equity prices late in the year hampered the returns relative to the benchmarks. The broad array of our equity portfolios, with the exception of the growth portfolios, significantly lagged their benchmarks in 1999. Some degree of underperformance was unavoidable as the U.S. market was increasingly driven by momentum, which in turn focused more tightly on narrow technology and e-commerce stocks. In such a market, the fundamental price/value discrepancies that are the core of our investment process are effectively ignored in the market. In addition, our stock selection was uncharacteristically weak and a meaningful source of the underperformance of our U.S. and Global Equity portfolios. In fixed income our U.S. Bond and High Yield portfolios outpaced the market and ranked highly in their respective universes of active managers. However, outside the U.S., our Global Bond portfolio generally underperformed, due almost entirely to strength in both the Japanese bond market and the yen, where we are underweighted. Our fundamental assessments across markets have been both accurate and perceptive, but momentum rather than the reality of fundamental value has continued to drive equity markets, particularly in the U.S. We have seen this phenomenon historically and it has always proven to be a sign of danger, that ultimately ends badly for the market in general and the momentum players in particular. Over time, these styles ebb and flow but momentum driven approaches have no lasting link to underlying fundamentals and always fail to deliver when viewed over meaningful horizons. It is these concerns which underlie our current asset allocation and equity portfolio strategies. 2000 will be a challenging year, but we are confident that remaining true to our investment disciplines will in the long run accrue to our shareholders' benefit. As always, we welcome your thoughts and comments, and appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /s/ Gary P. Brinson Gary P. Brinson Chairman and Chief Investment Officer - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- [GRAPHIC] - -------------------------------------------------------------------------------- As the negative effects of the Asian crisis gradually wane and domestic demand continues to remain robust, the expansion in Euroland gains speed. In late December 1999, the German government announced cuts in corporate and personal tax rates, and initiated cross-party talks about reforms of the country's burdened pension system. So far, however, neither the ruling coalition parties nor the opposition has managed to communicate its position in the pension debate in a transparent way, as the political system is being absorbed by allegations of funding fraud against the Christian democrats. As in the United States, pan- European inflation has accelerated in the wake of surging energy prices, whereas inflation excluding food and energy has moved sideways. While headline inflation figures will be heavily impacted by energy prices, core inflation is unlikely to accelerate much, given economy-wide over-capacities and disinflationary forces arising from continued deregulation of utility and telecom sectors. In Japan, real GDP declined in the third quarter of 1999, largely as a result of a phasing out of public spending programs, weak private capital expenditures and stagnating consumer spending. A sustainable recovery will hinge on healthy gains in private demand. Should the trend in economic growth continue to be disappointing, the government may adopt additional stimulative fiscal measures. The Bank of Japan has sterilized, and will probably continue to sterilize, expansionary foreign exchange market operations. Hopes that meaningful quantitative easing steps are around the corner remain premature.
- -------------------------------------------------------------------------------------------------------- Global (Ex-U.S.) Equity Environment - -------------------------------------------------------------------------------------------------------- 6 months 1 year 3 years 5 years 8/31/93* Major Markets ended ended ended ended to Total Return in U.S.Dollar Hedged Terms 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 19.89% 36.98% 21.89% 18.43% 14.34% Europe Ex U.K. 28.38 40.04 37.84 30.50 23.60 U.K. 7.16 15.34 18.33 18.38 14.62 Canada 27.60 45.99 21.46 21.63 18.20 Japan 16.37 54.31 10.18 7.88 5.56 Asia Ex Japan 20.68 61.12 -1.29 6.05 7.44 - -------------------------------------------------------------------------------------------------------- 6 months 1 year 3 years 5 years 8/31/93* Major Currencies ended ended ended ended to Percent Change Relative to U.S.Dollars 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------------------------------- Yen 18.26% 10.20% 4.28% -0.51% 0.36% Pound 2.25 -3.13 -1.98 0.60 1.27 Euro** -2.80 -14.64 -7.56 -4.28 -2.32 Canadian Dollar 1.98 5.84 -1.89 -0.68 -1.47 - --------------------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global (Ex-U.S.) Equity Fund Class I **Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized total returns - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND - -------------------------------------------------------------------------------- [GRAPHIC] - -------------------------------------------------------------------------------- The Brinson Global (Ex-U.S.) Equity Fund Class I has provided an annualized return of 10.01% since its inception on August 31, 1993. Over the same period, its benchmark, the MSCI World Ex USA (Free) Index, has produced a return of 11.28%. The Fund's performance was achieved with a volatility or risk of 12.64%, considerably below the 14.26% volatility of the benchmark. For the full year period, the Fund increased 19.16%, lagging the index's unhedged return of 27.77%. Most regions experienced strong performance in dollar-hedged terms, led by Asia (Ex-Japan), Japan and Europe (Ex-U.K.). The Fund benefited from our mid- year decision to increase Japan to neutral and then to an overweight, as well as from European market allocation. However, returns were hurt by the overweight to Australia and underweight to Asia (Ex-Japan). Currency management reduced returns, due to the underweight of the yen and overweight of the Euro, but holding an overweight position in the strong-performing Australian dollar helped the Fund's performance. Earlier in the year, traditional value stocks, encompassing such sectors as transportation, materials, basic industry and other economically sensitive areas, regained favor in Europe. At that time, our overweight in these sectors gave a lift to relative performance. By mid-year, however, investor sentiment changed sharply, as investors began to shun value stocks in order to flock to large capitalization, growth and momentum industries and stocks. Following in the footsteps of the U.S. market, investors in Japan, Southeast Asia, Australia, Europe and the U.K. rushed to stocks engaged in information technology, telecommunications and Internet-related businesses. By year-end, stocks with a growth tilt had significantly overtaken value on a global basis. In our view, many of these stocks have risen to levels that far exceed underlying value. Consequently, stock selection in our U.K. and European portfolios, which are underweight these securities, was hurt. These portfolios are positioned in industries and stocks that command more reasonable valuations and, in our view, offer greater upside potential. The Pacific (Ex-Japan) region has begun to rebound from last year's currency and banking crises. Japan has exhibited tentative signs of an economic revival, fueled by government spending packages and extremely low interest rates. Consolidation in the banking and financial sectors is easing fears of a financial meltdown, while encouraging signs of restructuring in other businesses have begun to surface. Our Japanese stock holdings are geared toward companies that are actively restructuring. - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC] - -------------------------------------------------------------------------------- Total Return - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years 8/31/93* ended ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 - ----------------------------------------------------------------------------------------------------- Brinson Global (Ex-U.S.) Equity Fund Class I 16.29% 19.16% 12.96% 13.42% 10.01% - ----------------------------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 22.45 27.77 15.67 13.12 11.28 - -----------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson Global (Ex-U.S.) Equity Fund Class I 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 Global (Ex-U.S.) Equity Fund Class I and the MSCI World Ex USA (Free) Index if you had invested $1,000,000 on August 31, 1993, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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 (Ex-U.S.) Equity Fund Class I vs. MSCI World Ex USA (Free) Index Wealth Value with Dividends Reinvested [GRAPH] [PLOT POINTS TO COME] 8/31/93 = $1,000,000 Data through 12/31/99 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 (EX-U.S.) EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC] - -------------------------------------------------------------------------------- Total Return - -------------------------------------------------------------------------------- 6 months 1 year 6/30/97* ended ended to 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------- Brinson Global (Ex-U.S.) Equity Fund Class N 16.11% 18.90% 9.44% - -------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 22.45 27.77 14.13 - -------------------------------------------------------------------------------- * Inception date of the Brinson Global (Ex-U.S.) Equity Fund Class N 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 Global (Ex-U.S.) Equity Fund Class N and the MSCI World Ex USA (Free) Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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 (Ex-U.S.) Equity Fund Class N vs. MSCI World Ex USA (Free) Index Wealth Value with Dividends Reinvested [GRAPH] [PLOT POINTS TO COME] 6/30/97 = $1,000,000 Data through 12/31/99 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 (EX-U.S.) EQUITY FUND - -------------------------------------------------------------------------------- [GRAPHIC] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Industry Diversification - -------------------------------------------------------------------------------- As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITIES Aerospace & Military ............................................ 0.70% Airlines ........................................................ 0.65 Appliances & Households ......................................... 3.81 Autos/Durables .................................................. 2.89 Banking ......................................................... 11.30 Beverages & Tobacco ............................................. 2.24 Broadcasting & Publishing ....................................... 3.55 Building Materials .............................................. 0.72 Business & Public Service ....................................... 5.05 Chemicals ....................................................... 2.84 Construction .................................................... 0.36 Data Processing ................................................. 2.96 Electric Components ............................................. 4.12 Electronics ..................................................... 7.16 Energy .......................................................... 3.94 Financial Services .............................................. 4.10 Food & House Products ........................................... 2.95 Forest Products ................................................. 1.13 Health & Personal Care .......................................... 5.95 Industrial Components ........................................... 1.64 Insurance ....................................................... 5.19 Leisure & Tourism ............................................... 0.24 Machinery & Engineering ......................................... 0.22 Merchandising ................................................... 3.10 Metals--Steel ................................................... 0.42 Multi-Industry .................................................. 1.05 Non-Ferrous Metals .............................................. 1.24 Real Estate ..................................................... 0.91 Recreation ...................................................... 0.82 Telecommunications .............................................. 13.61 Transportation .................................................. 1.51 Utilities ....................................................... 3.85 Wholesale & International Trade ................................. 0.22 ------ Total Global (Ex-U.S.) Equities ................................. 100.44 CONVERTIBLE BONDS ............................................... 0.03 SHORT-TERM INVESTMENTS .......................................... 0.52 ------ TOTAL INVESTMENTS ............................................... 100.99 LIABILITIES, LESS CASH AND OTHER ASSETS ......................... (0.99) ------ NET ASSETS ...................................................... 100.00% ====== - -------------------------------------------------------------------------------- Market and Currency Strategy - -------------------------------------------------------------------------------- As of December 31, 1999 (Unaudited) Fund Benchmark --------------------- --------------------- Market Currency Market Currency Strategy Strategy Strategy Strategy - ---------------------------------------------------------------------------- Australia 4.19% 8.19% 2.35% 2.35 Austria 0.11 0.00 0.21 0.00 Belgium 1.12 0.00 0.86 0.00 Canada 2.57 4.17 4.17 4.17 Denmark 0.46 0.75 0.75 0.75 Euro 0.00 44.52 0.00 36.29 Finland 3.35 0.00 2.85 0.00 France 9.89 0.00 9.83 0.00 Germany 9.27 0.00 10.04 0.00 Hong Kong 0.54 0.00 2.24 2.24 Ireland 0.00 0.00 0.40 0.00 Italy 3.13 0.00 4.05 0.00 Japan 31.29 18.29 26.29 26.29 Netherlands 4.61 0.00 5.02 0.00 New Zealand 0.31 0.31 0.15 0.15 Norway 0.00 0.36 0.36 0.36 Portugal 0.68 0.00 0.44 0.00 Singapore 0.92 1.02 1.02 1.02 Spain 3.09 0.00 2.59 0.00 Sweden 3.28 6.58 2.57 2.57 Switzerland 3.94 5.45 5.45 5.45 U.K. 17.25 10.36 18.36 18.36 - ---------------------------------------------------------------------------- 100.00% 100.00% 100.00% 100.00% - -------------------------------------------------------------------------------- Top Ten Global (Ex-U.S.) Equity Holdings - -------------------------------------------------------------------------------- As of December 31, 1999 (Unaudited) Percent of Net Assets - --------------------------------------------------------------------- 1. Sony Corp. 2.16% 2. Fujitsu 2.09 3. Nippon Telegraph & Telephone Corp. 1.95 4. Siemens AG 1.66 5. France Telecom S.A. 1.50 6. Nokia Oyj 1.48 7. Ericsson, B Shares 1.42 8. ING Groep NV 1.38 9. Fanuc 1.36 10. British Telecommunications PLC 1.26 - --------------------------------------------------------------------- - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value -------- ------- Global (Ex-U.S.) Equities -- 100.44% Australia -- 4.16% Amcor Ltd. ..................................... 89,740 $ 418,950 Amp Ltd. ....................................... 100,900 1,111,265 Boral Ltd. ..................................... 285,000 440,149 Brambles Industries Ltd. ....................... 26,140 720,555 Broken Hill Proprietary Co., Ltd. .............. 145,720 1,907,275 CSR Ltd. ....................................... 252,190 610,622 Lend Lease Corp., Ltd. ......................... 84,196 1,175,786 National Australia Bank Ltd. ................... 161,648 2,464,727 News Corp., Ltd. ............................... 261,488 2,530,827 News Corp., Ltd., Preferred .................... 96,879 827,337 Qantas Airways Ltd. ............................ 124,238 308,945 QBE Insurance Group Ltd. ....................... 174,980 812,998 Rio Tinto Ltd. ................................. 67,260 1,440,211 Santos Ltd. .................................... 208,461 566,129 Telstra Corp., Ltd. ............................ 631,110 3,419,621 Westpac Banking Corp., Ltd. .................... 303,941 2,089,828 WMC Ltd. ....................................... 85,970 472,573 Woolworth's Ltd. ............................... 218,560 749,453 ------------ 22,067,251 ------------ Austria -- 0.11% Austria Tabakwerke AG .......................... 11,600 558,134 ------------ Belgium -- 1.15% Electrabel S.A. ................................ 5,310 1,729,885 Fortis (B) ..................................... 114,367 4,106,440 KBC Bancassurance Holding ...................... 4,410 236,500 ------------ 6,072,825 ------------ Canada -- 1.92% Agrium, Inc. ................................... 71,280 550,083 Alcan Aluminum Ltd. ............................ 24,040 983,929 Bank of Montreal ............................... 14,710 499,692 Canadian National Railway Co. .................. 32,880 865,442 Canadian Pacific Ltd. .......................... 44,214 945,941 Corus Entertainment Inc. ....................... 8,326 169,239 Hudson's Bay Co. ............................... 64,320 762,285 Imasco Ltd. .................................... 23,900 657,896 Imperial Oil Ltd. .............................. 21,460 458,389 Magna International, Inc., Class A ............. 14,060 595,804 Newbridge Networks Corp. (b) ................... 31,510 706,712 NOVA Chemicals Corp. ........................... 27,121 527,919 Potash Corporation of Saskatchewan, Inc. ....... 8,860 421,236 Royal Bank of Canada ........................... 23,420 1,024,716 Shaw Communications, Inc., Class B ............. 19,980 655,996 TransCanada Pipelines Ltd. ..................... 18,876 162,578 Westcoast Energy, Inc. ......................... 13,220 210,875 ------------ 10,198,732 ------------ Denmark -- 0.48% Tele Danmark A/S ............................... 34,710 2,566,644 ------------ Finland -- 3.16% Merita Ltd., Class A ........................... 350,334 2,054,364 Nokia Oyj ...................................... 43,489 7,846,774 Sampo Insurance Co., Ltd., Series A ............ 94,154 3,274,971 UPM-Kymmene Corp. .............................. 89,016 3,569,170 ------------ 16,745,279 ------------ France -- 9.72% Air France (b) ................................... 89,252 1,699,851 Air Liquide ...................................... 23,423 3,902,229 Alcatel .......................................... 10,160 2,322,030 Axa .............................................. 13,200 1,831,257 Banque Nationale de Paris ........................ 69,648 6,395,041 Carrefour S.A. ................................... 13,001 2,386,186 Cie de Saint Gobain .............................. 14,848 2,778,763 CSF Thomson ...................................... 89,814 2,952,056 France Telecom S.A. .............................. 60,419 7,952,020 Groupe Danone .................................... 10,572 2,479,775 Michelin, Class B ................................ 26,793 1,047,430 Rhone-Poulenc, Class A ........................... 55,005 3,181,392 Schneider S.A. ................................... 26,479 2,068,983 Societe Generale ................................. 16,407 3,799,097 Total Fina S.A., Class B ......................... 33,219 4,412,062 Vivendi .......................................... 25,445 2,286,609 ------------ 51,494,781 ------------ Germany -- 9.09% Allianz AG ....................................... 12,638 4,224,870 Bayer AG ......................................... 127,756 6,044,530 Bayerische Motoren Werke AG ...................... 60,350 1,842,060 Continental AG ................................... 84,370 1,687,214 DaimlerChrysler AG ............................... 43,183 3,372,015 Deutsche Bank AG ................................. 47,611 4,011,292 Deutsche Telekom AG .............................. 60,380 4,227,647 Dresdner Bank AG ................................. 46,450 2,509,653 Mannesmann AG .................................... 22,330 5,380,993 SAP AG ........................................... 3,680 1,800,142 Siemens AG ....................................... 68,910 8,772,536 Veba AG .......................................... 86,078 4,184,785 Volkswagen AG .................................... 1,800 101,041 ------------ 48,158,778 ------------ Hong Kong -- 0.20% Henderson Land Development Co., Ltd. ............. 165,000 1,059,175 ------------ Italy -- 3.00% Assicurazioni Generali ........................... 72,446 2,381,922 Beni Stabili Spa ................................. 222,610 78,100 ENI Spa .......................................... 589,000 3,223,645 ENI Spa ADR ...................................... 10,650 587,081 La Rinascente Spa ................................ 198,140 1,265,176 San Paolo-imi, Spa ............................... 194,610 2,631,578 Telecom Italia Mobile Spa ........................ 312,000 3,468,369 Telecom Italia Spa ............................... 161,000 2,259,400 ------------ 15,895,271 ------------ Japan -- 32.62% Acom Co., Ltd. ................................... 27,200 2,660,075 Asahi Bank Ltd. .................................. 231,000 1,421,816 Bank of Tokyo-Mitsubushi Ltd. .................... 238,000 3,311,143 Benesse Corporation .............................. 8,700 2,090,958 Bridgestone Corp. ................................ 74,000 1,626,691 Canon, Inc. ...................................... 117,000 4,640,907 Dai Nippon Printing Co., Ltd. .................... 81,000 1,289,922 Dai-Ichi Kangyo Bank Ltd. ........................ 141,000 1,315,568 Daiichi Pharmaceutical Co., Ltd. ................. 70,000 908,896 Daikin Industries Ltd. ........................... 86,000 1,167,896 Denso Corp. ...................................... 64,000 1,525,671 - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value -------- ------- Japan -- continued East Japan Railway Co. ........................... 413 $ 2,223,272 Fanuc ............................................ 56,700 7,206,946 Fuji Bank Ltd. ................................... 109,000 1,057,467 Fujitsu .......................................... 243,000 11,063,260 Honda Motor Co. .................................. 102,000 3,786,820 Hoya Corp. ....................................... 32,000 2,516,731 Ito Yokado Co., Ltd. ............................. 25,000 2,711,152 Kamigumi Co. Ltd. ................................ 213,000 894,827 Kaneka Corp. ..................................... 21,000 268,155 Kao Corp. ........................................ 88,000 2,506,180 Kirin Brewery Co., Ltd. .......................... 157,000 1,648,918 Kokuyo ........................................... 44,000 584,632 Kuraray Co., Ltd. ................................ 168,000 1,698,793 Matsushita Electric Industrial Co. ............... 165,000 4,562,063 Mitsubishi Corp. ................................. 150,000 1,156,270 Mitsubishi Estate Co., Ltd. ...................... 262,000 2,552,040 Murata Manufacturing Co., Inc. ................... 13,000 3,048,215 NEC Corp. ........................................ 204,000 4,853,109 NGK Insulators ................................... 150,000 1,112,305 Nintendo Corp., Ltd. ............................. 26,300 4,362,992 Nippon Steel Co. ................................. 963,000 2,248,615 Nippon Telegraph & Telephone Corp. ............... 603 10,309,706 Nissin Food Products Co. ......................... 46,300 1,087,895 Nomura Securities Co., Ltd. ...................... 242,000 4,362,171 NTT Mobile Communications ........................ 121 4,645,889 Obayashi Corp. ................................... 230,000 1,085,340 Orix Corporation ................................. 26,500 5,959,943 Osaka Gas Co. .................................... 632,000 1,518,949 Rohm Co. ......................................... 6,000 2,462,019 Sankyo Co., Ltd. ................................. 104,000 2,133,750 Santen Pharmaceutical Co., Ltd. .................. 54,000 888,965 Secom Co., Ltd. .................................. 51,000 5,605,491 Sekisui House Ltd. ............................... 96,000 848,811 Seven-Eleven Japan Co., Ltd. ..................... 19,000 3,007,181 Softbank Corp. ................................... 3,900 3,726,442 Sony Corp. ....................................... 38,700 11,456,304 Sumitomo Bank .................................... 165,000 2,255,239 Sumitomo Chemical Co. ............................ 351,000 1,646,036 Sumitomo Electric Industries ..................... 96,000 1,107,674 Taiheiyo Cement Corp. ............................ 600 1,143 Takeda Chemical Industries ....................... 86,000 4,243,076 Takefuji Corp. ................................... 11,300 1,412,017 TDK Corp. ........................................ 30,000 4,135,607 Tokio Marine & Fire Insurance Co. ................ 128,000 1,494,407 Tokyo Electric Power ............................. 57,200 1,531,220 Tokyo Electron Ltd. .............................. 18,000 2,462,019 Toyota Motor Corp. ............................... 128,000 6,190,220 Yamato Transport Co., Ltd. ....................... 85,000 3,288,555 ------------- 172,888,374 ------------- Netherlands -- 4.89% ABN AMRO Holdings NV ............................. 100,579 2,500,335 Elsevier NV ...................................... 263,090 3,127,723 ING Groep NV ..................................... 121,722 7,313,496 Koninklijke KPN NV ............................... 61,722 5,995,190 Royal Dutch Petroleum Co. ........................ 51,220 3,124,204 TNT Post Group NV ................................ 66,040 1,883,339 Unilever NV ...................................... 35,903 1,973,637 ------------ 25,917,924 ------------ New Zealand -- 0.36% Auckland International Airport Ltd. ................ 150,310 227,321 Carter Holt Harvey Ltd. ............................ 239,240 311,908 Fletcher Challenge Paper ........................... 343,600 240,111 Lion Nathan Ltd. ................................... 175,270 406,744 Telecom Corp. of New Zealand Ltd. .................. 156,290 733,545 ------------ 1,919,629 ------------ Norway -- 0.27% Norske Skogindustrier ASA .......................... 27,490 1,429,704 ------------ Portugal -- 0.67% EDP Electricidade de Portugal S.A .................. 96,837 1,682,206 Portugal Telecom ................................... 170,300 1,859,010 ------------ 3,541,216 ------------ Singapore -- 0.93% Singapore Press Holdings Ltd. ...................... 129,975 2,816,385 United Overseas Bank Ltd. (Frgn.) .................. 236,360 2,085,529 ------------ 4,901,914 ------------ Spain -- 3.17% Banco Popular Espanol S.A .......................... 51,692 3,355,075 Banco Santander Central Hispano, S.A. .............. 275,710 3,106,405 Endesa S.A. ........................................ 88,995 1,758,294 Tabacalera S.A. .................................... 273,008 3,886,001 Telefonica S.A. (b) ................................ 188,477 4,685,428 ------------ 16,791,203 ------------ Sweden -- 3.26% Electrolux AB, B Shares ............................ 166,670 4,175,041 Ericsson, B Shares ................................. 117,490 7,522,771 Investor AB, B Shares .............................. 158,130 2,221,187 Nordbanken Holding AB .............................. 207,940 1,217,020 Swedish Match AB ................................... 617,820 2,147,870 ------------ 17,283,889 ------------ Switzerland -- 3.90% Adecco S.A. ........................................ 2,957 2,290,673 Nestle S.A. (Reg.) ................................. 2,345 4,273,358 Novartis AG (Reg.) ................................. 3,624 5,293,254 Roche Holding AG (Gen.) ............................ 460 5,431,374 Swisscom AG (Reg.) ................................. 8,386 3,373,889 ------------ 20,662,548 ------------ United Kingdom -- 17.38% Allied Zurich PLC .................................. 173,348 2,038,123 AstraZeneca Group PLC .............................. 55,422 2,293,842 Barclays PLC ....................................... 87,244 2,505,702 BP Amoco PLC ....................................... 635,108 6,371,962 British Aerospace PLC .............................. 111,502 736,805 British Airways PLC ................................ 224,518 1,461,904 British Telecommunications PLC ..................... 273,287 6,664,140 Charter PLC ........................................ 406,151 1,734,681 Diageo PLC ......................................... 400,290 3,212,849 FKI PLC ............................................ 989,328 3,826,817 Glaxo Wellcome PLC ................................. 179,998 5,076,822 Greenalls Group PLC ................................ 261,946 1,245,432 House of Fraser PLC ................................ 496,141 607,722 HSBC Holdings PLC .................................. 170,000 2,364,536 Lloyds TSB Group PLC ............................... 453,067 5,655,488 Marconi PLC ........................................ 260,038 4,591,297 Marks & Spencer PLC ................................ 431,185 2,048,348 - -------------------------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value -------- ------------ United Kingdom -- continued National Power PLC ................................. 464,673 $ 2,684,867 Nycomed Amersham PLC ............................... 329,161 2,045,121 Peninsular & Oriental Steam Navigation Co. ......... 98,277 1,636,208 Powergen PLC ....................................... 270,798 1,942,190 Prudential Corp. PLC ............................... 224,436 4,413,047 Reckitt & Colman PLC ............................... 146,450 1,370,181 Reed International PLC ............................. 379,419 2,834,360 Rio Tinto Ltd. ..................................... 152,015 3,662,805 RJB Mining PLC ..................................... 398,768 205,663 Royal & Sun Alliance Insurance Group PLC ........... 238,659 1,813,618 Scottish & Southern Energy PLC ..................... 376,917 3,002,469 Tesco PLC .......................................... 947,770 2,875,571 Thames Water PLC ................................... 128,560 1,599,592 Trinity Mirror PLC ................................. 212,105 2,259,636 Unilever PLC ....................................... 265,759 1,951,024 United News & Media PLC ............................ 281,079 3,574,305 Yorkshire Water PLC ................................ 316,361 1,784,585 ------------ 92,091,712 ------------ Total Global (Ex-U.S.) Equities (Cost $381,218,232) .............................. 532,244,983 ------------ Face Amount -------- Convertible Bonds -- 0.03% Australia -- 0.03% Burns, Philp Treasury, 7.50%, due 08/14/03 ...........................AUD 1,228,664 160,808 Burns, Philp & Co., Ltd., Warrants (b) ............. 1,228,664 -- ------------ Total Convertible Bonds (Cost $147,071) ............ 160,808 ------------ Shares Value ---------- ------------ Short-Term Investments -- 0.52% Investment Companies -- 0.52% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,771,329) ................................ 2,771,329 $ 2,771,329 ------------ Total Investments (Cost $384,136,632) -- 100.99% (a) ............... 535,177,120 Liabilities, less cash and other assets -- (0.99%) .......................... (5,250,763) ------------ Net Assets-- 100% .................................. $529,926,357 ============ See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $384,136,632; and net unrealized appreciation consisted of: Gross unrealized appreciation .......................................................................... $ 168,110,291 Gross unrealized depreciation .......................................................................... (17,069,803) ------------- Net unrealized appreciation ........................................................................ $ 151,040,488 =============
(b) Non-income producing security FORWARD FOREIGN CURRENCY CONTRACTS The Global (Ex-U.S.) Equity Fund had the following open forward foreign currency contracts as of December 31, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ----------- ------------ ----------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar .......................................... 02/17/00 31,200,000 $20,430,748 $ 139,239 British Pound .............................................. 02/17/00 11,000,000 17,729,353 (360,513) Canadian Dollar ............................................ 02/17/00 11,400,000 7,863,696 140,584 European Union ............................................. 02/17/00 66,800,000 67,201,867 (3,525,088) Japanese Yen ............................................... 02/17/00 670,000,000 6,596,631 204,600 Swedish Krona .............................................. 02/17/00 142,600,000 16,748,255 (741,167) Swiss Franc ................................................ 02/17/00 12,100,000 7,601,648 (513,130) Forward Foreign Currency Sale Contracts British Pound .............................................. 02/17/00 32,900,000 53,026,884 7,564 European Union ............................................. 02/17/00 21,100,000 21,226,937 1,321,718 Japanese Yen ............................................... 02/17/00 6,640,000,000 65,375,565 (4,361,020) Swedish Krona .............................................. 02/17/00 22,600,000 2,654,352 97,718 ----------- Total ................................................. $(7,589,495) ===========
FUTURES CONTRACTS The Global (Ex-U.S.) Equity Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ------------ ----------- ---------- ---------- Index Futures Buy Contracts CAC 40 10 Euro Index, 53 Contracts................. March 2000 $3,077,992 $3,192,720 $ 114,728 FTSE 100 Index, 27 Contracts....................... March 2000 1,849,400 1,883,790 34,390 --------- $ 149,118 =========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $160,808. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31,1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $381,365,303) ............................................................ $532,405,791 Affiliated issuers (Cost $2,771,329) ................................................................ 2,771,329 Foreign currency, at value (Cost $1,738,121) .......................................................... 1,737,556 Receivables: Investment securities sold .......................................................................... 12,859,880 Dividends ........................................................................................... 508,371 Interest ............................................................................................ 61,567 Variation margin ...................................................................................... 325,534 ------------ TOTAL ASSETS .................................................................................... 550,670,028 ------------ LIABILITIES: Payables: Due to custodian bank ............................................................................... 12,540,000 Investment advisory fees ............................................................................ 347,426 Accrued expenses .................................................................................... 266,750 Net unrealized depreciation on forward foreign currency contracts ..................................... 7,589,495 ------------ TOTAL LIABILITIES ............................................................................... 20,743,671 ------------ NET ASSETS ............................................................................................. $529,926,357 ============ NET ASSETS CONSIST OF: Paid in capital ....................................................................................... $378,247,079 Accumulated undistributed net investment income ....................................................... 801,068 Accumulated net realized gain ......................................................................... 7,267,983 Net unrealized appreciation ........................................................................... 143,610,227 ------------ NET ASSETS ...................................................................................... $529,926,357 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $522,620,905 and 37,007,803 shares issued and outstanding) ........................................ $ 14.12 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,258 and 89 shares issued and outstanding) ...................................................... $ 14.13 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $7,304,194 and 523,037 shares issued and outstanding) ............................................. $ 13.96 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
INVESTMENT INCOME: Dividends (net of $232,250 for foreign taxes withheld) ................................................. $ 2,962,580 Interest (including securities lending income of $42,550) .............................................. 325,478 ----------- TOTAL INCOME ...................................................................................... 3,288,058 ----------- EXPENSES: Advisory ............................................................................................... 1,997,182 Administrative ......................................................................................... 187,236 Custodian .............................................................................................. 137,485 Distribution ........................................................................................... 28,818 Other .................................................................................................. 140,059 ----------- TOTAL EXPENSES .................................................................................... 2,490,780 Earnings credits .................................................................................. (3,421) ----------- NET EXPENSES ...................................................................................... 2,487,359 ----------- NET INVESTMENT INCOME ............................................................................. 800,699 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments ............................................................................................ 13,306,773 Futures contracts ...................................................................................... 117,870 Foreign currency transactions .......................................................................... (1,622,233) ----------- Net realized gain ................................................................................. 11,802,410 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ....................................................................... 73,363,341 Forward contracts ...................................................................................... (7,108,205) Futures contracts ...................................................................................... 149,118 Translation of other assets and liabilities denominated in foreign currency ............................ 44,141 ----------- Change in net unrealized appreciation or depreciation ............................................. 66,448,395 ----------- Net realized and unrealized gain ....................................................................... 78,250,805 ----------- Net increase in net assets resulting from operations ................................................... $ 79,051,504 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ------------------ -------------- OPERATIONS: Net investment income ................................................................... $ 800,699 $ 6,208,221 Net realized gain (loss) ................................................................ 11,802,410 (1,916,922) Change in net unrealized appreciation or depreciation ................................... 66,448,395 19,559,006 ------------- ------------- Net increase in net assets resulting from operations .................................. 79,051,504 23,850,305 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I ...................................................................... (2,727,974) (4,564,403) Brinson Class N ...................................................................... -- (121) UBS Investment Funds Class ........................................................... (9,831) (23,356) Distributions from net realized gain: Brinson Class I ...................................................................... (5,283,152) (4,498,729) Brinson Class N ...................................................................... (13) (126) UBS Investment Funds Class ........................................................... (74,353) (52,439) ------------- ------------- Total distributions to shareholders ..................................................... (8,095,323) (9,139,174) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold ............................................................................. 366,304,838 842,598,303 Shares issued in connection with acquisition of UBS International Equity Fund ........... -- 21,515,034 Shares issued on reinvestment of distributions .......................................... 7,789,808 8,583,385 Shares redeemed ......................................................................... (412,201,341) (834,980,130) ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions ......... (38,106,695) 37,716,592 ------------- ------------- TOTAL INCREASE IN NET ASSETS ............................................................ 32,849,486 52,427,723 ------------- ------------- NET ASSETS: Beginning of period ..................................................................... 497,076,871 444,649,148 ------------- ------------- End of period (including accumulated undistributed net investment income of $801,068 and $2,738,174, respectively) ............................................... $ 529,926,357 $ 497,076,871 ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year Ended June 30, December 31, 1999 -------------------------------------------------------------------- Brinson Class I (Unaudited) 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ....... $ 12.34 $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69 -------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income ................. 0.04* 0.16 0.18 0.18 0.18 0.15 Net realized and unrealized gain (loss) ............................... 1.95 0.27 0.30 1.97 2.05 (0.16) -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ...................... 1.99 0.43 0.48 2.15 2.23 (0.01) -------- -------- -------- -------- -------- -------- Less distributions: Distributions from investment income .. (0.07) (0.12) (0.18) (0.17) (0.18) -- Distributions from net realized gain .. (0.14) (0.12) (0.74) (0.56) (0.56) -- -------- -------- -------- -------- -------- -------- Total distributions ................ (0.21) (0.24) (0.92) (0.73) (0.74) -- -------- -------- -------- -------- -------- -------- Net asset value, end of period ............. $ 14.12 $ 12.34 $ 12.15 $ 12.59 $ 11.17 $ 9.68 ======== ======== ======== ======== ======== ======== Total return (non-annualized) .............. 16.29% 3.65% 4.78% 20.27% 23.64% (0.10)% Ratios/Supplemental data: Net assets, end of period (in 000s) ...... $522,621 $490,322 $439,329 $420,855 $212,366 $148,319 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ................... 0.98%** 0.99% 1.00% 1.00% 1.20% 1.23% After expense reimbursement and earnings credits ................... N/A N/A N/A N/A 1.00% 1.00% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ................... 0.33%** 1.35% 1.52% 1.83% 1.67% 1.93% After expense reimbursement and earnings credits ................... N/A N/A N/A N/A 1.87% 2.16% Portfolio turnover rate .................. 32% 74% 49% 25% 20% 14%
* The net investment income per share data was determined by using average shares outstanding throughout the period ** Annualized N/A = Not Applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year Year December 31, 1999 Ended Ended Brinson Class N (Unaudited) June 30, 1999 June 30,1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period .................................... $12.30 $12.14 $12.59 ------ ------ ------ Income from investment operations: Net investment income ................................................ 0.02* 0.12 0.16 Net realized and unrealized gain ..................................... 1.95 0.27 0.29 ------ ------ ------ Total income from investment operations ........................... 1.97 0.39 0.45 ------ ------ ------ Less distributions: Distributions from net investment income ............................. -- (0.11) (0.16) Distributions from net realized gain ................................. (0.14) (0.12) (0.74) ------ ------ ------ Total distributions ............................................... (0.14) (0.23) (0.90) ------ ------ ------ Net asset value, end of period .......................................... $14.13 $12.30 $12.14 ====== ====== ====== Total return (non-annualized) ........................................... 16.11% 3.30% 4.51% Ratios/Supplemental data: Net assets, end of period (in 000s) ................................... $ 1 $ 15 $ 11 Ratio of gross expenses to average net assets ......................... 1.23%** 1.24% 1.25% Ratio of net investment income to average net assets .................. 0.08%** 1.10% 1.27% Portfolio turnover rate ............................................... 32% 74% 49%
* The net investment income per share data was determined by using average shares outstanding throughout the period **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 - -------------------------------------------------------------------------------- GLOBAL (EX-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 eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The financial highlights of the UBS Investment Funds Class are presented separately. On December 19, 1998, the Global (Ex-U.S.) Equity Fund (the "Fund") acquired all the net assets of the UBS International Equity Fund pursuant to a plan of reorganization approved by shareholders on December 11, 1998. The acquisition was accomplished by a tax-free exchange of 1,827,955 Brinson Class I shares of the Global (Ex-U.S.) Equity Fund for the shares of UBS International Equity Fund outstanding on December 18, 1998. The net assets of the UBS International Equity Fund, including $38,003 of net unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Global (Ex-U.S.) Equity Fund and the UBS International Equity Fund immediately before the merger were $463,315,718 and $21,515,034, respectively. The following is a summary of significant accounting policies consistently followed by the Global (Ex-U.S.) Equity 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. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. 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 Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1999, 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. - -------------------------------------------------------------------------------- 19 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 UBS Investment Funds 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. I. Earnings Credits: The Funds have entered into an arrangement with their custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. This amount is reflected in the statement of operations. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00%, 1.25% and 1.84% of the average daily net assets of the Brinson Class I, Brinson Class N and UBS Investment Funds Class, respectively. Investment advisory fees for the six months ended December 31, 1999, were as follows: Advisory Advisory Fee Fees ---------- ---------- Global (Ex-U.S.) Equity Fund ........................... 0.80% $1,997,182 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 for the six months ended December 31, 1999 were $4,078. The Fund invests in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments at December 31, 1999 were as follows:
% of Sales Interest Net Purchases Proceeds Income Value Assets ------------ ------------ -------- ---------- ------ Global (Ex-U.S.) Equity Fund .......... $312,583,848 $314,113,357 $279,916 $2,771,329 0.52%
3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1999, excluding short-term investments, were as follows: Proceeds Purchases From Sales ------------ ------------ Global (Ex-U.S.) Equity Fund .................... $159,076,213 $189,257,631 4. FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the six months ended December 31, 1999, was an affiliate of 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 - -------------------------------------------------------------------------------- 20 - -------------------------------------------------------------------------------- GLOBAL (EX-U.S.) EQUITY FUND-- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. SECURITY LENDING The Fund loaned securities to certain brokers with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. The Fund receives securities, which are not reflected in the statement of assets and liabilities, as collateral against the loaned securities. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 105% of the value of global (ex-U.S.) securities loaned. The value of loaned securities and related collateral at December 31, 1999 was $2,606,682 and $3,193,500, respectively. 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the daily net assets of the Brinson Class N. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the UBS Investment Funds Class. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is based on the Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08% per year of the average daily unutilized balance of the line of credit. During the six months ended December 31, 1999, the Global (Ex-U.S.) Equity Fund had borrowings of $19,700,000 outstanding for 1 day under the agreement. 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 -------------------------- ----------------------------- Shares Value Shares Value ---------- ------------ ------------ ------------ Sales: Brinson Class I ............................................. 28,442,308 $365,506,747 72,650,740* $857,199,838 Brinson Class N ............................................. 30 373 365 4,263 UBS Investment Funds Class .................................. 63,305 797,718 587,229 6,909,236 ---------- ------------ ------------ ------------ Total Sales ............................................... 28,505,643 $366,304,838 73,238,334 $864,113,337 ========== ============ ============ ============ Dividend Reinvestment: Brinson Class I ............................................. 575,659 $ 7,708,071 726,832 $ 8,514,975 Brinson Class N ............................................. 1 13 21 247 UBS Investment Funds Class .................................. 6,168 81,724 5,917 68,163 ---------- ------------ ------------ ------------ Total Dividend Reinvestment ............................... 581,828 $ 7,789,808 732,770 $ 8,583,385 ========== ============ ============ ============ Redemptions: Brinson Class I ............................................. 31,747,436 $410,927,152 69,803,887 $829,422,705 Brinson Class N ............................................. 1,174 14,890 41 487 UBS Investment Funds Class .................................. 98,658 1,259,299 481,376 5,556,938 ---------- ------------ ------------ ------------ Total Redemptions ......................................... 31,847,268 $412,201,341 70,285,304 $834,980,130 ========== ============ ============ ============
* Includes shares issued in connection with acquisition of UBS International Equity Fund. - -------------------------------------------------------------------------------- 21 Distributed by: Funds Distributor, Inc. 60 State Street Boston, MA 02109 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- THE BRINSON FUNDS - -------------------------------------------------------------------------------- AUSTRALIA . BAHRAIN . BRAZIL . CHINA . FRANCE . GERMANY . JAPAN . SINGAPORE SWITZERLAND . UNITED KINGDOM . UNITED STATES [GRAPHIC] 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel:(800) 448-2430 [UBS LOGO APPEARS HERE] Investment Funds U.S. Balanced Fund U.S. Equity Fund U.S. Large Capitalization Equity Fund U.S. Large Capitalization Growth Fund U.S. Small Capitalization Growth Fund U.S. Bond Fund High Yield Fund Semi-Annual Report December 31, 1999 Trustees and Officers - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Chairman of the Board E. Thomas McFarlan President Thomas J. Digenan, CFA, CPA Vice President Debra L. Nichols Vice President Carolyn M. Burke, CPA Secretary and Treasurer David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary ================================================================================ 1 The Funds' Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Since the founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with individualized client relationships of the highest quality. Now, in 2000, more than 1,200 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, and a recognized leader in our industry. In North America, we make our investment capabilities available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are institutionally priced mutual funds that provide investors convenient access to our global investment expertise and capabilities. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios-balancing considerations for both risk and return. Brinson Partners, Inc. is a member of UBS Asset Management, the institutional asset management division of UBS AG. ================================================================================ 2 Table of Contents - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Shareholder Letter.......................................................... 4 U.S. Economic and Market Highlights......................................... 5 U.S. Balanced Fund.......................................................... 6 Schedule of Investments................................................ 9 Financial Statements................................................... 12 Financial Highlights................................................... 15 U.S. Equity Fund............................................................ 16 Schedule of Investments................................................ 19 Financial Statements................................................... 21 Financial Highlights................................................... 24 U.S. Large Capitalization Equity Fund....................................... 25 Schedule of Investments................................................ 28 Financial Statements................................................... 29 Financial Highlights................................................... 32 U.S. Large Capitalization Growth Fund....................................... 33 Schedule of Investments................................................ 36 Financial Statements................................................... 37 Financial Highlights................................................... 40 U.S. Small Capitalization Growth Fund....................................... 41 Schedule of Investments................................................ 44 Financial Statements................................................... 46 Financial Highlights................................................... 49 U.S. Bond Fund.............................................................. 50 Schedule of Investments................................................ 53 Financial Statements................................................... 56 Financial Highlights................................................... 59 High Yield Fund............................................................. 60 Schedule of Investments................................................ 63 Financial Statements................................................... 66 Financial Highlights................................................... 69 The UBS Investment Funds--Notes to Financial Statements..................... 70
================================================================================ 3 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds January 27, 2000 Dear Shareholder: We are pleased to present the semi-annual report for the UBS Investment Funds for the six months ended December 31, 1999. This report provides a discussion on the current U.S. Economic outlook. We will also provide our current portfolio strategies and performance updates for each of our seven Domestic Mutual Funds. The decade of the 1990s ended with a particularly challenging year. We continued to apply our proven value-based investment process across all of our portfolios, but our investment results varied substantially. In some areas, such as fixed income, our performance was excellent relative to both the market and our peers. In other areas, most notably multi-asset and equity portfolios, results were disappointing. Throughout 1999, our asset allocation strategies continued to focus on reducing exposure to the risks presented by equity prices that have been driven far above even optimistic estimates of underlying value. While the risk hedge in balanced portfolios had little net effect on performance through most of the year, the surge in equity prices late in the year hampered the returns relative to the benchmarks. The broad array of our equity portfolios, with the exception of the growth portfolios, significantly lagged their benchmarks in 1999. Some degree of underperformance was unavoidable as the U.S. market was increasingly driven by momentum, which in turn focused more tightly on narrow technology and e-commerce stocks. In such a market, the fundamental price/value discrepancies that are the core of our investment process are effectively ignored in the market. In addition, our stock selection was uncharacteristically weak and a meaningful source of the underperformance of our U.S. and Global Equity portfolios. In fixed income our U.S. Bond and High Yield portfolios outpaced the market and ranked highly in their respective universes of active managers. However, outside the U.S., our Global Bond portfolio generally underperformed, due almost entirely to strength in both the Japanese bond market and the yen, where we are underweighted. Our fundamental assessments across markets have been both accurate and perceptive, but momentum rather than the reality of fundamental value has continued to drive equity markets, particularly in the U.S. We have seen this phenomenon historically and it has always proven to be a sign of danger, that ultimately ends badly for the market in general and the momentum players in particular. Over time, these styles ebb and flow but momentum driven approaches have no lasting link to underlying fundamentals and always fail to deliver when viewed over meaningful horizons. It is these concerns which underlie our current asset allocation and equity portfolio strategies. 2000 will be a challenging year, but we are confident that remaining true to our investment disciplines will in the long run accrue to our shareholders' benefit. As always, we welcome your thoughts and comments, and appreciate your continued trust and the confidence you have placed in the UBS Investment Funds. Sincerely, /s/ Hanspeter A. Walder /s/ Raymond Simon Hanspeter A. Walder Raymond Simon Executive Director Managing Director Private Banking Private Banking ================================================================================ 4 U.S. Economic and Market Highlights ________________________________________________________________________________ [LOGO] UBS Investment Funds U.S. economic statistics continue to surprise financial markets. In the fourth quarter of 1999, real GDP rose a larger-than-expected 5.8%. Stronger consumer spending, inventory building and exports were the main contributors. Business investment was the only major component recording a slowdown, but most of that decline reflects a pre-Y2K pause in computer equipment installation. The strength in consumer spending was broad-based, with big-ticket purchases of autos and home furnishings registering the largest increases. For the year 1999 as a whole, GDP growth came in at 4.0 percent, almost the same as in 1998. Economic releases are apt to surpass market expectations in the first half of the year, and barring unexpected strong action by the Federal Reserve, real growth would remain strong in 2000. Tight labor market conditions are producing gradually rising wage pressures, in line with our expectations. Employment costs released for the fourth quarter registered a bigger-than-expected surge of 1.1 percent, the strongest since 1991. The fourth-quarter acceleration in employment costs primarily reflects faster growth in benefits. This has been the area of our concern, as generally slowing benefit expenses have been a major force in the moderate growth of labor costs in the 1990s. Inflation moved up in 1999, with consumer prices rising 2.7 percent. The rise primarily reflects higher energy prices, and the most recent surge in oil prices suggests that short-term inflation risks have increased. Core inflation, which tended to move sideways around 2 percent in 1999, is assumed to move higher in 2000, stimulated by rising unit labor costs. U.S. Environment Major Markets One Year Ended December 31, 1999 Total Return U.S. Cash Equivalents 4.44 U.S. Bonds -0.84 U.S. Equities 23.82 Salomon U.S. Treasury Benchmark Returns One Year Ended December 31, 1999 Maturity (Years) Total Return 1 4.26 2 1.94 3 -2.54 10 -8.41 30 -14.89 Top Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1999 Wireless Telecom 146.83 Semiconductors 79.84 Media 38.07 Heavy Electrical Eqp 34.94 Electronic Equipment 34.94 Computer Software 30.34 Oil Services 18.83 Energy Reserves 13.02 Securities & Asset Mgmt. 11.97 Telephone 10.47 Bottom Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1999 Thrifts -23.15 Restaurants -23.48 Defense & Aerospace -23.62 Construction & Real Prop -24.42 Food & Beverages -25.12 Environmental Services -27.54 Apparel & Textiles -31-82 Medical Services -37.07 Tobacco -50.91 ================================================================================ 5 U.S. Balanced Fund ________________________________________________________________________________ [LOGO] The UBS Investment Fund - U.S. Balanced has produced an annualized return of 7.43% since its inception on July 31, 1995, while the return of the U.S. Balanced Mutual Fund Index was 18.33% over this time period. Importantly however, the U.S. Balanced Fund's performance was achieved with an annualized volatility over the life of the Fund of 5.84%, or approximately 40% less than the benchmarks annualized volatility of 10.15%. In 1999, the UBS Investment Fund - U.S. Balanced returned -7.44% which was substantially below the benchmark return of 14.66%. The underperformance in 1999 was due primarily to the equity underweight, the bond overweight, and adverse market conditions which negatively impacted our fundamental value-based equity investment style. The strength of the U.S. equity market continued to be driven in part by the success of a small number of the largest capitalization companies, with technology stocks being shown particular favor. Our significant underweight in technology growth stocks, combined with a tilt away from the largest members of the index and overweight in value shares, contributed to a large underperformance of the U.S. equity portion of the U.S. Balanced Fund. In the U.S. bond market, our moderately long duration strategy had a negative impact on performance as yields increased during 1999 while the overweight and security selection in corporate issues had significantly positive impacts on performance. The allocation to U.S. Treasury Inflation Protected Securities (TIPS) hurt the Fund's performance while the allocation to lower-credit issues helped the Fund's performance. The sustained rapid advance of the overall U.S. equity market has, in our assessment, resulted in a pronounced level of overpricing and, therefore, an expected return that is absolutely unattractive and fails to compensate adequately for the risks inherent in equity investment. Bonds are now offering yields above our estimates of longer-term equilibrium levels. This is particularly true in the case of TIPS, where the uncertainties associated with future inflation do not introduce a risk element into the assessment of value. The Fund's strategy, therefore, remains significantly overweight bonds and underweight equities. A substantial portion of the bond allocation is currently held in TIPS. ================================================================================ 6 - ------------------------------------------------------------ Label A B C D - ------------------------------------------------------------ 49 7/31/99 14,706 19,213 23,385 12,923 - ------------------------------------------------------------ 50 8/31/99 14,482 19,092 23,167 12,914 - ------------------------------------------------------------ 51 9/30/99 14,162 18,848 22,561 13,069 - ------------------------------------------------------------ 52 10/31/99 13,985 19,646 23,996 13,108 - ------------------------------------------------------------ 53 11/30/99 13,985 20,073 24,800 13,106 - ------------------------------------------------------------ 54 12/31/99 13,726 21,032 26,683 13,046 - ------------------------------------------------------------ U.S. Balanced Fund - -------------------------------------------------------------------------------- [LOGO]UBS Investment Funds Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. Equities Energy....................................... 0.31% Capital Investment Capital Goods.............................. 2.70 Technology................................. 9.04 ------ 11.74 Basic Industries Chemicals.................................. 1.36 Housing/Paper.............................. 4.52 Metals..................................... 2.08 ------ 7.96 Consumer Non-Durables............................... 1.06 Retail/Apparel............................. 2.98 Autos/Durables............................. 1.86 Health: Drugs.............................. 3.04 Health: Non-Drugs.......................... 2.69 ------ 11.63 Financial Banks...................................... 4.73 Non-Banks.................................. 2.68 ------ 7.41 Utilities Electric................................... 3.63 Telephone.................................. 1.87 ------ 5.50 Transportation............................... 4.29% Services/Misc................................ 3.13 ------ Total U.S. Equities.................... 51.97* U.S. BONDS Corporate Bonds Asset-Backed............................... 3.39 Consumer................................... 0.83 Industrial Components...................... 0.65 Health Drugs............................... 0.29 Services/Miscellaneous..................... 1.35 Telecommunications......................... 2.16 Utilities.................................. 0.56 ------ Total U.S. Corporate Bonds............. 9.23 International Dollar Bonds................... 2.29 Corporate Mortgage-Backed Securities......... 1.88 U.S. Government Agencies..................... 2.47 U.S. Gov't. Mortgage-Backed Securities....... 8.66 U.S. Government Obligations.................. 21.19 ------ Total U.S. Bonds....................... 45.72* SHORT-TERM INVESTMENTS....................... 3.58* ------ TOTAL INVESTMENTS...................... 101.27 LIABILITIES, LESS CASH AND OTHER ASSETS,.......................... (1.27) ------ NET ASSETS................................... 100.00% ====== - -------------------------------------------------------------------------------- *The Fund held a long position in U.S. Treasury futures on December 31, 1999 which increased U.S. bond exposure from 45.72% to 72.72%. The Fund also held a short position in stock index futures which reduced U.S. Equity exposure from 51.97% to 24.45%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 3.58% to 4.10%. Asset Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ------------------------------------------ U.S. Equities 65% 25% U.S. Bonds 35 75 - ------------------------------------------ 100% 100% Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------ 1. FDX Corp. 2.02% 2. Electronic Data Systems Corp. 1.93 3. Burlington Northern Santa Fe Corp. 1.61 4. General Instrument Corp. 1.41 5. CIGNA Corp. 1.29 6. Compuware Corp. 1.18 7. Allergan, Inc. 1.18 8. Compaq Computer Corp. 1.12 9. Nextel Communications, Inc. 1.10 10. First Data Corp. 1.08 - ------------------------------------------------ =============================================================================== 8 U.S. Balanced Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------
Shares Value --------- ----------- U.S. Equities -- 51.97% Advanced Micro Devices, Inc. (b).................. 9,600 $ 277,800 Allergan, Inc..................................... 8,000 398,000 Alza Corp. (b).................................... 3,900 135,038 American Standard Companies., Inc. (b)............ 4,600 211,025 AmSouth Bancorp................................... 5,380 103,901 Aon Corp.......................................... 5,150 206,000 Armstrong World Industries, Inc................... 1,200 40,050 Baxter International, Inc......................... 4,900 307,781 Burlington Northern Santa Fe Corp................. 22,400 543,200 Central & South West Corp......................... 12,200 244,000 Champion Enterprises, Inc. (b).................... 3,900 33,394 Champion International Corp....................... 1,400 86,713 Chase Manhattan Corp.............................. 3,900 302,981 CIGNA Corp........................................ 5,400 435,037 Circuit City Stores-Circuit City Group............ 3,700 166,731 CMS Energy Corp................................... 4,100 127,869 CommScope, Inc. (b)............................... 1,666 67,161 Compaq Computer Corp.............................. 13,900 376,169 Computer Sciences Corp. (b)....................... 3,100 293,337 Compuware Corp. (b)............................... 10,700 398,575 Consolidated Stores Corp. (b)..................... 5,500 89,375 Corning, Inc...................................... 1,500 193,406 Covance, Inc. (b)................................. 2,875 31,086 Delhaize America, Inc............................. 2,766 56,184 Dial Corp......................................... 3,000 72,938 Dominion Resources, Inc........................... 6,200 243,350 Eastman Chemical Co............................... 2,500 119,219 Electronic Data Systems Corp...................... 9,700 649,294 Eli Lilly and Co.................................. 2,100 139,650 Emerson Electric Co............................... 5,600 321,300 Entergy Corp...................................... 5,800 149,350 FDX Corp. (b)..................................... 16,600 679,562 Federal-Mogul Corp................................ 6,200 124,775 Federated Department Stores, Inc. (b)............. 1,600 80,900 First Data Corp................................... 7,358 362,841 Fleet Boston Financial Corp....................... 8,505 296,080 Fleetwood Enterprises, Inc........................ 2,900 59,813 Fort James Corp................................... 7,800 213,525 Gateway, Inc. (b)................................. 2,000 144,125 GATX Corp......................................... 1,800 60,750 General Instrument Corp........................... 5,600 476,000 Genzyme Corp. (b)................................. 3,000 135,000 GreenPoint Financial Corp......................... 8,600 204,787 Hibernia Corp., Class A........................... 6,500 69,063 Household International, Inc...................... 7,300 271,925 Illinois Tool Works, Inc.......................... 5,100 344,569 IMC Global, Inc................................... 9,600 157,200 Johnson Controls, Inc............................. 2,600 147,875 Kimberly-Clark Corp............................... 4,900 319,725 Kroger Co. (b).................................... 3,700 69,838 Lafarge Corp...................................... 3,600 99,450 Lear Corp. (b).................................... 5,400 172,800 Lexmark International Group, Inc. (b)............. 1,000 90,500 Lincoln National Corp............................. 2,200 88,000 Lockheed Martin Corp.............................. 8,042 175,919 Lyondell Chemical Co.............................. 6,500 82,875 Martin Marietta Materials, Inc.................... 2,636 108,076 Masco Corp........................................ 14,000 355,250 Mattel, Inc....................................... 14,200 $ 186,375 Mead Corp......................................... 2,900 125,969 Monsanto Co....................................... 4,700 167,437 National Service Industries, Inc.................. 2,200 64,900 New York Times Co................................. 3,900 191,587 Newell Rubbermaid, Inc............................ 9,100 263,900 Nextel Communications, Inc. (b)................... 3,600 371,250 Norfolk Southern Corp............................. 8,000 164,000 Owens-Illinois, Inc. (b).......................... 2,100 52,631 Peco Energy Co.................................... 4,000 139,000 Pentair, Inc...................................... 3,000 115,500 Philip Morris Companies, Inc...................... 7,100 164,631 PNC Bank Corp..................................... 3,700 164,650 Praxair, Inc...................................... 2,000 100,625 Raytheon Co., Class B............................. 8,400 223,125 Reliaster Financial Corp.......................... 2,200 86,213 SBC Communications, Inc........................... 5,300 258,375 Southdown, Inc.................................... 3,116 160,863 St. Jude Medical, Inc. (b)........................ 6,300 193,331 Torchmark Corp.................................... 3,000 87,188 Tyson Foods, Inc., Class A........................ 7,400 120,250 U.S. Bancorp...................................... 5,759 137,136 Ultramar Diamond Shamrock Corp.................... 4,590 104,136 Unisys Corp. (b).................................. 3,600 114,975 United Healthcare Corp............................ 4,500 239,062 USG Corp.......................................... 2,100 98,963 Viad Corp......................................... 4,400 122,650 W.W. Grainger, Inc................................ 2,700 129,094 Watson Pharmaceutical Co. (b)..................... 5,200 186,225 Wells Fargo and Co................................ 7,800 315,412 Westvaco Corp..................................... 3,600 117,450 Xerox Corp........................................ 11,000 249,562 York International Corp........................... 3,400 93,288 ---------- Total U.S. Equities (Cost $17,329,472)............ 17,520,890 ---------- Face Amount --------- Bonds -- 45.72% U.S. Corporate Bonds -- 9.23% Archer Daniels 6.950%, due 12/15/69............... $ 250,000 218,716 Electronic Data System 7.125%, due 10/15/09............................ 125,000 121,845 MBNA Global Capital Securities, FRN 5.795%, due 02/01/27............................ 215,000 176,630 Noram Energy Corp. 6.375%, due 11/01/03........... 200,000 190,227 PanAmSat Corp. 6.000%, due 01/15/03............... 335,000 311,771 Peco Energy Transition Trust 6.130%, due 03/01/09............................ 215,000 197,830 PP&L Transition Bond Company LLC 7.050%, due 06/25/09............................ 200,000 199,680 Rite Aid Corp., 144A, 6.125%, due 12/15/08........ 140,000 95,200 Sprint Capital Corp. 6.875%, due 11/15/28......... 200,000 177,914 TCI Communications, Inc. 8.750%, due 08/01/15............................ 220,000 240,105 Time Warner 7.570%, due 02/01/24.................. 290,000 278,953 UCFC Home Equity Loan 97-C, Class A8, FRN 5.069%, due 09/15/27........................ 568,857 569,517 U.S.A. Waste Services 6.500%, due 12/15/02........ 360,000 332,706 ---------- 3,111,094 ----------
=============================================================================== 9 U.S. Balanced Fund -- Schedule of Investments December 31, 1999 (Unaudited) - ------------------------------------------------------------------------------- Face Amount Value ---------- ------------ International Dollar Bonds -- 2.29% Abbey National PLC, Resettable Perpetual Preferred 6.700%, due 06/29/49................... $ 250,000 $ 226,341 Credit Suisse-London, 144A, Resettable Perpetual Preferred 7.900%, due 05/01/07 270,000 256,894 Empresa Nacional de Electricidad S.A 8.125%, due 02/01/69............................. 200,000 162,000 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14....................... 135,000 126,801 ------------ 772,036 ------------ Corporate Mortgage-Backed Securities -- 1.88% Heller Financial Commercial Mortgage Assets, Series 99-PH1, Class A1 6.500%, due 05/15/61............................. 178,117 172,271 LB Commercial Conduit Mortgage Trust, Series 99-C1, Class A1, 6.410%, due 10/15/30............................. 88,171 84,951 Residential Asset Securitization Trust 97-A10, Class A1, 7.250%, due 12/25/27................... 344,335 343,426 Residential Asset Securitization Trust 97-A11, Class A2, 7.000%, due 01/25/28................... 34,869 34,772 ------------ 635,420 ------------ U.S. Government Mortgage-Backed Securities -- 8.66% Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23............................. 326,964 330,799 9.000%, due 03/01/24............................. 151,892 159,020 Federal Home Loan Mortgage Corp.................... 9.000%, due 01/01/29............................. 139,320 144,936 Federal National Mortgage Assoc., Series 97-72, Class EG, 0.000%, due 09/25/22............................. 202,300 175,284 Federal National Mortgage Association.............. 7.500%, due 07/01/10............................. 247,773 249,814 7.500%, due 12/01/27............................. 215,656 213,397 7.600%, due 06/17/19............................. 278,827 280,271 FNCI, 8.000%, due 02/01/13......................... 276,984 282,581 Government National Mortgage Association 7.000%, due 12/15/23............................. 128,624 125,326 7.500%, due 06/15/24............................. 500,000 494,531 8.000%, due 08/15/22............................. 455,988 463,037 ------------ 2,918,996 ------------ U.S. Government Agencies -- 2.47% Jordan Aid, 8.750%, due 09/01/19................... 775,765 834,165 ------------ U.S. Government Obligations -- 21.19% U.S. Treasury Bond 8.000%, due 11/15/21 $ 495,000 $ 561,515 U.S. Treasury Inflation Indexed Note 3.625%, due 04/15/28............................. 2,440,000 2,267,719 3.875%, due 04/15/29............................. 4,400,000 4,204,816 U.S. Treasury Note 5.625%, due 05/15/08............ 115,000 108,172 ------------ 7,142,222 ------------ Total U.S. Bonds (Cost $16,140,158)................ 15,413,933 ------------ Short-Term Investments -- 3.58% U.S. Treasury Bills -- 2.07% U.S. Treasury Bill, due 02/03/00................... 700,000 696,968 ------------ Investment Companies -- 1.51% Shares ---------- Brinson Supplementary Trust U.S. Cash Management Prime Fund.............................. 507,697 507,697 ------------ Total Short-Term Investments (Cost $1,204,748)................................ 1,204,665 ------------ Total Investments (Cost $34,674,378) -- 101.27% (a)................ 34,139,488 Liabilities, less cash and other assets -- (1.27%).......................... (429,267) ------------ Net Assets -- 100%................................. $ 33,710,221 ============ See accompanying notes to schedule of investments. ================================================================================ 10 U.S. Balanced Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $34,674,378; and net unrealized depreciation consisted of: Gross unrealized appreciation............................................................. $ 2,514,223 Gross unrealized depreciation............................................................. (3,049,113) ------------ Net unrealized depreciation.......................................................... $ (534,890) ============
(b) Non-income producing security FRN: Floating rate note--The rate disclosed is that in effect at December 31, 1999. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $478,895 or 1.42% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally returns the right to call such a bond. FUTURES CONTRACTS The U.S. Balanced Fund had the following open futures contracts as of December 31, 1999:
Expiration Cost/ Current Unrealized Date Proceeds Value Loss ---------- ----------- ----------- ---------- U.S. Interest Rate Futures Buy Contracts 5 Year U.S. Treasury Notes, 69 contracts........... March 2000 $ 6,832,561 $ 6,764,156 $ (68,405) 10 Year U.S. Treasury Notes, 13 contracts.......... March 2000 1,268,302 1,246,172 (22,130) 30 Year U.S. Treasury Bonds, 12 contracts.......... March 2000 1,118,459 1,091,250 (27,209) Index Futures Sale Contracts Standard & Poor's 500, 25 contracts................ March 2000 9,000,450 9,276,250 (275,800) ---------- Total......................................... $ (393,544) ==========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $696,968. See accompanying notes to financial statements. ================================================================================ 11 U.S. Balanced Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $34,166,681)................................................. $ 33,631,791 Affiliated issuers (Cost $507,697)...................................................... 507,697 Cash....................................................................................... 392 Receivables: Investment securities sold.............................................................. 2,892 Dividends............................................................................... 25,956 Interest................................................................................ 165,142 Other assets............................................................................... 215 ------------ TOTAL ASSETS......................................................................... 34,334,085 ------------ LIABILITIES: Payables: Investment securities purchased......................................................... 502,266 Investment advisory fees................................................................ 15,445 Variation margin........................................................................ 53,015 Accrued expenses........................................................................ 53,138 ------------ TOTAL LIABILITIES.................................................................... 623,864 ------------ NET ASSETS................................................................................. $ 33,710,221 ------------ NET ASSETS CONSIST OF: Paid in capital.......................................................................... $ 35,219,429 Accumulated undistributed net investment income.......................................... 3,059 Distributions in excess of net realized gain............................................. (583,833) Net unrealized depreciation.............................................................. (928,434) ------------ NET ASSETS........................................................................... $ 33,710,221 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $32,262,816 and 3,841,353 shares issued and outstanding).......................................................... $ 8.40 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,075 and 128 shares issued and outstanding)................................................................. $ 8.40 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,446,330 and 173,243 shares issued and outstanding).......................................................... $ 8.35 ============
See accompanying notes to financial statements. ================================================================================ 12 U.S. Balanced Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Interest................................................................................... $ 582,877 Dividends.................................................................................. 133,281 ------------ TOTAL INCOME......................................................................... 716,158 ------------ EXPENSES: Advisory................................................................................... 131,459 Professional............................................................................... 18,552 Registration............................................................................... 17,892 Distribution............................................................................... 4,148 Printing................................................................................... 4,114 Other...................................................................................... 7,576 ------------ TOTAL EXPENSES....................................................................... 183,741 Expenses deferred by Advisor......................................................... (28,977) Earnings credits..................................................................... (7) ------------ NET EXPENSES......................................................................... 154,757 ------------ NET INVESTMENT INCOME................................................................ 561,401 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.............................................................................. 406,080 Futures contracts........................................................................ (775,642) ------------ Net realized loss.................................................................... (369,562) ------------ Change in net unrealized appreciation or depreciation on: Investments................................................................................ (3,394,694) Futures contracts.......................................................................... 142,826 ------------ Change in net unrealized appreciation or depreciation................................ (3,251,868) ------------ Net realized and unrealized loss............................................................. (3,621,430) ------------ Net decrease in net assets resulting from operations......................................... $ (3,060,029) ============
See accompanying notes to financial statements. ================================================================================ 13 U.S. Balanced Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- -------------- OPERATIONS: Net investment income.............................................................. $ 561,401 $ 1,558,422 Net realized gain (loss)........................................................... (369,562) 4,257,213 Change in net unrealized appreciation or depreciation.............................. (3,251,868) (5,162,345) ------------ ------------ Net increase (decrease) in net assets resulting from operations.................... (3,060,029) 653,290 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.................................................................. (729,082) (2,554,055) Brinson Class N.................................................................. (23) (68) UBS Investment Funds Class....................................................... (29,460) (123,921) Distributions in excess of net realized gain: Brinson Class I.................................................................. (225,248) (9,074,452) Brinson Class N.................................................................. (7) (243) UBS Investment Funds Class....................................................... (10,418) (483,100) ------------ ------------ Total distributions to shareholders.................................................. (994,238) (12,235,839) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold........................................................................ 5,675,756 14,184,340 Shares issued on reinvestment of distributions..................................... 970,972 12,036,064 Shares redeemed.................................................................... (8,275,334) (57,681,932) ------------ ------------ Net decrease in net assets resulting from capital share transactions............... (1,628,606) (31,461,528) ------------ ------------ TOTAL DECREASE IN NET ASSETS................................................. (5,682,873) (43,044,077) ------------ ------------ NET ASSETS: Beginning of period................................................................ 39,393,094 82,437,171 ------------ ------------ End of period (including accumulated undistributed net investment income of $3,059 and $200,223, respectively)..................................... $ 33,710,221 $ 39,393,094 ============ ============
See accompanying notes to financial statements. ================================================================================ 14 U.S. Balanced Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended August 31, 1995* December 31, 1999 Year Ended June 30, Through ---------------------------------------- UBS Investment Funds Class (Unaudited) 1999 1998 1997 June 30, 1996 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............ $ 9.32 $ 12.19 $ 12.46 $ 11.67 $ 11.38 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income....................... 0.13** 0.27** 0.42** 0.38 0.42 Net realized and unrealized gain (loss)..... (0.87) 0.18 0.95 1.31 0.86 ------- ------- ------- ------- ------- Total income (loss) from investment operations................ (0.74) 0.45 1.37 1.69 1.28 ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income.... (0.17) (0.67) (0.70) (0.36) (0.42) Distributions from net realized gain........ (0.06) (2.65) (0.94) (0.54) (0.57) ------- ------- ------- ------- ------- Total distributions.................... (0.23) (3.32) (1.64) (0.90) (0.99) ------- ------- ------- ------- ------- Net asset value, end of period.................. $ 8.35 $ 9.32 $ 12.19 $ 12.46 $ 11.67 ======= ======= ======= ======= ======= Total return (non-annualized)................... (7.44)% 4.13% 11.79% 14.99% 11.54% Ratios/Supplemental data: Net assets, end of period (in 000s)........... $ 1,446 $ 1,789 $ 1,880 $ 1,649 $ 779 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits..................... 1.45%*** 1.46% 1.31% 1.38% 1.51%*** After expense reimbursement and earnings credits..................... 1.30%*** 1.30% 1.30% 1.30% 1.30%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits..................... 2.35%*** 2.50% 3.38% 3.28% 3.26%*** After expense reimbursement and earnings credits..................... 2.50%*** 2.66% 3.39% 3.36% 3.47%*** Portfolio turnover rate....................... 42% 113% 194% 329% 240%
* Commencement of UBS Investment Funds Class ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. ================================================================================ 15 U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Since its inception on July 31, 1995, the UBS Investment Fund - U.S. Equity has provided an annualized return of 16.71%, compared to the 24.88% return of its benchmark, the Wilshire 5000 Equity Index. The annualized volatility of the Fund has been 15.30% since its inception, below the 15.33% volatility for the benchmark. In 1999, the Fund's total return of -4.51% trailed the 23.56% return for its benchmark. While these results are disappointing, we feel that the Fund is now well positioned as we move into the year 2000. Recent events and stratification of the U.S. market make our current investment strategies very appealing and our conviction remains higher than ever. Market exposure (average beta of .96) detracted modestly from Fund relative performance in the very strong equity environment that characterized 1999. Factor positions detracted from performance for the full year. The most significant negatives were the underexposure to stocks ranked high in relative strength and size and low in earnings/price, as a relatively narrow segment of the largest capitalization stocks, especially in the technology sector, continued to dominate market performance. Fundamentally driven investment styles tend to perform poorly in such narrow momentum-driven market environments. The Fund has minimal exposure to these largest stocks based upon our analysis, which indicates they are meaningfully overextended. Industry weightings also detracted from active returns during 1999. The underweight to the technology software and hardware sectors had the largest negative effect on performance. Investors have been willing to pay significant premiums for recent strong relative revenue growth and to extrapolate perceived earnings growth far into the future-in spite of rising interest rates which usually dampen high-multiple issues. We believe there is a low probability that such high implied earnings and profitability levels can be achieved, much less sustained, in a competitive economy. Our overweight in economically sensitive construction and transportation stocks also detracted from performance due to concerns over higher energy costs and fears that higher interest rates would pressure building activity. The pick-up in the global industrial economy helps a number of more economically sensitive sectors that have been in recession-like conditions for much of the past two years. Our exposure in the construction area is oriented toward non-residential infrastructure and basic building materials, and is not dependent upon higher residential construction spending. Stock selection had the largest negative impact on active returns for the full year. Among large capitalization issues, the best performers were Corning, First Data and Computer Sciences, while the most detrimental to performance were our weightings in Xerox, Lockheed Martin, FDX Corp and Raytheon. Given the shift toward momentum-based styles, investors had little tolerance for shortfalls in quarterly earnings and severely punished such disappointments. In the intermediate capitalization segment of the Fund, the most positive contributors were General Instruments, Circuit City and Allergan, while the weakest were Advanced Micro Devices, Fort James and Federal Mogul. ================================================================================ 16 U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO]UBS Investment Funds Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Equity -13.34% -4.51% 11.83% 16.71% - -------------------------------------------------------------------------------- Wilshire 5000 Equity Index 10.45 23.56 26.04 24.88 - --------------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund -- U.S. Equity. 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 UBS Investment Fund -- U.S. Equity and the Wilshire 5000 Equity Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund -- U.S. Equity vs. Wilshire 5000 Equity Index Wealth Value with Dividends Reinvested Label Label A B - -------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Equity Wilshire 5000 Equity Index - -------------------------------------------------------------------------------- 1 7/31/95 10,000 10,000 - -------------------------------------------------------------------------------- 2 8/31/95 10,184 10,098 - -------------------------------------------------------------------------------- 3 9/30/95 10,570 10,483 - -------------------------------------------------------------------------------- 4 10/31/95 10,528 10,377 - -------------------------------------------------------------------------------- 5 11/30/95 11,122 10,817 - -------------------------------------------------------------------------------- 6 12/31/95 11,335 10,994 - -------------------------------------------------------------------------------- 7 1/31/96 11,790 11,288 - -------------------------------------------------------------------------------- 8 2/28/96 11,971 11,486 - -------------------------------------------------------------------------------- 9 3/31/96 12,194 11,612 - -------------------------------------------------------------------------------- 10 4/30/96 12,418 11,898 - -------------------------------------------------------------------------------- 11 5/31/96 12,615 12,224 - -------------------------------------------------------------------------------- 12 6/30/96 12,570 12,123 - -------------------------------------------------------------------------------- 13 7/31/96 11,958 11,469 - -------------------------------------------------------------------------------- 14 8/31/96 12,415 11,836 - -------------------------------------------------------------------------------- 15 9/30/96 12,966 12,466 - -------------------------------------------------------------------------------- 16 10/31/96 13,242 12,640 - -------------------------------------------------------------------------------- 17 11/30/96 14,156 13,478 - -------------------------------------------------------------------------------- 18 12/31/96 14,157 13,326 - -------------------------------------------------------------------------------- 19 1/31/97 14,663 14,039 - -------------------------------------------------------------------------------- 20 2/28/97 14,757 14,033 - -------------------------------------------------------------------------------- 21 3/31/97 14,260 13,412 - -------------------------------------------------------------------------------- 22 4/30/97 14,691 13,997 - -------------------------------------------------------------------------------- 23 5/31/97 15,759 14,989 - -------------------------------------------------------------------------------- 24 6/30/97 16,499 15,677 - -------------------------------------------------------------------------------- 25 7/31/97 17,756 16,883 - -------------------------------------------------------------------------------- 26 8/31/97 17,053 16,248 - -------------------------------------------------------------------------------- 27 9/30/97 17,812 17,207 - -------------------------------------------------------------------------------- 28 10/31/97 16,865 16,634 - -------------------------------------------------------------------------------- 29 11/30/97 17,193 17,178 - -------------------------------------------------------------------------------- 30 12/31/97 17,587 17,496 - -------------------------------------------------------------------------------- 31 1/31/98 17,697 17,591 - -------------------------------------------------------------------------------- 32 2/28/98 19,232 18,871 - -------------------------------------------------------------------------------- 33 3/31/98 20,326 19,816 - -------------------------------------------------------------------------------- 34 4/30/98 20,115 20,051 - -------------------------------------------------------------------------------- 35 5/31/98 19,814 19,517 - -------------------------------------------------------------------------------- 36 6/30/98 19,931 20,202 - -------------------------------------------------------------------------------- 37 7/31/98 19,418 19,759 - -------------------------------------------------------------------------------- 38 8/31/98 16,644 16,682 - -------------------------------------------------------------------------------- 39 9/30/98 17,840 17,772 - -------------------------------------------------------------------------------- 40 10/31/98 19,187 19,094 - -------------------------------------------------------------------------------- 41 11/30/98 19,991 20,296 - -------------------------------------------------------------------------------- 42 12/31/98 20,737 21,595 - -------------------------------------------------------------------------------- 43 1/31/99 20,587 22,389 - -------------------------------------------------------------------------------- 44 2/28/99 19,831 21,577 - -------------------------------------------------------------------------------- 45 3/31/99 20,470 22,410 - -------------------------------------------------------------------------------- 46 4/30/99 22,303 23,484 - -------------------------------------------------------------------------------- 47 5/31/99 22,005 22,970 - -------------------------------------------------------------------------------- 48 6/30/99 22,847 24,159 - -------------------------------------------------------------------------------- 49 7/31/99 21,875 23,385 - -------------------------------------------------------------------------------- 50 8/31/99 21,106 23,167 - -------------------------------------------------------------------------------- 51 9/30/99 19,557 22,561 - -------------------------------------------------------------------------------- 52 10/31/99 19,568 23,996 - -------------------------------------------------------------------------------- 53 11/30/99 19,675 24,800 - -------------------------------------------------------------------------------- 54 12/31/99 19,790 26,683 - -------------------------------------------------------------------------------- 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. ================================================================================ 17 U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Energy...................................... 0.57% Capital Investment Capital Goods............................. 5.02 Technology................................ 16.51 ------- 21.53 Basic Industries Chemicals................................. 2.50 Housing/Paper............................. 8.31 Metals.................................... 3.80 ------- 14.61 Consumer Non-Durables.............................. 2.06 Retail/Apparel............................ 5.53 Autos/Durables............................ 3.63 Health: Drugs............................. 5.60 Health: Non-Drugs......................... 5.00 ------- 21.82 Financial Banks..................................... 8.67% Non-Banks................................. 4.93 ------- 13.60 Utilities Electric.................................. 7.07 Telephone................................. 3.42 ------- 10.49 Transportation.............................. 7.85 Services/Misc............................... 5.73 ------- Total U.S. Equities.................... 96.20* SHORT-TERM INVESTMENTS...................... 3.52* ------- TOTAL INVESTMENTS...................... 99.72 CASH AND OTHER ASSETS, LESS LIABILITIES............................ 0.28 ------- NET ASSETS.................................. 100.00% ======= - -------------------------------------------------------------------------------- *The Fund held a long position in stock index futures which increased U.S. Equity exposure from 96.20% to 99.66%. This adjustment results in a net decrease in the Fund's exposure to Short-Term Investments from 3.52% to 0.06%. Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - -------------------------------------------------------------- 1. FDX Corp. 3.66% 2. Electronic Data Systems Corp. 3.54 3. Burlington Northern Santa Fe Corp. 2.97 4. General Instrument Corp. 2.59 5. CIGNA Corp. 2.39 6. Allergan, Inc. 2.18 7. Compuware Corp. 2.17 8. Compaq Computer Corp. 2.05 9. Nextel Communications, Inc., Class A 2.03 10. First Data Corp. 1.97 - -------------------------------------------------------------- ================================================================================ 18 U.S. Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value ---------- ------------ U.S. Equities -- 96.20% Advanced Micro Devices, Inc. (b)...................... 259,900 $ 7,520,856 Allergan, Inc......................................... 221,400 11,014,650 Alza Corp. (b)........................................ 105,800 3,663,325 American Standard Companies., Inc. (b)................ 126,800 5,816,950 AmSouth Bancorp....................................... 148,209 2,862,286 Aon Corp.............................................. 140,350 5,614,000 Armstrong World Industries, Inc....................... 33,500 1,118,063 Baxter International, Inc............................. 135,100 8,485,969 Burlington Northern Santa Fe Corp..................... 616,900 14,959,825 Central & South West Corp............................. 335,000 6,700,000 Champion Enterprises, Inc. (b)........................ 108,100 925,606 Champion International Corp........................... 38,300 2,372,206 Chase Manhattan Corp.................................. 106,700 8,289,256 CIGNA Corp............................................ 149,650 12,056,178 Circuit City Stores-Circuit City Group................ 101,700 4,582,856 CMS Energy Corp....................................... 113,750 3,547,578 CommScope, Inc. (b)................................... 44,899 1,809,991 Compaq Computer Corp.................................. 382,500 10,351,406 Computer Sciences Corp. (b)........................... 84,400 7,986,350 Compuware Corp. (b)................................... 294,500 10,970,125 Consolidated Stores Corp. (b)......................... 151,900 2,468,375 Corning, Inc.......................................... 40,700 5,247,756 Covance, Inc. (b)..................................... 107,550 1,162,884 Delhaize America, Inc................................. 77,232 1,568,775 Dial Corp............................................. 87,200 2,120,050 Dominion Resources, Inc............................... 169,400 6,648,950 Eastman Chemical Co................................... 67,950 3,240,366 Electronic Data Systems Corp.......................... 266,900 17,865,619 Eli Lilly and Co...................................... 57,700 3,837,050 Emerson Electric Co................................... 153,700 8,818,537 Entergy Corp.......................................... 236,500 6,089,875 FDX Corp. (b)......................................... 451,600 18,487,375 Federal-Mogul Corp.................................... 171,300 3,447,413 Federated Department Stores, Inc. (b)................. 44,300 2,239,919 First Data Corp....................................... 201,430 9,933,017 Fleet Boston Financial Corp........................... 233,955 8,144,558 Fleetwood Enterprises, Inc............................ 78,700 1,623,188 Fort James Corp....................................... 213,600 5,847,300 Gateway Inc. (b)...................................... 53,300 3,840,931 GATX Corp............................................. 49,400 1,667,250 General Instrument Corp............................... 153,450 13,043,250 Genzyme Corp. (b)..................................... 81,450 3,665,250 GreenPoint Financial Corp............................. 236,900 5,641,181 Hibernia Corp......................................... 179,250 1,904,531 Household International, Inc.......................... 199,600 7,435,100 Illinois Tool Works, Inc.............................. 139,300 9,411,456 IMC Global, Inc....................................... 262,800 4,303,350 Johnson Controls, Inc................................. 79,000 4,493,125 Kimberly-Clark Corp................................... 135,750 8,857,687 Kroger Co. (b)........................................ 102,200 1,929,025 Lafarge Corp.......................................... 98,400 2,718,300 Lear Corp. (b)........................................ 151,350 4,843,200 Lexmark International Group, Inc. (b)................. 30,500 2,760,250 Lincoln National Corp................................. 60,300 2,412,000 Lockheed Martin Corp.................................. 237,352 5,192,075 Lyondell Chemical Co.................................. 177,250 2,259,938 Martin Marietta Materials, Inc........................ 73,707 3,021,987 Masco Corp............................................ 384,600 9,759,225 Mattel, Inc........................................... 387,600 5,087,250 Mead Corp............................................. 79,000 3,431,563 Monsanto Co........................................... 129,400 4,609,875 National Service Industries, Inc...................... 60,600 1,787,700 New York Times Co..................................... 107,200 5,266,200 Newell Rubbermaid, Inc................................ 250,700 7,270,300 Nextel Communications, Inc., Class A (b).............. 99,350 10,245,469 Norfolk Southern Corp................................. 218,500 4,479,250 Owens-Illinois, Inc. (b).............................. 67,900 1,701,744 Peco Energy Co........................................ 111,000 3,857,250 Pentair, Inc.......................................... 83,800 3,226,300 Philip Morris Companies, Inc.......................... 195,550 4,534,316 PNC Bank Corp......................................... 100,400 4,467,800 Praxair, Inc.......................................... 55,600 2,797,375 Raytheon Co., Class B................................. 229,650 6,100,078 Reliaster Financial Corp.............................. 60,600 2,374,763 SBC Communications, Inc............................... 143,500 6,995,625 Southdown, Inc........................................ 85,140 4,395,352 St. Jude Medical, Inc. (b)............................ 174,500 5,354,969 Torchmark Corp........................................ 82,600 2,400,563 Tyson Foods, Inc...................................... 229,250 3,725,312 U.S. Bancorp.......................................... 158,141 3,765,733 Ultramar Diamond Shamrock Corp........................ 127,018 2,881,721 Unisys Corp. (b)...................................... 99,500 3,177,781 United Healthcare Corp................................ 123,300 6,550,312 USG Corp.............................................. 56,500 2,662,563 Viad Corp............................................. 121,150 3,377,056 W.W. Grainger, Inc.................................... 80,400 3,844,125 Watson Pharmaceutical Co. (b)......................... 143,400 5,135,512 Wells Fargo and Co.................................... 215,200 8,702,150 Westvaco Corp......................................... 100,200 3,269,025 Xerox Corp............................................ 297,300 6,744,994 York International Corp............................... 92,600 2,540,713 ------------ Total U.S. Equities (Cost $439,940,416)............... 485,358,333 ------------ Short-Term Investments -- 3.52% Investment Companies -- 3.52% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $17,738,488)....................... 17,738,488 17,738,488 ------------ Total Investments (Cost $457,678,904) -- 99.72% (a)................... 503,096,821 Cash and other assets, less liabilities -- 0.28%...... 1,405,055 ------------ Net Assets -- 100%.................................... $504,501,876 ============
See accompanying notes to schedule of investments. ================================================================================ 19 U.S. Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $457,678,904; and net unrealized appreciation consisted of: Gross unrealized appreciation............... $ 97,065,747 Gross unrealized depreciation............... (51,647,830) ------------- Net unrealized appreciation............ $ 45,417,917 ============= (b) Non-income producing security. FUTURES CONTRACTS The U.S. Equity Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ---------- ------------ ----------- ---------- Index Futures Buy Contracts Standard & Poor's 500, 47 contracts....... March 2000 $17,310,345 $17,439,350 $129,005 ========
The segregated cash pledged to cover margin requirements for the open futures positions at December 31, 1999 was $956,250. 20 See accompanying notes to financial statements. ================================================================================ 20 U.S. Equity Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $439,940,416)........................................ $ 485,358,333 Affiliated issuers (Cost $17,738,488).......................................... 17,738,488 Cash.............................................................................. 915,483 Receivables: Dividends....................................................................... 948,360 Interest........................................................................ 8,302 Variation margin................................................................ 39,950 Other assets...................................................................... 7,343 ---------------- TOTAL ASSETS.................................................................. 505,016,259 ---------------- LIABILITIES: Payables: Investment securities purchased................................................. 203,681 Investment advisory fees........................................................ 310,702 ---------------- TOTAL LIABILITIES............................................................. 514,383 ---------------- NET ASSETS......................................................................... $ 504,501,876 ================ NET ASSETS CONSIST OF: Paid in capital................................................................... $ 447,548,416 Accumulated undistributed net investment income................................... 2,575,151 Accumulated net realized gain..................................................... 8,831,387 Net unrealized appreciation....................................................... 45,546,922 ---------------- NET ASSETS.................................................................... $ 504,501,876 ================ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $445,593,097 and 26,487,668 shares issued and outstanding)....... $ 16.82 ================ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $8,136,405 and 485,875 shares issued and outstanding)............ $ 16.75 ================ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $50,772,374 and 3,032,044 shares issued and outstanding)......... $ 16.75 ================
See accompanying notes to financial statements. ================================================================================ 21 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends..................................................... $ 4,864,406 Interest...................................................... 489,563 ------------- TOTAL INCOME............................................ 5,353,969 ------------- EXPENSES: Advisory...................................................... 2,275,632 Distribution.................................................. 167,143 Administration................................................ 29,871 Other......................................................... 302,235 ------------- TOTAL EXPENSES.......................................... 2,774,881 Earnings credits........................................ (528) NET EXPENSES............................................ 2,774,353 ------------- NET INVESTMENT INCOME................................... 2,579,616 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments.................................................. 16,528,414 Futures contracts............................................ 1,121,164 ------------- Net realized gain....................................... 17,649,578 ------------- Change in net unrealized appreciation or depreciation on: Investments.................................................. (123,031,905) Futures contracts............................................ 129,005 ------------- Change in net unrealized appreciation or depreciation... (122,902,900) ------------- Net realized and unrealized loss.............................. (105,253,322) ------------- Net decrease in net assets resulting from operations.......... $(102,673,706) ============= See accompanying notes to financial statements ================================================================================ 22 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSET
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ----------------- OPERATIONS: Net investment income........................................................... $ 2,579,616 $ 5,562,471 Net realized gain............................................................... 17,649,578 53,949,031 Change in net unrealized appreciation or depreciation........................... (122,902,900) 51,667,938 ----------------- ----------------- Net increase (decrease) in net assets resulting from operations................. (102,673,706) 111,179,440 ----------------- ----------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................................................... (1,354,936) (5,223,351) Brinson Class N............................................................... (12,687) (28,171) UBS Investment Funds Class.................................................... -- (190,578) Distributions from net realized gain: Brinson Class I............................................................... (46,078,258) (36,404,562) Brinson Class N............................................................... (773,650) (234,496) UBS Investment Funds Class.................................................... (5,191,383) (3,937,537) ----------------- ----------------- Total distributions to shareholders............................................. (53,410,914) (46,018,695) ----------------- ----------------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................................................... 70,513,579 283,730,686 Shares issued in connection with the acquisition of the UBS Value Equity Fund... -- 23,269,419 Shares issued on reinvestment of distributions.................................. 48,416,091 42,645,369 Shares redeemed................................................................. (248,393,696) (285,854,547) ----------------- ----------------- Net increase (decrease) in net assets resulting from capital share transactions. (129,464,026) 63,790,927 ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS.................................... (285,548,646) 128,951,672 ----------------- ----------------- NET ASSETS: Beginning of period............................................................. 790,050,522 661,098,850 ----------------- ----------------- End of period (including accumulated undistributed net investment income of $2,575,151 and $1,363,158, respectively)........................................ $ 504,501,876 $ 790,050,522 ================= =================
See accompanying notes to financial statements. ================================================================================ 23 U.S. Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended August 31, 1995* December 31, 1999 Year Ended June 30, Through --------------------------------- UBS Investment Funds Class (Unaudited) 1999 1998 1997 June 30, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period....................... $ 21.39 $ 19.83 $ 17.59 $ 14.58 $ 11.94 --------- --------- --------- --------- --------- Income (loss) from investment operations: Net investment income.................................... 0.08** 0.06** 0.09 0.11 0.10 Net realized and unrealized gain (loss).................. (2.90) 2.67 3.38 4.22 2.92 --------- --------- --------- --------- --------- Total income (loss) from investment operations................................. (2.82) 2.73 3.47 4.33 3.02 --------- --------- --------- --------- --------- Less distributions: Distributions from net investment income................ (0.05) (0.05) (0.10) (0.09) (0.13) Distributions from net realized gain.................... (1.77) (1.12) (1.13) (1.23) (0.25) --------- --------- --------- --------- --------- Total distributions................................... (1.82) (1.17) (1.23) (1.32) (0.38) --------- --------- --------- --------- --------- Net asset value, end of period............................. $ 16.75 $ 21.39 $ 19.83 $ 17.59 $ 14.58 ========= ========= ========= ========= ========= Total return (non-annualized).............................. (4.51)% 14.63% 20.80% 31.28% 25.70% Ratios/Supplemental data: Net assets, end of period (in 000s)..................... $ 50,772 $ 69,167 $ 55,063 $ 35,039 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits............................... 1.32%*** 1.32% 1.32% 1.41% 1.66%*** After expense reimbursement and earnings credits.............................. N/A N/A N/A 1.32% 1.32%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits.............................. 0.32%*** 0.30% 0.60% 0.54% 0.61%*** After expense reimbursement and earnings credits.............................. N/A N/A N/A 0.63% 0.95%*** Portfolio turnover rate................................. 26% 48% 42% 43% 36%
* Commencement of UBS Investment Funds Class ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized N/A = Not Applicable See accompanying notes to financial statements. ================================================================================ 24 U.S. Large Capitalization Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Since its inception on April 30, 1998, the UBS Investment Fund -- U.S. Large Capitalization Equity has provided an annualized return of -4.06% compared to the 19.85% return of its benchmark, the S&P 500 Equity Index. Results for the one-year period were also disappointing, with the Fund returning -11.39% versus the benchmark return of 21.04%. While these results are well below our expectations, we feel the Fund is very well positioned to take advantage of the current market environment--which has seen many sectors and market segments driven to extreme levels of over- and under-valuation. For 1999, market exposure detracted very modestly from active returns, consistent with a slightly below market beta and very strong returns. Results suffered from a meaningful underweight in the high momentum, high price/earnings and large capitalization stocks. Our Fund has minimal exposure to such stocks based upon our valuation analysis, which indicates they are meaningfully overvalued. Industry exposures also detracted from active returns, with negative contributions from the relative underweights in semiconductors and computer software and overweights in railroads and tobacco. These negative returns were only partially offset by positive contributions from our underweights in food and beverages, drugs and specialty retail and overweights in information services. Stock selection had the largest negative impact on active returns for the full year. The strongest contributors were Corning, First Data and Computer Sciences while the biggest detractors were Xerox, Lockheed Martin, FDX Corp., and Raytheon. Given the momentum orientation of the current market environment, companies that reported any disappointment in expected earnings were heavily penalized. A relatively narrow segment of the largest capitalization stocks, especially in the technology sector, continued to dominate market performance. Technology, with a return of 79% for the year, had the best return of any sector and its heavy weighting in the S&P 500 Index (30% at year-end) resulted in contributing about 67% of the Index's year-to-date return. We believe investors have been too willing to pay significant premiums for the perception of strong top-line growth and to assume strong relative earnings growth far into the future. We remain convinced that there are greater relative values away from such issues, which are dominated by momentum investors. Specifically, the Fund's most important factor exposures, as we enter 2000, include underweights in size, momentum and growth and overweights in the traditional value measures of earnings/ price, book/price and yield. From an industry standpoint, the Fund is underweight in technology hardware, retail, drugs and energy and overweight in transportation, banks, information services and electric utilities. ================================================================================ 25 U.S. Large Capitalization Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 1 year 4/30/98* ended ended to 12/31/99 12/31/99 12/31/99 - --------------------------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Large Capitalization Equity -17.78% -11.39% -4.06% - --------------------------------------------------------------------------------------------------- S&P 500 Equity Index 7.71 21.04 19.85 - ---------------------------------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund -- U.S. Large Capitalization Equity. 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 UBS Investment Fund -- U.S. Large Capitalization Equity and the S&P 500 Equity Index if you had invested $10,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund -- U.S. Large Capitalization Equity vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested
- ----------------------------------------------------------------------------------- Label A B - ----------------------------------------------------------------------------------- UBS Investment Fund Label U.S. Large Cap Equity S&P 500 Index - ----------------------------------------------------------------------------------- 1 4/30/98 10,000 10,000 - ----------------------------------------------------------------------------------- 2 5/98 9,827 9,828 - ----------------------------------------------------------------------------------- 3 6/98 9,968 10,227 - ----------------------------------------------------------------------------------- 4 7/98 9,774 10,118 - ----------------------------------------------------------------------------------- 5 8/98 8,481 8,655 - ----------------------------------------------------------------------------------- 6 9/98 9,133 9,210 - ----------------------------------------------------------------------------------- 7 10/98 9,795 9,959 - ----------------------------------------------------------------------------------- 8 11/98 10,212 10,563 - ----------------------------------------------------------------------------------- 9 12/98 10,529 11,171 - ----------------------------------------------------------------------------------- 10 1/99 10,601 11,638 - ----------------------------------------------------------------------------------- 11 2/99 10,263 11,277 - ----------------------------------------------------------------------------------- 12 3/99 10,509 11,728 - ----------------------------------------------------------------------------------- 13 4/99 11,400 12,182 - ----------------------------------------------------------------------------------- 14 5/99 11,062 11,894 - ----------------------------------------------------------------------------------- 15 6/99 11,349 12,555 - ----------------------------------------------------------------------------------- 16 7/99 10,836 12,163 - ----------------------------------------------------------------------------------- 17 8/99 10,518 12,102 - ----------------------------------------------------------------------------------- 18 9/99 9,596 11,771 - ----------------------------------------------------------------------------------- 19 10/99 9,565 12,516 - ----------------------------------------------------------------------------------- 20 11/99 9,473 12,770 - ----------------------------------------------------------------------------------- 21 12/99 9,331 12,522 - -----------------------------------------------------------------------------------
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. ================================================================================ 26 U.S. Large Capitalization Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds As a Percent of Net Assets As of December 31, 1999 (Unaudited) - ------------------------------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods......................................... 5.33% Technology............................................ 19.11 ------- 24.44 Basic Industries Chemicals............................................. 0.93 Housing/Paper......................................... 2.94 Metals................................................ 6.35 ------- 10.22 Consumer Non-Durables.......................................... 1.50 Retail/Apparel........................................ 5.61 Health: Drugs......................................... 2.80 Health: Non-Drugs..................................... 5.20 ------- 15.11 Financial Banks................................................. 11.04% Non-Banks............................................. 5.85 ------- 16.89 Utilities Electric.............................................. 8.76 Telephone............................................. 2.32 ------- 11.08 Transportation.......................................... 12.54 Services/Miscellaneous.................................. 5.76 ------- Total U.S. Equities................................ 96.04* SHORT-TERM INVESTMENTS.................................. 3.43* ------- TOTAL INVESTMENTS.................................. 99.47 CASH AND OTHER ASSETS, LESS LIABILITIES................................... 0.53 ------- NET ASSETS.............................................. 100.00% ======= - -------------------------------------------------------------------------------- * The Fund held a long position in stock index futures which increased U.S. Equity exposure from 96.04% to 99.79%. This adjustment results in a net decrease in the Fund's exposure to Short-Term Investments from 3.43% to -0.32% Top 10 U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------------------------ 1. FDX Corp. 6.12% 2. Electronic Data Systems Corp. 5.91 3. Burlington Northern Santa Fe Corp. 4.95 4. CIGNA Corp. 3.99 5. Compuware Corp. 3.63 6. Compaq Computer Corp. 3.42 7. First Data Corp. 3.29 8. Masco Corp. 3.23 9. Illinois Tool Works, Inc. 3.12 10. Kimberly-Clark Corp. 2.93 - ------------------------------------------------------------------ ================================================================================ 27 U.S. Large Capitalization Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value ------------ ------------ U.S. Equities -- 96.04% Aon Corp...................................... 13,750 $ 550,000 Baxter International, Inc..................... 13,200 829,125 Burlington Northern Santa Fe Corp............. 60,500 1,467,125 Central & South West Corp..................... 32,800 656,000 Chase Manhattan Corp.......................... 10,500 815,719 CIGNA Corp.................................... 14,700 1,184,269 Compaq Computer Corp.......................... 37,500 1,014,844 Computer Sciences Corp. (b)................... 8,300 785,388 Compuware Corp. (b)........................... 28,900 1,076,525 Corning, Inc.................................. 4,000 515,750 Covance, Inc. (b)............................. 6,500 70,281 Dominion Resources, Inc....................... 16,600 651,550 Electronic Data Systems Corp.................. 26,200 1,753,762 Eli Lilly and Co.............................. 5,700 379,050 Emerson Electric Co........................... 15,100 866,363 Entergy Corp.................................. 16,400 422,300 FDX Corp. (b)................................. 44,300 1,813,531 First Data Corp............................... 19,800 976,387 Fleet Boston Financial Corp................... 22,985 800,165 Gateway, Inc. (b)............................. 5,200 374,725 Household International, Inc.................. 19,600 730,100 Illinois Tool Works, Inc...................... 13,700 925,606 Kimberly-Clark Corp........................... 13,300 867,825 Kroger Co. (b)................................ 10,000 188,750 Lexmark International Group, Inc. (b)......... 2,900 262,450 Lockheed Martin Corp.......................... 21,400 468,125 Masco Corp.................................... 37,700 956,637 Mattel, Inc................................... 38,000 498,750 Monsanto Co................................... 12,700 452,438 Newell Rubbermaid, Inc........................ 24,600 713,400 Norfolk Southern Corp......................... 21,400 438,700 Philip Morris Companies, Inc.................. 19,200 445,200 PNC Bank Corp................................. 9,800 436,100 Praxair, Inc.................................. 5,500 276,719 Raytheon Co., Class B......................... 22,500 597,656 SBC Communications, Inc....................... 14,100 687,375 U.S. Bancorp.................................. 15,500 369,094 United Healthcare Corp........................ 12,100 642,813 Wells Fargo and Co............................ 21,100 853,231 Xerox Corp.................................... 29,200 662,475 ------------ Total U.S. Equities (Cost $31,220,080)........ 28,476,303 ------------ Short Term Investments -- 3.43% Investment Companies -- 3.43% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,018,306)..... 1,018,306 1,018,306 ------------ Total Investments (Cost $32,238,386) -- 99.47% (a)............ 29,494,609 Cash and other assets, less liabilities -- 0.53%................... 156,596 ------------ Net Assets -- 100%............................ $ 29,651,205 ============ NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $32,238,386; and net unrealized depreciation consisted of: Gross unrealized appreciation............. $ 1,215,839 Gross unrealized depreciation............. (3,959,616) -------------- Net unrealized depreciation........... $ (2,743,777) ============== (b) Non-income producing security FUTURES CONTRACTS The U.S. Large Capitalization Equity Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ---------- ---------- ---------- ----------- Index Futures Buy Contracts Standard & Poor's 500, 3 contracts........ March 2000 $1,108,514 $1,113,150 $ 4,636 ===========
The segregated cash pledged to cover margin requirements for the open futures positions at December 31, 1999 was $93,750. See accompanying notes to financial statements. ================================================================================ 28 U. S. Large Capitalization Equity Fund--Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $31,220,080)........................................................... $ 28,476,303 Affiliated issuers (Cost $1,018,306).............................................................. 1,018,306 Cash............................................................................................... 106,990 Receivables: Dividends......................................................................................... 52,604 Interest.......................................................................................... 752 Variation margin.................................................................................. 2,843 Other assets....................................................................................... 19,431 ------------- TOTAL ASSETS.................................................................................. 29,677,229 ------------- LIABILITIES: Payables: Investment advisory fees.......................................................................... 6,834 Accrued expenses.................................................................................. 19,190 ------------- TOTAL LIABILITIES............................................................................. 26,024 ------------- NET ASSETS.......................................................................................... $ 29,651,205 ============= NET ASSETS CONSIST OF: Paid in capital.................................................................................... $ 34,129,717 Accumulated undistributed net investment income.................................................... 16,008 Distributions in excess of net realized gain....................................................... (1,755,379) Net unrealized depreciation........................................................................ (2,739,141) ------------- NET ASSETS.................................................................................... $ 29,651,205 ============= OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $29,011,865 and 3,569,134 shares issued and outstanding)........................................ $ 8.13 ============= Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $562,411 and 68,872 shares issued and outstanding).............................................. $ 8.17 ============= UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $76,929 and 9,516 shares issued and outstanding)................................................ $ 8.08 =============
See accompanying notes to financial statements. ================================================================================ 29 U. S. Large Capitalization Equity Fund--Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends............................................................................ $ 201,610 Interest............................................................................. 31,884 ----------- TOTAL INCOME................................................................... 233,494 ----------- EXPENSES: Advisory............................................................................. 85,880 Registration......................................................................... 25,734 Professional......................................................................... 19,450 Printing............................................................................. 8,030 Distribution......................................................................... 2,932 Other................................................................................ 5,285 ----------- TOTAL EXPENSES................................................................. 147,311 Expenses deferred by Advisor................................................... (46,252) Earnings credits............................................................... (15) ----------- NET EXPENSES................................................................... 101,044 ----------- NET INVESTMENT INCOME.......................................................... 132,450 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments......................................................................... 89,048 Futures contracts................................................................... 71,238 ----------- Net realized gain.............................................................. 160,286 ----------- Change in net unrealized appreciation or depreciation on: Investments........................................................................ (4,939,653) Futures contracts.............................................................. 4,636 ----------- Change in net unrealized appreciation or depreciation.......................... (4,935,017) ----------- Net realized and unrealized loss...................................................... (4,774,731) ----------- Net decrease in net assets resulting from operations.................................. $(4,642,281) ===========
See accompanying notes to financial statements. ================================================================================ 30 U. S. Large Capitalization Equity Fund--Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ------------- OPERATIONS: Net investment income......................................................... $ 132,450 $ 185,687 Net realized gain............................................................. 160,286 339,283 Change in net unrealized appreciation or depreciation......................... (4,935,017) 2,374,562 ----------- ------------ Net increase (decrease) in net assets resulting from operations............... (4,642,281) 2,899,532 ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................................................. (193,937) (87,626) Brinson Class N............................................................. (3,265) (69,880) UBS Investment Funds Class.................................................. (496) (12) Distributions in excess of net realized gain: Brinson Class I............................................................. (2,112,125) -- Brinson Class N............................................................. (67,253) -- UBS Investment Funds Class.................................................. (6,269) -- ----------- ------------ Total distributions to shareholders........................................... (2,383,345) (157,518) ----------- ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................................................... 17,125,025 24,853,429 Shares issued on reinvestment of distributions................................ 1,897,089 147,324 Shares redeemed............................................................... (8,774,987) (17,500,436) ----------- ------------ Net increase in net assets resulting from capital share transactions.......... 10,247,127 7,500,317 ----------- ------------ TOTAL INCREASE IN NET ASSETS............................................ 3,221,501 10,242,331 ----------- ------------ NET ASSETS: Beginning of period........................................................... 26,429,704 16,187,373 ----------- ------------ End of period (including accumulated undistributed net investment income of $16,008 and $81,256, respectively)................................. $29,651,205 $ 26,429,704 =========== ============
See accompanying notes to financial statements. ================================================================================ 31 U. S. Large Capitalization Equity Fund--Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year April 6, 1998* December 31, 1999 Ended Through UBS Investment Funds Class (Unaudited) June 30, 1999 June 30, 1998 - --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............................ $ 11.07 $ 9.79 $ 10.00 ------- ------- ------- Income (loss) from investment operations: Net investment income........................................ 0.05** 0.04** 0.02 Net realized and unrealized gain (loss)...................... (2.01) 1.31 (0.22) ------- ------- ------- Total income (loss) from investment operations............ (1.96) 1.35 (0.20) ------- ------- ------- Less distributions: Distributions from net investment income..................... (0.08) (0.07) (0.01) Distributions from and in excess of net realized gain........ (0.95) -- -- ------- ------- ------- Total distributions....................................... (1.03) (0.07) (0.01) ------- ------- ------- Net asset value, end of period.................................. $ 8.08 $ 11.07 $ 9.79 ======= ======= ======= Total return (non-annualized)................................... (11.39)% 13.86% (2.06)% Ratios/Supplemental data: Net assets, end of period (in 000s).......................... $ 77 $ 6 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits........... 1.70%*** 1.81% 2.11%*** After expense reimbursement and earnings credits............ 1.32%*** 1.32% 1.32%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits........... 0.20%*** 0.05% 0.00%*** After expense reimbursement and earnings credits............ 0.58%*** 0.54% 0.79%*** Portfolio turnover rate....................................... 84% 88% 12%
*Commencement of investment operations **The net investment income per share data was determined using average shares outstanding throughout the period. ***Annualized See accompanying notes to financial statements. ================================================================================ 32 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Since its performance inception on December 31, 1998, the UBS Investment Fund -U.S. Large Capitalization Growth has returned 31.63%, compared to a return of 33.16% for the Russell 1000 Growth Index and a return of 21.04% for the S&P 500 Equity Index. The volatility for the Fund was 16.58% compared to 16.97% for the Russell 1000 and 12.94% for the S&P 500. Just as last year, 1999 was a very good year to be a growth manager (the S&P 500 lagged the Russell Growth by 12%). The underlying forces, however, were quite different. The three key growth sectors in the U.S. stock market are technology, healthcare and consumer staples (over 70% of the benchmark). In 1999, only technology drove these positive returns, while in 1998 healthcare helped, and in 1997 consumer staples also aided returns. Indeed, by the end of the year technology comprised 45% of the benchmark and nearly 30% of the S&P 500, representing dramatic increases from just a few years ago. Another important trend in 1999 was the sharp increase in performance in smaller growth stocks in the second half of the year. This was mainly due to the broadening of the technology trend and the dramatic surge in Internet related issues. Just as the slowdown in global growth had hurt the major consumer franchise companies such as Coca Cola in 1997, major healthcare companies lagged badly in 1999 under the threat of politically controlled drug prices. What had been one of the best areas in 1998 became one of the worst in 1999. Ironically, smaller healthcare companies, particularly in biotechnology, performed almost as well as smaller technology companies in the latter part of the year. Our performance in 1999 benefited from stock selection, was hurt slightly by our sector weights, and was hurt more importantly by underweighting the price momentum factor in the market. Within the three major growth sectors, our stock selection was quite positive. The negative sector effect was mainly a result of overweighting financial stocks and modestly underweighting technology for most of the year. A major challenge facing growth investors in the year 2000 is the extreme performance of the technology sector at the expense of other areas. This is particularly true after the dramatic gains in the last quarter of the year. We have used this opportunity to take profits in many issues and reduce our sector concentration to a below-average, though still meaningful level. We are having difficulty finding companies whose fundamental prospects are as attractive as our technology holdings, but we cannot ignore the excessive enthusiasm for this area. This reduction has funded new investments in attractive retail and consumer staple companies. ================================================================================ 33 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 12/31/98* ended to 12/31/99 12/31/99 - -------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Large Capitalization Growth 12.61% 31.63% - -------------------------------------------------------------------------------- S&P 500 Equity Index 7.71 21.04 - -------------------------------------------------------------------------------- Russell 1000 Growth Index** 20.56 33.16 - --------------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund -- U.S. Large Capitalization Growth. ** The Advisor has chosen to change the Fund's benchmark index from the S&P 500 Equity Index to the Russell 1000 Growth Index due to the Advisor's determination that the Russell 1000 Growth Index more closely reflects the Fund's investment strategies. 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 UBS Investment Fund -- U.S. Large Capitalization Growth, the S&P 500 Equity Index and the Russell 1000 Growth Index if you had invested $10,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund -- U.S. Large Capitalization Growth vs. S&P 500 Equity Index and Russell 1000 Growth Index Wealth Value with Dividends Reinvested U.S. Large Capitalization Growth S&P 500 Index Russell 1000 - ------------------------------------------------------------------------------- 12/31/98 10,000 10,000 10,000 - ------------------------------------------------------------------------------- 1/31/99 10,617 10,418 10,587 - ------------------------------------------------------------------------------- 2/28/99 10,152 10,094 10,104 - ------------------------------------------------------------------------------- 3/31/99 10,633 10,498 10,636 - ------------------------------------------------------------------------------- 4/30/99 11,030 10,905 10,649 - ------------------------------------------------------------------------------- 5/31/99 10,887 10,647 10,322 - ------------------------------------------------------------------------------- 6/30/99 11,698 11,238 11,045 - ------------------------------------------------------------------------------- 7/31/99 11,208 10,887 10,694 - ------------------------------------------------------------------------------- 8/31/99 11,191 10,834 10,869 - ------------------------------------------------------------------------------- 9/30/99 10,811 10,537 10,640 - ------------------------------------------------------------------------------- 10/31/99 11,394 11,203 11,000 - ------------------------------------------------------------------------------- 11/31/99 11,968 11,431 12,061 - ------------------------------------------------------------------------------- 12/31/99 13,163 12,104 13,316 - ------------------------------------------------------------------------------- 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. ================================================================================ 34 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Industry Diversification
As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Energy............................ 2.45% Capital Investment Technology...................... 19.79 Electric Components............. 9.35 ------ 29.14 Basic Industries Housing/Paper................... 1.54 Consumer Non-Durables.................... 1.94 Retail/Apparel.................. 11.11 Autos/Durables.................. 0.77 Health: Drugs................... 9.56 Health: Non-Drugs............... 5.43 ------ 28.81 Financial Non-Banks....................... 8.20% Utilities Telephone....................... 16.09 Services/Miscellaneous............ 7.03 ------ Total U.S. Equities...... 93.26* ------ SHORT-TERM INVESTMENTS............ 5.09* ------ TOTAL INVESTMENTS........... 98.35 CASH AND OTHER ASSETS, LESS LIABILITIES................ 1.65 ------ NET ASSETS........................ 100.00% ======
- -------------------------------------------------------------------------------- The Fund held a long position in stock index futures which increased U.S. Equity exposure from 93.26% to 100.10%. This adjustment results in a net decrease in the Fund's exposure to Short-Term Investments from 5.09% to -1.75%. Top 10 U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ----------------------------------------------- 1. Oracle Corp. 4.08% 2. QUALCOMM, Inc. 3.90 3. Sun Microsystems, Inc. 3.85 4. Microsoft, Inc. 3.66 5. General Electric Co. 3.42 6. Texas Instruments, Inc. 2.86 7. Wal-Mart Stores, Inc. 2.80 8. America On-Line, Inc. 2.64 9. Immunex Corp. 2.52 10. Dayton Hudson Corp. 2.44 - ----------------------------------------------- ================================================================================ 35 U.S. Large Capitalization Growth Fund--Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value -------- ----------- U.S. Equities -- 93.26% 3 Com Corp. (b)........................................... 2,900 $ 136,300 AFLAC, Inc................................................ 3,900 184,031 America On-Line, Inc. (b)................................. 3,800 286,663 American Express Co....................................... 1,300 216,125 American International Group, Inc......................... 1,925 208,141 AT&T Corp................................................. 4,250 215,688 AT&T Corp.--Liberty Media Group, Inc. (b)................. 4,056 230,178 Avon Products, Inc........................................ 2,000 66,000 Bell Atlantic Corp........................................ 1,300 80,031 BMC Software, Inc. (b).................................... 1,500 119,906 Boeing Co................................................. 2,000 83,125 Boston Scientific Corp. (b)............................... 5,400 118,125 Bristol-Myers Squibb Co................................... 2,400 154,050 CBS Corp. (b)............................................. 3,000 191,813 Cisco Systems, Inc. (b)................................... 2,400 257,100 Citigroup, Inc............................................ 2,800 155,575 Dayton Hudson Corp........................................ 3,600 264,375 Electronic Data Systems Corp.............................. 1,900 127,181 Federal Home Loan Association Co.......................... 3,400 160,013 Gap, Inc.................................................. 3,300 151,800 General Electric Co....................................... 2,400 371,400 Halliburton Co............................................ 2,100 84,525 Immunex Corp. (b)......................................... 2,500 273,281 Intel Corp................................................ 1,900 156,394 International Business Machines Corp...................... 2,300 248,400 Johnson & Johnson Co...................................... 2,300 214,188 Lowe's Companies, Inc..................................... 2,800 167,300 Lucent Technologies, Inc.................................. 2,500 187,031 MCI WorldCom, Inc. (b).................................... 3,600 191,025 Merck & Co., Inc.......................................... 3,300 221,306 Merrill Lynch & Co........................................ 1,800 150,300 Microsoft, Inc. (b)....................................... 3,400 396,950 Motorola, Inc............................................. 1,200 176,700 Nike, Inc................................................. 2,000 99,125 Nortel Networks, Inc...................................... 2,500 252,500 Oracle Corp. (b).......................................... 3,950 442,647 Pepsi Bottling Group, Inc................................. 6,100 101,031 Pfizer, Inc............................................... 6,400 207,600 Philip Morris Companies, Inc.............................. 4,700 108,981 Proctor & Gamble Co....................................... 1,300 142,431 QUALCOMM, Inc. (b)........................................ 2,400 423,000 Quintiles Transnational Corp. (b)......................... 3,900 72,881 Safeway, Inc. (b)......................................... 5,000 177,813 SBC Communications, Inc................................... 3,400 165,750 Schering Plough Corp...................................... 4,300 181,406 Schlumberger Ltd.......................................... 2,900 163,125 Sun Microsystems, Inc. (b)................................ 5,400 418,162 Texas Instruments, Inc.................................... 3,200 310,000 Time Warner, Inc.......................................... 1,500 108,656 Transocean Offshore, Inc.................................. 562 18,932 Tyco International Co..................................... 2,100 81,638 Wal-Mart Stores, Inc...................................... 4,400 304,150 Walt Disney Co............................................ 3,200 93,600 ----------- Total Equities (Cost $8,120,194).......................... 10,118,448 ----------- Face Amount --------- Short-Term Investments -- 5.09% Investment Companies -- 5.09% Vista U.S. Government Money Market Fund (Cost $551,964) (b)............................... $ 551,964 551,964 ----------- Total Investments (Cost $8,672,158) -- 98.35% (a)........................ 10,670,412 Cash and other assets, less liabilities -- 1.65%.............................. 178,608 ----------- Net Assets -- 100%..................................... $10,849,020 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $8,672,158; and net unrealized appreciation consisted of: Gross unrealized appreciation........................ $ 2,347,701 Gross unrealized depreciation........................ (349,447) ------------ Net unrealized appreciation...................... $ 1,998,254 ============ (b) Non-income producing security. FUTURES CONTRACTS The U.S. Large Capitalization Growth Fund had the following open futures contracts as of December 31, 1999: Expiration Current Unrealized Date Cost Value Gain ---------- -------- ------- ---------- Index Futures Buy Contracts Standard & Poor's 500, 2 contracts.... March 2000 731,314 742,100 $10,786 ======= The segregated cash pledged to cover margin requirements for the open futures positions at December 31, 1999 was $18,750. See accompanying notes to financial statements. ================================================================================ 36 U.S. Large Capitalization Growth Fund -- Financial Statements - ------------------------------------------------------------------------------ STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $8,672,158)...................................................... $ 10,670,412 Cash............................................................................................ 218,400 Receivables: Due from Advisor............................................................................ 2,780 Dividends................................................................................... 6,891 Interest.................................................................................... 3,678 Variation margin............................................................................ 1,768 ------------- TOTAL ASSETS.............................................................................. 10,903,929 ------------- LIABILITIES: Payables: Accrued expenses............................................................................ 54,909 ------------- TOTAL LIABILITIES......................................................................... 54,909 ------------- NET ASSETS...................................................................................... $ 10,849,020 ============= NET ASSETS CONSIST OF: Paid in capital............................................................................. $ 8,496,445 Accumulated undistributed net investment loss............................................... (19,874) Accumulated net realized gain............................................................... 363,409 Net unrealized appreciation................................................................. 2,009,040 ------------- NET ASSETS................................................................................ $ 10,849,020 ============= OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $3,767,216 and 256,482 shares issued and outstanding)..................................... $ 14.69 ============= Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,317 and 90 shares issued and outstanding).............................................. $ 14.63 ============= UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $7,080,487 and 486,374 shares issued and outstanding)..................................... $ 14.56 =============
See accompanying notes to financial statements. ================================================================================ 37 U. S. Large Capitialization Growth Fund - Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends..................................................................................... $ 34,407 Interest...................................................................................... 5,952 -------------- TOTAL INCOME................................................................................ 40,359 -------------- EXPENSES: Advisory...................................................................................... 31,958 Distribution.................................................................................. 23,378 Professional.................................................................................. 22,114 Registration.................................................................................. 15,506 Custodian..................................................................................... 6,627 Other......................................................................................... 23,423 -------------- TOTAL EXPENSES.............................................................................. 123,006 Expenses deferred and reimbursed by Advisor................................................. (56,260) Earnings credits............................................................................ (6,513) -------------- NET EXPENSES................................................................................ 60,233 -------------- NET INVESTMENT LOSS......................................................................... (19,874) -------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments................................................................................... 353,419 Futures Contracts............................................................................. 27,940 -------------- Net realized gain........................................................................... 381,359 -------------- Change in net unrealized appreciation or depreciation on: Investments................................................................................... 946,091 Futures Contracts............................................................................. 10,786 -------------- Change in net unrealized appreciation or depreciation....................................... 956,877 -------------- Net realized and unrealized gain.................................................................. 1,338,236 -------------- Net increase in net assets resulting from operations.............................................. $ 1,318,362 ==============
See accompanying notes to financial statements. ================================================================================ 38 U.S. Large Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ----------------- ------------------ OPERATIONS: Net investment loss............................................................ $ (19,874) $ (123) Net realized gain.............................................................. 381,359 408,525 Change in net unrealized appreciation or depreciation.......................... 956,877 463,877 --------------- ------------ Net increase in net assets resulting from operations........................... 1,318,362 872,279 --------------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net realized gain: Brinson Class I.............................................................. (226,909) - Brinson Class N.............................................................. (80) - UBS Investment Funds Class................................................... (376,172) - --------------- ------------ Total distributions to shareholders............................................ (603,161) - --------------- ------------ CAPITAL SHARE TRANSACTIONS: Shares sold.................................................................... 4,243,090 5,233,678 Shares issued on reinvestment of distributions................................. 593,637 - Shares redeemed................................................................ (2,787,807) (2,169,846) --------------- ------------ Net increase in net assets resulting from capital share transactions........... 2,048,920 3,063,832 --------------- ------------ TOTAL INCREASE IN NET ASSETS............................................... 2,764,121 3,936,111 --------------- ------------ NET ASSETS: Beginning of period............................................................ 8,084,899 4,148,788 --------------- ------------ End of period (including accumulated undistributed net investment income of $(19,874) and $0, respectively).................................... $ 10,849,020 $ 8,084,899 =============== ============
* Reflects the Fund's change in fiscal year end from December 31 to June 30 See accompanying notes to financial statements. ================================================================================ 39 U. S. Large Capitialization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Period Ended UBS Investment Funds Class (Unaudited) June 30, 1999* - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period................................................ $ 13.85 $ 11.84 -------- -------- Income from investment operations: Net investment loss............................................................. (0.05)** (0.04) Net realized and unrealized gain................................................ 1.71 2.05 -------- -------- Total income from investment operations....................................... 1.66 2.01 -------- -------- Less distributions: Distributions from net realized gain............................................ (0.95) - -------- -------- Total distributions........................................................... (0.95) - -------- -------- Net asset value, end of period...................................................... $ 14.56 $ 13.85 ======== ======== Total return (non-annualized)....................................................... 31.63% 16.98% Ratios/Supplemental data: Net assets, end of period (in 000s)............................................... $ 7,080 $ 5,136 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits............................... 2.94%*** 3.15%*** After expense reimbursement and earnings credits................................ 1.57%*** 1.57%*** Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits............................... (2.06)%*** (2.03)%*** After expense reimbursement and earnings credits................................ (0.69)%*** (0.45)%*** Portfolio turnover rate........................................................... 46% 51%
* Commencement of UBS Investment Funds Class was December 31, 1998. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. ================================================================================ 40 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds The UBS Investment Fund - U.S. Small Capitalization Growth appreciated 40.57% since its performance inception on December 31, 1998, significantly outpacing the 21.26% return of the Russell 2000 Index, a commonly cited index of small capitalization (small cap) U.S. stocks. The Fund's outperformance relative to the Russell 2000 in 1999 may be attributed to several factors. First, a supportive economic environment and a sizzling technology sector generated renewed interest in small cap growth stocks. Stock selection was also a strong positive in 1999, particularly in the consumer cyclical and technology sectors. Industry selection was a modest positive, mostly due to an overweight of technology stocks and an underweight in basic materials and financials. Finally, the Fund benefited from participation in a number of well-received initial public offerings, mostly in the Internet arena. Stocks that helped performance in 1999 included Peregrine Systems, Mercury Interactive, Dendrite International, Cost Plus Warehouse, TMP Worldwide, DII Group, and Zebra Technologies. Most of these equities were beneficiaries of last year's technology rally. Stocks that detracted from relative performance included Halo Industries, Pediatrix Medical, Sunrise Assisted Living, Brightpoint Cellular, and Kellstrom. In general, most of these underperformers suffered earnings shortfalls due to disappointing top-line growth. As a result, we focused more research in 1999 on eliminating companies from the Fund that were likely to report decelerating future sales growth. As we consider the outlook for small cap stocks, it is heartening to note these stocks outperformed their large cap brethren last year for the first time in six years - albeit not by a wide margin. After trailing badly earlier in 1999, the Russell 2000 nosed out the S&P 500 by a mere 22 basis points at year-end. It is too early to tell whether recent strength signals the beginning of a new small cap rally, but conditions are ripe for such a move. Relative valuations for small cap stocks remain compelling by virtually any measure. The forward-looking Price/Earnings (P/E) multiple for the Russell 2000 currently weighs in at 19.3 times earnings, while investors are paying an expensive 25.2 times earnings for the S&P 500. A look at other valuation ratios leads to similar conclusions. Although large cap stocks have enjoyed superior earnings growth and asset utilization in the past year, small cap stocks are expected to grow more quickly in the year ahead. For example, the IBES analyst consensus report forecasts that small cap earnings will grow 24% in the year ahead versus 21% for the S&P 500. Extending our time horizon, Russell 2000 profits are projected to rise 21% annually over the next three to five years, while S&P 500 earnings are forecasted to grow 17% a year. Given these solid growth prospects, we remain bullish on the outlook for small cap stocks over the next several years. ================================================================================ 41 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return 6 months 12/31/98* ended to 12/31/99 12/31/99 - -------------------------------------------------------------------------------- UBS Investment Fund - U.S. Small Capitalization Growth 35.34% 40.57% - -------------------------------------------------------------------------------- Russell 2000 Index 10.96 21.26 - -------------------------------------------------------------------------------- * Inception date of the UBS Investment Fund - U.S. Small Capitalization Growth. 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 UBS Investment Fund - U.S. Small Capitalization Growth and the Russell 2000 Index if you had invested $10,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund - U.S. Small Capitalization Growth vs. Russell 2000 Index Wealth Value with Dividends Reinvested - ------------------------------------------------------------------------------- Label A B - ------------------------------------------------------------------------------- Label Brinson U.S. Small Capitalization Growth Russell 2000 Index - ------------------------------------------------------------------------------- 1 12/31/98 10,000 10,000 2 1/31/99 9,989 10,133 3 2/28/99 9,148 9,312 4 3/31/99 9,352 9,458 5 4/30/99 9,318 10,305 6 5/31/99 9,727 10,456 7 6/30/99 10,386 10,928 8 7/31/99 10,477 10,628 9 8/31/99 10,239 10,235 10 9/30/99 10,591 10,237 11 10/31/99 10,989 10,279 12 11/30/99 12,716 10,893 13 12/31/99 14,057 12,126 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. ================================================================================ 42 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [Logo]UBS Investment Funds Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. EQUITIES Energy................................................... 1.52% Capital Investment Technology............................................... 14.83 Electrical Components.................................... 6.51 -------- 21.34 Basic Industries Housing/Paper............................................ 1.52 Consumer Non-Durables............................................. 2.56 Retail/Apparel........................................... 11.84 Autos/Durables........................................... 9.87 Health: Drugs............................................ 2.84 Health: Non-Drugs........................................ 8.77 -------- 35.88 Financial Banks.................................................... 5.63% Non-Banks................................................ 6.08 -------- 11.71 Utilities Telephone................................................ 3.11 Transportation........................................... 4.82 Services/Miscellaneous................................... 14.36 -------- Total U.S. Equities...................................... 94.26 SHORT-TERM INVESTMENTS................................... 5.89 -------- TOTAL INVESTMENTS........................................ 100.15 LIABILITIES, LESS CASH AND OTHER ASSETS............................................. (0.15) -------- NET ASSETS............................................... 100.00% ======== - -------------------------------------------------------------------------------- Top 10 U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - -------------------------------------------------------------------------------- 1. Zebra Technologies Corp., Class A 2.08% 2. DII Group, Inc. 2.04 3. QRS Corp. 1.99 4. Mercury Interactive Corp. 1.96 5. Peregrine Systems, Inc. 1.92 6. Dendrite International, Inc. 1.90 7. Expeditors International of Washington, Inc. 1.90 8. U.S. Trust Corp. 1.83 9. Patterson Dental Co. 1.78 10. Helix Technology Corp. 1.77 - -------------------------------------------------------------------------------- ================================================================================ 43 U.S. Small Capitalization Growth Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value ------- ---------- U.S. Equities -- 94.26% ACT Manufacturing, Inc. (b).............................. 8,300 $ 311,250 Agency.com, Inc. (b)..................................... 2,100 107,100 Anixer International, Inc. (b)........................... 18,700 385,687 AnnTaylor Stores Corp. (b)............................... 11,500 396,031 AVT Corp. (b)............................................ 17,400 817,800 C & D Technologies, Inc.................................. 10,071 428,017 C-Bridge Internet Solutions, Inc. (b).................... 850 41,331 Cacheflow, Inc. (b)...................................... 2,100 274,444 Calico Commerce, Inc. (b)................................ 2,200 116,600 CaseyOs General Stores, Inc.............................. 10,800 112,725 Celestial Seasonings, Inc. (b)........................... 27,500 511,758 Charles River Associates, Inc. (b)....................... 17,900 599,650 ChildrenOs Place Retail Stores, Inc. (b)................. 23,300 382,994 Cobalt Networks, Inc. (b)................................ 900 97,538 Cost Plus, Inc. (b)...................................... 19,550 696,469 Credence Systems Corp. (b)............................... 8,600 743,900 CTS Corp................................................. 4,000 301,500 Cytyc Corp. (b).......................................... 9,900 604,519 Data Return Corp. (b).................................... 2,100 112,350 Datascope Corp........................................... 11,800 472,000 Deltathree.com, Inc. (b)................................. 2,100 54,075 Dendrite International, Inc. (b)......................... 26,550 899,381 Digex, Inc. (b).......................................... 3,000 206,250 DII Group, Inc. (b)...................................... 13,600 965,175 Elantec Semiconductor, Inc. (b).......................... 20,400 673,200 Elcor Corp............................................... 22,550 679,319 Emmis Communications Corp. (b)........................... 4,800 598,275 Ethan Allen Interiors, Inc............................... 12,850 412,003 Expeditors International of Washington, Inc.............. 20,500 898,156 Forward Air Corp. (b).................................... 16,749 726,488 Graco, Inc............................................... 16,700 599,112 Greater Bay Bancorp...................................... 10,000 428,750 Haverty Furniture Cos., Inc.............................. 17,100 215,887 Helix Technology Corp.................................... 18,700 837,994 Hooper Holmes, Inc....................................... 24,400 628,300 Ibasis, Inc. (b)......................................... 2,100 60,375 Inamed Corp. (b)......................................... 15,500 680,062 Insight Communications (b)............................... 5,000 148,125 Insight Enterprises, Inc. (b)............................ 17,800 723,125 Insituform Technologies, Inc. (b)........................ 25,400 717,550 Investors Financial Services Corp........................ 18,200 837,200 Jack in the Box, Inc. (b)................................ 26,500 548,219 Jakks Pacific, Inc. (b).................................. 21,000 392,437 Jore Corp. (b)........................................... 8,300 64,844 Kana Communications, Inc. (b)............................ 800 164,000 Kenneth Cole Productions, Inc. (b)....................... 15,900 727,425 Kent Electronics Corp. (b)............................... 25,300 575,575 King Pharmaceuticals, Inc. (b)........................... 14,100 790,481 Kronos, Inc. (b)......................................... 3,400 204,000 Manitowoc Co., Inc....................................... 7,400 251,600 McAfee.com, Corp. (b).................................... 2,100 94,500 Meade Instruments Corp. (b).............................. 9,600 273,600 Mediaplex, Inc. (b)...................................... 5,200 326,300 MedQuist, Inc. (b)....................................... 13,900 358,794 Mercury Computer Systems, Inc. (b)....................... 15,000 525,000 Mercury Interactive Corp. (b)............................ 8,600 928,262 Metasolv Software, Inc. (b).............................. 2,100 171,675 NetRatings, Inc. (b)..................................... 2,100 101,063 Netzee, Inc. (b)......................................... 17,800 295,925 North Fork Bancorporation, Inc........................... 33,500 586,250 Ondisplay, Inc. (b)...................................... 650 59,069 Optio Software, Inc. (b)................................. 4,200 98,700 Pacific Sunwear of California, Inc. (b).................. 19,550 629,266 Patterson Dental Co. (b)................................. 19,700 839,712 Patterson Energy, Inc. (b)............................... 30,500 396,500 Peoples Heritage Financial Group, Inc.................... 30,700 462,419 Peregrine Systems, Inc. (b).............................. 10,800 909,225 Protective Life Corp..................................... 25,500 811,219 QRS Corp. (b)............................................ 8,950 939,750 Quest Diagnostics, Inc. (b).............................. 18,700 571,519 ResMed, Inc. (b)......................................... 14,900 622,075 Retek, Inc. (b).......................................... 1,600 120,400 Richmond County Financial Corp........................... 17,641 318,641 Roper Industries, Inc.................................... 15,500 586,094 Rudolph Technologies, Inc. (b)........................... 5,200 174,200 Sciquest.com, Inc. (b)................................... 2,100 166,950 Shaw Group, Inc. (b)..................................... 27,200 688,500 SonicWall, Inc. (b)...................................... 2,100 84,525 Spanish Broadcasting System (b).......................... 15,500 623,875 Stone Energy Corp. (b)................................... 9,000 320,625 Swift Transportation Co., Inc. (b)....................... 37,200 655,650 Sykes Enterprises, Inc. (b).............................. 18,200 798,525 Syntel, Inc. (b)......................................... 8,200 132,738 TMP Worldwide, Inc. (b).................................. 5,200 738,400 Tollgrade Communications, Inc. (b)....................... 6,200 213,900 Tower Automotive, Inc. (b)............................... 21,000 324,187 Tritel, Inc. (b)......................................... 2,100 66,544 Triton PCS Holdings, Inc. (b)............................ 8,300 377,650 U.S. Foodservice (b)..................................... 41,600 696,800 U.S. Trust Corp.......................................... 10,800 866,025 Vintage Petroleum, Inc................................... 33,100 399,269 Viropharma, Inc. (b)..................................... 15,000 555,000 Waters Corp. (b)......................................... 14,300 757,900 Whitehall Jewellers, Inc. (b)............................ 18,500 682,187 XPedior, Inc. (b)........................................ 850 24,438 Zebra Technologies Corp., Class A (b).................... 16,800 982,800 ----------- Total U.S. Equities (Cost $33,705,445)................... 44,577,692 ----------- ================================================================================ 44 U.S. Small Capitalization Growth Fund -- Schedule of Investments December 31, 1999 (Unaudited) Shares Value ---------- ----------- Short Term Investments -- 5.89% Investment Companies -- 5.89% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,787,103)....................... 2,787,103 $ 2,787,103 ----------- Total Investments (Cost $36,492,548) -- 100.15% (a)....... 47,364,795 Liabilities, less cash and other assets -- (0.15%)....................... (71,000) ----------- Net Assets -- 100%........................ $47,293,795 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $36,492,548; and net unrealized appreciation consisted of: Gross unrealized appreciation..................... $12,798,752 Gross unrealized depreciation..................... (1,926,505) ----------- Net unrealized appreciation.................... $10,872,247 =========== (b) Non-income producing security. See accompanying notes to financial statements. ================================================================================ 45 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (UNAUDITED) ASSETS: Investments, at value: Unaffiliated issuers (Cost $33,705,445)..................................................... $44,577,692 Affiliated issuers (Cost $2,787,103)........................................................ 2,787,103 Cash.......................................................................................... 440 Receivables: Dividends................................................................................... 1,792 Interest.................................................................................... 12,421 ----------- TOTAL ASSETS............................................................................. 47,379,448 ----------- LIABILITIES: Payables: Investment advisory fees.................................................................... 32,064 Accrued expenses............................................................................ 53,589 ----------- TOTAL LIABILITIES........................................................................ 85,653 ----------- NET ASSETS...................................................................................... $47,293,795 =========== NET ASSETS CONSIST OF: Paid in capital............................................................................... $34,855,447 Accumulated undistributed net investment loss................................................. (114,496) Accumulated net realized gain................................................................. 1,680,597 Net unrealized appreciation................................................................... 10,872,247 ----------- NET ASSETS............................................................................... $47,293,795 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $45,914,693 and 3,681,767 shares issued and outstanding)............. $ 12.47 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,416 and 114 shares issued and outstanding)...................................... $ 12.42 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,377,686 and 111,403 shares issued and outstanding).............................. $ 12.37 ===========
See accompanying notes to financial statements. ================================================================================ 46 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED) INVESTMENT INCOME: Dividends.......................................................................... $ 57,827 Interest........................................................................... 59,483 -------------- TOTAL INCOME................................................................... 117,310 -------------- EXPENSES: Advisory........................................................................... 197,692 Professional....................................................................... 19,281 Registration....................................................................... 17,849 Distribution....................................................................... 3,123 Other.............................................................................. 31,367 -------------- TOTAL EXPENSES................................................................. 269,312 Expenses deferred by Advisor................................................... (37,437) Earnings credits............................................................... (69) -------------- NET EXPENSES................................................................... 231,806 -------------- NET INVESTMENT LOSS............................................................ (114,496) -------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments................................................... 5,935,595 Change in net unrealized appreciation or depreciation on investments............... 6,732,379 -------------- Net realized and unrealized gain................................................... 12,667,974 -------------- Net increase in net assets resulting from operations............................... $ 12,553,478 ==============
See accompanying notes to financial statements. ================================================================================ 47 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ----------------- ---------------- OPERATIONS: Net investment loss................................................................ $ (114,496) $ (68,177) Net realized gain (loss)........................................................... 5,935,595 (633,451) Change in net unrealized appreciation or depreciation.............................. 6,732,379 1,970,811 ------------- ------------- Net increase in net assets resulting from operations............................... 12,553,478 1,269,183 ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold........................................................................ 14,546,659 23,560,273 Shares issued on reinvestment of distributions..................................... -- -- Shares redeemed.................................................................... (15,658,308) (11,586,801) ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions.... (1,111,649) 11,973,472 ------------- ------------- TOTAL INCREASE IN NET ASSETS.................................................... 11,441,829 13,242,655 ------------- ------------- NET ASSETS: Beginning of period................................................................ 35,851,966 22,609,311 ------------- ------------- End of period (including accumulated undistributed net investment loss of $(114,496) and $0, respectively).............................................. $ 47,293,795 $ 35,851,966 ============= =============
*Reflects the Fund's change in fiscal year end from December 31 to June 30 See accompanying notes to financial statements. ================================================================================ 48 U.S. Small Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Six Months Ended UBS Investment Funds Class (Unaudited) June 30, 1999* - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period........................... $ 9.14 $ 8.80 ------------ ------------ Income from investment operations: Net investment loss....................................... (0.07)** (0.06) Net realized and unrealized gain.......................... 3.30 0.40 ------------ ------------ Total income from investment operations................ 3.23 0.34 ------------ ------------ Net asset value, end of period................................. $ 12.37 $ 9.14 ============ ============ Total return (non-annualized).................................. 40.57% 3.86% Ratios/Supplemental data: Net assets, end of period (in 000s).......................... $ 1,378 $ 640 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits......... 2.11%*** 2.09%*** After expense reimbursement and earnings credits.......... 1.92%*** 1.92%*** Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits......... (1.52%)*** (1.39%)*** After expense reimbursement and earnings credits.......... (1.33%)*** (1.22%)*** Portfolio turnover rate..................................... 69% 71%
* Commencement of UBS Investment Funds Class was December 31, 1998 ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 49 U.S. Bond Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Since its inception on August 31, 1995, the UBS Investment Fund -- U.S. Bond has returned 5.41%, while its benchmark, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index has returned 6.05%. Over the same period, the Fund's annualized volatility or risk of 3.90% was comparable to the benchmark volatility of 3.42%. In calendar year 1999 the Fund posted a return of -1.55% compared to the benchmark's return of -0.84%. The overall U.S. bond market's returns for the year were very disappointing in absolute terms -- the worst for bonds since 1994, and was one of the rare occasions when broad market benchmarks produced negative returns. A combination of strong economic growth (unusual this late in the cycle), rising inflation pressures and monetary policy tightening by the Federal Reserve (the Fed) conspired to push yields up steadily. Yields on benchmark 30-year treasuries rose by nearly 150 basis points from their January lows to finish at 6.5%. This put them up 180 basis points from the record lows set in the fall of 1998. Shorter-term notes saw even greater increases as the yield curve flattened. The Fed raised official rates three times, undoing all three of the 25 basis point cuts taken in 1998, leaving the federal funds rate at 5.5%. This demand in the marketplace for higher yields pushed bond prices substantially lower. While U.S. Treasuries suffered, spread (i.e., corporate, mortgage) sectors did not fare as badly. After the virtually unprecedented widening seen during 1998's global market crisis, spreads narrowed this year, although not quite enough to retrace all of the 1998 sell-off. The tightening in spreads produced strong relative performance for corporates and mortgages, which outperformed equivalent duration U.S. Treasuries by 174 and 112 basis points, respectively. Our overweights to corporate bonds, particularly within the BBB-rated and Yankee sectors, helped Fund returns. Issue selection within both corporates and mortgages was also a source of added value. These positives were offset by our duration strategy, as we maintained a posture slightly longer than benchmarks for most of the year. Yield curve strategy was also slightly positive, with our barbell strategy benefiting from a flattening in the yield curve. ================================================================================ 50 U.S. Bond Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 1 year 3 years 8/31/95* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------------------ UBS Investment Fund -- U.S. Bond 0.14% -1.55% 4.99% 5.41% - ------------------------------------------------------------------------------------------------------------ Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 0.55 -0.84 5.72 6.05 - ------------------------------------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund -- U.S. Bond. 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 UBS Investment Fund -- U.S. Bond and the Salomon Smith Barney BIG Bond Index if you had invested $10,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund -- U.S. Bond vs. Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested - ----------------------------------------------------- Label A B - ----------------------------------------------------- Label Brinson Index - ----------------------------------------------------- 1 8/31/95 10,000 10,000 - ----------------------------------------------------- 2 10,080 10,094 - ----------------------------------------------------- 3 10,230 10,229 - ----------------------------------------------------- 4 10,390 10,389 - ----------------------------------------------------- 5 12/31/95 10,529 10,532 - ----------------------------------------------------- 6 10,591 10,604 - ----------------------------------------------------- 7 10,366 10,425 - ----------------------------------------------------- 8 10,284 10,350 - ----------------------------------------------------- 9 10,202 10,273 - ----------------------------------------------------- 10 10,161 10,268 - ----------------------------------------------------- 11 6/30/96 10,324 10,400 - ----------------------------------------------------- 12 10,345 10,428 - ----------------------------------------------------- 13 10,283 10,413 - ----------------------------------------------------- 14 10,491 10,594 - ----------------------------------------------------- 15 10,762 10,832 - ----------------------------------------------------- 16 11,032 11,011 - ----------------------------------------------------- 17 12/31/96 10,861 10,914 - ----------------------------------------------------- 18 10,871 10,956 - ----------------------------------------------------- 19 10,893 10,968 - ----------------------------------------------------- 20 10,731 10,857 - ----------------------------------------------------- 21 10,893 11,012 - ----------------------------------------------------- 22 11,001 11,116 - ----------------------------------------------------- 23 6/30/97 11,141 11,248 - ----------------------------------------------------- 24 11,479 11,553 - ----------------------------------------------------- 25 11,370 11,453 - ----------------------------------------------------- 26 11,522 11,622 - ----------------------------------------------------- 27 11,675 11,788 - ----------------------------------------------------- 28 11,708 11,843 - ----------------------------------------------------- 29 12/31/97 11,844 11,964 - ----------------------------------------------------- 30 11,981 12,118 - ----------------------------------------------------- 31 11,970 12,110 - ----------------------------------------------------- 32 12,004 12,157 - ----------------------------------------------------- 33 12,050 12,220 - ----------------------------------------------------- 34 12,165 12,338 - ----------------------------------------------------- 35 6/30/98 12,252 12,439 - ----------------------------------------------------- 36 12,264 12,465 - ----------------------------------------------------- 37 12,461 12,656 - ----------------------------------------------------- 38 12,682 12,954 - ----------------------------------------------------- 39 12,636 12,896 - ----------------------------------------------------- 40 12,717 12,967 - ----------------------------------------------------- 41 12/31/98 12,767 13,007 - ----------------------------------------------------- 42 12,876 13,104 - ----------------------------------------------------- 43 12,647 12,874 - ----------------------------------------------------- 44 12,731 12,948 - ----------------------------------------------------- 45 12,755 12,990 - ----------------------------------------------------- 46 12,623 12,871 - ----------------------------------------------------- 47 6/30/99 12,552 12,827 - ----------------------------------------------------- 48 12,490 12,776 - ----------------------------------------------------- 49 12,453 12,767 - ----------------------------------------------------- 50 12,613 12,920 - ----------------------------------------------------- 51 12,613 12,959 - ----------------------------------------------------- 52 12,625 12,957 - ----------------------------------------------------- 53 12/31/99 12,569 12,898 - ----------------------------------------------------- Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 51 U.S. Bond Fund - -------------------------------------------------------------------------------- [LOGO]UBS Investment Funds Industry Diversification Funds As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed................................................ 10.13% Consumer.................................................... 1.65 Energy...................................................... 1.11 Financial Services.......................................... 5.32 Food & House Products....................................... 0.61 Health...................................................... 2.09 Industrial Components....................................... 0.12 Publishing.................................................. 0.41 Services/Miscellaneous...................................... 3.23 Telecommunications.......................................... 2.46 Utilities................................................... 0.51 ------- Total U.S. Corporate Bonds............................... 27.64 International Dollar Bonds..................................... 9.95 Corporate Mortgage-Backed Securities........................... 19.87 U.S. Government Agencies....................................... 2.64 U.S. Gov't Mortgage-Backed Securities.......................... 27.87 U.S. Government Obligations.................................... 10.79 ------- Total U.S. Bonds......................................... 98.76 ------- SHORT-TERM INVESTMENTS......................................... 0.32 ------- TOTAL INVESTMENTS........................................ 99.08 CASH AND OTHER ASSETS, LESS LIABILITIES........................ 0.92 ------- NET ASSETS..................................................... 100.00% ======= - -------------------------------------------------------------------------------- ================================================================================ 52 U.S. Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Face Amount Value ------------ ----------- Bonds -- 98.76% U.S. Corporate Bonds -- 27.64% Cendant Corp., 7.750%, due 12/01/03................ $ 1,060,000 $ 1,058,440 Centaur Funding Corp., 144A (b), 0.000%, due 04/21/20............................. 1,355 207,965 9.080%, due 04/21/20............................. 715 730,194 Ches Pot Tel MD, 8.000%, due 10/15/29............................. 87,000 88,319 Chrysler Financial Corp., 7.400%, due 08/01/69............................. 100,000 92,321 Countrywide Funding Corp. FRN, 5.420%, due 12/01/03............................. 250,000 232,065 Farmers Exchange Capital, 144A, 7.050%, due 07/15/28............................. 1,090,000 925,441 Fidelity Investments, 144A, 7.570%, due 06/15/29............................. 1,250,000 1,201,834 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03............................. 980,000 970,406 Ford Motor Credit Co., 6.700%, due 07/16/04............................. 310,000 303,248 GE Capital Mortgage Services, Inc., 97-HE4 A76.735%, due 12/25/28.................... 410,000 400,652 General Motors Acceptance Corp., 9.625%, due 12/15/01............................. 294,000 307,423 Green Tree Financial Corp., 6.160%, due 02/01/31............................. 1,000,000 947,460 Green Tree Financial Corp., Series 94-5, Class A5, 8.300%, due 11/15/19............................. 320,000 327,552 Illinois Power Special Purpose Trust, 98-1, 5.650%, due 12/25/10............................. 1,565,000 1,411,927 Kroger Co., 8.000%, due 09/15/29................... 500,000 488,245 Lilly Del Mar, 144A, 0.000%, due 08/01/29.......... 1,000,000 995,182 MBNA Global Capital Securities FRN, 0.000%, due 02/01/27............................. 90,000 73,938 Monsanto Co., 144A, 6.600%, due 12/01/28............................. 1,250,000 1,074,251 News America Holdings, 7.750%, due 12/01/45............................. 358,000 326,417 Northern States Power, 6.875%, due 08/01/09............................. 925,000 888,811 PanAmSat Corp., 6.000%, due 01/15/03............................. 375,000 348,997 6.375%, due 01/15/08............................. 500,000 423,820 Peco Energy Transition Trust, 6.130%, due 03/01/09............................. 1,135,000 1,044,359 PP&L Transition Bond Company LLC, 6.960%, due 12/26/07............................. 200,000 199,394 7.050%, due 06/25/09............................. 1,390,000 1,387,776 Premier Auto Trust, Series 96-4A, Class A4, 6.400%, due 10/06/01............................. 180,716 180,843 Rite Aid Corp., 144A, 6.125%, due 12/15/08............................. 890,000 605,200 Face Amount Value ------------ ----------- Salomon, Inc., 6.750%, due 02/15/03................ $ 300,000 $ 294,980 Service Corp., International, 6.000%, due 12/15/05............................. 750,000 557,393 Sears Credit Account Master Trust, Series 99-3, Class A, 6.450%, due 11/15/09............................. 1,200,000 1,169,640 Tele-Communications, Inc., 9.800%, due 02/01/12............................. 950,000 1,109,684 Texas Utilities, 5.940%, due 10/15/11.............. 420,000 412,590 Time Warner, Inc., 7.570%, due 02/01/24............ 340,000 327,048 U.S.A. Waste Services, 6.500%, due 12/15/02............................. 400,000 369,674 Westinghouse Electric, 8.625%, due 08/01/12............................. 575,000 606,102 UCFC Home Equity Loan, Series 97-C, Class A8, FRN, due 09/15/27..................................... 85,441 85,540 ----------- 22,175,131 ----------- Corporate Mortgage-Backed Securities -- 19.87% ABN Amro Mortgage Corp., Series 99-2 IA2, 6.300%, due 04/25/29............................. 2,100,000 1,998,360 ABN Amro Mortgage Corp., Series 99-3, Class A2, 6.300%, due 05/25/29............................. 1,000,000 950,750 Chase Mortgage Finance Corp., Series 93-J1, Class 1A5, 6.625%, due 08/25/09............................. 58,831 56,160 Chemical Mortgage Securities Inc., Series 93-1, Class A5, 7.450%, due 02/25/23............................. 159,954 159,756 Citicorp Mortgage Securities, Inc., Series 94-9, Class A8, 5.750%, due 06/25/09............................. 1,100,910 1,016,657 Heller Financial Commercial Mortgage Assets, Series 99-PH1 A1, 6.500%, due 05/15/61............................. 1,203,494 1,163,995 LB Commercial Conduit Mortgage Trust, Series 99-C1 A1, 6.410%, due 08/15/07............................. 690,672 665,449 Nomura Asset Securities Corp., 7.120%, due 04/13/36............................. 1,200,000 1,174,452 Norwest Asset Securities Corp., Series 98-25, Class A5, 6.000%, due 12/25/28............................. 2,400,000 2,253,384 PNC Mortgage Securities Corp., Series 94-3, Class A8, 7.500%, due 07/25/24............................. 215,000 206,185 Prudential Home Mortgage Securities, Series 93-43, Class A9, 6.750%, due 10/25/23............................. 268,294 257,903 ================================================================================ 53 U.S. Bond Fund -- Schedule of Investments December 31, 1999 (unaudited) - -------------------------------------------------------------------------------- Face Amount Value ------------ ----------- Prudential Home Mortgage Securities, Series 94-3, Class A10, 97-HE4 A7 6.500%, due 02/25/24..................... $ 170,000 $ 162,591 Residential Accredit Loans, Inc., Series 96-QS4, Class Al10, 7.900%, due 08/25/26..................... 275,000 274,409 Residential Accredit Loans, Inc., Series 98-QS4, Class AI5, 7.000%, due 03/25/28..................... 2,850,000 2,686,495 Residential Asset Securitization Trust, Series 97-A10, Class A1, 7.250%, due 12/25/27..................... 391,024 389,992 Residential Funding Mortgage, Series 95-S6, Class A7, 7.500%, due 11/25/25..................... 949,408 930,790 Structured Asset Securities Corp., Series 98-RF1, Class A, 144A, 7.900%, due 10/15/28..................... 473,810 477,216 Structured Asset Securities Corp., Series 98-RF1, Class A, 8.712%, due 03/15/27..................... 388,513 400,290 Structured Asset Securities Corp., Series 98-RF2, 8.582%, due 07/15/27..................... 137,457 141,237 Thrift Financial Corp., 11.250%, due 01/01/16.................... 29,379 30,263 Vendee Mortgage Trust, Series 92-1, Class 2Z, 7.750%, due 05/15/22...................... 553,329 550,087 ---------- 15,946,421 ---------- International Dollar Bonds -- 9.95% Abbey National PLC, 6.700%, Resettable Perpetual Preferred, 6.700%, due 06/29/49..................... 1,075,000 973,264 Banco Santiago S.A., 7.000%, due 07/18/07..................... 380,000 340,945 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.900%, due 05/01/07..................... 1,100,000 1,046,604 Empresa Nacional de Electricidad S.A., 7.875%, due 02/01/27..................... 594,000 516,298 Interamer Development Bank, 6.800%, due 10/15/25..................... 100,000 93,077 Korea Development Bank, 7.125%, due 09/17/01..................... 500,000 496,120 Pemex Finance Ltd., 2A-B1, 144A, 8.450%, due 02/15/07..................... 940,000 913,304 Petroliam Nasional Berhad, 144A, 7.625%, due 10/15/26..................... 430,000 378,616 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14..................... $ 450,000 $ 422,672 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49..................... 585,000 557,858 Southern Investments UK, 6.800%, due 12/01/06..................... 1,345,000 1,259,134 Tyco International Group, S.A., 5.875%, due 11/01/04..................... 595,000 550,797 7.000%, due 06/15/28..................... 500,000 432,445 ---------- 7,981,134 ---------- U.S. Government Mortgage-Backed Securities -- 27.87% Fannie Mae, 6.375%, due 06/15/09........... 220,000 209,642 Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25..................... 115,854 119,655 Federal Home Loan Mortgage Corp., 7.000%, due 10/15/13..................... 492,125 468,587 7.238%, due 05/01/26..................... 12,320 12,366 Federal Home Loan Mortgage Corp. Gold, 8.000%, due 11/01/22..................... 86,371 87,384 9.000%, due 03/01/24..................... 65,048 68,101 Federal National Mortgage Assoc. Series 97-72, Class EG 0.000%, due 09/25/22....................... 264,180 228,900 Federal National Mortgage Association, 5.625%, due 03/15/01....................... 4,080,000 4,040,885 8.000%, due 08/01/08....................... 543,163 554,309 8.000%, due 12/18/11....................... 100,000 101,979 6.500%, due 03/01/19....................... 476,937 455,624 8.500%, due 07/01/22....................... 9,358 9,691 9.500%, due 08/01/22....................... 60,755 64,219 7.500%, due 12/01/23....................... 476,031 471,045 7.000%, due 12/01/24....................... 2,580,594 2,495,816 7.500%, due 01/01/28....................... 262,040 259,501 6.000%, due 03/01/28....................... 653,272 598,442 6.500%, due 06/01/28....................... 707,837 668,508 6.000%, due 08/01/28....................... 1,428,573 1,307,889 6.500%, due 09/01/28....................... 233,641 220,659 6.500%, due 02/01/29....................... 497,942 469,466 7.000%, due 03/01/29....................... 45,445 43,984 Federal National Mortgage Association Strips, 8.000%, due 08/01/23....................... 294,086 90,397 0.000%, due 02/01/28....................... 223,882 145,290 FNCI, 8.000%, due 02/01/13................. 169,684 173,113 Freddie Mac, 5.750%, due 06/15/01.......... 1,000,000 990,028 - ------------------------------------------------------------------------------- 54 U.S. Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Shares Value -------- ----------- Government National Mortgage Association, 10.000%, due 09/15/00.................. 804 $ 838 10.000%, due 05/15/01.................. 1,105 1,152 9.000%, due 11/15/04................... 7,096 7,294 9.000%, due 11/15/04................... 2,859 2,939 8.000%, due 08/15/22................... 41,039 41,673 7.500%, due 12/15/22................... 207,917 207,069 7.500%, due 12/15/23................... 862,804 858,581 7.500%, due 01/15/24................... 57,259 56,934 6.500%, due 10/15/24................... 7,016,059 6,671,397 7.500%, due 06/15/25................... 72,430 72,057 7.000%, due 07/15/25................... 84,595 82,395 ----------- 22,357,809 ----------- U.S. Government Agencies -- 2.64% Aid-Israel, Series 10-Z, 0.000%, due 02/15/03................... 805,000 656,316 Jordan Aid, 8.750%, due 09/01/19......... 1,357,589 1,459,788 ----------- 2,116,104 ----------- U.S. Government Obligations -- 10.79% U.S. Treasury Bond, 8.750%, due 05/15/17.................. $ 460,000 549,125 8.000%, due 11/15/21.................. 3,320,000 3,766,125 U.S. Treasury Inflation Indexed Note, 3.625%, due 04/15/28.................. 1,770,000 1,645,025 U.S. Treasury Note, 5.750%, due 08/15/03.................. 205,000 200,708 7.000%, due 07/15/06.................. 2,440,000 2,499,475 ----------- 8,660,458 ----------- Total Bonds (Cost $82,704,874).......... 79,237,057 ----------- Short-Term Investments -- 0.32% Investment Companies -- 0.32% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $259,361)....................... 259,361 259,361 ----------- Total Investments (Cost $82,964,235) -- 99.08% (a)...... 79,496,418 Cash and other assets, less liabilities -- 0.92%............. 736,231 ----------- Net Assets -- 100%...................... $80,232,649 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $82,964,235; and net unrealized depreciation consisted of: Gross unrealized appreciation.... $ 281,821 Gross unrealized depreciation.... (3,749,638) ----------- Net unrealized depreciation...... $(3,467,817) =========== (b) Non-income producing security. FRN: Floating rate note -- The rate disclosed is that in effect at December 31, 1999. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $8,978,479 or 11.19% of net assets. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 55 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $82,704,874)....................................................... $ 79,237,057 Affiliated issuers (Cost $259,361)............................................................ 259,361 Receivables: Investment securities sold.................................................................... 152 Interest...................................................................................... 856,363 Other assets.................................................................................... 1,842 ---------------- TOTAL ASSETS.............................................................................. 80,354,775 ---------------- LIABILITIES: Payables: Investment advisory fees...................................................................... 32,925 Due to custodian bank......................................................................... 86,328 Accrued expenses.............................................................................. 2,873 ---------------- TOTAL LIABILITIES......................................................................... 122,126 ---------------- NET ASSETS....................................................................................... $ 80,232,649 ================ NET ASSETS CONSIST OF: Paid in capital............................................................................... $ 86,614,032 Distributions in excess of net investment income.............................................. (183,624) Accumulated net realized loss................................................................. (2,729,942) Net unrealized depreciation................................................................... (3,467,817) ---------------- NET ASSETS................................................................................ $ 80,232,649 ================ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $74,460,691 and 7,628,122 shares issued and outstanding).................................. $ 9.76 ================ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,133 and 116 shares issued and outstanding)............................................. $ 9.77 ================ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,770,825 and 594,049 shares issued and outstanding)..................................... $ 9.71 ================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 56 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends.................................................... $ 46,708 Interest..................................................... 3,685,825 -------------- TOTAL INCOME............................................. 3,732,533 -------------- EXPENSES: Advisory..................................................... 283,873 Registration................................................. 20,800 Professional................................................. 20,529 Distribution................................................. 14,465 Other........................................................ 20,526 -------------- TOTAL EXPENSES........................................... 360,193 Expenses deferred by Advisor............................. (2,293) Earnings credits......................................... (1,659) -------------- NET EXPENSES............................................. 356,241 -------------- NET INVESTMENT INCOME.................................... 3,376,292 -------------- NET REALIZED AND UNREALIZED LOSS: Net realized loss............................................ (1,678,187) Change in net unrealized appreciation or depreciation........ (964,402) -------------- Net realized and unrealized loss............................. (2,642,589) -------------- Net increase in net assets resulting from operations......... $ 733,703 ==============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 57 U.S. Bond Fund -- Financial Statements
- ------------------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF CHANGES IN NET ASSETS Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 --------------- ---------------- OPERATIONS: Net investment income.................................................................. $ 3,376,292 $ 4,517,147 Net realized loss...................................................................... (1,678,187) (338,906) Change in net unrealized appreciation or depreciation.................................. (964,402) (3,036,340) --------------- ---------------- Net increase in net assets resulting from operations................................... 733,703 1,141,901 --------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions in excess of net investment income....................................... (4,521,037) (3,812,376) Distributions from net realized gain................................................... -- (55,782) Distributions in excess of net realized gain........................................... -- (1,051,755) --------------- ---------------- Total distributions to shareholders*................................................... (4,521,037) (4,919,913) --------------- ---------------- CAPITAL SHARE TRANSACTIONS: Shares sold............................................................................ 51,018,071 156,386,946 Shares issued in connection with the acquisition of UBS Bond Fund...................... -- 15,177,263 Shares issued on reinvestment of distributions......................................... 4,378,710 4,271,987 Shares redeemed........................................................................ (69,422,381) (115,331,025) --------------- ---------------- Net increase (decrease) in net assets resulting from capital share transactions........ (14,025,600) 60,505,171 --------------- ---------------- TOTAL INCREASE (DECREASE) IN NET ASSETS............................................ (17,812,934) 56,727,159 --------------- ---------------- NET ASSETS: Beginning of period.................................................................... 98,045,583 41,318,424 --------------- ---------------- End of period (including undistributed net investment income of $(183,624) and $961,121, respectively).............................................. $ 80,232,649 $ 98,045,583 =============== ================ *DISTRIBUTIONS BY CLASS: Distributions from net investment income: Brinson Class I...................................................................... (4,175,208) (3,583,162) Brinson Class N...................................................................... (61) (46) UBS Investment Funds Class........................................................... (345,768) (229,168) Distributions from and in excess of net realized gain: Brinson Class I...................................................................... -- (1,038,553) Brinson Class N...................................................................... -- (16) UBS Investment Funds Class........................................................... -- (68,968) --------------- ---------------- Total distributions to shareholders.................................................... (4,521,037) (4,919,913) --------------- ---------------- See accompanying notes to financial statements. ===================================================================================================================================
58 U.S. Bond Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended August 31, 1995* December 31, 1999 Year Ended June 30, Through ----------------------------------- UBS Investment Funds Class (Unaudited) 1999 1998 1997 June 30, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period................ $ 10.23 $ 10.54 $ 10.22 $ 9.92 $ 10.00 --------- --------- --------- --------- --------- Income from investment operations: Net investment income............................ 0.29** 0.52** 0.50 0.46** 0.46 Net realized and unrealized gain (loss).......... (0.27) (0.26) 0.49 0.32 (0.13) --------- --------- --------- --------- --------- Total income from investment operations..... 0.02 0.26 0.99 0.78 0.33 --------- --------- --------- --------- --------- Less distributions: Distributions from net investment income......... (0.54) (0.42) (0.53) (0.48) (0.38) Distributions in excess of net realized gain..... -- (0.15) (0.14) -- (0.03) --------- --------- --------- --------- --------- Total distributions......................... (0.54) (0.57) (0.67) (0.48) (0.41) --------- --------- --------- --------- --------- Net asset value, end of period...................... $ 9.71 $ 10.23 $ 10.54 $ 10.22 $ 9.92 ========= ========= ========= ========= ========= Total return (non-annualized)....................... (1.55)% 2.45% 9.97% 7.91% 3.24% Ratios/Supplemental data: Net assets, end of period (in 000s)................ $ 5,771 $ 6,015 $ 2,444 $ 1,399 $ 636 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits........................... 1.08%*** 1.08% 1.31% 2.12% 4.10%*** After expense reimbursement and earnings credits........................... 1.07%*** 1.07% 1.07% 1.07% 1.07%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits........................... 5.47%*** 4.95% 5.14% 4.67% 2.53%*** After expense reimbursement and earnings credits........................... 5.48%*** 4.96% 5.38% 5.72% 5.56%*** Portfolio turnover rate............................. 103% 260% 198% 410% 363%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 59 High Yield Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds The UBS Investment Fund -D High Yield has earned an annualized return of 4.09% since its inception on December 31, 1998, versus 1.57% for its benchmark, the Merrill Lynch High Yield Master Index. This performance was achieved with an annualized volatility of 4.30% versus 2.98% for the benchmark. This strong performance was due mainly to credit and sector selection decisions. Due to continued strength in the U.S. economy, spreads (over U.S. Treasuries) in the high yield market tightened from 555 basis points at 1998 year-end to 453 basis points at 1999 year-end. However, an increase in the general level of U.S. interest rates raised the benchmark's yield-to-worst from 10.20% to 10.97% over the same one-year period. As the year progressed, the market became increasingly intolerant of poor financial results. Often when companies reported bad news their bond prices dropped by more than 15%. Conversely, when companies reported good news, their bond prices showed only modest gains. In September, default rates stood at 3.26% versus 1.32% a year earlier. As participants focused on higher default rates, the market's shrinking liquidity was exacerbated by the perception of potential business disruptions resulting from Y2K. In December, evidence suggested that the default rate had peaked and that Y2K concerns had been addressed. Liquidity improved and demand for new bond issuance increased. This firmed up the market, leading to solid performance in the fourth quarter. As in 1998, industry weightings helped to enhance returns. The Fund benefited from underweights in healthcare, textile and entertainment/film, which significantly underperformed the market, and from overweights in cable, broadcasting and publishing/printing, which performed well. Fund performance was hurt somewhat by an underweight in cyclicals, which significantly outperformed the broader market in 1999. - -------------------------------------------------------------------------------- 60 High Yield Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return 6 months 12/31/98* ended to 12/31/99 12/31/99 - ----------------------------------------------------------- UBS Investment Fund - High Yield 1.45% 4.09% - ----------------------------------------------------------- Merrill Lynch High Yield Master Index -0.18 1.57 - ----------------------------------------------------------- * Inception date of the UBS Investment Fund - High Yield. 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 UBS Investment Fund -D High Yield and the Merrill Lynch High Yield Master Index if you had invested $10,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund - High Yield vs. Merrill Lynch High Yield Master Index Wealth Value with Dividends Reinvested - ----------------------------------------------------------- Date UBS Investment Fund - Merrill Lynch High Yield High Yield Master Index - ----------------------------------------------------------- 12/31/98 10,000 10,000 - ----------------------------------------------------------- 1/31/99 10,240 10,099 - ----------------------------------------------------------- 2/28/99 10,281 10,022 - ----------------------------------------------------------- 3/31/99 10,391 10,108 - ----------------------------------------------------------- 4/30/99 10,541 10,266 - ----------------------------------------------------------- 5/31/99 10,311 10,195 - ----------------------------------------------------------- 6/30/99 10,261 10,176 - ----------------------------------------------------------- 7/31/99 10,240 10,191 - ----------------------------------------------------------- 8/31/99 10,188 10,087 - ----------------------------------------------------------- 9/30/99 10,147 10,049 - ----------------------------------------------------------- 10/31/99 10,137 9,990 - ----------------------------------------------------------- 11/31/99 10,343 10,104 - ----------------------------------------------------------- 12/31/99 10,409 10,157 - ----------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 61 High Yield Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - ----------------------------------------------------------------- U.S. BONDS Corporate Bonds Aerospace & Military 0.69% Auto 1.24 Chemicals 4.39 Construction 4.64 Consumer 3.21 Electronics and Electric Components 0.55 Energy 2.33 Financial Services 1.34 Food & House Products 5.07 Health 3.06 Publishing 2.25 Radio Broadcasting 3.14 Real Estate 0.83 Recreation 8.46 Retail 5.23 Services/Miscellaneous 17.51 Telecommunications 14.29% Television Broadcasting 14.88 ------ Total U.S. Corporate Bonds 93.11 International Dollar Bonds 2.39 ------ Total U.S. Bonds 95.50 Warrants 0.02 ------ SHORT-TERM INVESTMENTS 2.57 ------ TOTAL INVESTMENTS 98.09 CASH AND OTHER ASSETS, LESS LIABILITIES 1.91 ------ NET ASSETS 100.00% ====== - ----------------------------------------------------------------- Top Ten U.S. Bond Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ----------------------------------------------------------------- 1. Exodus Communications, Inc. 1.83% 2. Lyondell Chemical Co. 1.59 3. Paxson Communications Corp. 1.57 4. Dobson Sygnet Communications, Inc. 1.56 5. Microcell Telecommunications, Inc. 1.55 6. Group Maintenance America Corp. 1.50 7. Waterford Gaming 1.48 8. PSINet, Inc. 1.48 9. Verio, Inc. 1.46 10. Paxson Communications Corp. 1.44 - ----------------------------------------------------------------- ================================================================================ 62 High Yield Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Face Amount Value ---------- ------- U.S. Bonds -- 95.50% U.S. Corporate Bonds -- 93.11% Ackerley Group, Inc., Series B, 9.000%, due 01/15/09........................ $ 675,000 $ 658,125 Adelphia Communications Corp., 9.375%, due 11/15/09........................ 500,000 490,000 Allbritton Communications Co., Series B, 8.875%, due 02/01/08........................ 550,000 528,000 American Mobile Satellite Corp., 12.250%, due 04/01/08....................... 250,000 195,313 Avalon Cable Holdings, 9.375%, due 12/01/08........................ 600,000 606,000 Bally Total Fitness Corp., Series B, 9.875%, due 10/15/07........................ 500,000 485,000 Big City Radio, Inc., (c) 0.000%, due 03/15/05........................ 1,100,000 709,500 Budget Group, Inc., 9.125%, due 04/01/06........................ 500,000 465,000 Building Materials Corp., 7.750%, due 07/15/05........................ 650,000 591,500 Capstar Broadcasting Partners, Inc., (d) 0.000%, due 02/01/09........................ 500,000 445,000 Carmike Cinemas, Inc., 9.375%, due 02/01/09........................ 750,000 650,625 CB Richard Ellis Services, Inc., 8.875%, due 06/01/06........................ 525,000 467,250 Centennial Cellular, 10.750%, due 12/15/08....................... 500,000 535,000 Century Communications Corp., 0.000%, due 01/15/08........................ 425,000 186,469 8.375%, due 11/15/17........................ 300,000 265,500 Collins & Alkman Corp., 11.500%, due 04/15/06....................... 700,000 691,250 CSC Holdings, Inc., 7.625%, due 07/15/18........................ 600,000 558,000 Cumulus Media, Inc., 10.375%, due 07/01/08....................... 590,000 613,600 Dan River, Inc., Snr-Sub-Nts, 10.125%, due 12/15/03....................... 500,000 500,000 Dobson Sygnet Communications, Inc., 12.250%, due 12/15/08....................... 800,000 880,000 Eagle Family Foods, Series B, 8.750%, due 01/15/08........................ 750,000 577,500 Exodus Communications, Inc., 11.250%, due 07/01/08....................... 1,000,000 1,032,500 Falcon Holding Group, Series B, (e) 0.000%, due 04/15/10........................ 150,000 112,313 Fedders North America, 9.375%, due 08/15/07........................ 500,000 490,000 Federal-Mogul Corp., 7.500%, due 01/15/09........................ 250,000 222,691 Fox/Liberty Networks, Step, (f) 0.000%, due 08/15/07........................ $ 500,000 $ 402,500 Global Imaging Systems, Inc., 10.750%, due 02/15/07....................... 325,000 312,000 Golden Sky DBS, Inc., (g) 0.000%, due 03/01/07........................ 375,000 228,281 Gothic Production Corp., 11.125%, due 05/01/05 Series B.............. 500,000 425,000 Granite Broadcasting Corp., 10.375%, due 05/15/05....................... 400,000 408,000 Group Maintenance America Corp., 9.750%, due 01/15/09........................ 850,000 843,625 Harvey Casinos Resorts, 10.625%, due 06/01/06....................... 300,000 309,750 Hollinger International Publishing Corp., 9.250%, due 02/01/06........................ 750,000 742,500 ICN Pharmaceuticals, Inc., 9.250%, due 08/15/05........................ 400,000 394,000 Integrated Electrical Services, Inc., 9.375%, due 02/01/09........................ 750,000 735,937 Interep National Radio Sales, Series B, 10.000%, due 07/01/08....................... 650,000 622,375 Iron Mountain, Inc., 10.125%, due 10/01/06....................... 200,000 203,500 8.750%, due 09/30/09........................ 500,000 476,250 Isle of Capri Casinos, Inc., 8.750%, due 04/15/09........................ 500,000 460,000 ISP Holdings Inc., Series B, 9.000%, due 10/15/03........................ 630,000 614,250 J.H. Heafner Co., 10.000%, due 05/15/08....... 525,000 475,125 Level 3 Communications, Inc., (h) 0.000%, due 12/01/08........................ 850,000 514,250 Liberty Group Operating, 9.375%, due 02/01/08........................ 850,000 756,500 LIN Holdings Corp., Step, (i) 0.000%, due 03/01/08........................ 1,000,000 673,750 Loral Space & Communications Ltd., 9.500%, due 01/15/06........................ 200,000 180,000 Lyondell Chemical Co., Series B, 9.875%, due 05/01/07........................ 880,000 897,600 Mail Well Corp., 8.750%, due 12/15/08......... 500,000 475,000 Merrill Corp., 12.000%, due 05/01/09.......... 325,000 318,500 Metromedia Fiber Network, 10.000%, due 12/15/09....................... 600,000 615,000 Mohegan Tribal Gaming Authority, 8.750%, due 01/01/09........................ 600,000 591,000 MTS, Inc., 9.375%, due 05/01/05............... 750,000 375,000 NationsRent, Inc., 10.375%, due 12/15/08...... 675,000 664,875 NBTY, Inc., Series B, 8.625%, due 09/15/07........................ 440,000 407,000 ================================================================================ 63 High Yield Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Face Amount Value ---------- ---------- New World Pasta Co., 9.250%, due 02/15/09............................ $ 545,000 $ 490,500 Newpark Resources, Inc., Series B, 8.625%, due 12/15/07............................ 700,000 651,000 Nextel Communications, Inc., 144A, 9.375%, due 11/15/09............................ 305,000 298,900 Nextel Communications, Inc., Step, (j) 0.000%, due 09/15/07............................ 800,000 596,000 Nextlink Communications, 144A, 0.000%, due 12/01/09 (k)........................ 712,000 414,740 10.500%, due 12/01/09........................... 175,000 177,625 Nortex, Inc., 9.875%, due 03/01/04............... 450,000 443,250 NTL Communications Corp., Series B, Step, (1) 0.000%, due 10/01/08............................ 900,000 636,750 Packaging Corp. of America, 9.625%, due 04/01/09............................ 220,000 224,675 Paxson Communications Corp., 11.625%, due 10/01/02........................... 850,000 884,000 Paxson Communications Corp. (b), 0.000%, due 10/31/06............................ 797 812,818 Pegasus Communication Corp., Class B, 144A, 12.500%, due 08/01/07..................... 550,000 599,500 Pegasus Communications Corp., Class B, 9.625%, due 10/15/05............................ 750,000 757,500 9.750%, due 12/01/06............................ 150,000 151,500 Perry Ellis International, Inc., 12.250%, due 04/01/03........................... 650,000 645,937 Phoenix Color, Inc., 10.375%, due 02/01/09........................... 600,000 576,000 Pilgrim's Pride Corp., Snr-Sub-Nts, 10.875%, due 08/01/03........................... 561,000 566,610 Pillowtex Corp., 10.000%, due 11/15/06........... 125,000 57,500 Plains Resources, Inc., 10.250%, due 03/15/06 Series B........................... 300,000 291,000 Premier Parks, Inc., Step, (m) 0.000%, due 04/01/08............................ 1,100,000 759,000 Protection One Alarm, Inc., 7.375%, due 08/15/05............................ 365,000 290,175 PSINet, Inc., 10.500%, due 12/01/06........................... 150,000 151,125 PSINet, Inc., 11.500%, due 11/01/08.............. 800,000 836,000 Qwest Communications International, Inc., (n) 0.000%, due 10/15/07............................ 500,000 405,000 R. H. Donnelly, Inc., 9.125%, due 06/01/08....... 750,000 735,000 Range Resources Corp., 8.750%, due 01/15/07............................ 650,000 596,375 Rayovac Corp., Series B, 10.250%, due 11/01/06........................... 600,000 612,000 RCN Corp., Step, (o) 0.000%, due 10/15/07............................ 450,000 316,125 Revlon Consumer Products, 8.125%, due 02/01/06............................ $ 400,000 $ 294,000 8.625%, due 02/01/08............................ 220,000 110,000 Scotts Co., 144A, 8.625%, due 01/15/09........... 500,000 485,000 Sequa Corp., 9.000%, due 08/01/09................ 400,000 387,000 Simmons Co., 10.250%, due 03/15/09............... 700,000 662,375 Sinclair Broadcast Group, 10.000%, due 09/30/05........................... 250,000 247,500 8.750%, due 12/15/07............................ 425,000 392,063 Sleepmaster Corp., 144A, 11.000%, due 05/15/09........................... 500,000 508,750 Speedway Motorsports, Inc., 8.500%, due 08/15/07............................ 700,000 679,000 T/SF Communications Corp., Series B, 10.375%, due 11/01/07........................... 550,000 528,000 Telecorp PCS, Inc., (p) 0.000%, due 04/15/09............................ 700,000 441,000 TeleWest Communications PLC, 144A, (q) 0.000%, due 04/15/09............................ 500,000 315,000 Trans-Resources, Inc., Series B, (r) 0.000%, due 03/15/08............................ 650,000 325,000 Tritel PCS, Inc., 144A, (s) 0.000%, due 05/15/09............................ 200,000 126,500 Triton PCS, Inc., (t) 0.000%, due 05/01/08............................ 1,125,000 795,937 Twin Labs, Inc., 10.250%, due 05/15/06........... 500,000 517,500 U.S. Unwired, Inc., 144A, (u) 0.000%, due 11/01/09............................ 800,000 468,000 United Industries Corp., 9.875%, due 04/01/09............................ 700,000 638,750 United Rentals, Inc., Series B, 9.500%, due 06/01/08............................ 625,000 610,937 9.250%, due 01/15/09............................ 370,000 355,200 Verio, Inc., 13.500%, due 06/15/04............... 750,000 823,125 Voicestream Wire, 144A, 10.375%, due 11/15/09........................... 225,000 231,750 Waterford Gaming, 144A, 9.500%, due 03/15/10.................................... 850,000 837,250 Williams Communications Group, Inc., 10.875%, due 10/01/09........................... 635,000 663,575 ---------- 52,497,521 ---------- International Dollar Bonds -- 2.39% Imax, Corp., 7.875%, due 12/01/05................ 500,000 472,500 Microcell Telecommunications, Inc., Series B, 0.000%, due 06/01/06................. 990,000 873,675 ---------- 1,346,175 ---------- Total U.S. Bonds (Cost $56,267,269).............. 53,843,696 ---------- ================================================================================ 64 High Yield Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Warrants Value ---------- ------------ Warrants -- 0.02% American Mobile Satellite Corp., 144A, Warrants (Cost $11,250) (b).................. 250 $ 10,000 ------------ Shares ---------- Short-Term Investments -- 2.57% Investment Companies -- 2.57% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,449,925)........................... 1,449,925 1,449,925 ------------ Total Investments (Cost $57,728,444) -- 98.09% (a)............ 55,303,621 Cash and other assets, less liabilities -- 1.91%................... 1,078,599 ------------ Net Assets -- 100%........................... $ 56,382,220 ============ NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $57,728,444; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 438,489 Gross unrealized depreciation (2,863,312) --------------- Net unrealized depreciation $ (2,424,823) =============== (b) Non-income producing security. (c) Interest rate 0.000% until 03/15/01, then 11.125% to maturity (d) Interest rate 0.000% until 02/01/02, then 12.750% to maturity (e) Interest rate 0.000% until 04/15/03, then 9.285% to maturity (f) Interest rate 0.000% until 08/15/02, then 9.750% to maturity (g) Interest rate 0.000% until 03/01/04, then 13.500% to maturity (h) Interest rate 0.000% until 12/01/03, then 10.500% to maturity (i) Interest rate 0.000% until 03/01/03, then 10.000% to maturity (j) Interest rate 0.000% until 09/15/02, then 10.650% to maturity (k) Interest rate 0.000% until 12/01/04, then 12.125% to maturity (l) Interest rate 0.000% until 10/01/03, then 12.375% to maturity (m) Interest rate 0.000% until 04/01/03, then 10.000% to maturity (n) Interest rate 0.000% until 10/15/02, then 9.470% to maturity (o) Interest rate 0.000% until 10/15/02, then 11.125% to maturity (p) Interest rate 0.000% until 04/15/04, then 11.625% to maturity (q) Interest rate 0.000% until 04/15/04, then 9.250% to maturity (r) Interest rate 0.000% until 03/15/03, then 12.000% to maturity (s) Interest rate 0.000% until 05/15/04, then 12.750% to maturity (t) Interest rate 0.000% until 05/01/03, then 11.000% to maturity (u) Interest rate 0.000% until 11/01/04, then 13.375% to maturity 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $4,473,015 or 7.93% of net assets. See accompanying notes to financial statements. ================================================================================ 65 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $56,278,519)............................................. $53,853,696 Affiliated issuers (Cost $1,449,925)................................................ 1,449,925 Receivables: Investment securities sold.......................................................... 308,735 Interest............................................................................ 1,153,641 ----------- TOTAL ASSETS..................................................................... 56,765,997 ----------- LIABILITIES: Payables: Investment advisory fees............................................................ 25,035 Due to custodian bank............................................................... 308,042 Accrued expenses.................................................................... 50,700 ----------- TOTAL LIABILITIES................................................................ 383,777 ----------- NET ASSETS............................................................................... $56,382,220 =========== NET ASSETS CONSIST OF: Paid in capital........................................................................ $59,825,015 Accumulated undistributed net investment income........................................ 558,849 Distributions in excess of net realized gain........................................... (1,576,821) Net unrealized depreciation............................................................ (2,424,823) ----------- NET ASSETS............................................................................... $56,382,220 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $53,461,003 and 5,563,579 shares issued and outstanding)............................. $ 9.61 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,046 and 109 shares issued and outstanding)......................................... $ 9.60 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $2,920,171 and 304,104 shares issued and outstanding)................................. $ 9.60 ===========
See accompanying notes to financial statements. ================================================================================ 66 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Interest........................................................................ $ 3,208,339 ----------- TOTAL INCOME................................................................. 3,208,339 ----------- EXPENSES: Advisory........................................................................ 192,673 Distribution.................................................................... 26,035 Professional.................................................................... 20,107 Registration.................................................................... 15,506 Other........................................................................... 39,774 ----------- TOTAL EXPENSES............................................................... 294,095 Expenses deferred by Advisor................................................. (40,895) Earnings credits............................................................. (1,756) ----------- NET EXPENSES................................................................. 251,444 ----------- NET INVESTMENT INCOME........................................................ 2,956,895 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss on investments................................................ (1,508,313) Change in net unrealized appreciation or depreciation........................... (280,354) ----------- Net realized and unrealized loss................................................ (1,788,667) ----------- Net increase in net assets resulting from operations............................ $ 1,168,228 ===========
================================================================================ 67 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ------------ ------------- OPERATIONS: Net investment income............................................................... $ 2,956,895 $ 2,487,185 Net realized gain (loss)............................................................ (1,508,313) 420,129 Change in net unrealized appreciation or depreciation............................... (280,354) (1,916,114) ------------ ------------- Net increase in net assets resulting from operations................................ 1,168,228 991,200 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................... (2,747,919) (1,845,754) Brinson Class N................................................................... (48) (30) UBS Investment Funds Class........................................................ (261,823) (167,575) Distributions from and in excess of net realized gain: Brinson Class I................................................................... (384,243) -- Brinson Class N................................................................... (7) -- UBS Investment Funds Class........................................................ (40,374) -- ------------ ------------- Total distributions to shareholders................................................. (3,434,414) (2,013,359) ------------ ------------- CAPITAL SHARE TRANSACTIONS: Shares sold......................................................................... 7,261,164 52,695,849 Shares issued on reinvestment of distributions...................................... 3,052,216 1,797,826 Shares redeemed..................................................................... (18,002,121) (22,036,291) ------------ ------------- Net increase (decrease) in net assets resulting from capital share transactions..... (7,688,741) 32,457,384 ------------ ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS....................................... (9,954,927) 31,435,225 ------------ ------------- NET ASSETS: Beginning of period................................................................. 66,337,147 34,901,922 ------------ ------------- End of period (including accumulated undistributed net investment income of $558,849 and $611,744, respectively)..................................... $ 56,382,220 $ 66,337,147 ============ =============
* Reflects the Fund's change in fiscal year end from December 31 to June 30 See accompanying notes to financial statements. ================================================================================ 68 High Yield Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended December 31, 1999 Six Months Ended UBS Investment Funds Class (Unaudited) June 30, 1999* - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period............................................ $ 9.95 $ 9.98 ------- ------- Income from investment operations: Net investment income....................................................... 0.42** 0.41** Net realized and unrealized loss............................................ (0.27) (0.15) ------- ------- Total income from investment operations................................. 0.15 0.26 ------- ------- Less distributions: Distribution from net investment income..................................... (0.43) (0.29) Distributions from and in excess of net realized gain....................... (0.07) -- ------- ------- Total distributions..................................................... (0.50) (0.29) ------- ------- Net asset value, end of period.................................................. $ 9.60 $ 9.95 ======= ======= Total return (non-annualized)................................................... 4.09% 2.61% Ratios/Supplemental Data: Net assets, end of period (in 000s)........................................... $ 2,920 $ 6,292 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits........................... 1.68%*** 1.68%*** After expense reimbursement and earnings credits............................ 1.55%*** 1.55%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits........................... 8.29%*** 7.69%*** After expense reimbursement and earnings credits............................ 8.42%*** 7.82%*** Portfolio turnover rate....................................................... 29% 77%
* Commencement of UBS Investment Funds Class was December 31, 1998 ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 69 UBS Investment Funds N 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 eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The financial highlights of the UBS Investment Funds Class are presented separately. Prior to December 19, 1998, the U.S. Large Capitalization Growth Fund (formerly, UBS Large Cap Growth Fund), U.S. Small Capitalization Growth Fund (formerly, UBS Small Cap Fund), High Yield Fund (formerly, UBS High Yield Bond Fund), UBS Value Equity Fund and UBS Bond Fund sought to achieve their investment objectives by investing substantially all of their investable assets in a corresponding portfolio of UBS Investor Portfolios Trust (each a "Portfolio" and collectively, the "Portfolios"), an open-end management investment company that had the same investment objective. On October 20, 1998, the Board of Directors approved a tax-free plan of reorganization (the "Reorganization"). Pursuant to the Reorganization, the net assets of the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were withdrawn from their corresponding Portfolio and thereafter each began to operate, under its new name, as a separate Fund in the Trust. In addition, the net assets of the UBS Value Equity Fund and UBS Bond Fund were withdrawn from their corresponding Portfolio and acquired by the U.S. Equity Fund and U.S. Bond Fund, respectively, in a tax-free exchange solely for Brinson Class I shares of each Fund. The UBS Value Equity Fund and UBS Bond Fund were then dissolved. Shares issued in exchange, net asset value and corresponding net unrealized appreciation at December 18, 1998, were as follows: Net Net Unrealized Fund Shares Asset Value Appreciation - ---- ------ ----------- ------------ UBS Value Equity Fund............ 1,233,797 $23,269,419 $774,047 UBS Bond Fund.................... 1,429,121 15,177,263 27,192 The aggregate net assets of the U.S. Equity Fund and U.S. Bond Fund immediately before the mergers were $729,679,727 and $80,523,890, respectively. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund 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. Equity securities traded over-the-counter are valued at the most recent bid price. 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. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. 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. - -------------------------------------------------------------------------------- 70 UBS Investment Funds N Notes To Financial Statements - -------------------------------------------------------------------------------- C. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1999, therefore, no federal income tax provision was required. E. Distributions to Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. F. Income and Expense Allocations: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds 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. H. Earnings Credits: The Fund's have entered into an agreement with their custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. This amount is reflected in the statement of operations. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized operating expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions for the six months ended December 31, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fees Fund Fee Expense Cap Expense Cap Expense Cap Fees Deferred - ---- -------- --------------- --------------- -------------- ----------- -------- U.S. Balanced Fund......................... 0.70% 0.80% 1.05% 1.30% $ 131,459 $ 28,977 U.S. Equity Fund........................... 0.70 0.80 1.05 1.32 2,275,632 -- U.S. Large Capitalization Equity Fund...... 0.70 0.80 1.05 1.32 85,880 46,252 U.S. Large Capitalization Growth Fund...... 0.70 0.80 1.05 1.57 31,958 56,260 U.S. Small Capitalization Growth Fund...... 1.00 1.15 1.40 1.92 197,692 37,437 U.S. Bond Fund............................. 0.50 0.60 0.85 1.07 283,873 2,293 High Yield Fund............................ 0.60 0.70 0.95 1.55 192,673 40,895
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 six months ended December 31, 1999 were as follows: U.S. Balanced Fund................................................. $2,244 U.S. Equity Fund................................................... 9,914 U.S. Large Capitalization Equity Fund.............................. 2,244 U.S. Large Capitalization Growth Fund.............................. 1,834 U.S. Small Capitalization Growth Fund.............................. 1,919 U.S. Bond Fund..................................................... 2,186 High Yield Fund.................................................... 2,181 - -------------------------------------------------------------------------------- 71 UBS INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The following Funds invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund (OSupplementary TrustO). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments for the six months ended December 31, 1999, were as follows:
% of Sales Interest Net Fund Purchases Proceeds Income Value Assets - ---- ------------ ------------ ----------- ------------ -------- U.S. Balanced Fund................................ $ 11,136,330 $ 10,864,712 $ 26,452 $ 507,697 1.51% U.S. Equity Fund.................................. 157,878,579 177,825,076 489,563 17,738,488 3.52 U.S. Large Capitalization Equity Fund............. 33,397,905 33,912,604 31,884 1,018,306 3.43 U.S. Large Capitalization Growth Fund............. -- -- -- -- -- U.S. Small Capitalization Growth Fund............. 18,471,553 17,818,667 59,423 2,787,103 5.89 U.S. Bond Fund.................................... 54,290,733 59,535,749 216,321 259,361 0.32 High Yield Fund................................... 22,196,646 22,992,870 82,908 1,449,925 2.57
3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1999, excluding short-term investments, were as follows:
Proceeds Fund Purchases From Sales - ----- ------------- ------------ U.S. Balanced Fund.................................................................. $ 14,920,499 $ 16,406,156 U.S. Equity Fund.................................................................... 164,908,312 352,962,708 U.S. Large Capitalization Equity Fund............................................... 28,374,811 19,896,891 U.S. Large Capitalization Growth Fund............................................... 5,102,225 3,978,343 U.S. Small Capitalization Growth Fund............................................... 25,658,441 26,524,897 U.S. Bond Fund...................................................................... 104,061,479 112,194,288 High Yield Fund..................................................................... 17,141,344 25,158,957
4. FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures 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 distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, total 0.50%, 0.52%, 0.52%, 0.77%, 0.77%, 0.47%, and 0.85% of the average daily net assets of the UBS Investment Funds Class of the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund, respectively. 6. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds rate plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the six months ended December 31, 1999, the Funds had no borrowings under the agreement. ================================================================================ 72 UBS Investment Funds Notes To Financial Statements - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. Balanced Fund ------------------------------------------------------------------------- Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 -------------------------------- --------------------------------- Shares Value Shares Value ------------- ------------ ---------- ------------- Sales: Brinson Class I..................................... 616,573 $ 5,599,982 1,174,303 $ 12,704,822 Brinson Class N..................................... - - 1,652 15,306 UBS Investment Funds Class.......................... 8,273 75,774 135,474 1,464,212 ---------- ------------ ---------- ------------- Total Sales...................................... 624,846 $ 5,675,756 1,311,429 $ 14,184,340 ========== ============ ========== ============= Dividend Reinvestment: Brinson Class I..................................... 109,872 $ 936,112 1,235,079 $ 11,512,192 Brinson Class N..................................... 4 30 33 311 UBS Investment Funds Class.......................... 4,112 34,830 56,474 523,561 ---------- ------------ ---------- ------------- Total Dividend Reinvestment...................... 113,988 $ 970,972 1,291,586 $ 12,036,064 ========== ============ ========== ============= Redemptions: Brinson Class I..................................... 895,496 $ 8,000,958 4,977,791 $ 56,107,946 Brinson Class N..................................... 11 96 1,641 15,210 UBS Investment Funds Class.......................... 31,085 274,280 154,266 1,558,776 ---------- ------------ ---------- ------------- Total Redemptions................................ 926,592 $ 8,275,334 5,133,698 $ 57,681,932 ========== ============ ========== =============
U.S. Equity Fund ------------------------------------------------------------------------- Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 -------------------------------- --------------------------------- Shares Value Shares Value ------------- ------------ ---------- ------------- Sales: Brinson Class I..................................... 3,518,151 $ 65,942,440 14,157,093* $ 272,587,287 Brinson Class N..................................... 208,641 3,860,847 417,980 8,022,220 UBS Investment Funds Class.......................... 34,158 710,292 1,317,474 26,390,598 ---------- ------------ ---------- ------------- Total Sales...................................... 3,760,950 $ 70,513,579 15,892,547 $ 307,000,105 ========== ============ ========== ============= Dividend Reinvestment: Brinson Class I..................................... 2,790,780 $ 46,438,462 2,164,601 $ 40,726,871 Brinson Class N..................................... 2,356 39,033 12,904 239,980 UBS Investment Funds Class.......................... 116,996 1,938,596 89,839 1,678,518 ---------- ------------ ---------- ------------- Total Dividend Reinvestment...................... 2,910,132 $ 48,416,091 2,267,344 $ 42,645,369 ========== ============ ========== ============= Redemptions: Brinson Class I..................................... 13,026,509 $240,364,538 13,543,224 $ 265,910,621 Brinson Class N..................................... 78,672 1,434,023 90,831 1,768,705 UBS Investment Funds Class.......................... 353,070 6,595,135 950,265 18,175,221 ---------- ------------ ---------- ------------- Total Redemptions................................ 13,458,251 $248,393,696 14,584,320 $ 285,854,547 ========== ============ ========== =============
*Includes shares issued in connection with the acquisition of the UBS Value Equity Fund. ================================================================================ 73 UBS Investment Funds N Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Large Capitalization Equity Fund ------------------------------------------------------- Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 -------------------------- -------------------------- Shares Value Shares Value ----------- ------------ ----------- ------------ Sales: Brinson Class I..................................... 2,008,094 $ 17,027,675 2,384,176 $ 24,164,112 Brinson Class N..................................... 622 20,926 61,091 684,700 UBS Investment Funds Class.......................... 8,148 76,424 427 4,617 ----------- ------------ ----------- ------------ Total Sales...................................... 2,016,864 $ 17,125,025 2,445,694 $ 24,853,429 =========== ============ =========== ============ Dividend Reinvestment: Brinson Class I..................................... 223,565 $ 1,819,816 7,506 $ 77,433 Brinson Class N..................................... 8,631 70,518 7,094 69,880 UBS Investment Funds Class.......................... 836 6,755 1 11 ----------- ------------ ----------- ------------ Total Dividend Reinvestment...................... 233,032 $ 1,897,089 14,601 $ 147,324 =========== ============ =========== ============ Redemptions: Brinson Class I..................................... 699,059 $ 6,228,716 370,824 $ 3,862,037 Brinson Class N..................................... 277,962 2,546,271 1,369,240 13,638,399 UBS Investment Funds Class.......................... -- -- -- -- ----------- ------------ ----------- ------------ Total Redemptions................................ 977,021 $ 8,774,987 1,740,064 $ 17,500,436 =========== ============ =========== ============ U.S. Large Capitalization Equity Fund ------------------------------------------------------- Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 -------------------------- -------------------------- Shares Value Shares Value ----------- ------------ ----------- ------------ Sales: Brinson Class I..................................... 89,568 $ 1,215,511 35,111 $ 451,776 Brinson Class N..................................... -- -- -- -- UBS Investment Funds Class.......................... 223,049 3,027,579 372,727 4,781,902 ----------- ------------ ----------- ------------ Total Sales...................................... 312,617 $ 4,243,090 407,838 $ 5,233,678 =========== ============ =========== ============ Dividend Reinvestment: Brinson Class I..................................... 15,996 $ 217,385 -- -- Brinson Class N..................................... 6 80 -- -- UBS Investment Funds Class.......................... 27,906 376,172 -- -- ----------- ------------ ----------- ------------ Total Dividend Reinvestment...................... 43,908 $ 593,637 -- $ -- =========== ============ =========== ============ Redemptions: Brinson Class I..................................... 60,955 $ 851,942 173,449 $ 2,143,629 Brinson Class....................................... -- -- -- -- UBS Investment Funds Class.......................... 135,539 1,935,865 1,853 26,217 ----------- ------------ ----------- ------------ Total Redemptions................................ 196,494 $ 2,787,807 175,302 $ 2,169,846 =========== ============ =========== ============
*Reflects the Fund's change in fiscal year end from December 31 to June 30 ================================================================================ 74 UBS Investments Funds -- Notes To Finance Statements - --------------------------------------------------------------------------------
U.S. Small Capitalization Growth Fund --------------------------------------------------- Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ------------------------ ------------------------ Shares Value Shares Value ----------- ----------- ----------- ----------- Sales: Brinson Class I................................................. 1,361,057 $14,001,883 2,641,837 $22,702,120 Brinson Class N................................................. -- -- -- -- UBS Investment Funds Class...................................... 51,364 544,776 99,579 858,153 ----------- ----------- ----------- ----------- Total Sales.................................................. 1,412,421 $14,546,659 2,741,416 $23,560,273 =========== =========== =========== =========== Redemptions: Brinson Class I................................................. 1,515,520 $15,555,524 1,375,470 $11,346,801 Brinson Class N................................................. -- -- -- -- UBS Investment Funds Class...................................... 9,951 102,784 29,703 240,000 ----------- ----------- ----------- ----------- Total Redemptions........................................... 1,525,471 $15,658,308 1,405,173 $11,586,801 =========== =========== =========== ===========
*Reflects the Fund's change in fiscal year end from December 31 to June 30
U.S. Bond Fund ----------------------------------------------------- Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 ----------------------------------------------------- Shares Value Shares Value ----------- ----------- ----------- ------------ Sales: Brinson Class I................................................. 4,864,653 $49,803,731 15,463,879** $165,316,122 Brinson Class N................................................. -- -- 2,379 25,964 UBS Investment Funds Class...................................... 118,531 1,214,340 582,475 6,222,123 ----------- ----------- ----------- ------------ Total Sales................................................. 4,983,184 $51,018,071 16,048,733 $171,564,209 =========== =========== =========== ============ Dividend Reinvestment: Brinson Class I................................................. 414,708 $ 4,089,021 386,462 $ 4,042,561 Brinson Class N................................................. 6 61 6 62 UBS Investment Funds Class...................................... 29,524 289,628 22,041 229,364 ----------- ----------- ----------- ------------ Total Dividend Reinvestment................................. 444,238 $ 4,378,710 408,509 $ 4,271,987 =========== =========== =========== ============ Redemptions: Brinson Class I................................................. 6,607,127 $ 68,012,603 10,568,875 $112,692,202 Brinson Class N................................................. -- -- 2,379 25,905 UBS Investment Funds Class...................................... 141,723 1,409,778 248,522 2,612,918 ----------- ----------- ----------- ------------ Total Redemptions........................................... 6,748,850 $69,422,381 10,819,776 $115,331,025 =========== =========== =========== ============
**Includes shares issued in connection with the acquisition of the UBS Bond Fund. ================================================================================ 75 CBS Investments Funds -- Notes to Finance Statements - -------------------------------------------------------------------------------
High Yield Fund --------------------------------------------------- Six Months Ended December 31, 1999 Six Months Ended* (Unaudited) June 30, 1999 ------------------------ ------------------------ Shares Value Shares Value ----------- ----------- ----------- ----------- Sales: Brinson Class I.......................................... 704,855 $ 6,981,404 4,509,034 $46,327,741 Brinson Class N.......................................... -- -- -- -- UBS Investment Funds Class............................... 28,339 279,760 620,093 6,368,108 ----------- ----------- ----------- ----------- Total Sales.......................................... 733,194 $ 7,261,164 5,129,127 $52,695,849 =========== =========== =========== =========== Dividend Reinvestment: Brinson Class I.......................................... 291,880 $ 2,802,047 166,520 $ 1,658,538 Brinson Class N.......................................... 6 54 3 30 UBS Investment Funds Class............................... 26,054 250,115 13,996 139,258 ----------- ----------- ----------- ----------- Total Dividend Reinvestment.......................... 317,940 $ 3,052,216 180,519 $ 1,797,826 =========== =========== =========== =========== Redemptions: Brinson Class I.......................................... 1,462,323 $14,308,185 2,144,630 $22,018,291 Brinson Class N.......................................... -- -- -- -- UBS Investment Funds Class............................... 382,724 3,693,936 1,754 18,000 ----------- ----------- ----------- ----------- Total Redemptions.................................... 1,845,047 $18,002,121 2,146,384 $22,036,291 =========== =========== =========== ===========
*Reflects the Fund's change in fiscal year end from December 31 to June 30 ================================================================================ 76 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. - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Investment Funds P.O. Box 2798, Boston, Massachusetts 02208-2798. Tel: (800) 794-7753 [UBS LOGO APPEARS HERE] Global Fund Global Equity Fund Global Bond Fund Semi-Annual Report December 31, 1999 Trustees and Officers [LOGO] - -------------------------------------------------------------------------------- Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Secretary and Treasurer E. Thomas McFarlan David E. Floyd, CPA President Assistant Secretary Thomas J. Digenan, CFA, CPA Mark F. Kemper Vice President Assistant Secretary Debra L. Nichols Vice President ================================================================================ 1 The Funds' Advisor -- Brinson Partners, Inc. [LOGO] - -------------------------------------------------------------------------------- Since the founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with individualized client relationships of the highest quality. Now, in 2000, more than 1,200 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, and a recognized leader in our industry. In North America, we make our investment capabilities available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are no-load, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and capabilities. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios--balancing considerations for both risk and return. Brinson Partners, Inc. is a member of UBS Asset Management, the institutional asset management division of UBS AG. ================================================================================ 2 Table of Contents [LOGO] - -------------------------------------------------------------------------------- Shareholder Letter............................................ 4 Global Economic and Market Highlights......................... 5 Global Fund................................................... 6 Schedule of Investments.................................... 10 Financial Statements....................................... 17 Financial Highlights....................................... 21 Global Equity Fund............................................ 22 Schedule of Investments.................................... 26 Financial Statements....................................... 29 Financial Highlights....................................... 32 Global Bond Fund.............................................. 33 Schedule of Investments.................................... 36 Financial Statements....................................... 39 Financial Highlights....................................... 42 The UBS Investment Funds--Notes to Financial Statements....... 43
================================================================================ 3 Shareholder Letter [LOGO] - -------------------------------------------------------------------------------- January 27, 2000 Dear Shareholder: We are pleased to present the semi-annual report for the UBS Investment Funds for the six-month period ending December 31, 1999. This report will provide a discussion on the current U.S. and International Economic outlook. We will also provide our current portfolio strategies and performance updates for our three Global Mutual Funds. The decade of the 1990s ended with a particularly challenging year. We continued to apply our proven value-based investment process across all of our portfolios, but our investment results varied substantially. In some areas, such as fixed income, our performance was excellent relative to both the market and our peers. In other areas, most notably multi-asset and equity portfolios, results were disappointing. Throughout 1999, our asset allocation strategies continued to focus on reducing exposure to the risks presented by equity prices that have been driven far above even optimistic estimates of underlying value. While the risk hedge in balanced portfolios had little net effect on performance through most of the year, the surge in equity prices late in the year hampered the returns relative to the benchmarks. The broad array of our equity portfolios, with the exception of the growth portfolios, significantly lagged their benchmarks in 1999. Some degree of underperformance was unavoidable as the U.S. market was increasingly driven by momentum, which in turn focused more tightly on narrow technology and e-commerce stocks. In such a market, the fundamental price/value discrepancies that are the core of our investment process are effectively ignored in the market. In addition, our stock selection was uncharacteristically weak and a meaningful source of the underperformance of our U.S. and Global Equity portfolios. In fixed income our U.S. Bond and High Yield portfolios outpaced the market and ranked highly in their respective universes of active managers. However, outside the U.S., our Global Bond portfolio generally underperformed, due almost entirely to strength in both the Japanese bond market and the yen, where we are underweighted. Our fundamental assessments across markets have been both accurate and perceptive, but momentum rather than the reality of fundamental value has continued to drive equity markets, particularly in the U.S. We have seen this phenomenon historically and it has always proven to be a sign of danger, that ultimately ends badly for the market in general and the momentum players in particular. Over time, these styles ebb and flow but momentum driven approaches have no lasting link to underlying fundamentals and always fail to deliver when viewed over meaningful horizons. It is these concerns which underlie our current asset allocation and equity portfolio strategies. 2000 will be a challenging year, but we are confident that remaining true to our investment disciplines will in the long run accrue to our shareholders' benefit. As always, we welcome your thoughts and comments, and appreciate your continued trust and the confidence you have placed in the UBS Investment Funds. Sincerely, /s/ Hanspeter A. Walder /s/ Raymond Simon Hanspeter A. Walder Raymond Simon Executive Director Managing Director Private Banking Private Banking ================================================================================ 4 Global Economic and Market Highlights - -------------------------------------------------------------------------------- [LOGO]UBS Investment Funds As the negative effects of the Asian crisis gradually wane and domestic demand continues to remain robust, the expansion in Euroland gains speed. In late December 1999, the German government announced cuts in corporate and personal tax rates, and initiated cross-party talks about reforms of the country's burdened pension system. So far, however, neither the ruling coalition parties nor the opposition has managed to communicate its position in the pension debate in a transparent way, as the political system is being absorbed by allegations of funding fraud against the Christian democrats. As in the United States, pan- European inflation has accelerated in the wake of surging energy prices, whereas inflation excluding food and energy has moved sideways. While headline inflation figures will be heavily impacted by energy prices, core inflation is unlikely to accelerate much, given economy-wide over-capacities and disinflationary forces arising from continued deregulation of utility and telecom sectors. In Japan, real GDP declined in the third quarter of 1999, largely as a result of a phasing out of public spending programs, weak private capital expenditures and stagnating consumer spending. A sustainable recovery will hinge on healthy gains in private demand. Should the trend in economic growth continue to be disappointing, the government may adopt additional stimulative fiscal measures. The Bank of Japan has sterilized, and will probably continue to sterilize, expansionary foreign exchange market operations. Hopes that meaningful quantitative easing steps are around the corner remain premature. Global Environment
6 months 1 year 3 years 7/31/95* Major Markets ended ended ended to Total Return in U.S. Dollars 12/31/99 12/31/99 12/31/99 12/31/99 - ---------------------------------------------------------------------------------------------------------------------------- U.S. Equity 10.45% 23.56% 26.04% 24.88% Global (Ex-U.S.) Equities (currency unhedged) 22.45 27.77 15.67 12.68 Global (Ex-U.S.) Equities (currency hedged) 19.89 36.98 21.89 20.82 U.S. Bonds 0.55 -0.84 5.72 6.21 Global (Ex-U.S.) Bonds (currency unhedged) 4.44 -5.09 2.29 2.26 Global (Ex-U.S.) Bonds (currency hedged) 1.66 2.88 8.42 9.89 U.S. Cash Equivalents 2.79 5.31 5.58 5.62 - ---------------------------------------------------------------------------------------------------------------------------- 6 months 1 year 3 years 7/31/95* Major Currencies ended ended ended to Percent Change Relative to U.S. Dollars 12/31/99 12/31/99 12/31/99 12/31/99 - ---------------------------------------------------------------------------------------------------------------------------- Yen 18.26% 10.20% 4.28% -3.35% Pound 2.25 -3.13 -1.98 0.16 Euro** -2.80 -14.64 -7.56 -7.09 Canadian Dollar 1.98 5.84 -1.89 -1.74 - ----------------------------------------------------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund - Global ** Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized returns. ================================================================================ 5 Global Fund - -------------------------------------------------------------------------------- [LOGO]UBS Investment Funds Since its inception on July 31, 1995, the UBS Investment Fund - Global has provided an annualized return of 9.18% versus the 15.18% return of its index, the Global Securities Markets Mutual Fund Index (Unhedged). The annualized volatility of the Fund over this period was 7.56%, almost 25% less than the 9.81% volatility of the benchmark. The Fund's 1999 return of 0.83% fell substantially short of the benchmark return of 16.85%. While these results are disappointing, we remain committed to our long-term value-oriented investment philosophy. Security selection in U.S. equity and Japanese equity markets contributed negatively to the added value while issue selection in U.S. bonds made a positive contribution. The large underweight in developed equity markets and the corresponding overweight in nominal and real bond markets detracted significantly from the Fund's added value as equity markets enjoyed another stellar year. It was a difficult year for developed bond markets with the notable exception of the Japanese market. Yields rose and most returns were negative when the currency effects were removed. The slightly long duration positions maintained in most developed bond markets hurt the Fund's relative performance as did the significant underweight and short duration strategy in Japanese bonds and the allocation to U.S. Treasury Inflation Protected Securities (TIPS). The overweighting in emerging debt, as well as the active management within this category, made a positive contribution. Emerging and developed equity markets performed very strongly as inflation remained in check while industry consolidation and restructuring reached record levels. Technology and telecommunications shares provided exceptional returns, pushing their valuations significantly higher from already lofty levels. The yen strengthened during the year, which detracted from the Global Fund's performance, as did the euro's weakness. On the positive side, the relative strength of the Australian dollar, and our decision to overweight that currency, added value to the Fund. Going into 2000, the Global Fund remains significantly underweight in the developed equity markets with an offsetting overweight in bond markets. The gains in developed equity markets have led to a very high level of overpricing, making bond markets increasingly attractive on a relative basis. The Fund is also maintaining a large underweight in the yen as this currency has again become significantly overvalued in the world markets--particularly compared with continental European currencies. Along with the yen underweight, the strategy includes sterling and U.S. dollar underweights counterbalanced by overweights in the euro, Australian dollar and the Swedish krona. ================================================================================ 6 Global Fund - -------------------------------------------------------------------------------- [LOGO]UBS Investment Funds Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund - Global -1.44% 0.83% 6.13% 9.18% - ------------------------------------------------------------------------------------------------------------------------------ GSMI Mutual Fund Index** 10.41 16.85 15.86 15.18 - ------------------------------------------------------------------------------------------------------------------------------ Salomon Smith Barney World Gov't. Bond Index 3.13 -4.26 3.43 3.52 - ------------------------------------------------------------------------------------------------------------------------------ MSCI World Equity (Free) Index 15.25 25.12 21.81 19.22 - ------------------------------------------------------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund - Global ** An unmanaged index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI World ex USA (Free) Index; 21% Salomon Smith Barney BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% MSCI Emerging Markets Free Index; and 3% Merrill Lynch High Yield Master Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund - Global, the GSMI Mutual Fund Index, the Salomon Smith Barney World Government Bond Index and the MSCI World Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund - Global vs. GSMI Mutual Fund Index, Salomon Smith Barney World Gov't. Bond Index and MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested
- ------------------------------------------------------------------------------------------------------------------ Label A B C D - ------------------------------------------------------------------------------------------------------------------ Label Date Brinson Global Fund GSMI Mutual Fund MSCI World Equi??? Solomon Smith B???? - ------------------------------------------------------------------------------------------------------------------ 1 Jul 31, 95 $10,000 $10,000 $10,000 $10,000 - ------------------------------------------------------------------------------------------------------------------ 2 Aug 31, 95 $10,129 $ 9,965 $ 9,777 $ 9,656 - ------------------------------------------------------------------------------------------------------------------ 3 Sep 30, 95 $10,293 $10,232 $10,066 $ 9,871 - ------------------------------------------------------------------------------------------------------------------ 4 Oct 31, 95 $10,362 $10,167 $ 9,909 $ 9,944 - ------------------------------------------------------------------------------------------------------------------ 5 Nov 30, 95 $10,655 $10,472 $10,255 $10,057 - ------------------------------------------------------------------------------------------------------------------ 6 Dec 31, 95 $10,861 $10,665 $10,556 $10,162 - ------------------------------------------------------------------------------------------------------------------ 7 Jan 31, 96 $11,063 $10,839 $10,753 $10,037 - ------------------------------------------------------------------------------------------------------------------ 8 Feb 29, 96 $11,008 $10,870 $10,818 $ 9,986 - ------------------------------------------------------------------------------------------------------------------ 9 Mar 31, 96 $11,091 $10,963 $10,998 $ 9,972 - ------------------------------------------------------------------------------------------------------------------ 10 Apr 30, 96 $11,229 $11,152 $11,256 $ 9,932 - ------------------------------------------------------------------------------------------------------------------ 11 May 31, 96 $11,266 $11,234 $11,265 $ 9,934 - ------------------------------------------------------------------------------------------------------------------ 12 Jun 30, 96 $11,324 $11,257 $11,325 $10,013 - ------------------------------------------------------------------------------------------------------------------ 13 Jul 31, 96 $11,157 $10,961 $10,925 $10,205 - ------------------------------------------------------------------------------------------------------------------ 14 Aug 31, 96 $11,334 $11,138 $11,054 $10,245 - ------------------------------------------------------------------------------------------------------------------ 15 Sep 30, 96 $11,687 $11,505 $11,488 $10,287 - ------------------------------------------------------------------------------------------------------------------ 16 Oct 31, 96 $11,873 $11,620 $11,567 $10,479 - ------------------------------------------------------------------------------------------------------------------ 17 Nov 30, 96 $12,329 $12,109 $12,219 $10,617 - ------------------------------------------------------------------------------------------------------------------ 18 Dec 31, 96 $12,332 $12,001 $12,025 $10,531 - ------------------------------------------------------------------------------------------------------------------ 19 Jan 31, 97 $12,475 $12,177 $12,172 $10,250 - ------------------------------------------------------------------------------------------------------------------ 20 Feb 28, 97 $12,567 $12,234 $12,311 $10,173 - ------------------------------------------------------------------------------------------------------------------ 21 Mar 31, 97 $12,373 $11,965 $12,064 $10,096 - ------------------------------------------------------------------------------------------------------------------ 22 Apr 30, 97 $12,506 $12,207 $12,460 $10,007 - ------------------------------------------------------------------------------------------------------------------ 23 May 31, 97 $13,008 $12,824 $13,231 $10,279 - ------------------------------------------------------------------------------------------------------------------ 24 Jun 30, 97 $13,377 $13,283 $13,889 $10,402 - ------------------------------------------------------------------------------------------------------------------ 25 Jul 31, 97 $13,797 $13,812 $14,531 $10,321 - ------------------------------------------------------------------------------------------------------------------ 26 Aug 31, 97 $13,428 $13,306 $13,547 $10,314 - ------------------------------------------------------------------------------------------------------------------ 27 Sep 30, 97 $13,838 $13,882 $14,284 $10,534 - ------------------------------------------------------------------------------------------------------------------ 28 Oct 31, 97 $13,428 $13,434 $13,534 $10,753 - ------------------------------------------------------------------------------------------------------------------ 29 Nov 30, 97 $13,449 $13,554 $13,771 $10,589 - ------------------------------------------------------------------------------------------------------------------ 30 Dec 31, 97 $13,589 $13,717 $13,939 $10,557 - ------------------------------------------------------------------------------------------------------------------ 31 Jan 31, 98 $13,735 $13,902 $14,330 $10,659 - ------------------------------------------------------------------------------------------------------------------ 32 Feb 28, 98 $14,230 $14,575 $15,299 $10,746 - ------------------------------------------------------------------------------------------------------------------ 33 Mar 31, 98 $14,556 $14,988 $15,943 $10,639 - ------------------------------------------------------------------------------------------------------------------ 34 Apr 30, 98 $14,568 $15,135 $16,099 $10,810 - ------------------------------------------------------------------------------------------------------------------ 35 May 31, 98 $14,478 $14,922 $15,904 $10,834 - ------------------------------------------------------------------------------------------------------------------ 36 Jun 30, 98 $14,394 $15,111 $16,276 $10,851 - ------------------------------------------------------------------------------------------------------------------ 37 Jul 31, 98 $14,349 $15,032 $16,251 $10,865 - ------------------------------------------------------------------------------------------------------------------ 38 Aug 31, 98 $13,193 $13,512 $14,085 $11,160 - ------------------------------------------------------------------------------------------------------------------ 39 Sep 30, 98 $13,601 $13,978 $14,335 $11,754 - ------------------------------------------------------------------------------------------------------------------ 40 Oct 31, 98 $14,088 $14,813 $15,634 $12,102 - ------------------------------------------------------------------------------------------------------------------ 41 Nov 30, 98 $14,473 $15,418 $16,565 $11,931 - ------------------------------------------------------------------------------------------------------------------ 42 Dec 31, 98 $14,622 $15,974 $17,370 $12,171 - ------------------------------------------------------------------------------------------------------------------ 43 Jan 31, 99 $14,647 $16,196 $17,752 $12,059 - ------------------------------------------------------------------------------------------------------------------ 44 Feb 28, 99 $14,274 $15,766 $17,280 $11,672 - ------------------------------------------------------------------------------------------------------------------ 45 Mar 31, 99 $14,498 $16,264 $17,997 $11,701 - ------------------------------------------------------------------------------------------------------------------ 46 Apr 30, 99 $15,083 $16,830 $18,709 $11,697 - ------------------------------------------------------------------------------------------------------------------ 47 May 31, 99 $14,796 $16,404 $18,020 $11,500 - ------------------------------------------------------------------------------------------------------------------ 48 Jun 30, 99 $14,958 $16,906 $18,858 $11,299 - ------------------------------------------------------------------------------------------------------------------ 49 Jul 31, 99 $14,921 $16,815 $18,802 $11,576 - ------------------------------------------------------------------------------------------------------------------ 50 Aug 31, 99 $14,683 $16,769 $18,767 $11,629 - ------------------------------------------------------------------------------------------------------------------ 51 Sep 30, 99 $14,458 $16,698 $18,591 $11,810 - ------------------------------------------------------------------------------------------------------------------ 52 Oct 31, 99 $14,433 $17,294 $19,556 $11,804 - ------------------------------------------------------------------------------------------------------------------ 53 Nov 30, 99 $14,483 $17,699 $20,106 $11,680 - ------------------------------------------------------------------------------------------------------------------ 54 Dec 31, 99 $14,743 $18,666 $21,734 $11,652 - ------------------------------------------------------------------------------------------------------------------
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 7 GLOBAL FUND - ------------------------------------------------------------------------------- [LOGO] Asset Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ----------------------------------------------------------- U.S. Equities 40.0% 19.9% Global (Ex-U.S.) Equities 22.0 17.1 Emerging Markets Equities 3.0 3.0 Dollar Bonds 21.0 41.0 High Yield Bonds 3.0 3.0 Global (Ex-U.S.) Bonds 9.0 11.0 Emerging Markets Debt 2.0 5.0 Cash Equivalents 0.0 0.0 - ----------------------------------------------------------- 100.0% 100.0% Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ----------------------------------------------------------- 1. FDX Corp. 1.18% 2. Electronic Data Systems Corp. 1.13 3. Burlington Northern Santa Fe Corp. 0.94 4. General Instrument Corp. 0.82 5. CIGNA Corp. 0.76 6. Allergan, Inc. 0.69 7. Compuware Corp. 0.69 8. Compaq Computer Corp. 0.65 9. Nextel Communications, Inc. 0.65 10. First Data Corp. 0.63 - ----------------------------------------------------------- Currency Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ----------------------------------------------------------- U.S. 66.0% 62.5% Japan 9.4 1.4 U.K. 4.8 0.0 Euro 11.7 18.5 Other Europe 2.5 6.5 Canada 1.3 1.3 Emerging Markets 3.0 3.0 Asia (Ex-Japan) 0.7 0.2 Australia/New Zealand 0.6 6.6 - ----------------------------------------------------------- 100.0% 100.0% Top Ten Global (Ex-U.S.) Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ----------------------------------------------------------- 1. Fujitsu 0.56% 2. Sony Corp. 0.56 3. Nippon Telegraph & Telephone Corp. 0.48 4. Fanuc 0.34 5. Toyota Motor Corp. 0.32 6. Orix Corp. 0.30 7. Secom Co., Ltd. 0.26 8. NTT Mobile Communications Network, Inc. 0.24 9. Canon, Inc. 0.24 10. NEC Corp. 0.23 - ----------------------------------------------------------- =============================================================================== 8 Global Fund - -------------------------------------------------------------------------------- [LOGO] Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - ------------------------------------------------------------- U.S. EQUITIES Energy....................................... 0.18% Capital Investment Capital Goods............................... 1.22 Technology.................................. 4.77 ------ 5.99 Basic Industries Chemicals................................... 1.27 Housing/Paper............................... 2.80 Metals...................................... 1.40 ------ 5.47 Consumer Non-Durables................................ 0.63 Retail/Apparel.............................. 1.75 Autos/Durables.............................. 1.00 Health: Drugs............................... 1.78 Health: Non-Drugs........................... 1.57 ------ 6.73 Financial Banks....................................... 2.22 Non-Banks................................... 2.40 ------ 4.62 Utilities Electric.................................... 2.12 Telephone................................... 1.09 ------ 3.21 Transportation............................... 2.50 Services/Misc................................ 1.91 Post Venture................................. 2.32 ------ Total U.S. Equities...................... 32.93* GLOBAL (EX-U.S.) EQUITIES Aerospace & Military......................... 0.08 Airlines..................................... 0.04 Appliances & Households...................... 0.85 Autos/Durables............................... 0.61 Banking...................................... 1.64 Beverages & Tobacco.......................... 0.37 Broadcasting & Publishing.................... 0.44 Building Materials........................... 0.09 Business & Public Service.................... 0.76 Chemicals.................................... 0.39 Construction................................. 0.09 Data Processing.............................. 0.80 Electric Components.......................... 0.91 Electronics.................................. 1.13 Energy....................................... 0.50 Financial Services........................... 1.06 Food & House Products........................ 0.42 Forest Products.............................. 0.13 Health: Drugs................................ 0.91 Industrial Components........................ 0.32 Insurance.................................... 0.63% Leisure & Tourism............................ 0.02 Machinery & Engineering...................... 0.04 Merchandising................................ 0.51 Metals--Steel................................ 0.11 Multi-Industry............................... 0.13 Non-Ferrous Metals........................... 0.17 Real Estate.................................. 0.18 Recreation................................... 0.20 Telecommunications........................... 1.86 Transportation............................... 0.39 Utilities.................................... 0.51 Wholesale & International Trade.............. 0.06 ------ Total Global (Ex-U.S.) Equities.......... 16.35 EMERGING MARKETS EQUITIES.................... 5.49 ------ TOTAL EQUITIES............................... 54.77 U.S. BONDS Corporate Bonds Airlines.................................... 0.05 Asset-Backed................................ 0.53 Autos/Durables.............................. 0.18 Consumer.................................... 0.14 Financial Services.......................... 0.64 Health...................................... 0.18 Services/Miscellaneous...................... 0.47 Telecommunications.......................... 0.21 Utilities................................... 0.18 ------ 2.58 International Dollar Bonds................... 1.68 Corporate Mortgage-Backed Securities......... 2.03 U.S. Government Mortgage-Backed Securities... 2.49 U.S. Government Obligations.................. 15.29 ------ Total U.S. Bonds......................... 24.07* HIGH YIELD BONDS............................. 2.55 GLOBAL (EX-U.S.) BONDS Foreign Financial Bonds...................... 0.78 Foreign Government Bonds..................... 8.41 ------ Total Global (Ex-U.S.) Bonds............. 9.19 EMERGING MARKETS BONDS....................... 7.19 SHORT-TERM INVESTMENTS....................... 20.60* ------ TOTAL INVESTMENTS........................ 118.37 LIABILITIES, LESS CASH AND OTHER ASSETS................................ (18.37) ------ NET ASSETS............................... 100.00% ====== - -------------------------------------------------------------------------------- * The Fund held a long position in U.S. Treasury futures on December 31, 1999 which increased U.S. Bond exposure from 24.07% to 39.23%. The Fund held a short position in stock index futures on December 31, 1999 which reduced U.S. Equity exposure from 32.93% to 19.70%. These adjustments result in a net decrease in the Fund's exposure to Short- Term Investments from 20.60% to 18.67%. ================================================================================ 9 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value -------- ------------ Equities -- 54.77% U.S. Equities -- 32.93% Advanced Micro Devices, Inc. (b).................... 54,600 $ 1,579,987 Allergan, Inc. (b).................................. 46,600 2,318,350 Alza Corp. (b)...................................... 22,200 768,675 American Standard Cos., Inc. (b).................... 26,600 1,220,275 AmSouth Bancorp..................................... 31,087 600,368 Aon Corp............................................ 29,447 1,177,880 Armstrong World Industries, Inc..................... 7,000 233,625 Baxter International, Inc........................... 28,400 1,783,875 Brinson Post-Venture Fund (b)....................... 397,192 7,740,955 Burlington Northern Santa Fe Corp................... 129,600 3,142,800 Central & South West Corp........................... 70,300 1,406,000 Centaur Funding Corp., 144A......................... 750 765,938 Centaur Funding Corp., 144A......................... 1,430 219,476 Champion Enterprises, Inc. (b)...................... 22,800 195,225 Champion International Corp......................... 8,000 495,500 Chase Manhattan Corp................................ 22,400 1,740,200 CIGNA Corp.......................................... 31,400 2,529,662 Circuit City Stores-Circuit City Group.............. 21,300 959,831 CMS Energy Corp..................................... 23,900 745,381 CommScope, Inc. (b)................................. 9,733 392,362 Compaq Computer Corp................................ 80,300 2,173,119 Computer Sciences Corp. (b)......................... 17,700 1,674,862 Compuware Corp...................................... 61,800 2,302,050 Consolidated Stores Corp. (b)....................... 31,900 518,375 Corning, Inc........................................ 8,600 1,108,863 Covance, Inc. (b)................................... 17,572 189,997 Delhaize America, Inc............................... 16,167 328,392 Dial Corp........................................... 18,000 437,625 Dominion Resources, Inc............................. 35,600 1,397,300 Eastman Chemical Co................................. 14,300 681,931 Electronic Data Systems Corp........................ 56,100 3,755,194 Eli Lilly and Co.................................... 12,100 804,650 Emerson Electric Co................................. 32,300 1,853,212 Entergy Corp........................................ 34,000 875,500 FDX Corp. (b)....................................... 95,800 3,921,812 Federal-Mogul Corp.................................. 36,000 724,500 Federated Department Stores, Inc.................... 9,300 470,231 First Data Corp..................................... 42,330 2,087,398 Fleet Boston Financial Corp......................... 49,115 1,709,816 Fleetwood Enterprises, Inc.......................... 16,500 340,313 Fort James Corp..................................... 44,800 1,226,400 Gateway, Inc........................................ 11,300 814,306 GATX Corp........................................... 10,400 351,000 General Instrument Corp. (b)........................ 32,000 2,720,000 Genzyme Corp. (b)................................... 17,100 769,500 GreenPoint Financial Corp........................... 49,700 1,183,481 Hibernia Corp....................................... 37,700 400,563 Household International, Inc........................ 41,900 1,560,775 Illinois Tool Works, Inc............................ 29,200 1,972,825 IMC Global, Inc..................................... 55,200 903,900 Johnson Controls, Inc............................... 15,200 864,500 Kimberly-Clark Corp................................. 28,500 1,859,625 Kroger Co........................................... 21,500 405,813 Lafarge Corp........................................ 20,700 571,838 Lear Corp. (b)...................................... 31,000 992,000 Lexmark International Group, Inc.................... 6,200 561,100 Lincoln National Corp............................... 12,700 508,000 Lockheed Martin Corp................................ 45,846 $ 1,002,881 Lyondell Chemical Co................................ 37,300 475,575 Martin Marietta Materials, Inc...................... 15,484 634,844 Masco Corp.......................................... 80,800 2,050,300 Mattel, Inc......................................... 81,400 1,068,375 Mead Corp........................................... 16,600 721,063 Monsanto Co......................................... 27,200 969,000 National Service Industries, Inc.................... 12,700 374,650 New York Times Co................................... 22,500 1,105,313 Newell Rubbermaid, Inc.............................. 52,600 1,525,400 Nextel Communications, Inc. (b)..................... 20,900 2,155,312 Norfolk Southern Corp............................... 45,900 940,950 Owens-Illinois, Inc................................. 12,000 300,750 Peco Energy Co...................................... 23,300 809,675 Pentair, Inc........................................ 17,596 677,446 Philip Morris Companies, Inc........................ 41,100 953,006 PNC Bank Corp....................................... 21,100 938,950 Praxair, Inc........................................ 11,700 588,656 Raytheon Co., Class B............................... 48,300 1,282,969 Reliaster Financial Corp............................ 12,700 497,681 SBC Communications, Inc............................. 30,400 1,482,000 Southdown, Inc...................................... 17,836 920,784 St. Jude Medical, Inc. (b).......................... 36,600 1,123,162 Torchmark Corp...................................... 17,300 502,781 Tyson Foods, Inc.................................... 44,698 726,343 U.S. Bancorp........................................ 33,180 790,099 Ultramar Diamond Shamrock Corp...................... 26,702 605,802 Unisys Corp......................................... 20,900 667,494 United Healthcare Corp.............................. 25,900 1,375,937 USG Corp............................................ 11,900 560,788 Viad Corp........................................... 25,400 708,025 W.W. Grainger, Inc.................................. 15,700 750,656 Watson Pharmaceutical Co............................ 30,100 1,077,956 Wells Fargo and Co.................................. 45,200 1,827,775 Westvaco Corp....................................... 21,000 685,125 Xerox Corp.......................................... 62,900 1,427,044 York International Corp............................. 19,500 535,031 ------------ Total U.S. Equities................................. 109,876,729 ------------ Global (Ex-U.S.) Equities -- 16.35% Australia -- 0.69% Amcor Ltd........................................... 9,420 43,977 Amp Ltd............................................. 10,300 113,439 Boral Ltd........................................... 30,000 46,331 Brambles Industries Ltd............................. 2,670 73,599 Broken Hill Proprietary Co., Ltd.................... 15,310 200,387 CSR Ltd............................................. 26,070 63,123 Lend Lease Corp., Ltd............................... 8,732 121,941 National Australia Bank Ltd......................... 16,727 255,045 News Corp., Ltd..................................... 27,389 265,086 News Corp., Ltd., Preferred......................... 10,036 85,707 Qantas Airways Ltd.................................. 12,937 32,171 QBE Insurance Group Ltd............................. 18,241 84,752 Rio Tinto Ltd....................................... 6,845 146,569 Santos Ltd.......................................... 21,990 59,720 Telstra Corp. Ltd................................... 65,000 352,198 Westpac Banking Corp., Ltd.......................... 31,528 216,779 WMC Ltd............................................. 9,740 53,540 Woolworth's Ltd..................................... 22,660 77,702 ------------ 2,292,066 ------------
- -------------------------------------------------------------------------------- 10 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value ------- ------------ Austria -- 0.02% Austria Tabakwerke AG.................................. 1,400 $ 67,361 ------------ Belgium -- 0.12% Electrabel S.A......................................... 370 120,538 Fortis B............................................... 8,027 288,216 ------------ 408,754 ------------ Canada -- 0.30% Agrium, Inc............................................ 7,140 55,101 Alcan Aluminum Ltd..................................... 2,420 99,048 Bank of Montreal....................................... 1,520 51,634 Canadian National Railway Co........................... 2,920 76,858 Canadian Pacific Ltd................................... 4,473 95,698 Hudson's Bay Co........................................ 6,410 75,968 Imasco, Ltd............................................ 2,390 65,790 Imperial Oil Ltd....................................... 2,110 45,070 Magna International, Inc., Class A..................... 1,360 57,631 Newbridge Networks Corp. (b)........................... 3,560 79,844 Nova Chemicals Corp.................................... 2,704 52,634 Potash Corporation of Saskatchewan, Inc................ 860 40,887 Royal Bank of Canada................................... 2,370 103,697 Shaw Communications, Inc., Class B..................... 1,980 65,009 TransCanada Pipelines Ltd.............................. 1,890 16,278 Westcoast Energy, Inc.................................. 1,350 21,534 ------------ 1,002,681 ------------ Denmark -- 0.06% Tele Danmark A/S....................................... 2,620 193,737 ------------ Finland -- 0.37% Merita Ltd., Class A................................... 36,330 213,040 Nokia Oyj.............................................. 3,060 552,119 Sampo Insurance Co., Ltd., Series A.................... 6,000 208,699 UPM-Kymmene Corp....................................... 6,270 251,401 ------------ 1,225,259 ------------ France -- 1.11% Air France (b)......................................... 6,260 119,225 Air Liquide............................................ 1,645 274,054 Alcatel Alsthom........................................ 820 187,408 Axa.................................................... 840 116,534 Banque Nationale de Paris.............................. 4,889 448,905 Carrefour S.A.......................................... 910 167,020 Cie de Saint Gobain.................................... 1,037 194,072 CSF Thomson (b)........................................ 6,300 207,072 France Telecom S.A..................................... 4,240 558,046 Groupe Danone.......................................... 740 173,575 Michelin, Class B...................................... 1,879 73,457 Rhone-Poulenc, Class A................................. 3,864 223,487 Schneider S.A.......................................... 1,860 145,334 Societe Generale....................................... 1,155 267,444 Total Fina S.A., Class B (b)........................... 2,952 392,077 Vivendi................................................ 1,790 160,858 ------------ 3,708,568 ------------ Germany -- 0.90% Allianz AG............................................. 780 260,753 Bayer AG............................................... 8,080 382,290 Bayerische Motoren Werke AG............................ 4,250 129,722 Continental AG......................................... 4,850 $ 96,989 DaimlerChrysler AG (b)................................. 2,606 203,494 Deutsche Bank AG....................................... 2,940 247,109 Deutsche Telekom AG.................................... 3,760 263,265 Dresdner Bank AG....................................... 2,870 155,064 Mannesmann AG.......................................... 1,380 332,547 SAP AG................................................. 270 132,076 Siemens AG............................................. 4,250 541,043 Veba AG................................................ 5,039 244,977 ------------ 2,989,329 ------------ Hong Kong -- 0.02% Henderson Land Development Co., Ltd.................... 12,000 77,031 ------------ Italy -- 0.34% Assicurazioni Generali................................. 4,800 157,817 Beni Stabili Spa....................................... 24,511 8,599 ENI Spa................................................ 19,000 103,989 ENI Spa ADR............................................ 3,070 169,234 La Rinascente Spa...................................... 12,740 81,348 San Paolo-imi Spa...................................... 13,511 182,700 Telecom Italia Mobile Spa.............................. 22,000 244,565 Telecom Italia Spa..................................... 12,000 168,402 ------------ 1,116,654 ------------ Japan -- 8.32% Acom Co., Ltd.......................................... 3,900 381,408 Asahi Bank Ltd......................................... 39,000 240,047 Bank of Tokyo-Mitsubushi Ltd........................... 40,000 556,494 Benesse Corp........................................... 1,300 312,442 Bridgestone Corp....................................... 13,000 285,770 Canon, Inc............................................. 20,000 793,317 Dai Nippon Printing Co., Ltd........................... 14,000 222,949 Dai-Ichi Kangyo Bank................................... 24,000 223,926 Daiichi Pharmaceutical Co., Ltd........................ 10,000 129,842 Daikin Industries Ltd.................................. 11,000 149,382 Denso Corp............................................. 11,000 262,225 East Japan Railway Co.................................. 70 376,826 Fanuc.................................................. 8,900 1,131,249 Fuji Bank Ltd.......................................... 18,000 174,627 Fujitsu................................................ 41,000 1,866,641 Honda Motor Co......................................... 17,000 631,137 Hoya Corp.............................................. 5,000 393,239 Ito Yokado Co., Ltd.................................... 4,000 433,784 Kamigumi Co., Ltd...................................... 30,000 126,032 Kao Corp............................................... 13,000 370,231 Kirin Brewery Co., Ltd................................. 27,000 283,572 Kokuyo................................................. 6,000 79,722 Kuraray Co., Ltd....................................... 25,000 252,797 Matsushita Electric Industrial Co...................... 25,000 691,222 Mitsubishi Corp........................................ 25,000 192,712 Mitsubishi Estate Co., Ltd............................. 40,000 389,624 Murata Manufacturing Co., Inc.......................... 1,000 234,478 NEC Corp............................................... 32,000 761,272 NGK Insulators......................................... 25,000 185,384 Nintendo Corp., Ltd.................................... 4,000 663,573 Nippon Steel Co........................................ 163,000 380,607 Nippon Telegraph & Telephone Corp...................... 93 1,590,054 Nissin Food Products Co................................ 7,000 164,477
- -------------------------------------------------------------------------------- 11 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) ___________________________________________________________________________
Shares Value --------- ------------ Nomura Securities Co., Ltd..................... 41,000 $ 739,045 NTT Mobile Communications...................... 21 806,311 Obayashi Corp.................................. 34,000 160,442 Orix Corp...................................... 4,500 1,012,066 Osaka Gas Co................................... 92,000 221,113 Rohm Co........................................ 1,000 410,337 Sankyo Co., Ltd................................ 18,000 369,303 Santen Pharmaceutical Co., Ltd................. 8,000 131,698 Secom Co., Ltd................................. 8,000 879,293 Sekisui House Ltd.............................. 16,000 141,468 Seven-Eleven Japan Co., Ltd.................... 3,000 474,818 Softbank Corp.................................. 700 668,849 Sony Corp...................................... 6,300 1,864,980 Sumitomo Bank.................................. 28,000 382,707 Sumitomo Chemical Co........................... 53,000 248,547 Sumitomo Electric Industries................... 10,000 115,383 Takeda Chemical Industries..................... 15,000 740,071 Takefuji Corp.................................. 1,900 237,419 TDK Corp....................................... 5,000 689,268 Tokio Marine & Fire Insurance Co............... 22,000 256,851 Tokyo Electric Power........................... 9,700 259,665 Tokyo Electron Ltd............................. 3,000 410,337 Toyota Motor Corp.............................. 22,000 1,063,944 Yamato Transport Co., Ltd...................... 14,000 541,644 ------------ 27,756,621 ------------ Netherlands -- 0.55% ABN AMRO Holdings NV........................... 7,029 174,737 Elsevier NV.................................... 18,470 219,579 ING Groep NV................................... 8,536 512,873 Koninklijke KPN NV............................. 4,364 423,885 Royal Dutch Petroleum Co....................... 3,590 218,975 TNT Post Group NV.............................. 4,600 131,183 Unilever NV.................................... 2,523 138,693 ------------ 1,819,925 ------------ New Zealand -- 0.06% Auckland International Airport Ltd............. 17,350 26,239 Carter Holt Harvey Ltd......................... 26,940 35,123 Lion Nathan Ltd................................ 20,220 46,924 Telecom Corp. of New Zealand Ltd............... 17,910 84,061 ------------ 192,347 ------------ Norway -- 0.03% Norske Skogindustrier ASA...................... 2,050 106,617 ------------ Portugal -- 0.08% DP Electricidade de Portugal S.A............... 7,600 132,023 Portugal Telecom............................... 13,400 146,276 ------------ 278,299 ------------ Singapore -- 0.14% Singapore Press Holdings Ltd................... 8,820 191,118 United Overseas Bank........................... 30,116 265,729 ------------ 456,847 ------------ Spain -- 0.41% Banco Popular S.A.............................. 3,627 235,411 Banco Santander Central Hispano, S.A........... 19,346 217,970 Endesa S.A..................................... 6,245 123,384 Tabacalera S.A................................. 32,997 469,680 Telefonica S.A................................. 13,223 328,716 ------------ 1,375,161 ------------ Sweden -- 0.36% Electrolux AB, B Shares........................ 11,690 $ 292,832 Ericsson, B Shares............................. 8,240 527,599 Investor AB, B Shares.......................... 11,100 155,917 Nordbanken Holding AB.......................... 14,590 85,392 Swedish Match AB............................... 42,080 146,292 ------------ 1,208,032 ------------ Switzerland -- 0.43% Adecco S.A..................................... 207 160,355 Nestle S.A. (Reg.)............................. 165 300,684 Novartis AG (Reg.)............................. 254 370,995 Roche Holding AG (Gen.)........................ 32 377,835 Swisscom AG (Reg.)............................. 588 236,566 ------------ 1,446,435 ------------ United Kingdom -- 2.04% Allied Zurich PLC (b).......................... 13,052 153,458 AstraZeneca PLC................................ 4,002 165,637 Barclays PLC................................... 6,050 173,760 BP Amoco PLC................................... 46,946 471,003 British Aerospace PLC.......................... 11,302 74,684 British Airways PLC............................ 17,000 110,692 British Telecommunications PLC................. 20,000 487,703 Charter PLC.................................... 27,676 118,205 Diageo PLC..................................... 27,209 218,388 FKI PLC........................................ 67,040 259,317 Glaxo Wellcome PLC............................. 13,260 373,997 Greenalls Group PLC............................ 17,358 82,529 House of Fraser PLC............................ 30,780 37,702 HSBC Holdings PLC.............................. 13,000 180,817 Lloyds TSB Group PLC........................... 32,969 411,541 Marconi PLC.................................... 26,360 465,419 Marks & Spencer PLC............................ 32,060 152,301 National Power PLC............................. 33,500 193,562 Nycomed Amersham PLC........................... 22,844 141,933 Peninsular & Oriental Steam Navigation Co...... 7,540 125,533 Powergen PLC................................... 18,000 129,098 Prudential Corp. PLC........................... 16,540 325,223 Reckitt & Colman PLC........................... 10,000 93,560 Reed International PLC......................... 28,010 209,242 Rio Tinto Ltd.................................. 11,190 269,623 RJB Mining PLC................................. 26,590 13,714 Royal & Sun Alliance Insurance Group PLC....... 17,884 135,904 Scottish & Southern Energy PLC................. 27,880 222,088 Tesco PLC...................................... 70,190 212,959 Thames Water PLC............................... 8,997 111,944 Trinity Mirror PLC............................. 16,315 173,810 Unilever PLC................................... 20,000 146,827 United News & Media PLC........................ 19,490 247,842 Yorkshire Water PLC............................ 22,080 124,553 ------------ 6,814,568 ------------ Total Global (Ex-U.S.) Equities................ 54,536,292 ------------ Emerging Markets Equities -- 5.49% Brinson Emerging Markets Equity Fund (b)....... 1,580,129 18,326,811 ------------ Total Equities (Cost $169,721,051)............. 182,739,832 ------------
12 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Face Amount Value ----------- ----------- Bonds -- 43.00% U.S. Bonds -- 24.07% U.S. Corporate Bonds -- 2.58% Avon Products, Inc., 6.900%, due 11/15/04..................... $ 150,000 $ 146,710 Bell Atlantic Corp., 8.000%, due 10/15/29..................... 78,000 79,183 Bombardier Capital, Inc., MTN, 7.300%, due 12/15/02................................................ 565,000 558,974 Cendant Corp., 7.750%, due 12/01/03........................... 640,000 639,058 Daimlerchrysler NA Hldg, 7.200%, due 09/01/09................................................ 600,000 589,084 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03............................... 1,055,000 1,044,672 GATX Capital Corp., Series F, MTN, 6.923%, due 04/25/01................................................ 1,000,000 1,000,118 Monsanto Co., 144A, 6.600%, due 12/01/28...................... 545,000 468,374 Newcourt Credit Group 144A, 6.875%, due 02/16/05................................................ 600,000 592,080 Noram Energy Corp., 6.375%, due 11/01/03...................... 615,000 584,948 PanAmSat Corp., 6.000%, due 01/15/03.......................... 225,000 209,398 PanAmSat Corp., 6.375%, due 01/15/08.......................... 500,000 423,820 Service Corp., International, 6.000%, due 12/15/05................................................ 500,000 371,595 TIme Warner, Inc., 6.625%, due 05/15/29....................... 550,000 468,097 UCFC Home Equity Loan 97-C, Class A8, FRN, 0.000%, due 09/15/27................................... 724,000 724,840 US Airways, Inc., 8.360%, due 07/20/20........................ 160,000 155,006 Waste Management, Inc., 6.875%, due 05/15/09................................................ 640,000 541,069 ----------- 8,597,026 ----------- Corporate Mortgage- Backed Securities -- 2.03% Asset Securitization Corp., 96-D, Class A1B, 7.210%, due 10/13/26........................................ 1,000,000 990,780 Norwest Asset Securities Corp., 96-2, Class A9, 7.000%, due 09/25/11........................................ 435,000 421,106 Prudential Home Mortgage Securities, 94-3, Class A10, 6.500%, due 02/25/24............................. 730,000 698,186 Residential Asset Securitization Trust, 7.500%, due 07/25/11........................................ 666,645 668,172 Residential Asset Securitization Trust, 97-A11, Class A2, 7.000%, due 01/25/28.............................. 22,416 22,354 Residential Asset Securitization Trust, 97-A7, Class A1, 7.250%, due 12/25/27.............................. 1,080,000 1,036,325 Residential Asset Securitization Trust, 97-A7, Class A1, 7.500%, due 09/25/27.............................. 182,332 182,135 Structured Asset Securities Corp., 98-RF1, Class A, 8.712%, due 03/15/27............................... 1,006,602 1,037,114 Thrift Financial Corp., 11.250%, due 01/01/16................. 51,564 53,115 Vendee Mortgage Trust, 98-2, Class 1G, 6.750%, due 06/15/28........................................ 1,760,000 1,624,621 ----------- 6,733,908 ----------- International Dollar Bonds -- 1.68% Banco Santiago S.A., 7.000%, due 07/18/07..................... 650,000 583,195 Banque Centrale de Tunisie, 8.250%, due 09/19/27................................................ 785,000 638,794 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14 ,................................ 1,000,000 939,270 Tyco International Corp., 144A, 6.821%, due 03/05/01................................................ 3,500,000 3,499,346 ----------- 5,660,605 ----------- U.S. Government Mortgage- Backed Securities -- 2.49% Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25............................... $ 18,814 $ 19,431 Federal Home Loan Mortgage Corp., 7.238%, due 05/01/26........................................ 102,664 103,052 Federal Home Loan Mortgage Corp. Gold 8.000%, due 11/01/22........................................ 65,126 65,890 8.000%, due 05/01/23........................................ 682,266 690,269 9.000%, due 03/01/24........................................ 463,466 485,216 Federal National Mortgage Association 6.375%, due 06/15/09........................................ 2,380,000 2,267,942 6.500%, due 03/01/19........................................ 279,418 266,932 8.500%, due 07/01/22........................................ 280,887 290,894 7.000%, due 10/01/28........................................ 936,705 905,932 7.000%, due 03/01/29........................................ 259,036 250,708 Federal National Mortgage Association Strips 8.000%, due 08/01/23........................................ 1,250,698 384,444 0.000%, due 02/01/28........................................ 950,639 616,926 FNCI, 8.000%, due 02/01/13.................................... 499,070 509,155 Freddie Mac Series 194 Class PO, 0.000%, due 04/01/28................................................ 710,398 439,332 Government National Mortgage Association 10.000%, due 09/15/00....................................... 912 951 10.000%, due 05/15/01....................................... 1,255 1,309 9.000%, due 11/15/04........................................ 11,291 11,606 8.000%, due 08/15/22........................................ 274,129 278,367 8.000%, due 11/15/22........................................ 204,231 207,477 7.000%, due 06/15/27........................................ 513,887 496,597 ----------- 8,292,430 ----------- U.S. Government Obligations -- 15.29% U.S. Treasury Bond 8.750%, due 05/15/17........................................ 300,000 358,125 8.000%, due 11/15/21........................................ 435,000 493,453 U.S. Treasury Inflation Indexed Note 3.625%, due 04/15/28........................................ 33,965,000 31,566,833 3.875%, due 04/15/29........................................ 18,530,000 17,708,009 U.S. Treasury Note 6.625%, due 07/31/01........................................ 500,000 503,282 6.625%, due 05/15/07........................................ 400,000 401,625 ----------- 51,031,327 ----------- Total U.S. Bonds.............................................. 80,315,296 ----------- Shares ----------- High Yield Bonds -- 2.55% Brinson High Yield Fund (b)................................... 617,548 8,501,106 ----------- Face Amount ----------- Global (Ex-U.S.) Bonds -- 9.19% Australia -- 0.68% Queensland Treasury Corp. Global Notes 6.500%, due 06/14/05.....................................AUD 2,600,000 1,664,856 8.000%, due 09/14/07........................................ 900,000 618,466 ----------- 2,283,322 -----------
================================================================================ 13 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Face Amount Value ----------- ------------ Canada -- 0.95% Government of Canada 7.000%, due 12/01/06.......................CAD 1,290,000 $ 924,324 6.000%, due 06/01/08.......................... 700,000 478,816 4.250%, due 12/01/21.......................... 2,200,000 1,767,215 ------------ 3,170,355 ------------ Denmark -- 0.82% Depfa Pfandbrief Bank, 5.750%, due 03/04/09.......................EUR 850,000 863,113 Kingdom of Denmark 7.000%, due 11/10/24.......................DKK 2,350,000 351,974 7.000%, due 12/15/04.......................... 5,480,000 791,546 9.000%, due 11/15/00.......................... 3,800,000 532,299 8.000%, due 03/15/06.......................... 1,200,000 182,673 ------------ 2,721,605 ------------ France -- 1.22% Government of France (OAT) 9.500%, due 01/25/01.......................EUR 1,500,000 1,575,465 4.000%, due 10/25/09.......................... 725,000 647,198 8.500%, due 12/26/12.......................... 1,199,999 1,525,725 5.500%, due 04/25/29.......................... 330,000 309,620 ------------ 4,058,008 ------------ Germany -- 0.90% Deutscheland Republic Series 96, 6.250%, due 04/26/06.......................... 125,000 133,106 Bundesrepublik Deutscheland 8.375%, due 05/21/01.......................... 1,535,000 1,625,459 6.250%, due 01/04/24.......................... 750,000 779,989 DePfa Deutsche Pfandbriefbank AG, 4.750%, due 03/20/03.......................... 480,000 479,803 ------------ 3,018,357 ------------ Italy -- 0.38% Buoni Poliennali Del Tes, 5.000%, due 05/01/08.......................... 740,000 721,374 Republic of Italy (BTP), 12.000%, due 09/01/02......................... 470,000 541,795 ------------ 1,263,169 ------------ Japan -- 1.18% Government of Japan 3.000%, due 09/20/05.......................JPY 90,000,000 970,264 4.600%, due 09/20/04.......................... 260,000,000 2,970,313 ------------ 3,940,577 ------------ Netherlands -- 0.75% Government of Netherlands 3.000%, due 02/15/02.......................EUR 1,330,000 1,297,190 5.500%, due 01/15/28.......................... 360,000 336,324 7.500%, due 04/15/10.......................... 550,000 634,842 7.750%, due 03/01/05.......................... 200,000 224,838 ------------ 2,493,194 ------------ Spain -- 0.60% Government of Spain 6.150%, due 01/31/13.......................... 400,001 415,083 3.250%, due 01/31/05.......................... 1,720,000 1,577,484 ------------ 1,992,567 ------------ Sweden -- 0.90% Government of Sweden 6.750%, due 05/05/14.......................SEK 8,800,000 $ 1,108,105 10.250%, due 05/05/03......................... 14,000,000 1,881,598 ------------ 2,989,703 ------------ United Kingdom -- 0.82% Halifax PLC, Series EMTN, 8.750%, due 07/10/06...............................GBP 720,000 1,257,385 U.K. Treasury, 5.750%, due 12/07/09.......................... 600,000 987,332 7.250%, due 12/07/07.......................... 270,000 474,761 ------------ 2,719,478 ------------ Total Global (Ex-U.S.) Bonds................... 30,650,335 ------------ Shares ----------- ............................................ Emerging Markets Bonds -- 7.19% Brinson Emerging Markets Debt Fund (b)......... 1,039,012 23,996,711 ------------ Total Bonds (Cost $138,116,867)................ 143,463,448 ------------ Short-Term Investments -- 20.60% Investment Companies -- 3.60% Brinson Supplementary Trust U.S. Cash Management Prime Fund......................... 12,006,635 12,006,635 ------------ Face Amount ----------- ............................................ U.S. Corporate Bonds -- 11.11% Centex Corp., Series A, MTN 6.684%, due 06/30/00.......................... $ 5,000,000 5,000,000 Conagra, Inc., 144A 6.320%, due 06/12/00.......................... 1,300,000 1,299,350 Enron Corp. 6.634%, due 03/30/00............... 5,000,000 5,000,000 GATX Capital Corp. 6.500%, due 11/01/00........ 1,500,000 1,506,478 General Motors Corporate Notes 9.375%, due 04/01/00.......................... 2,000,000 2,019,442 Hertz Corp. 6.625%, due 07/15/00............... 2,500,000 2,512,990 Kroger Co. 7.063%, due 10/01/00................ 5,000,000 4,999,757 NorAm Energy Corp. 7.500%, due 08/01/00.......................... 2,000,000 2,013,165 Raytheon Co. 6.300%, due 08/15/00.............. 3,000,000 3,015,108 Safeway, Inc. 5.750%, due 11/15/00............. 4,000,000 3,981,669 Supevalue Stores, Inc., Series A, MTN 6.500%, due 10/06/00.......................... 2,000,000 2,004,250 Union Pacific Corp., Series E, MTN 9.680%, due 04/12/00.......................... 1,200,000 1,211,397 Vastar Resources, Inc. 6.000%, due 04/20/00.......................... 2,500,000 2,503,213 ------------ 37,066,819 ------------ U.S. Government Obligations -- 1.12% U.S. Treasury Bill, 0.00%, due 02/03/00........ 3,765,000 3,748,694 ------------ Commercial Paper -- 4.77% Arrow Electronics, Inc. 5.500%, due 01/03/00.......................... 2,300,000 2,299,297 Dynegy, Inc. 5.500%, due 01/03/00.............. 4,574,000 4,572,603 FMC Corp. 5.750%, due 01/03/00................. 5,000,000 4,998,403 Safeway, Inc. 5.500%, due 01/03/00............. 4,044,000 4,042,764 ------------ 15,913,067 ------------
================================================================================ 14 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Face Amount Value ------ ------------- Total Short-Term Investments (Cost $73,082,365)...................... $ 68,735,215 ------------- Total Investments (Cost $380,920,283) -- 118.37% (a)...... 394,938,495 Liabilities, less cash and other assets -- (18.37%)............... (61,291,344) ------------- Net Assets -- 100%....................... $ 333,647,151 =============
See accompanying notes to schedule of investments. ================================================================================ 15 Global Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $380,920,283; and net unrealized appreciation consisted of: Gross unrealized appreciation................... $ 35,127,094 Gross unrealized depreciation................... (21,108,882) ------------ Net unrealized appreciation................. $ 14,018,212 ============ (b) Non-income producing security. FRN: Floating Rate Note -- The rate disclosed is that in effect at December 31, 1999. TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 1999, the value of these securities amounted to $4,231,891 or 1.27% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Fund had the following open forward foreign currency contracts as of December 31, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ------------- ----------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar................................ 02/08/00 33,300,000 $21,803,182 $ 48,316 British Pound.................................... 02/08/00 11,550,000 18,615,821 (219,353) Canadian Dollar.................................. 02/08/00 4,600,000 3,172,414 50,108 Danish Krone..................................... 02/08/00 18,000,000 2,430,984 (181,157) Euro............................................. 02/08/00 40,000,000 40,213,534 (2,899,481) Japanese Yen..................................... 02/08/00 578,000,000 5,682,558 90,963 Swedish Krona.................................... 02/08/00 112,800,000 13,239,903 (695,100) Swiss Franc...................................... 02/08/00 5,500,000 3,451,673 (310,940) Forward Foreign Currency Sale Contracts Australian Dollar................................ 02/08/00 6,700,000 4,386,826 (113,968) British Pound.................................... 02/08/00 17,200,000 27,722,362 202,368 Canadian Dollar.................................. 02/08/00 4,600,000 3,172,414 (111,461) Danish Krone..................................... 02/08/00 30,000,000 4,051,640 308,826 Euro............................................. 02/08/00 8,250,000 8,294,041 497,671 Japanese Yen..................................... 02/08/00 3,277,000,000 32,217,550 (1,851,820) Swedish Krona.................................... 02/08/00 17,500,000 2,054,063 86,741 ----------- Total........................................ $(5,098,287) ===========
FUTURES CONTRACTS The Brinson Global Fund had the following open futures contracts as of December 31, 1999:
Expiration Cost/ Current Unrealized Date Proceeds Value Loss ---------- ----------- ----------- ----------- U.S. Interest Rate Futures Buy Contracts 5 Year U.S. Treasury Notes, 385 contracts............ March 2000 $38,111,273 $37,742,031 $ (369,242) 10 Year U.S. Treasury Notes, 74 contracts............ March 2000 7,212,627 7,093,593 (119,034) 30 Year U.S. Treasury Notes, 63 contracts............ March 2000 5,872,691 5,729,062 (143,629) Index Future Sale Contracts S&P 500 Index, 119 contracts......................... March 2000 42,843,542 44,154,950 (1,311,408) ----------- Total............................................ $(1,943,313) ===========
The market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $3,748,694. See accompanying notes to financial statements. ================================================================================ 16 Global Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited)
ASSETS: Investments, at value: Unaffiliated issuers (Cost $319,565,037).................................................................. $324,366,271 Affiliated issuers (Cost $61,355,246)..................................................................... 70,572,224 Foreign currency, at value (Cost $152,313)................................................................. 151,741 Receivables: Investment securities sold................................................................................ 251,690 Dividends................................................................................................. 257,093 Interest.................................................................................................. 1,604,830 ------------ TOTAL ASSETS...................................................................................... $397,203,849 ------------ LIABILITIES: Payables: Securities loaned......................................................................................... 57,479,350 Investment advisory fees.................................................................................. 228,226 Due to custodian bank..................................................................................... 279,049 Variation margin.......................................................................................... 277,007 Accrued expenses.......................................................................................... 194,779 Net unrealized depreciation on forward foreign currency contracts.......................................... 5,098,287 ------------ TOTAL LIABILITIES................................................................................. 63,556,698 ------------ NET ASSETS.................................................................................................. $333,647,151 ============ NET ASSETS CONSIST OF: Paid in capital............................................................................................ $324,670,999 Accumulated distribution in excess of net investment income................................................ (411,874) Accumulated net realized gain.............................................................................. 2,448,747 Net unrealized appreciation................................................................................ 6,939,279 ------------ NET ASSETS................................................................................................. $333,647,151 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $318,094,279 and 28,489,881 shares issued and outstanding)............................................. $ 11.17 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,331,490 and 119,546 shares issued and outstanding).................................................. $ 11.14 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $14,221,382 and 1,279,339 shares issued and outstanding)............................................... $ 11.12 ============
See accompanying notes to financial statements. ================================================================================ 17 Global Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
INVESTMENT INCOME: Interest (net of $4,739 for foreign taxes withheld; including securities lending income of $155,319)... $ 4,674,023 Dividends (net of $28,430 for foreign taxes withheld).................................................. 1,427,928 ------------ TOTAL INCOME....................................................................................... 6,101,951 ------------ EXPENSES: Advisory............................................................................................... 1,641,535 Administration......................................................................................... 143,881 Professional........................................................................................... 77,412 Printing............................................................................................... 66,934 Distribution........................................................................................... 66,831 Custodian.............................................................................................. 48,131 Other.................................................................................................. 52,368 ------------ TOTAL EXPENSES..................................................................................... 2,097,092 Earnings credits................................................................................... (1,963) ------------ NET EXPENSES....................................................................................... 2,095,129 ------------ NET INVESTMENT INCOME.............................................................................. 4,006,822 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments........................................................................................... 10,602,009 Futures contracts..................................................................................... (3,838,627) Foreign currency transactions......................................................................... 144,805 ------------ Net realized gain.................................................................................. 6,908,187 ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency...................................................................... (11,930,745) Futures contracts..................................................................................... 697,060 Forward contracts..................................................................................... (6,506,307) Translation of other assets and liabilities denominated in foreign currency........................... 16,926 ------------ Change in net unrealized appreciation or depreciation................................................. (17,723,066) ------------ Net realized and unrealized loss...................................................................... (10,814,879) ------------ Net decrease in net assets resulting from operations................................................... $ (6,808,057) ============
See accompanying notes to financial statements. ================================================================================ 18 Global Fund -- Schedule of Investments - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999(Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net decrease in net assets resulting from operations............................................. $ (6,808,057) Adjustments to reconcile net decrease in net assets resulting from operations to net cash used for operating activities: Net realized and unrealized loss on investments................................................. 10,814,879 Decrease in receivable for investment securities sold........................................... 8,642,091 Decrease in dividends and interest receivable................................................... 1,372,338 Decrease in payable for securities purchased.................................................... (25,213,162) Decrease in payable for investment advisory fee................................................. (93,085) Increase in payable to Fund custodian........................................................... 279,049 Decrease in accrued expenses.................................................................... (10,753) Decrease in variation margin.................................................................... (248,118) Net amortization of premium..................................................................... 385,052 ------------- Net cash used for operating activities......................................................... (10,879,766) ------------- CASH FLOWS USED FOR FINANCING ACTIVITIES: Purchases of investments......................................................................... (321,094,569) Proceeds from sales of investments............................................................... 524,162,878 Net realized loss on futures contracts........................................................... (3,838,627) Net realized gain on foreign currency transactions............................................... 144,805 Change in net unrealized appreciation or depreciation on futures contracts....................... 697,060 Change in net unrealized appreciation or depreciation on other assets and liabilities............ 16,926 Net decrease in foreign currency................................................................. 2,223,501 ------------- Net cash provided by investing activities...................................................... 202,311,974 ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net capital shares transactions.................................................................. (151,332,750) Net decrease from securities lending............................................................. (39,994,824) Dividends and capital gain distributions paid.................................................... (1,895,987) ------------- Net cash used for financing activities......................................................... (193,223,561) ------------- Net decrease in cash............................................................................. (1,791,353) CASH AT BEGINNING OF PERIOD....................................................................... 1,791,353 ------------- CASH AT END OF PERIOD............................................................................. $ -- =============
See accompanying notes to financial statements. ================================================================================ 19 Global Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 ----------------- -------------- OPERATIONS: Net investment income............................................................ $ 4,006,822 $ 12,109,444 Net realized gain................................................................ 6,908,187 44,693,620 Change in net unrealized appreciation or depreciation............................ (17,723,066) (37,993,047) ------------- ------------- Net increase (decrease) in net assets resulting from operations.................. (6,808,057) 18,810,017 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income......................................... (4,006,822) (12,109,444) Distributions in excess of net investment income................................. (1,164,990) (6,197,274) Distributions from net realized gain............................................. (15,248,821) (33,009,121) ------------- ------------- Total distributions to shareholders*............................................. (20,420,633) (51,315,839) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................................................... 155,204,510 410,521,495 Shares issued on reinvestment of distributions................................... 18,524,646 47,914,179 Shares redeemed.................................................................. (305,569,570) (632,556,320) ------------- ------------- Net decrease in net assets resulting from capital share transactions............. (131,840,414) (174,120,646) ------------- ------------- TOTAL DECREASE IN NET ASSETS.................................................. (159,069,104) (206,626,468) ------------- ------------- NET ASSETS: Beginning of period.............................................................. 492,716,255 699,342,723 ------------- ------------- End of period (including undistributed net investment income of $(411,874) and $753,116, respectively).......................................... $ 333,647,151 $ 492,716,255 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income: Brinson Class I.................................................................. $ (4,971,880) $ (17,500,696) Brinson Class N.................................................................. (18,730) (753,377) UBS Investment Funds Class....................................................... (181,202) (52,645) Distributions from net realized gain: Brinson Class I.................................................................. (14,468,448) (31,201,392) Brinson Class N.................................................................. (59,854) (1,710,286) UBSInvestment Funds Class........................................................ (720,519) (97,443) ------------- ------------- Total distributions to shareholders............................................... $ (20,420,633) $ (51,315,839) ============= =============
See accompanying notes to financial statements. ================================================================================ 20 Global Fund -- Financial Highlights - ------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended July 31, 1995* December 31, 1999 Year Ended June 30, Through ------------------------------ UBS Investment Funds Class (Unaudited) 1999 1998 1997 June 30, 1996 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period..................... $ 11.95 $ 12.71 $ 13.05 $ 12.18 $ 11.60 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income.................................. 0.09** 0.20 0.30 0.34 0.39 Net realized and unrealized gain (loss)................ (0.27) 0.25 0.61 1.75 1.10 ------- ------- ------- ------- ------- Total income (loss) from investment operations.............................. (0.18) 0.45 0.91 2.09 1.49 ------- ------- ------- ------- ------- Less distributions: Distributions from and in excess of net investment income..................................... (0.13) (0.37) (0.55) (0.57) (0.59) Distributions from net realized gain................... (0.52) (0.84) (0.70) (0.65) (0.32) ------- ------- ------- ------- ------- Total distributions.................................. (0.65) (1.21) (1.25) (1.22) (0.91) ------- ------- ------- ------- ------- Net asset value, end of period............................ $ 11.12 $ 11.95 $ 12.71 $ 13.05 $ 12.18 ======= ======= ======= ======= ======= Total return (non-annualized)............................. (1.44)% 3.92% 7.60% 18.13% 13.24% Ratios/Supplemental data: Net assets, end of period (in 000s)...................... $14,221 $22,060 $30,436 $26,303 $14,030 Ratio of gross expenses to average net assets............................................. 1.64%*** 1.61% 1.59% 1.64% 1.69%*** Ratio of net investment income to average net assets............................................. 1.33%*** 1.58% 2.05% 2.38% 3.04%*** Portfolio turnover rate.................................. 36% 105% 88% 150% 142%
* Commencement of UBS Investment Funds Class ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 21 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds The UBS Investment Fund - Global Equity has provided an annualized return of 13.94% since its inception on July 31, 1995. Over the same period, the annualized return of the benchmark, the MSCI World Equity (Free) Index, was 19.22%. The Fund's performance was achieved with a volatility of 11.37%, somewhat less risk than its benchmark's volatility of 13.52%. For the full year the Fund increased 12.02%, lagging the index's unhedged return of 25.12%. Most regions experienced strong performance in dollar-hedged terms, led by Asia (Ex- Japan) and Japan and followed by Europe (Ex-U.K.). We gained from our mid-year decision to increase Japan to neutral and then to an overweight. European market allocation also added value, as did the underweight to North America. The overweights to the U.K. and Australia and underweight of Asia (Ex-Japan) detracted. Our currency management also reduced returns, due to the yen's strength and euro's weakness. Global returns in the latter part of the year were largely fueled by investor enthusiasm for technology and telecommunications stocks, especially those with an Internet connection. By year-end, growth stocks had significantly overtaken value stocks on a global basis. In our view, many of these stocks have been bid up to levels that far exceed underlying value. Thus, the U.S. portion of the Fund is positioned in industries and stocks that enjoy less lofty valuations and offer greater upside potential. The Pacific (Ex-Japan) region has begun to rebound from last year's currency and banking crises. Japan has shown tentative signs of an economic revival, fueled by government spending packages and extremely low interest rates. There are also encouraging signs of restructuring, as well as consolidation in the banking and financial sectors, easing the fears of a financial meltdown that has weighed down investor sentiment for much of the decade. Our strategies position us to take advantage of current valuation discrepancies. Our largest underweight is to North America and largest overweight to Japan, while Europe and the U.K. are neutral. Our currency strategy, unsuccessful this year, maintains an underweight to the expensive yen and pound sterling, with overweights in the very cheap Euro and the Australian dollar. We are overweight industrials and materials, where values are most compelling. Our most important underweights are in those sectors that have risen significantly: information technology, energy and telecommunications services. ================================================================================ 22 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------- UBS Investment Fund - Global Equity 5.00% 12.02% 11.68% 13.94% - -------------------------------------------------------------------------------- MSCI World Equity (Free) Index 15.25 25.12 21.81 19.22 - --------------------------------------------------------------------------------
*Performance inception date of the UBS Investment Fund - Global Equity. 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 UBS Investment Fund - Global Equity and the MSCI World Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund - Global Equity vs. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested
Brinson Global Equity MSCI World Equity - ---------------------------------------------------- 7/31/95 $10,000 $10,000 - ---------------------------------------------------- 8/31/95 $10,155 $ 9,777 - ---------------------------------------------------- 9/30/95 $10,329 $10,066 - ---------------------------------------------------- 10/31/95 $10,300 $ 9,909 - ---------------------------------------------------- 11/30/95 $10,667 $10,255 - ---------------------------------------------------- 12/31/95 $10,993 $10,556 - ---------------------------------------------------- 1/31/96 $11,312 $10,753 - ---------------------------------------------------- 2/29/96 $11,354 $10,818 - ---------------------------------------------------- 3/31/96 $11,539 $10,998 - ---------------------------------------------------- 4/30/96 $11,858 $11,256 - ---------------------------------------------------- 5/31/96 $11,889 $11,265 - ---------------------------------------------------- 6/30/96 $11,925 $11,325 - ---------------------------------------------------- 7/31/96 $11,544 $10,925 - ---------------------------------------------------- 8/31/96 $11,739 $11,054 - ---------------------------------------------------- 9/30/96 $12,110 $11,488 - ---------------------------------------------------- 10/31/96 $12,152 $11,567 - ---------------------------------------------------- 11/30/96 $12,760 $12,219 - ---------------------------------------------------- 12/31/96 $12,787 $12,025 - ---------------------------------------------------- 1/31/97 $12,899 $12,172 - ---------------------------------------------------- 2/28/97 $13,067 $12,311 - ---------------------------------------------------- 3/31/97 $13,011 $12,064 - ---------------------------------------------------- 4/30/97 $13,067 $12,460 - ---------------------------------------------------- 5/31/97 $13,832 $13,231 - ---------------------------------------------------- 6/30/97 $14,351 $13,889 - ---------------------------------------------------- 7/31/97 $14,813 $14,531 - ---------------------------------------------------- 8/31/97 $14,125 $13,547 - ---------------------------------------------------- 9/30/97 $14,711 $14,284 - ---------------------------------------------------- 10/31/97 $13,900 $13,534 - ---------------------------------------------------- 11/30/97 $13,888 $13,771 - ---------------------------------------------------- 12/31/97 $14,048 $13,939 - ---------------------------------------------------- 1/31/98 $14,271 $14,330 - ---------------------------------------------------- 2/28/98 $15,138 $15,299 - ---------------------------------------------------- 3/31/98 $15,757 $15,943 - ---------------------------------------------------- 4/30/98 $15,720 $16,099 - ---------------------------------------------------- 5/31/98 $15,658 $15,904 - ---------------------------------------------------- 6/30/98 $15,520 $16,276 - ---------------------------------------------------- 7/31/98 $15,433 $16,251 - ---------------------------------------------------- 8/31/98 $13,734 $14,085 - ---------------------------------------------------- 9/30/98 $13,932 $14,335 - ---------------------------------------------------- 10/31/98 $14,850 $15,634 - ---------------------------------------------------- 11/30/98 $15,408 $16,565 - ---------------------------------------------------- 12/31/98 $15,897 $17,370 - ---------------------------------------------------- 1/31/99 $15,897 $17,752 - ---------------------------------------------------- 2/28/99 $15,404 $17,280 - ---------------------------------------------------- 3/31/99 $15,885 $17,997 - ---------------------------------------------------- 4/30/99 $16,960 $18,709 - ---------------------------------------------------- 5/31/99 $16,340 $18,020 - ---------------------------------------------------- 6/30/99 $16,960 $18,858 - ----------------------------------------------------
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. ================================================================================ 23 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Market Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ----------------------------------------------------------- U.S. 49.0% 38.0% Australia 1.2 3.8 Austria 0.1 0.0 Belgium 0.4 0.7 Canada 2.1 1.2 Denmark 0.4 0.3 Finland 1.5 1.9 France 5.0 5.8 Germany 5.1 4.1 Hong Kong 1.1 0.2 Ireland 0.2 0.0 Italy 2.1 1.4 Japan 13.4 23.1 Netherlands 2.6 2.0 New Zealand 0.1 0.0 Norway 0.2 0.0 Portugual 0.2 0.2 Singapore 0.5 0.7 Spain 1.3 2.6 Sweden 1.3 2.6 Switzerland 2.8 1.9 United Kingdom 9.4 9.5 Cash Reserves 0.0 0.0 - ----------------------------------------------------------- 100.0% 100.0% Top Ten U.S. Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------------------- 1. New York Times Co. 1.79% 2. CIGNA Corp. 1.75 3. First Data Corp. 1.54 4. FDX Corp. 1.41 5. General Instrument Corp. 1.37 6. Compuware Corp. 1.34 7. Burlington Northern Santa Fe Group 1.29 8. St. Jude Medical, Inc. 1.10 9. Electronic Data Systems Corp. 1.07 10. Allergan, Inc. 0.99 - ------------------------------------------------------------- Currency Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ------------------------------------------------------------- U.S. 49.0% 46.1% Australia 1.2 7.3 Canada 2.1 2.1 Denmark 0.4 0.4 Euro 18.5 28.5 Hong Kong 1.1 0.0 Japan 13.4 5.4 New Zealand 0.1 0.0 Norway 0.2 0.2 Singapore 0.5 0.5 Sweden 1.3 5.3 Switzerland 2.8 2.8 United Kingdom 9.4 1.4 - ------------------------------------------------------------- 100.0% 100.0% Top Ten Global (Ex-U.S.) Equity Holdings As of December 31, 1999 (Unaudited) Percent of Net Assets - ------------------------------------------------------------- 1. Sony Corp. 2.39% 2. Fujitsu 1.54 3. Banque Nationale de Paris 1.53 4. Seven-Eleven Japan Co., Ltd. 1.33 5. TDK Corp. 1.33 6. Nippon Telegraph & Telephone Corp. 1.24 7. Bayer AG 1.22 8. Orix Corp. 1.16 9. Murata Manufacturing Co., Ltd. 1.13 10. Siemens AG 1.09 - ------------------------------------------------------------- ================================================================================ 24 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - -------------------------------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods................................. 1.81% Technology.................................... 6.37 ------ 8.18 Basic Industries Chemicals..................................... 0.80 Housing/Paper................................. 3.04 Metals........................................ 1.39 ------ 5.23 Consumer Non-Durables.................................. 0.84 Retail/Apparel................................ 1.22 Autos/Durables................................ 1.45 Health: Drugs................................. 2.83 Health: Non-Drugs............................. 2.25 ------ 8.59 Financial Banks......................................... 2.58 Non-Banks..................................... 2.52 ------ 5.10 Utilities Electric...................................... 2.87 Telephone..................................... 1.62 ------ 4.49 Transportation................................. 2.70 Services/Misc.................................. 3.97 ------ Total U.S. Equities........................ 38.26* GLOBAL (EX-U.S.) EQUITIES Aerospace & Military........................... 0.36% Airlines....................................... 0.43 Appliances & Households........................ 2.91 Autos/Durables................................. 1.07 Banking........................................ 7.41 Beverages and Tobacco.......................... 1.32 Broadcasting & Publishing...................... 2.88 Building Materials............................. 0.23 Business & Public Service...................... 3.45 Chemicals...................................... 2.20 Data Processing................................ 2.40 Electric Components............................ 2.78 Electronics.................................... 5.26 Energy......................................... 0.86 Financial Services............................. 3.31 Food & House Products.......................... 1.80 Forest Products................................ 0.99 Health & Personal Care......................... 3.33 Industrial Components.......................... 0.61 Insurance...................................... 1.40 Merchandising.................................. 2.11 Multi-Industry................................. 0.28 Non-Ferrous Metals............................. 0.30 Real Estate.................................... 0.88 Recreation..................................... 0.98 Telecommunications............................. 6.16 Transportation................................. 1.64 Utilities...................................... 2.53 ------ Total Global (Ex-U.S.) Equities.... 59.88 SHORT-TERM INVESTMENTS......................... 0.49* ------ TOTAL INVESTMENTS.................. 98.63 CASH AND OTHER ASSETS, LESS LIABILITIES............................. 1.37 ------ NET ASSETS........................ 100.00% ====== - -------------------------------------------------------------------- * The Fund held a long position in stock index futures on December 31, 1999 which increased U.S. Equity exposure from 38.26% to 39.15%. This adjustment resulted in a net decrease in the Fund's exposure to Short-Term Investments from 0.49% to (0.40)%. - -------------------------------------------------------------------------------- 25 Global Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value -------- ----------- Equities -- 98.14% U.S. Equities -- 38.26% Advanced Micro Devices, Inc. (b)............. 9,000 $ 260,438 Allergan, Inc. (b)........................... 16,600 825,850 Alza Corp. (b)............................... 6,800 235,450 American Standard Cos., Inc. (b)............. 9,100 417,463 Baxter International, Inc.................... 9,500 596,719 Burlington Northern Santa Fe Corp............ 44,300 1,074,275 Central & South West Corp.................... 31,600 632,000 Champion International Corp.................. 7,600 470,725 CIGNA Corp................................... 18,000 1,450,125 Compaq Computer Corp......................... 27,300 738,806 Computer Sciences Corp. (b).................. 8,500 804,312 Compuware Corp............................... 29,800 1,110,050 Corning, Inc................................. 4,400 567,325 Delhaize America, Inc........................ 33 670 Dial Corp.................................... 15,100 367,119 Dominion Resources, Inc...................... 12,800 502,400 Electronic Data Systems Corp................. 13,300 890,269 Eli Lilly and Co............................. 3,500 232,750 Emerson Electric Co.......................... 12,600 722,925 FDX Corp. (b)................................ 28,500 1,166,719 Federal-Mogul Corp........................... 16,900 340,113 Federated Department Stores, Inc............. 4,500 227,531 First Data Corp.............................. 26,004 1,282,322 Fleet Boston Financial Corp.................. 16,829 585,860 Fort James Corp.............................. 15,300 418,838 Gateway, Inc................................. 5,400 389,138 General Instrument Corp. (b)................. 13,400 1,139,000 Genzyme Corp. (b)............................ 3,600 162,000 GreenPoint Financial Corp.................... 14,200 338,138 Household International, Inc................. 14,300 532,675 Illinois Tool Works, Inc..................... 10,600 716,162 Kimberly-Clark Corp.......................... 12,500 815,625 Lafarge Corp................................. 4,800 132,600 Lear Corp. (b)............................... 10,600 339,200 Lexmark International Group, Inc............. 2,900 262,450 Lincoln National Corp........................ 6,200 248,000 Lockheed Martin Corp......................... 12,902 282,231 Masco Corp................................... 17,300 438,987 Mattel, Inc.................................. 19,200 252,000 Monsanto Co.................................. 12,100 431,063 New York Times Co............................ 30,200 1,483,575 Newell Rubbermaid, Inc....................... 9,100 263,900 Nextel Communications, Inc. (b).............. 5,700 587,812 Peco Energy Co............................... 15,110 525,072 Pentair, Inc................................. 4,700 180,950 Philip Morris Companies, Inc................. 14,100 326,944 PNC Bank Corp................................ 7,200 320,400 Praxair, Inc................................. 8,100 407,531 Raytheon Co., Class B........................ 17,900 475,469 Reliaster Financial Corp..................... 4,000 156,750 SBC Communications, Inc...................... 15,700 765,375 Southdown, Inc............................... 5,176 267,211 St. Jude Medical, Inc. (b)................... 29,700 911,419 Torchmark Corp............................... 8,200 238,313 U.S. Bancorp................................. 11,363 270,581 Unisys Corp.................................. 6,700 213,981 United Healthcare Corp....................... 3,700 $ 196,563 W.W. Grainger, Inc........................... 11,000 525,937 Watson Pharmaceutical Co..................... 17,400 623,137 Wells Fargo and Co........................... 15,500 626,781 ----------- Total U.S. Equities.......................... 31,768,024 ----------- Global (Ex-U.S.) Equities -- 59.88% Australia -- 3.46% Broken Hill Proprietary Co., Ltd............. 32,150 420,800 Lend Lease Corp., Ltd........................ 12,394 173,081 National Australia Bank Ltd.................. 40,875 623,241 News Corp., Ltd.............................. 69,640 674,015 QBE Insurance Group Ltd...................... 28,778 133,709 Rio Tinto Ltd................................ 11,763 251,876 Westpac Banking Corp., Ltd................... 70,045 481,613 Woolworth's Ltd.............................. 32,600 111,787 ----------- 2,870,122 ----------- Belgium -- 0.71% Electrabel S.A............................... 1,170 381,161 Fortis B..................................... 5,752 206,530 ----------- 587,691 ----------- Canada -- 1.30% Agrium, Inc.................................. 6,200 47,847 Canadian National Railway Co................. 9,000 236,891 Newbridge Networks Corp. (b)................. 16,900 379,036 Potash Corporation of Saskatchewan, Inc...... 3,000 142,631 Shaw Communications, Inc., Class B........... 8,400 275,794 ----------- 1,082,199 ----------- Denmark -- 0.30% Tele Danmark A/S............................. 3,400 251,414 ----------- Finland -- 1.81% Nokia Oyj.................................... 2,500 451,078 Sampo Insurance Co., Ltd., Series A.......... 6,500 226,090 UPM-Kymmene Corp............................. 20,600 825,974 ----------- 1,503,142 ----------- France -- 5.28% Accor S.A. Air Liquide.................................. 1,478 246,232 Alcatel Alsthom.............................. 420 95,989 Banque Nationale de Paris.................... 13,792 1,266,374 Carrefour S.A................................ 1,360 249,613 Cie de Saint Gobain.......................... 1,026 192,013 CSF Thomson (b).............................. 9,095 298,940 France Telecom S.A........................... 5,480 721,248 Groupe Danone................................ 1,110 260,362 Michelin, Class B............................ 2,741 107,155 Rhone-Poulenc, Class A....................... 7,110 411,230 Total Fina S.A., Class B (b)................. 2,209 293,394 Vivendi...................................... 2,719 244,342 ----------- 4,386,892 ----------- Germany -- 3.89% Bayer AG..................................... 21,390 1,012,027 Continental AG............................... 19,950 398,956 DaimlerChrysler AG (b)....................... 2,325 181,552 Mannesmann AG................................ 1,450 349,415
- -------------------------------------------------------------------------------- 26 Global Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value -------- ----------- Siemens AG.................................. 7,120 $ 906,406 Veba AG..................................... 7,910 384,554 ----------- 3,232,910 ----------- Hong Kong -- 0.19% Henderson Land Development Co., Ltd......... 25,000 160,481 ----------- Italy -- 1.12% San Paolo-imi Spa........................... 17,811 240,846 Telecom Italia Mobile Spa................... 42,800 475,789 Telecom Italia Spa.......................... 15,000 210,503 ----------- 927,138 ----------- Japan -- 23.94% Acom Co., Ltd............................... 4,500 440,086 Bank of Tokyo-Mitsubushi Ltd................ 36,000 500,845 Benesse Corp................................ 2,400 576,816 Canon, Inc.................................. 18,000 713,986 Dai-Ichi Kangyo Bank........................ 47,000 438,523 East Japan Railway Co....................... 51 274,545 Fanuc....................................... 7,000 889,747 Fujitsu..................................... 28,000 1,274,779 Honda Motor Co.............................. 19,000 705,388 Hoya Corp................................... 4,000 314,591 Kao Corp.................................... 17,000 484,148 Mitsubishi Estate Co., Ltd.................. 41,000 399,365 Murata Manufacturing Co., Inc............... 4,000 937,912 NEC Corp.................................... 35,000 832,641 Nintendo Corp., Ltd......................... 4,900 812,877 Nippon Telegraph & Telephone Corp........... 60 1,025,841 Nomura Securities Co., Ltd.................. 37,000 666,944 NTT Mobile Communications................... 10 383,958 Orix Corporation............................ 4,300 967,085 Santen Pharmaceutical Co., Ltd.............. 14,000 230,472 Secom Co., Ltd.............................. 6,000 659,470 Seven-Eleven Japan Co., Ltd................. 7,000 1,107,909 Softbank Corp............................... 400 382,199 Sony Corp................................... 6,700 1,983,391 Sumitomo Chemical Co........................ 80,000 375,165 Takeda Chemical Industries.................. 15,000 740,071 TDK Corp.................................... 8,000 1,102,828 Yamato Transport Co., Ltd................... 17,000 657,711 ----------- 19,879,293 ----------- Netherlands -- 1.85% ING Groep NV................................ 11,220 674,138 Koninklijke KPN NV.......................... 5,313 516,063 TNT Post Group NV........................... 12,000 342,218 ----------- 1,532,419 ----------- Portugal -- 0.22% EDP Electricidade de Portugal S.A........... 10,400 180,664 ----------- Singapore -- 0.72% Singapore Press Holdings Ltd................ 16,046 347,695 United Overseas Bank........................ 28,512 251,577 ----------- 599,272 ----------- Spain -- 2.49% Banco Popular S.A........................... 8,673 $ 562,922 Banco Santander Central Hispano, S.A........ 29,081 327,653 Endesa S.A.................................. 9,397 185,659 Tabacalera S.A.............................. 35,268 502,005 Telefonica S.A.............................. 19,674 489,094 ----------- 2,067,333 ----------- Sweden -- 2.31% Electrolux AB, B Shares..................... 17,250 432,108 Ericsson, B Shares.......................... 7,490 479,578 Investor AB, B Shares....................... 16,510 231,909 Nordbanken Holding AB....................... 94,570 553,494 Swedish Match AB............................ 62,670 217,874 ----------- 1,914,963 ----------- Switzerland -- 1.82% Adecco S.A.................................. 852 660,011 Nestle S.A. (Reg.).......................... 175 318,907 Novartis AG (Reg.).......................... 249 363,692 Roche Holding AG (Gen.)..................... 14 165,303 ----------- 1,507,913 ----------- United Kingdom -- 8.47% Allied Zurich PLC (b)....................... 13,975 164,310 AstraZeneca PLC............................. 4,639 192,002 British Airways PLC......................... 55,000 358,121 British Telecommunications PLC.............. 24,000 585,243 Diageo PLC.................................. 46,630 374,267 FKI PLC..................................... 98,405 380,640 Glaxo Wellcome PLC.......................... 9,620 271,331 HSBC Holdings PLC........................... 29,000 403,362 Lloyds TSB Group PLC........................ 40,220 502,053 National Power PLC.......................... 54,500 314,900 Nycomed Amersham PLC........................ 63,000 391,427 Peninsular & Oriental Steam Navigation Co... 11,475 191,047 Powergen PLC................................ 33,000 236,679 Prudential Corp. PLC........................ 22,000 432,582 Reckitt & Colman PLC........................ 14,000 130,984 Reed International PLC...................... 73,000 545,329 Scottish & Southern Energy PLC.............. 52,650 419,403 Tesco PLC................................... 93,250 282,924 Trinity Mirror PLC.......................... 17,175 182,972 Unilever PLC................................ 41,000 300,994 United News & Media PLC..................... 29,000 368,775 ----------- 7,029,345 ----------- Total Global (Ex-U.S.) Equities............. 49,713,191 ----------- Total Equities (Cost $65,016,878)........... 81,481,215 -----------
================================================================================ 27 Global Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) - --------------------------------------------------------------------------------
Shares Value -------- ----------- Short-Term Investments -- 0.49% Investment Companies -- 0.49% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $411,539)............................. 411,539 $ 411,539 ----------- Total Investments (Cost $65,428,417) -- 98.63% (a)............ 81,892,754 Cash and other assets, less liabilities -- 1.37%................... 1,134,027 ----------- Net Assets -- 100%........................... $83,026,781 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $65,428,417; and net unrealized appreciation consisted of: Gross unrealized appreciation.................................. $ 20,104,252 Gross unrealized depreciation.................................. (3,639,915) ------------ Net unrealized appreciation............................. $ 16,464,337 ============
(b) Non-income producing security. (c) Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS The Global Equity Fund had the following open forward foreign currency contracts as of December 31, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ------------ ---------- --------- ------------ Forward Foreign Currency Buy Contracts British Pound........................... 06/02/00 4,250,000 6,847,880 (46,945) Japanese Yen............................ 06/02/00 1,290,000,000 12,922,930 94,245 Forward Foreign Currency Sale Contracts Australian Dollar....................... 06/02/00 5,200,000 3,407,311 92,050 British Pound........................... 06/02/00 700,000 1,127,886 (1,802) Canadian Dollar......................... 06/02/00 800,000 553,235 7,979 Euro.................................... 06/02/00 5,800,000 5,880,564 (29,007) Swedish Krona........................... 06/02/00 24,200,000 2,860,950 (9,921) Swiss Franc............................. 06/02/00 1,200,000 763,174 (5,318) --------- Total.............................. $ 101,281 =========
FUTURES CONTRACTS The Brinson Global Equity Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ------------ ---------- --------- ------------ Index Futures Buy Contracts S&P 500 Index, 2 contracts.............. March 2000 $ 714,839 $ 742,100 $ 27,261
The market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $75,000. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 28 Global Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $65,016,878).................................................... $81,481,215 Affiliated issuers (Cost $411,539)......................................................... 411,539 Foreign currency, at value (Cost $972,985)................................................... 970,107 Cash......................................................................................... 75,727 Receivables: Dividends................................................................................... 99,356 Interest.................................................................................... 3,394 Variation margin............................................................................ 1,340 Net unrealized appreciation on forward foreign currency contracts............................ 101,281 ----------- TOTAL ASSETS.............................................................................. 83,143,959 ----------- LIABILITIES: Payables: Investment advisory fees.................................................................... 49,888 Accrued expenses............................................................................ 67,290 ----------- TOTAL LIABILITIES......................................................................... 117,178 ----------- NET ASSETS.................................................................................... $83,026,781 =========== NET ASSETS CONSIST OF: Paid in capital.............................................................................. $65,630,618 Accumulated undistributed net investment income.............................................. 8,384 Accumulated net realized gain................................................................ 799,117 Net unrealized appreciation.................................................................. 16,588,662 ----------- NET ASSETS................................................................................ $83,026,781 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $40,734,080 and 3,182,445 shares issued and outstanding)......................................................................... $ 12.80 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $231,676 and 18,131 shares issued and outstanding)............................................................................. $ 12.78 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $42,061,025 and 3,291,032 shares issued and outstanding)......................................................................... $ 12.78 ===========
See accompanying notes to financial statements. ================================================================================ 29 Global Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends (net of $23,473 for foreign taxes withheld)................................. $ 571,589 Interest.............................................................................. 25,947 ----------- TOTAL INCOME...................................................................... 597,536 ----------- EXPENSES: Advisory.............................................................................. 335,604 Distribution.......................................................................... 161,840 Printing.............................................................................. 37,929 Professional.......................................................................... 17,780 Other................................................................................. 49,361 ----------- TOTAL EXPENSES.................................................................... 602,514 Expenses deferred by Advisor...................................................... (18,447) Earnings credits.................................................................. (1,001) ----------- NET EXPENSES...................................................................... 583,066 ----------- NET INVESTMENT INCOME............................................................. 14,470 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................................... 5,365,679 Futures contracts................................................................... 28,781 Foreign currency transactions....................................................... (1,663,061) ----------- Net realized gain................................................................. 3,731,399 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency.................................................... 230,903 Futures contracts................................................................... 27,261 Forward contracts................................................................... (29,467) Translation of other assets and liabilities denominated in foreign currency......... 1,575 ----------- Change in net unrealized appreciation or depreciation............................. 230,272 ----------- Net realized and unrealized gain...................................................... 3,961,671 ----------- Net increase in net assets resulting from operations.................................. $ 3,976,141 ===========
See accompanying notes to financial statements. ================================================================================ 30 Global Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ------------------ --------------- OPERATIONS: Net investment income........................................................... $ 14,470 $ 497,109 Net realized gain............................................................... 3,731,399 5,596,677 Change in net unrealized appreciation or depreciation........................... 230,272 1,132,303 ------------ ------------- Net increase in net assets resulting from operations............................ 3,976,141 7,226,089 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................ (229,745) (384,423) Brinson Class N................................................................ (985) (2,181) UBS Investment Funds Class..................................................... (77,667) (219,326) Distributions from net realized gain: Brinson Class I................................................................ (3,607,591) (352,100) Brinson Class N................................................................ (19,859) (2,950) UBS Investment Funds Class..................................................... (3,756,305) (713,059) ------------ ------------- Total distributions to shareholders............................................ (7,692,152) (1,674,039) ------------ ------------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................................................... 7,577,518 34,808,631 Shares issued on reinvestment of distributions.................................. 6,445,851 1,462,446 Shares redeemed................................................................. (13,648,784) (37,326,928) ------------ ------------- Net increase (decrease) in net assets resulting from capital share transactions................................................................ 374,585 (1,055,851) ------------ ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... (3,341,426) 4,496,199 ------------ ------------- NET ASSETS: Beginning of period............................................................. 86,368,207 81,872,008 ------------ ------------- End of period (including accumulated undistributed net investment income of $8,384 and $302,311, respectively)............................................. $ 83,026,781 $ 86,368,207 ============ =============
See accompanying notes to financial statements. ================================================================================ 31 Global Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended July 31. 1995* December 31, 1999 Year Ended June 30, Through ------------------------------- UBS Investment Funds Class (Unaudited) 1999 1998 1997 June 30, 1996 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............... $ 13.40 $ 12.51 $ 12.73 $ 11.57 $ 10.35 --------- ------- ------- ------- -------- Income from investment operations: Net investment income........................... (0.03)** 0.04** 0.07 0.08 (0.01) Net realized and unrealized gain................ 0.64 1.09 0.83 2.13 1.93 --------- ------- ------- ------- -------- Total income from investment operations................................. 0.61 1.13 0.90 2.21 1.92 --------- ------- ------- ------- -------- Less distributions: Distributions from net investment income........................................ (0.02) (0.06) (0.07) (0.06) (0.01) Distributions from and in excess of net realized gain................................. (1.21) (0.18) (1.05) (0.99) (0.69) --------- ------- ------- ------- -------- Total distributions......................... (1.23) (0.24) (1.12) (1.05) (0.70) --------- ------- ------- ------- -------- Net asset value, end of period..................... $ 12.78 $ 13.40 $ 12.51 $ 12.73 $ 11.57 ========= ======= ======= ======= ======== Total return (non-annualized)...................... 5.00% 9.28% 8.15% 20.34% 19.25% Ratios/Supplemental data: Net assets, end of period (in 000s)............... $ 42,061 $44,042 $59,147 $61,680 $ 33,012 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.............................. 1.81%*** 1.81% 1.78% 2.00% 2.53%*** After expense reimbursement and earnings credits.............................. 1.76%*** 1.76% 1.76% 1.75% 1.76%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits.............................. (0.39)%*** 0.29% 0.53% 0.60% (0.19)%*** After expense reimbursement and earnings credits.............................. (0.34)%*** 0.34% 0.55% 0.85% 0.58%*** Portfolio turnover rate........................... 57% 86% 46% 32% 74%
* Commencement of UBS Investment Funds Class ** The net investment income per share data was determined by using average shares outstanding throughout the period *** Annualized See accompanying notes to financial statements. ================================================================================ 32 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Since its performance inception on July 31, 1995, the UBS Investment Fund - Global Bond has recorded an annualized return of 4.74%, versus the 3.52% return of its benchmark, the Salomon Smith Barney World Government Bond Index. This performance record was achieved with significantly less risk or volatility than the benchmark; 4.82% versus 5.65%, respectively. In calendar year 1999 the Fund posted a decline of 6.74% compared to the benchmark's decline of 4.26%. 1999 proved to be the worst year for global government bonds since 1994. Yields rose (and prices therefore fell) in every major market, apart from Japan, by up to 200 basis points. The main factor behind this development was the growing momentum of world economic growth, led by the continuing strength of economic activity in the U.S. As well as encouraging investors to look for higher real returns, this also gave rise to fears (which were ultimately fulfilled) that central banks would raise official rates to counter rising inflation risks. The weakness in government bonds was accentuated by the unwinding of last year's move to low-risk investments in the aftermath of the Russian default. The main reason for the relative underperformance of the Fund was market allocation strategy, specifically a large underweight to the Japanese market. Despite very low nominal yields, Japanese government bond prices were supported by the Bank of Japan's "zero interest rate" policy, an attempt to stimulate the lackluster domestic economy and limit the strength of the yen. In currencies, underweights to the yen and the pound sterling also hurt performance. However, active bond management helped, with positions in inflation-linked bonds in Canada and good relative performance from non-government bonds in the U.S. component of the Fund. ================================================================================ 33 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO] Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - ------------------------------------------------------------------------------------------------------------------------- UBS Investment Fund -- Global Bond -0.07% -6.74% 1.73% 4.74% - ------------------------------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index 3.13 -4.26 3.43 3.52 - -------------------------------------------------------------------------------------------------------------------------
*Performance inception date of the UBS Investment Fund -- Global Bond. 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 UBS Investment Fund -- Global Bond and the Salomon Smith Barney World Government Bond Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund -- Global Bond vs. Salomon Smith Barney World Gov't Bond Index Wealth Value with Dividends Reinvested
- --------------------------------------------------------------------------------------------------------------------------- LABEL A B - --------------------------------------------------------------------------------------------------------------------------- Label UBS Investment Fund Global Bond Salomon Smith Barney World Gov't Bond Index - --------------------------------------------------------------------------------------------------------------------------- 1 7/31/95 $10,000 $10,000 2 8/31/95 $10,104 $ 9,656 3 9/30/95 $10,218 $ 9,871 4 10/31/95 $10,388 $ 9,944 5 11/30/95 $10,587 $10,057 6 12/31/95 $10,722 $10,162 7 1/31/96 $10,776 $10,037 8 2/29/96 $10,658 $ 9,986 9 3/31/96 $10,701 $ 9,972 10 4/30/96 $10,808 $ 9,932 11 5/31/96 $10,829 $ 9,934 12 6/30/96 $10,917 $10,013 13 7/31/96 $11,036 $10,205 14 8/31/96 $11,113 $10,245 15 9/30/96 $11,287 $10,287 16 10/31/96 $11,527 $10,479 17 11/30/96 $11,734 $10,617 18 12/31/96 $11,654 $10,531 19 1/31/97 $11,484 $10,250 20 2/28/97 $11,484 $10,173 21 3/31/97 $11,313 $10,096 22 4/30/97 $11,240 $10,007 23 5/31/97 $11,569 $10,279 24 6/30/97 $11,703 $10,402 25 7/31/97 $11,654 $10,321 26 8/31/97 $11,606 $10,314 27 9/30/97 $11,837 $10,534 28 10/31/97 $11,984 $10,753 29 11/30/97 $11,825 $10,589 30 12/31/97 $11,791 $10,557 31 1/31/98 $11,892 $10,659 32 2/28/98 $11,968 $10,746 33 3/31/98 $11,829 $10,639 34 4/30/98 $11,980 $10,810 35 5/31/98 $11,968 $10,834 36 6/30/98 $11,970 $10,851 37 7/31/98 $11,957 $10,865 38 8/31/98 $12,097 $11,160 39 9/30/98 $12,671 $11,754 40 10/31/98 $12,938 $12,102 41 11/30/98 $12,849 $11,931 42 12/31/98 $13,156 $12,171 43 1/31/99 $13,130 $12,059 44 2/28/99 $12,717 $11,672 45 3/31/99 $12,691 $11,701 46 4/30/99 $12,717 $11,697 47 5/31/99 $12,478 $11,500 48 6/30/99 $12,278 $11,299 - ---------------------------------------------------------------------------------------------------------------------------
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. ================================================================================ 34 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds
Asset Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ------------------------------------------------------------ U.S. 27.1% 33.1% Australia 0.6 5.1 Austria 0.9 0.0 Belgium 2.4 0.0 Canada 2.9 5.0 Denmark 1.2 4.2 Finland 0.7 0.0 France 7.5 9.2 Germany 7.9 5.7 Ireland 0.3 0.0 Italy 8.1 2.8 Japan 26.6 7.6 Netherlands 2.6 5.6 Portugal 0.4 0.0 Spain 3.3 4.4 Sweden 1.3 6.8 Switzerland 0.4 0.0 TIPS 0.0 1.8 U.K. 5.8 5.8 Euro 0.0 2.9 - ------------------------------------------------------------ 100.0% 100.0%
Currency Allocation As of December 31, 1999 (Unaudited) Current Benchmark Strategy - ------------------------------------------------------------- U.S. 27.1% 23.1% Australia 0.6 6.6 Canada 2.9 2.9 Denmark 1.2 1.2 Euro 34.0 41.9 Japan 26.6 18.6 Sweden 1.3 5.3 Switzerland 0.4 0.4 U.K. 5.9 0.0 - ------------------------------------------------------------- 100.0% 100.0%
Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - ------------------------------------------------- U.S. BONDS Corporate Bonds Airlines................................ 0.84% Asset-Backed............................ 2.51 Consumer................................ 1.10 Financial Services...................... 1.44 Food and Housing Products............... 0.31 Publishing.............................. 0.65 Services/Miscellaneous.................. 0.95 Utilities............................... 0.09 ------ 7.89 ------ International Dollar Bonds.............. 4.01 Corporate Mortgage-Backed Securities.... 8.12 U.S. Government Agencies................ 1.12 U.S. Gov't Mortgage-Backed Securities... 5.70 U.S. Government Obligations............. 5.48 ------ 24.43 ------ Total U.S. Bonds..................... 32.32 ------ GLOBAL (EX-U.S.) BONDS Foreign Financial Bonds.................. 7.21 Foreign Government Bonds................. 56.20 ------ Total Global (Ex-U.S.) Bonds......... 63.41 SHORT-TERM INVESTMENTS................... 0.58 ------ TOTAL INVESTMENTS.................... 96.31 CASH AND OTHER ASSETS, LESS LIABILITIES........................ 3.69 ------ NET ASSETS.......................... 100.00% ======
================================================================================ 35 Global Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited) - -------------------------------------------------------------------------------- Face Amount Value ---------- --------- Bonds -- 95.73% U.S. Bonds -- 32.32% U.S. Corporate Bonds -- 7.89% Cendant Corp., 7.750%, due 12/01/03........... $ 500,000 $ 499,264 Centaur Funding Corp., 144A, 0.000%, due 01/01/80......................... 1,021 398,288 Centaur Funding Corp., 144A, 9.080%, due 01/01/80......................... 153 115,110 Chase Manhattan Auto Owner Trust, Series 96-C, Class A4, 6.150%, due 03/15/02......................... 125,000 124,798 Comed Transitional Funding Trust, Series 98-1, Class A7, 5.740%, due 12/25/10......................... 370,000 333,614 Continental Airlines, Inc., Series 99-2, 7.056%, due 09/15/09............ 710,000 675,750 Countrywide Capital, Inc., 8.000%, due 12/15/26......................... 250,000 224,977 Fidelity Investments, 7.570%, due 06/15/29......................... 450,000 432,660 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03.......... 240,000 237,650 Lilly Del Mar, 144A, 7.17%, due 08/01/29.......................... 350,000 348,314 News America Holdings, 7.750%, due 12/01/45......................... 575,000 524,273 Noram Energy Corp., 6.375%, due 11/01/03......................... 75,000 71,335 Peco Energy Transition Trust, 6.130%, due 03/01/09......................... 540,000 496,876 Premier Auto Trust, Series 96-3, Class A4, 6.750%, due 11/06/00............... 163,308 163,434 Safeway Inc, 7.250%, due 09/15/04............. 250,000 248,528 The Money Store, Series 98-B, Class AF2, 6.115%, due 05/15/10......................... 4,089 4,089 Time Warner Cos., Inc., 7.570%, due 02/01/24......................... 560,000 538,668 UCFC Home Equity Loan, Series 97-C, Class A8, FRN, 5.6375%, due 09/15/27................... 78,696 78,787 USA Waste Services, 7.000%, due 10/01/04......................... 300,000 270,446 Vanderbilt Mortgage Finance, 98-B, Class 1A2, 6.120%, due 05/07/09.............. 600,000 593,694 ----------- 6,380,555 ----------- Corporate Mortgage-Backed Securities -- 8.12% ABN Amro Mortgage Corp., Series 99-2 IA2, 6.300%, due 04/25/29......................... 345,000 328,302 Bear Stearns Mortgage Securities, Inc., 96-7, Class A4, 6.000%, due 01/28/09............... 200,000 191,924 First Union Lehman Brothers, 97-C2, Class A2, 6.600%, due 05/18/07............... 240,000 230,009 GE Capital Mortgage Services, Inc., 93-7F, Class FA3, 6.500%, due 09/25/08.............. 145,184 144,352 Heller Financial Commercial Mortgage Assets, Series 99-PH1 A1, 6.500%, due 05/15/61......................... 399,560 386,446 LB Commercial Conduit Mortgage Trust, Series 99-C1 A1, 6.410%, due 08/15/07......................... $ 548,619 $ 528,583 Norwest Asset Securities Corp., Series 98-25, Class A5, 6.000%, due 12/25/28......................... 965,000 906,048 PNC Mortgage Securities Corp., Series 94-3, Class A8, 7.500%, due 07/25/24......................... 190,000 182,210 Prudential Home Mortgage Securities Series 96-7, Class A4, 6.750%, due 06/25/11......................... 150,000 143,793 Series 93-43, Class A9, 6.750%, due 10/25/23......................... 201,221 193,428 Residential Accredit Loans, Inc. Series 98-QS4, Class AI5, 7.000%, due 03/25/28................................. 625,000 623,656 Series 96-QS4, Class Al10, 7.900%, due 08/25/26......................... 400,000 377,052 Residential Asset Securitization Trust Series 97-A11, Class A2, 7.000%, due 01/25/28......................... 32,378 32,288 Series 97-A11, Class A6, 7.000%, due 01/25/28......................... 430,000 405,339 Series 98-A1, Class A1, 7.000%, due 03/25/28......................... 72,972 72,562 Series 97-A7, Class A1, 7.250%, due 12/25/27......................... 335,000 321,453 Series 97-A7, Class A1, 7.500%, due 09/25/27......................... 56,102 56,041 Structured Asset Securities Corp. Series 98-RF2, 144A, 8.582%, due 07/15/27......................... 315,780 324,464 Series 98-RF1, Class A, 8.712%, due 03/15/27......................... 208,384 214,701 Structured Mortgage Asset Residential Trust, Series 96-5C, Class CI, 7.150%, due 03/25/23......................... 925,000 904,363 ----------- 6,567,014 ----------- International Dollar Bonds -- 4.01% National Australia Bank, FRN, 6.40%, due 12/10/07.......................... 640,000 623,858 Petroleos de Venezuela S.A., 8.750%, due 02/15/04......................... 500,000 488,159 Banco Santiago S.A., 7.000%, due 07/18/07......................... 400,000 358,889 Empresa National Electric, 7.875%, due 10/01/69......................... 500,000 385,159 Korea Development Bank, 7.125%, due 09/17/01......................... 300,000 297,672 Banque Centrale de Tunisie, 8.250%, due 09/19/27......................... 400,000 325,500 Credit Suisse-London, 144A, 7.900%, Resettable Perpetual Preferred, 7.900%, due 05/01/07......................... 500,000 475,729 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49......................... 300,000 286,081 ----------- 3,241,047 ----------- ================================================================================ 36 Global Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited) - ------------------------------------------------------------------------------- Face Amount Value ---------- ----------- U.S. Gov't Mortgage-Backed Securities -- 5.70% Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25.......................... $ 8,912 $ 9,204 Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13.......................... 68,215 64,952 7.238%, due 05/01/26.......................... 17,453 17,519 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.......................... 42,505 43,004 9.000%, due 03/01/24.......................... 116,158 121,609 Federal National Mortgage Association 6.000%, due 01/01/29.......................... 155,793 142,632 6.500%, due 03/01/19.......................... 120,439 115,057 6.500%, due 02/01/29.......................... 593,700 559,748 7.000%, due 12/01/24.......................... 402,571 389,346 7.000%, due 03/01/29.......................... 27,267 26,390 7.500%, due 07/01/10.......................... 762,377 768,657 7.500%, due 12/01/23.......................... 317,354 314,030 7.500%, due 05/18/25.......................... 250,000 246,780 7.500%, due 12/01/27.......................... 638,881 632,189 7.890%, due 04/01/26.......................... 175,960 178,991 8.000%, due 03/01/11.......................... 68,243 69,622 8.500%, due 07/01/22.......................... 7,930 8,213 Federal National Mortgage Association Strips, 0.000%, due 02/01/28.......................... 141,218 91,645 8.000%, due 08/01/23.......................... 185,330 56,967 FNCI, 8.000%, due 02/01/13...................... 72,365 73,827 Government National Mortgage Association, 7.000%, due 08/15/24.......................... 352,905 343,816 7.000%, due 07/15/25.......................... 49,590 48,300 7.500%, due 08/15/23.......................... 60,521 60,204 7.500%, due 12/15/23.......................... 94,179 93,718 7.500%, due 01/15/24.......................... 65,741 65,368 ---------- 4,541,788 ---------- U.S. Government Agencies -- 1.12% Jordan Aid, 8.750%, due 09/01/19................ 452,530 486,597 Tennesse Valley Authority, 6.375%, due 06/15/05.......................... 500,000 481,834 ---------- 968,431 ---------- U.S. Government Obligations -- 5.48% U.S. Treasury Bond, 8.000%, due 11/15/21.......................... 1,985,000 2,251,734 8.750%, due 05/15/17.......................... 300,000 358,125 U.S. Treasury Inflation Indexed Note, 3.625%, due 04/15/28.......................... 570,000 529,754 U.S. Treasury Note 5.625%, due 05/15/08.......................... 640,000 602,000 5.750%, due 08/15/03.......................... 700,000 685,344 ----------- 4,426,957 ----------- Total U.S. Bonds................................ 26,125,792 ----------- Global (Ex-U.S.) Bonds -- 63.41% Australia -- 5.19% International Bank for Recon & Dev 5.500%, due 05/14/03.......................AUD 1,800,000 $ 1,131,331 Queensland Treasury Corp.- Global Note 6.500%, due 06/14/05.......................... 1,130,000 723,572 8.000%, due 09/14/07.......................... 3,400,000 2,338,654 ----------- 4,193,557 ----------- Canada -- 6.85% Government of Canada 4.250%, due 12/01/21.......................CAD 3,730,000 2,996,234 6.000%, due 06/01/08.......................... 2,030,000 1,378,316 Province of Ontario, 7.500%, due 01/19/06........................... 1,600,000 1,161,056 ----------- 5,535,606 ----------- Denmark -- 6.66% City of Copenhagen, 6.250%, due 03/15/01........................DKK 2,400,000 329,368 Depfa Pfandbrief Bank, 5.750%, due 03/04/09........................EUR 2,250,000 2,284,710 Great Belt, 7.000%, due 09/02/03.............DKK 3,650,000 515,097 Kingdom of Denmark 7.000%, due 11/15/07........................... 1,400,000 206,067 7.000%, due 11/10/24........................... 4,800,000 718,927 8.000%, due 11/15/01........................... 9,300,000 1,326,531 ----------- 5,380,700 ----------- France -- 7.74% Government of France (BTAN), 7.750%, due 04/12/00.......................EUR 609,796 618,470 Government of France (OAT) 4.000%, due 10/25/09........................... 200,000 178,537 6.000%, due 10/25/25........................... 400,000 403,364 7.500%, due 04/25/05........................... 902,368 1,005,385 7.500%, due 04/25/05........................... 1,097,632 1,222,942 8.500%, due 04/25/23........................... 1,350,000 1,786,540 9.500%, due 01/25/01........................... 990,000 1,039,807 ----------- 6,255,045 ----------- Germany -- 6.09% Bundesrepublik Deutschland, 5.250%, due 02/21/01.......................... 390,000 396,838 5.625%, due 01/04/28.......................... 380,000 362,817 6.250%, due 04/26/06.......................... 1,850,000 1,969,963 International Bank of Recon & Dev, 7.125%, due 04/12/05.......................... 2,019,603 2,196,114 ----------- 4,925,732 ----------- Italy -- 2.07% Republic of Italy (BTP), 7.750%, due 11/01/06.......................... 930,000 1,053,475 9.000%, due 10/01/03.......................... 550,001 617,477 ----------- 1,670,952 ----------- Japan -- 7.28% Government of Japan 3.000%, due 09/20/05.......................JPY 110,000,000 1,175,712 4.600%, due 09/20/04.......................... 415,000,000 4,712,564 ----------- 5,888,276 ----------- ================================================================================ 37 Global Bond Fund -- Schedule of Investments December 31, 1999 (Unaudited) - ------------------------------------------------------------------------------- Face Amount Value -------- ------- Netherlands -- 5.70% LKB Baden-Wuerttemberg Finance, 6.500%, due 09/15/08.................EUR 818,067 $ 861,807 Netherlands Government 3.000%, due 02/15/02.................... 2,650,000 2,584,627 5.500%, due 01/15/28.................... 1,050,000 980,945 7.500%, due 04/15/10.................... 160,000 184,681 ----------- 4,612,060 ----------- Spain -- 3.90% Bonos Y Oblig Del Estado, 3.250%, due 01/31/05.................... 1,400,000 1,283,999 Government of Spain, 7.350%, due 03/31/07.................... 1,670,000 1,871,762 ----------- 3,155,761 ----------- Sweden -- 6.32% Government of Sweden 6.000%, due 02/09/05.................SEK 3,500,000 419,113 6.750%, due 05/05/14.................... 12,400,000 1,561,420 10.250%, due 05/05/03................... 23,300,000 3,131,517 ----------- 5,112,050 ----------- United Kingdom -- 5.61% Abbey National Treasury Service, 6.500%, due 03/05/04.................GBP 450,000 $ 712,141 British Gas PLC, 8.125%, due 03/31/03.................... 195,000 320,537 UK Treasury 7.250%, due 12/07/07.................... 820,000 1,441,866 5.750%, due 12/07/09.................... 1,250,000 2,056,942 ----------- 4,531,486 ----------- Total Global (Ex-U.S.) Bonds............. 51,261,225 ----------- Total Bonds (Cost $82,090,416)........... 77,387,017 ----------- Shares -------- Short-Term Investments -- 0.58% Investment Companies -- 0.58% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $469,060)......................... 469,060 $ 469,060 ----------- Total Investments (Cost $82,559,476) -- 96.31%............ 77,856,077 Cash and other assets, less liabilities -- 3.69%............... 2,986,424 ----------- Net Assets -- 100%....................... $80,842,501 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $82,559,476; and net unrealized depreciation consisted of: Gross unrealized appreciation....................... $ 331,039 Gross unrealized depreciation....................... (5,034,438) ----------- Net unrealized depreciation.................... $(4,703,399) =========== (b) Non-income producing security. FRN: Floating Rate Note TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 1999, the value of these securities amounted to $2,094,881 or 2.59% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Bond Fund had the following open forward foreign currency contracts as of December 31, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ----------- ----------- ---------- Forward Foreign Currency Buy Contracts British Pound........................... 03/01/00 5,650,000 $ 9,106,441 $ (57,066) Canadian Dollar......................... 03/01/00 4,700,000 510,169 (86,143) Danish Kroner........................... 03/01/00 19,500,000 2,637,430 152,269 Euro.................................... 03/01/00 3,200,000 3,222,298 108,261 Japanese Yen............................ 03/01/00 650,000,000 7,249,634 (62,649) Swedish Krona........................... 03/01/00 12,000,000 1,410,533 51,099 Forward Foreign Currency Sale Contracts Australian Dollar....................... 03/01/00 2,200,000 1,440,724 23,329 British Pound........................... 03/01/00 2,850,000 4,593,514 (16,514) Euro.................................... 03/01/00 13,10,000 13,191,284 (769,386) Japanese Yen............................ 03/01/00 1,620,000,000 28,187,534 1,021,604 ---------- Total.............................. $ 364,804 ==========
See accompanying notes to financial statements. ================================================================================ 38 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $82,090,416)....................................................................... $ 77,387,017 Affiliated issuers (Cost $469,060)............................................................................ 469,060 Cash............................................................................................................ 931 Foreign currency, at value (Cost $893,716)...................................................................... 887,157 Receivables: Investment securities sold.................................................................................... 14,677 Interest...................................................................................................... 1,786,202 Net unrealized appreciation on forward foreign currency contracts............................................... 364,804 ------------- TOTAL ASSETS................................................................................................ 80,909,848 ------------- LIABILITIES: Payables: Investment advisory fees...................................................................................... 44,481 Accrued expenses.............................................................................................. 22,866 ------------- TOTAL LIABILITIES........................................................................................... 67,347 ------------- NET ASSETS....................................................................................................... $ 80,842,501 ============= NET ASSETS CONSIST OF: Paid in capital................................................................................................ $ 88,899,967 Accumulated undistributed net investment income................................................................ 1,916,511 Accumulated net realized loss.................................................................................. (5,588,837) Net unrealized depreciation.................................................................................... (4,385,140) ------------- NET ASSETS.................................................................................................. $ 80,842,501 ============= OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $77,217,107 and 8,533,100 shares issued and outstanding)..................................................... $ 9.05 ============= Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,162 and 127 shares issued and outstanding)........................................ $ 9.15 ============= UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $3,624,232 and 401,023 shares issued and outstanding)................................ $ 9.04 =============
See accompanying notes to financial statements. ================================================================================ 39 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Interest (net of $32,604 for foreign taxes withheld)....................................................... $ 2,338,848 Dividends.................................................................................................. 25,477 ----------- TOTAL INCOME............................................................................................ 2,364,325 ----------- EXPENSES: Advisory................................................................................................... 339,912 Registration............................................................................................... 39,560 Professional............................................................................................... 25,362 Distribution............................................................................................... 11,340 Other...................................................................................................... 42,182 ----------- TOTAL OPERATING EXPENSES.............................................................................. 458,356 Expenses deferred by Advisor.......................................................................... (38,065) Earnings credits...................................................................................... (63) ----------- NET OPERATING EXPENSES................................................................................ 420,228 Interest Expense...................................................................................... 27,240 ----------- NET INVESTMENT INCOME................................................................................. 1,916,857 ----------- NET REALIZED ANDUN REALIZED GAIN (LOSS): Net realized loss on: Investments............................................................................................... (1,315,340) Foreign currency transactions............................................................................. (2,284,183) ----------- Net realized loss....................................................................................... (3,599,523) ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency.......................................................................... 298,082 Forward contracts......................................................................................... 1,689,713 Translation of other assets and liabilities denominated in foreign currency............................... 7,206 ----------- Change in net unrealized appreciation or depreciation................................................... 1,995,001 ----------- Net realized and unrealized loss........................................................................... (1,604,522) ----------- Net increase in net assets resulting from operations....................................................... $ 312,335 ===========
See accompanying notes to financial statements. ================================================================================ 40 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ----------------- OPERATIONS: Net investment income............................................................. $ 1,916,857 $ 5,139,936 Net realized gain (loss).......................................................... (3,599,523) 1,499,627 Change in net unrealized appreciation or depreciation............................. 1,995,001 (6,052,418) ----------------- ----------------- Net increase in net assets resulting from operations.............................. 312,335 587,145 ----------------- ----------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.................................................................. (1,118,349) (5,705,972) Brinson Class N.................................................................. -- (13,166) UBS Investment Funds Class....................................................... (43,991) (180,397) Distributions from net realized gain: Brinson Class I.................................................................. (82,557) (925,451) Brinson Class N.................................................................. (1) (811) UBS Investment Funds Class....................................................... (4,026) (35,005) ----------------- ----------------- Total distributions to shareholders............................................... (1,248,924) (6,860,802) ----------------- ----------------- Capital share transactions: Shares sold....................................................................... 10,208,441 115,882,090 Shares issued on reinvestment of distributions.................................... 1,080,310 4,872,310 Shares redeemed................................................................... (27,855,393) (111,795,220) ----------------- ----------------- Net increase (decrease) in net assets resulting from capital share transactions... (16,566,642) 8,959,180 ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS....................................... (17,503,231) 2,685,523 ----------------- ----------------- NET assets: Beginning of period............................................................... 98,345,732 95,660,209 ----------------- ----------------- End of period (including accumulated undistributed net investment income of $1,916,511 and $1,161,994, respectively)......................................... $ 80,842,501 $ 98,345,732 ================= =================
See accompanying notes to financial statements. ================================================================================ 41 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended July 31, 1995* December 31, 1999 Year Ended June 30, Through --------------------------------------- UBS Investment Funds Class (Unaudited) 1999 1998 1997 June 30, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............... $ 9.16 $ 9.39 $ 9.61 $ 10.02 $ 10.56 -------- -------- -------- -------- -------- Income from investment operations: Net investment income........................... 0.19** 0.34** 0.38** 0.62 0.78 Net realized and unrealized gain (loss)......... (0.19) (0.07) (0.18) 0.10 0.15 -------- -------- -------- -------- -------- Total income from investment operations....... -- 0.27 0.20 0.72 .93 -------- -------- -------- -------- -------- Less distributions: Distributions from and in excess of net investment income......................... (0.11) (0.42) (0.25) (0.94) (1.37) Distributions from net realized gain............ (0.01) (0.08) (0.17) (0.19) (0.10) -------- -------- -------- -------- -------- Total distributions........................... (0.12) (0.50) (0.42) (1.13) (1.47) -------- -------- -------- -------- -------- Net asset value, end of period..................... $ 9.04 $ 9.16 $ 9.39 $ 9.61 $ 10.02 ======== ======== ======== ======== ======== Total return (non-annualized)...................... (0.07)% 2.58% 2.28% 7.20% 9.17% Ratios/Supplemental data: Net assets, end of period (in 000s)............... $ 3,624 $ 4,429 $ 4,377 $ 4,110 $ 3,653 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.............................. 1.53%*** 1.39% 1.45% 1.81% 2.14% After expense reimbursement and earnings credits****.......................... 1.45%*** N/A 1.39% 1.39% 1.39% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits.............................. 3.67%*** 3.56% 3.98% 4.41% 4.49% After expense reimbursement and earnings credits.............................. 3.81%*** N/A 4.04% 4.83% 5.24% Portfolio turnover rate........................... 35% 138% 151% 235% 184%
* Commencement of UBS Investment Funds Class ** The net investment income per share data was determined by using average shares outstanding throughout the year *** Annualized **** The ratio of net operating expenses to average net assets for the six months ended December 31, 1999, was 1.39%. N/A = Not Applicable See accompanying notes to financial statements. ================================================================================ 42 UBS Investment 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 eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The financial highlights of the UBS Investment Funds Class are presented separately. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund in the preparation of their financial statements. A. Investment Valuation: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. U.S. equity securities traded over-the-counter are priced at the most recent bid price. 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 respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing 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 of the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C. Investment Transactions: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1999, therefore, no federal income tax provision was required. F. Distributions to Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. G. Income and Expense Allocation: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. ================================================================================ 43 UBS Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 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. I. Earnings Credits: The Funds have entered into an arrangement with their custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. This amount is reflected in the statement of operations. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized operating expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees for the six months ended December 31, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fees Fee Expense Cap Expense Cap Expense Cap Fees Deferred -------- --------------- --------------- -------------- -------- -------- Global Fund...................... 0.80% 1.10% 1.35% 1.75% $1,641,535 $ -- Global Equity Fund............... 0.80 1.00 1.25 1.76 335,604 18,447 Global Bond Fund................. 0.75 0.90 1.15 1.39 339,912 38,065
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 six months ended December 31, 1999 were $4,268, $2,230 and $2,208 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. The Global Fund invests in shares of certain affiliated investment companies also sponsored by the Advisor. These investments represented 21.15% of the Fund's total net assets at December 31, 1999. Activity for the six months ended December 31, 1999 was as follows:
Net Change in Sales Realized Net Unrealized Interest Affiliates Purchases Proceeds Gain/(Loss) Gain/(Loss) Income Value - ---------- ------------ ------------ ------------ -------------- ---------- ------------- Brinson Post-Venture Fund............... $ -- $ -- $ -- $ 80,510 $ -- $ 7,740,955 Brinson High Yield Fund................. -- 6,000,000 1,029,066 (749,294) -- 8,501,106 Brinson Emerging Markets Equity Fund.... -- 2,728,450 (620,659) 4,132,636 -- 18,326,811 Brinson Emerging Markets Debt Fund...... -- 4,000,000 769,030 2,514,137 -- 23,996,711 Brinson Supplementary Trust U.S. Cash Management Prime Fund.................. 214,667,924 234,755,971 -- -- 300,209 12,006,635
The Global Equity Fund and Global Bond Fund also invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor and is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income in the statement of operations. Amounts relating to those investments at the six months ended December 31, 1999 were as follows:
% of Sales Interest Net Affiliates Purchases Proceeds Income Value Assets - ---------- ---------- ----------- -------- -------- ------- Global Equity Fund..... $15,177,471 $15,788,120 $ 24,988 $411,539 0.49% Global Bond Fund....... 20,533,527 26,203,701 45,065 469,060 0.58
================================================================================ 44 UBS Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1999, excluding short-term investments, were as follows: Proceeds Purchases From Sales ------------ ------------ Global Fund........................... $142,746,662 $283,169,079 Global Equity Fund.................... 47,047,973 56,616,119 Global Bond Fund...................... 31,227,121 62,903,677 4. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the six months ended December 31, 1999, was an affiliate of 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 net 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. SECURITY LENDING The Global Fund loaned securities to certain brokers, with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 102% of the value of domestic securities loaned and 105% of the value of non- U.S. securities loaned. The cash collateral received is invested in interest- bearing securities and is included in the schedule of investments. The value of loaned securities and related collateral outstanding at December 31, 1999 were as follows: Value of Loaned Cash Collateral Securities Received --------------- --------------- Global Fund ....................... $56,204,165 $57,479,350 =============== =============== 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the UBS Investment Funds Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364-day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds Rate ================================================================================ 45 UBS Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the six months ended December 31, 1999, the Global Fund and Global Bond Fund had total borrowings of $9,500,000 and $31,000,000 outstanding for two days and six days under the agreement, respectively. The Global Equity Fund had no borrowings under the agreement. 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Global Fund -------------------------------------------------- Six Months Ended Year Ended December 31, 1999 June 30, 1999 ------------------------ ------------------------ Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I.................... 13,313,712 $154,829,980 33,634,272 $404,497,836 Brinson Class N.................... 5,699 67,133 31,878 401,372 UBS Investment Funds Class......... 26,354 307,397 469,115 5,622,287 ---------- ------------ ---------- ------------ Total Sales....................... 13,345,765 $155,204,510 34,135,265 $410,521,495 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.................... 1,590,665 $ 17,592,753 3,914,936 $ 45,438,730 Brinson Class N.................... 6,165 68,059 12,826 148,599 UBS Investment Funds Class......... 78,388 863,834 201,293 2,326,850 ---------- ------------ ---------- ------------ Total Dividend Reinvestment....... 1,675,218 $ 18,524,646 4,129,055 $ 47,914,179 ========== ============ ========== ============ Redemptions: Brinson Class I.................... 25,452,650 $297,617,004 50,809,625 $617,784,220 Brinson Class N.................... 23,828 280,466 4,388 53,226 UBS Investment Funds Class......... 670,655 7,672,100 1,220,493 14,718,874 ---------- ------------ ---------- ------------ Total Redemptions................. 26,147,133 $305,569,570 52,034,506 $632,556,320 ========== ============ ========== ============ Global Equity Fund -------------------------------------------------- Six Months Ended Year Ended December 31, 1999 June 30, 1999 ------------------------ ------------------------ Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I.................... 415,195 $ 5,374,301 2,413,314 $ 30,206,170 Brinson Class N.................... -- -- 15,911 200,000 UBS Investment Funds Class......... 169,249 2,203,217 352,164 4,402,461 ---------- ------------ ---------- ------------ Total Sales....................... 584,444 $ 7,577,518 2,781,389 $ 34,808,631 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.................... 257,009 $ 3,143,195 54,126 $ 661,376 Brinson Class N.................... 1,707 20,844 426 5,130 UBS Investment Funds Class......... 268,571 3,281,812 66,261 795,940 ---------- ------------ ---------- ------------ Total Dividend Reinvestment....... 527,287 $ 6,445,851 120,813 $ 1,462,446 ========== ============ ========== ============ Redemptions: Brinson Class I.................... 626,264 $ 8,104,601 1,142,595 $ 14,484,716 Brinson Class N.................... -- -- -- -- UBS Investment Funds Class......... 432,319 5,544,183 1,860,700 22,842,212 ---------- ------------ ---------- ------------ Total Redemptions................. 1,058,583 $ 13,648,784 3,003,295 $ 37,326,928 ========== ============ ========== ============
================================================================================ 46 UBS Investment Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
Global Bond Fund -------------------------------------------------- Six Months Ended Year Ended December 31, 1999 June 30, 1999 ------------------------ ------------------------ Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I.................... 1,096,853 $ 10,137,515 11,338,295 $110,539,879 Brinson Class N.................... 129 1,195 117,021 1,120,104 UBS Investment Funds Class......... 7,546 69,731 432,357 4,222,107 ---------- ------------ ---------- ------------ Total Sales....................... 1,104,528 $ 10,208,441 11,887,673 $115,882,090 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.................... 113,380 $ 1,041,959 484,490 $ 4,679,150 Brinson Class N.................... -- 1 579 5,581 UBS Investment Funds Class......... 4,178 38,350 19,366 187,579 ---------- ------------ ---------- ------------ Total Dividend Reinvestment....... 117,558 $ 1,080,310 504,435 $ 4,872,310 ========== ============ ========== ============ Redemptions: Brinson Class I.................... 2,795,101 $ 25,880,953 11,403,020 $107,591,860 Brinson Class N.................... 118,466 1,105,323 90 871 UBS Investment Funds Class......... 94,125 869,117 434,492 4,202,489 ---------- ------------ ---------- ------------ Total Redemptions................. 3,007,692 $ 27,855,393 11,837,602 $111,795,220 ========== ============ ========== ============
================================================================================ 47 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. [UBS LOGO APPEARS HERE] P.O. Box 2798, Boston, Massachusetts 02208-2798 . Tel: (800) 794-7753 [LOGO] UBS Investment Funds Global (Ex-U.S.) Equity Fund Semi-Annual Report December 31, 1999 Trustees and Officers [LOGO] UBS Investment Funds Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Frank K. Reilly, CFA Chairman of the Board E. Thomas McFarlan President Thomas J. Digenan, CFA, CPA Vice President Debra L. Nichols Vice President Carolyn M. Burke, CPA Secretary and Treasurer David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary 1 The Fund's Advisor -- Brinson Partners, Inc. [LOGO] UBS Investment Funds Since the founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with individualized client relationships of the highest quality. Now, in 2000, more than 1,200 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, and a recognized leader in our industry. In North America, we make our investment capabilities available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are no-load, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and capabilities. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios--balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Asset Management, the institutional asset management division of UBS AG. 2 Table of Contents [LOGO] UBS Investment Funds Shareholder Letter................................ 4 Global Economic and Market Highlights............. 5 Global (Ex-U.S.) Equity Fund...................... 6 Schedule of Investments........................... 9 Financial Statements.............................. 13 Financial Highlights.............................. 16 Notes to Financial Statements..................... 17 3 Shareholder Letter [LOGO] UBS Investment Funds January 27, 2000 Dear Shareholder: We are pleased to present the semi-annual report for the UBS Investment Funds for the six-months ended December 31, 1999. This report provides a discussion on the current U.S. and International Economic outlook. We will also provide our current portfolio strategies and performance updates for our international mutual fund. The decade of the 1990s ended with a particularly challenging year. We continued to apply our proven value-based investment process across all of our portfolios, but our investment results varied substantially. In some areas, such as fixed income, our performance was excellent relative to both the market and our peers. In other areas, most notably multi-asset and equity portfolios, results were disappointing. Throughout 1999, our asset allocation strategies continued to focus on reducing exposure to the risks presented by equity prices that have been driven far above even optimistic estimates of underlying value. While the risk hedge in balanced portfolios had little net effect on performance through most of the year, the surge in equity prices late in the year hampered the returns relative to the benchmarks. The broad array of our equity portfolios, with the exception of the growth portfolios, significantly lagged their benchmarks in 1999. Some degree of underperformance was unavoidable as the U.S. market was increasingly driven by momentum, which in turn focused more tightly on narrow technology and e-commerce stocks. In such a market, the fundamental price/value discrepancies that are the core of our investment process are effectively ignored in the market. In addition, our stock selection was uncharacteristically weak and a meaningful source of the underperformance of our U.S. and Global Equity portfolios. In fixed income our U.S. Bond and High Yield portfolios outpaced the market and ranked highly in their respective universes of active managers. However, outside the U.S., our Global Bond portfolio generally underperformed, due almost entirely to strength in both the Japanese bond market and the yen, where we are underweighted. Our fundamental assessments across markets have been both accurate and perceptive, but momentum rather than the reality of fundamental value has continued to drive equity markets, particularly in the U.S. We have seen this phenomenon historically and it has always proven to be a sign of danger, that ultimately ends badly for the market in general and the momentum players in particular. Over time, these styles ebb and flow but momentum driven approaches have no lasting link to underlying fundamentals and always fail to deliver when viewed over meaningful horizons. It is these concerns which underlie our current asset allocation and equity portfolio strategies. 2000 will be a challenging year, but we are confident that remaining true to our investment disciplines will in the long run accrue to our shareholders' benefit. As always, we welcome your thoughts and comments, and appreciate your continued trust and the confidence you have placed in the UBS Investment Funds. Sincerely, /s/ Hanspeter A. Walder /s/ Raymond Simon Hanspeter A. Walder Raymond Simon Executive Director Managing Director Private Banking Private Banking 4 Global Economic and Market Highlights [LOGO] UBS Investment Funds As the negative effects of the Asian crisis gradually wane and domestic demand continues to remain robust, the expansion in Euroland gains speed. In late December 1999, the German government announced cuts in corporate and personal tax rates, and initiated cross-party talks about reforms of the country's burdened pension system. So far, however, neither the ruling coalition parties nor the opposition has managed to communicate its position in the pension debate in a transparent way, as the political system is being absorbed by allegations of funding fraud against the Christian democrats. As in the United States, pan- European inflation has accelerated in the wake of surging energy prices, whereas inflation excluding food and energy has moved sideways. While headline inflation figures will be heavily impacted by energy prices, core inflation is unlikely to accelerate much, given economy-wide over-capacities and disinflationary forces arising from continued deregulation of utility and telecom sectors. In Japan, real GDP declined in the third quarter of 1999, largely as a result of a phasing out of public spending programs, weak private capital expenditures and stagnating consumer spending. A sustainable recovery will hinge on healthy gains in private demand. Should the trend in economic growth continue to be disappointing, the government may adopt additional stimulative fiscal measures. The Bank of Japan has sterilized, and will probably continue to sterilize, expansionary foreign exchange market operations. Hopes that meaningful quantitative easing steps are around the corner remain premature. Global (Ex-U.S.) Equity Environment
6 months 1 year 3 years 7/31/95* Major Markets ended ended ended to Total Return in U.S. Dollar Hedged Terms 12/31/99 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 19.89% 36.98% 21.89% 20.82% Europe Ex U.K. 28.38 40.04 37.84 32.80 U.K. 7.16 15.34 18.33 17.46 Canada 27.60 45.99 21.46 21.81 Japan 16.37 54.31 10.18 11.73 Asia Ex Japan 20.68 61.12 -1.29 4.47 - --------------------------------------------------------------------------------
6 months 1 year 3 years 7/31/95* Major Currencies ended ended ended to Percent Change Relative to U.S. Dollars 12/31/99 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------- Yen 18.26% 10.20% 4.28% -3.35% Pound 2.25 -3.13 -1.98 0.16 Euro** -2.80 -14.64 -7.56 -7.09 Canadian Dollar 1.98 5.84 -1.89 -1.74 - --------------------------------------------------------------------------------
*Performance inception date of the UBS Investment Fund -- Global (Ex-U.S.) Equity **Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized total returns 5 Global (Ex-U.S.) Equity Fund [LOGO] UBS Investment Funds The UBS Investment Fund -- Global (Ex-U.S.) Equity has provided an annualized return of 12.88% since its inception on July 31, 1995. Over the same period, its benchmark, the MSCI World Ex USA (Free) Index, has produced a return of 12.68%. The Fund's performance was achieved with a volatility or risk of 12.91%, considerably below the 14.26% volatility of the benchmark. For the full year period, the Fund increased 18.15%, lagging the index's unhedged return of 27.77%. Most regions experienced strong performance in dollar-hedged terms, led by Asia (Ex-Japan), Japan and Europe (Ex-U.K.). The Fund benefited from our mid- year decision to increase Japan to neutral and then to an overweight, as well as from European market allocation. However, returns were hurt by the overweight to Australia and underweight to Asia (Ex-Japan). Currency management reduced returns, due to the underweight of the yen and overweight of the euro, but holding an overweight position in the strong-performing Australian dollar helped the Fund's performance. Earlier in the year, traditional value stocks, encompassing such sectors as transportation, materials, basic industry and other economically sensitive areas, regained favor in Europe. At that time, our overweight in these sectors gave a lift to relative performance. By mid-year, however, investor sentiment changed sharply, as investors began to shun value stocks in order to flock to large capitalization, growth and momentum industries and stocks. Following in the footsteps of the U.S. market, investors in Japan, Southeast Asia, Australia, Europe and the U.K. rushed to stocks engaged in information technology, telecommunications and Internet-related businesses. By year-end, stocks with a growth tilt had significantly overtaken value on a global basis. In our view, many of these stocks have risen to levels that far exceed underlying value. Consequently, stock selection in our U.K. and European portfolios, which are underweight these securities, was hurt. These portfolios are positioned in industries and stocks that command more reasonable valuations and, in our view, offer greater upside potential. The Pacific (Ex-Japan) region has begun to rebound from last year's currency and banking crises. Japan has exhibited tentative signs of an economic revival, fueled by government spending packages and extremely low interest rates. Consolidation in the banking and financial sectors is easing fears of a financial meltdown, while encouraging signs of restructuring in other businesses have begun to surface. Our Japanese stock holdings are geared toward companies that are actively restructuring. 6 Global (Ex-U.S.) Equity Fund [LOGO] UBS Investment Funds Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 12/31/99 12/31/99 12/31/99 12/31/99 - -------------------------------------------------------------------------------------- UBS Investment Fund -- Global (Ex-U.S.) Equity 15.83% 18.15% 12.07% 12.88% - -------------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 22.45 27.77 15.67 12.68 - --------------------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund -- Global (Ex-U.S.) Equity 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 UBS Investment Fund -- Global (Ex-U.S.) Equity and the MSCI World Ex USA (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1999. 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. UBS Investment Fund -- Global (Ex-U.S.) Equity vs. MSCI World Ex USA (Free) Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
UBS Investment Fund -- MSCI World Ex USA Global (Ex-U.S.) Equity (Free) Index ----------------------- ----------------- 12/31/95 $10,858 $10,220 12/31/96 $12,140 $10,947 12/31/97 $12,750 $11,174 12/31/98 $14,463 $13,259 12/31/99 $17,075 $16,941
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 (Ex-U.S.) Equity Fund [LOGO] UBS Investment Funds Industry Diversification As a Percent of Net Assets As of December 31, 1999 (Unaudited) - ------------------------------------------------ GLOBAL (EX-U.S.) EQUITIES Aerospace & Military................... 0.70% Airlines............................... 0.65 Appliances & Households................ 3.81 Autos/Durables......................... 2.89 Banking................................ 11.30 Beverages & Tobacco.................... 2.24 Broadcasting & Publishing.............. 3.55 Building Materials..................... 0.72 Business & Public Service.............. 5.05 Chemicals.............................. 2.84 Construction........................... 0.36 Data Processing........................ 2.96 Electric Components.................... 4.12 Electronics............................ 7.16 Energy................................. 3.94 Financial Services..................... 4.10 Food & House Products.................. 2.95 Forest Products........................ 1.13 Health & Personal Care................. 5.95 Industrial Components.................. 1.64 Insurance.............................. 5.19 Leisure & Tourism...................... 0.24 Machinery & Engineering................ 0.22 Merchandising.......................... 3.10 Metals--Steel.......................... 0.42 Multi-Industry......................... 1.05 Non-Ferrous Metals..................... 1.24 Real Estate............................ 0.91 Recreation............................. 0.82 Telecommunications..................... 13.61 Transportation......................... 1.51 Utilities.............................. 3.85 Wholesale & International Trade........ 0.22 ------ Total Global (Ex-U.S.) Equities... 100.44 CONVERTIBLE BONDS...................... 0.03 SHORT-TERM INVESTMENTS................. 0.52 ------ TOTAL INVESTMENTS................. 100.99 LIABILITIES, LESS CASH AND OTHER ASSETS.................. (0.99) ------ NET ASSETS............................. 100.00% ======
Market and Currency Strategy
As of December 31, 1999 (Unaudited) Fund Benchmark ------------------ ------------------ Market Currency Market Currency Strategy Strategy Strategy Strategy - ---------------------------------------------------- Australia 4.19% 8.19% 2.35% 2.35 Austria 0.11 0.00 0.21 0.00 Belgium 1.12 0.00 0.86 0.00 Canada 2.57 4.17 4.17 4.17 Denmark 0.46 0.75 0.75 0.75 Euro 0.00 44.52 0.00 36.29 Finland 3.35 0.00 2.85 0.00 France 9.89 0.00 9.83 0.00 Germany 9.27 0.00 10.04 0.00 Hong Kong 0.54 0.00 2.24 2.24 Ireland 0.00 0.00 0.40 0.00 Italy 3.13 0.00 4.05 0.00 Japan 31.29 18.29 26.29 26.29 Netherlands 4.61 0.00 5.02 0.00 New Zealand 0.31 0.31 0.15 0.15 Norway 0.00 0.36 0.36 0.36 Portugal 0.68 0.00 0.44 0.00 Singapore 0.92 1.02 1.02 1.02 Spain 3.09 0.00 2.59 0.00 Sweden 3.28 6.58 2.57 2.57 Switzerland 3.94 5.45 5.45 5.45 U.K. 17.25 10.36 18.36 18.36 - ---------------------------------------------------- 100.00% 100.00% 100.00% 100.00%
Top Ten Global (Ex-U.S.) Equity Holdings
As of December 31, 1999 (Unaudited) Percent of Net Assets - -------------------------------------------------- 1. Sony Corp. 2.16% 2. Fujitsu 2.09 3. Nippon Telegraph & Telephone Corp. 1.95 4. Siemens AG 1.66 5. France Telecom S.A. 1.50 6. Nokia Oyj 1.48 7. Ericsson, B Shares 1.42 8. ING Groep NV 1.38 9. Fanuc 1.36 10. British Telecommunications PLC 1.26
8 Global (Ex-U.S.) Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Shares Value -------- ----------- Global (Ex-U.S.) Equities -- 100.44% Australia -- 4.16% Amcor Ltd................................ 89,740 $ 418,950 Amp Ltd.................................. 100,900 1,111,265 Boral Ltd................................ 285,000 440,149 Brambles Industries Ltd.................. 26,140 720,555 Broken Hill Proprietary Co., Ltd......... 145,720 1,907,275 CSR Ltd.................................. 252,190 610,622 Lend Lease Corp., Ltd.................... 84,196 1,175,786 National Australia Bank Ltd.............. 161,648 2,464,727 News Corp., Ltd.......................... 261,488 2,530,827 News Corp., Ltd., Preferred.............. 96,879 827,337 Qantas Airways Ltd....................... 124,238 308,945 QBE Insurance Group Ltd.................. 174,980 812,998 Rio Tinto Ltd............................ 67,260 1,440,211 Santos Ltd............................... 208,461 566,129 Telstra Corp., Ltd....................... 631,110 3,419,621 Westpac Banking Corp., Ltd............... 303,941 2,089,828 WMC Ltd.................................. 85,970 472,573 Woolworth's Ltd.......................... 218,560 749,453 ----------- 22,067,251 ----------- Austria -- 0.11% Austria Tabakwerke AG.................... 11,600 558,134 ----------- Belgium -- 1.15% Electrabel S.A........................... 5,310 1,729,885 Fortis (B)............................... 114,367 4,106,440 KBC Bancassurance Holding................ 4,410 236,500 ----------- 6,072,825 ----------- Canada -- 1.92% Agrium, Inc.............................. 71,280 550,083 Alcan Aluminum Ltd....................... 24,040 983,929 Bank of Montreal......................... 14,710 499,692 Canadian National Railway Co............. 32,880 865,442 Canadian Pacific Ltd..................... 44,214 945,941 Corus Entertainment Inc.................. 8,326 169,239 Hudson's Bay Co.......................... 64,320 762,285 Imasco Ltd............................... 23,900 657,896 Imperial Oil Ltd......................... 21,460 458,389 Magna International, Inc., Class A....... 14,060 595,804 Newbridge Networks Corp. (b)............. 31,510 706,712 NOVA Chemicals Corp...................... 27,121 527,919 Potash Corporation of Saskatchewan, Inc.. 8,860 421,236 Royal Bank of Canada..................... 23,420 1,024,716 Shaw Communications, Inc., Class B....... 19,980 655,996 TransCanada Pipelines Ltd................ 18,876 162,578 Westcoast Energy, Inc.................... 13,220 210,875 ----------- 10,198,732 ----------- Denmark -- 0.48% Tele Danmark A/S......................... 34,710 2,566,644 ----------- Finland -- 3.16% Merita Ltd., Class A..................... 350,334 2,054,364 Nokia Oyj................................ 43,489 7,846,774 Sampo Insurance Co., Ltd., Series A...... 94,154 3,274,971 UPM-Kymmene Corp......................... 89,016 3,569,170 ----------- 16,745,279 ----------- France -- 9.72% Air France (b)........................... 89,252 1,699,851 Air Liquide.............................. 23,423 3,902,229 Alcatel.................................. 10,160 2,322,030 Axa...................................... 13,200 1,831,257 Banque Nationale de Paris................ 69,648 6,395,041 Carrefour S.A............................ 13,001 2,386,186 Cie de Saint Gobain...................... 14,848 2,778,763 CSF Thomson.............................. 89,814 2,952,056 France Telecom S.A....................... 60,419 7,952,020 Groupe Danone............................ 10,572 2,479,775 Michelin, Class B........................ 26,793 1,047,430 Rhone-Poulenc, Class A................... 55,005 3,181,392 Schneider S.A............................ 26,479 2,068,983 Societe Generale......................... 16,407 3,799,097 Total Fina S.A., Class B................. 33,219 4,412,062 Vivendi.................................. 25,445 2,286,609 ----------- 51,494,781 ----------- Germany -- 9.09% Allianz AG............................... 12,638 4,224,870 Bayer AG................................. 127,756 6,044,530 Bayerische Motoren Werke AG.............. 60,350 1,842,060 Continental AG........................... 84,370 1,687,214 DaimlerChrysler AG....................... 43,183 3,372,015 Deutsche Bank AG......................... 47,611 4,011,292 Deutsche Telekom AG...................... 60,380 4,227,647 Dresdner Bank AG......................... 46,450 2,509,653 Mannesmann AG............................ 22,330 5,380,993 SAP AG................................... 3,680 1,800,142 Siemens AG............................... 68,910 8,772,536 Veba AG.................................. 86,078 4,184,785 Volkswagen AG............................ 1,800 101,041 ----------- 48,158,778 ----------- Hong Kong -- 0.20% Henderson Land Development Co., Ltd...... 165,000 1,059,175 ----------- Italy -- 3.00% Assicurazioni Generali................... 72,446 2,381,922 Beni Stabili Spa......................... 222,610 78,100 ENI Spa.................................. 589,000 3,223,645 ENI Spa ADR.............................. 10,650 587,081 La Rinascente Spa........................ 198,140 1,265,176 San Paolo-imi, Spa....................... 194,610 2,631,578 Telecom Italia Mobile Spa................ 312,000 3,468,369 Telecom Italia Spa....................... 161,000 2,259,400 ----------- 15,895,271 ----------- Japan -- 32.62% Acom Co., Ltd............................ 27,200 2,660,075 Asahi Bank Ltd........................... 231,000 1,421,816 Bank of Tokyo-Mitsubushi Ltd............. 238,000 3,311,143 Benesse Corporation...................... 8,700 2,090,958 Bridgestone Corp......................... 74,000 1,626,691 Canon, Inc............................... 117,000 4,640,907 Dai Nippon Printing Co., Ltd............. 81,000 1,289,922 Dai-Ichi Kangyo Bank Ltd................. 141,000 1,315,568 Daiichi Pharmaceutical Co., Ltd.......... 70,000 908,896 Daikin Industries Ltd.................... 86,000 1,167,896 Denso Corp............................... 64,000 1,525,671
9 Global (Ex-U.S.) Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Shares Value -------- ------------ Japan -- continued East Japan Railway Co................... 413 $ 2,223,272 Fanuc................................... 56,700 7,206,946 Fuji Bank Ltd........................... 109,000 1,057,467 Fujitsu................................. 243,000 11,063,260 Honda Motor Co.......................... 102,000 3,786,820 Hoya Corp............................... 32,000 2,516,731 Ito Yokado Co., Ltd..................... 25,000 2,711,152 Kamigumi Co. Ltd........................ 213,000 894,827 Kaneka Corp............................. 21,000 268,155 Kao Corp................................ 88,000 2,506,180 Kirin Brewery Co., Ltd.................. 157,000 1,648,918 Kokuyo.................................. 44,000 584,632 Kuraray Co., Ltd........................ 168,000 1,698,793 Matsushita Electric Industrial Co....... 165,000 4,562,063 Mitsubishi Corp......................... 150,000 1,156,270 Mitsubishi Estate Co., Ltd.............. 262,000 2,552,040 Murata Manufacturing Co., Inc........... 13,000 3,048,215 NEC Corp................................ 204,000 4,853,109 NGK Insulators.......................... 150,000 1,112,305 Nintendo Corp., Ltd..................... 26,300 4,362,992 Nippon Steel Co......................... 963,000 2,248,615 Nippon Telegraph & Telephone Corp....... 603 10,309,706 Nissin Food Products Co................. 46,300 1,087,895 Nomura Securities Co., Ltd.............. 242,000 4,362,171 NTT Mobile Communications............... 121 4,645,889 Obayashi Corp........................... 230,000 1,085,340 Orix Corporation........................ 26,500 5,959,943 Osaka Gas Co............................ 632,000 1,518,949 Rohm Co................................. 6,000 2,462,019 Sankyo Co., Ltd......................... 104,000 2,133,750 Santen Pharmaceutical Co., Ltd.......... 54,000 888,965 Secom Co., Ltd.......................... 51,000 5,605,491 Sekisui House Ltd....................... 96,000 848,811 Seven-Eleven Japan Co., Ltd............. 19,000 3,007,181 Softbank Corp........................... 3,900 3,726,442 Sony Corp............................... 38,700 11,456,304 Sumitomo Bank........................... 165,000 2,255,239 Sumitomo Chemical Co.................... 351,000 1,646,036 Sumitomo Electric Industries............ 96,000 1,107,674 Taiheiyo Cement Corp.................... 600 1,143 Takeda Chemical Industries.............. 86,000 4,243,076 Takefuji Corp........................... 11,300 1,412,017 TDK Corp................................ 30,000 4,135,607 Tokio Marine & Fire Insurance Co........ 128,000 1,494,407 Tokyo Electric Power.................... 57,200 1,531,220 Tokyo Electron Ltd...................... 18,000 2,462,019 Toyota Motor Corp....................... 128,000 6,190,220 Yamato Transport Co., Ltd............... 85,000 3,288,555 ----------- 172,888,374 ----------- Netherlands -- 4.89% ABN AMRO Holdings NV.................... 100,579 2,500,335 Elsevier NV............................. 263,090 3,127,723 ING Groep NV............................ 121,722 7,313,496 Koninklijke KPN NV...................... 61,722 5,995,190 Royal Dutch Petroleum Co................ 51,220 3,124,204 TNT Post Group NV....................... 66,040 1,883,339 Unilever NV............................. 35,903 1,973,637 ----------- 25,917,924 ----------- New Zealand -- 0.36% Auckland International Airport Ltd...... 150,310 227,321 Carter Holt Harvey Ltd.................. 239,240 311,908 Fletcher Challenge Paper................ 343,600 240,111 Lion Nathan Ltd......................... 175,270 406,744 Telecom Corp. of New Zealand Ltd........ 156,290 733,545 ----------- 1,919,629 ----------- Norway -- 0.27% Norske Skogindustrier ASA............... 27,490 1,429,704 ----------- Portugal -- 0.67% EDP Electricidade de Portugal S.A....... 96,837 1,682,206 Portugal Telecom........................ 170,300 1,859,010 ----------- 3,541,216 ----------- Singapore -- 0.93% Singapore Press Holdings Ltd............ 129,975 2,816,385 United Overseas Bank Ltd. (Frgn.)....... 236,360 2,085,529 ----------- 4,901,914 ----------- Spain -- 3.17% Banco Popular Espanol S.A............... 51,692 3,355,075 Banco Santander Central Hispano, S.A.... 275,710 3,106,405 Endesa S.A.............................. 88,995 1,758,294 Tabacalera S.A.......................... 273,008 3,886,001 Telefonica S.A. (b)..................... 188,477 4,685,428 ----------- 16,791,203 ----------- Sweden -- 3.26% Electrolux AB, B Shares................. 166,670 4,175,041 Ericsson, B Shares...................... 117,490 7,522,771 Investor AB, B Shares................... 158,130 2,221,187 Nordbanken Holding AB................... 207,940 1,217,020 Swedish Match AB........................ 617,820 2,147,870 ----------- 17,283,889 ----------- Switzerland -- 3.90% Adecco S.A.............................. 2,957 2,290,673 Nestle S.A. (Reg.)...................... 2,345 4,273,358 Novartis AG (Reg.)...................... 3,624 5,293,254 Roche Holding AG (Gen.)................. 460 5,431,374 Swisscom AG (Reg.)...................... 8,386 3,373,889 ----------- 20,662,548 ----------- United Kingdom -- 17.38% Allied Zurich PLC....................... 173,348 2,038,123 AstraZeneca Group PLC................... 55,422 2,293,842 Barclays PLC............................ 87,244 2,505,702 BP Amoco PLC............................ 635,108 6,371,962 British Aerospace PLC................... 111,502 736,805 British Airways PLC..................... 224,518 1,461,904 British Telecommunications PLC.......... 273,287 6,664,140 Charter PLC............................. 406,151 1,734,681 Diageo PLC.............................. 400,290 3,212,849 FKI PLC................................. 989,328 3,826,817 Glaxo Wellcome PLC...................... 179,998 5,076,822 Greenalls Group PLC..................... 261,946 1,245,432 House of Fraser PLC..................... 496,141 607,722 HSBC Holdings PLC....................... 170,000 2,364,536 Lloyds TSB Group PLC.................... 453,067 5,655,488 Marconi PLC............................. 260,038 4,591,297 Marks & Spencer PLC..................... 431,185 2,048,348
10 Global (ex-U.S.) Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited)
Shares Value -------- ------------ United Kingdom -- continued National Power PLC......................... 464,673 $ 2,684,867 Nycomed Amersham PLC....................... 329,161 2,045,121 Peninsular & Oriental Steam Navigation Co.. 98,277 1,636,208 Powergen PLC............................... 270,798 1,942,190 Prudential Corp. PLC....................... 224,436 4,413,047 Reckitt & Colman PLC....................... 146,450 1,370,181 Reed International PLC..................... 379,419 2,834,360 Rio Tinto Ltd.............................. 152,015 3,662,805 RJB Mining PLC............................. 398,768 205,663 Royal & Sun Alliance Insurance Group PLC... 238,659 1,813,618 Scottish & Southern Energy PLC............. 376,917 3,002,469 Tesco PLC.................................. 947,770 2,875,571 Thames Water PLC........................... 128,560 1,599,592 Trinity Mirror PLC......................... 212,105 2,259,636 Unilever PLC............................... 265,759 1,951,024 United News & Media PLC.................... 281,079 3,574,305 Yorkshire Water PLC........................ 316,361 1,784,585 ------------ 92,091,712 ------------ Total Global (Ex-U.S.) Equities (Cost $381,218,232)...................... 532,244,983 ------------
Face Amount --------- Convertible Bonds -- 0.03% Australia -- 0.03% Burns, Philp Treasury, 7.50%, due 08/14/03................AUD 1,228,664 160,808 Burns, Philp & Co., Ltd., Warrants (b).. 1,228,664 -- ------------ Total Convertible Bonds (Cost $147,071). 160,808 ------------
Shares Value --------- ------------ Short-Term Investments -- 0.52% Investment Companies -- 0.52% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,771,329)...................... 2,771,329 $ 2,771,329 ------------ Total Investments (Cost $384,136,632) -- 100.99% (a)..... 535,177,120 Liabilities, less cash and other assets -- (0.99%)................ (5,250,763) ------------ Net Assets -- 100%....................... $529,926,357 ============
See accompanying notes to schedule of investments. 11 Global (Ex-U.S.) Equity Fund -- Schedule of Investments December 31, 1999 (Unaudited) NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $384,136,632; and net unrealized appreciation consisted of: Gross unrealized appreciation....................... $168,110,291 Gross unrealized depreciation....................... (17,069,803) ------------ Net unrealized appreciation.................... $151,040,488 ============
(b) Non-income producing security FORWARD FOREIGN CURRENCY CONTRACTS The Global (Ex-U.S.) Equity Fund had the following open forward foreign currency contracts as of December 31, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ------------- ----------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar............................. 02/17/00 31,200,000 $20,430,748 $ 139,239 British Pound................................. 02/17/00 11,000,000 17,729,353 (360,513) Canadian Dollar............................... 02/17/00 11,400,000 7,863,696 140,584 European Union................................ 02/17/00 66,800,000 67,201,867 (3,525,088) Japanese Yen.................................. 02/17/00 670,000,000 6,596,631 204,600 Swedish Krona................................. 02/17/00 142,600,000 16,748,255 (741,167) Swiss Franc................................... 02/17/00 12,100,000 7,601,648 (513,130) Forward Foreign Currency Sale Contracts British Pound................................. 02/17/00 32,900,000 53,026,884 7,564 European Union................................ 02/17/00 21,100,000 21,226,937 1,321,718 Japanese Yen.................................. 02/17/00 6,640,000,000 65,375,565 (4,361,020) Swedish Krona................................. 02/17/00 22,600,000 2,654,352 97,718 ----------- Total.................................... $(7,589,495) ===========
FUTURES CONTRACTS The Global (Ex-U.S.) Equity Fund had the following open futures contracts as of December 31, 1999:
Expiration Current Unrealized Date Cost Value Gain ---------- ---------- ---------- ---------- Index Futures Buy Contracts CAC 40 10 Euro Index, 53 Contracts.............. March 2000 $3,077,992 $3,192,720 $114,728 FTSE 100 Index, 27 Contracts.................... March 2000 1,849,400 1,883,790 34,390 -------- $149,118 ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1999 was $160,808. See accompanying notes to financial statements. 12 Global (Ex-U.S.) Equity Fund -- Financial Statements STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999 (Unaudited) ASSETS: Investments, at value: Unaffiliated issuers (Cost $381,365,303).................................................... $532,405,791 Affiliated issuers (Cost $2,771,329)........................................................ 2,771,329 Foreign currency, at value (Cost $1,738,121).................................................. 1,737,556 Receivables: Investment securities sold.................................................................. 12,859,880 Dividends................................................................................... 508,371 Interest.................................................................................... 61,567 Variation margin.............................................................................. 325,534 ------------ TOTAL ASSETS............................................................................ 550,670,028 ------------ LIABILITIES: Payables: Due to custodian bank....................................................................... 12,540,000 Investment advisory fees.................................................................... 347,426 Accrued expenses............................................................................ 266,750 Net unrealized depreciation on forward foreign currency contracts............................. 7,589,495 ------------ TOTAL LIABILITIES....................................................................... 20,743,671 ------------ NET ASSETS...................................................................................... $529,926,357 ============ NET ASSETS CONSIST OF: Paid in capital............................................................................... $378,247,079 Accumulated undistributed net investment income............................................... 801,068 Accumulated net realized gain................................................................. 7,267,983 Net unrealized appreciation................................................................... 143,610,227 ------------ NET ASSETS.............................................................................. $529,926,357 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $522,620,905 and 37,007,803 shares issued and outstanding)................................ $ 14.12 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,258 and 89 shares issued and outstanding).............................................. $ 14.13 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $7,304,194 and 523,037 shares issued and outstanding)..................................... $ 13.96 ============
See accompanying notes to financial statements. 13 Global (Ex-U.S.) Equity Fund -- Financial Statements STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited) INVESTMENT INCOME: Dividends (net of $232,250 for foreign taxes withheld)............................ $ 2,962,580 Interest (including securities lending income of $42,550)......................... 325,478 ----------- TOTAL INCOME................................................................ 3,288,058 ----------- EXPENSES: Advisory.......................................................................... 1,997,182 Administrative.................................................................... 187,236 Custodian......................................................................... 137,485 Distribution...................................................................... 28,818 Other............................................................................. 140,059 ----------- TOTAL EXPENSES.............................................................. 2,490,780 Earnings credits............................................................ (3,421) ----------- NET EXPENSES................................................................ 2,487,359 ----------- NET INVESTMENT INCOME....................................................... 800,699 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................................... 13,306,773 Futures contracts............................................................... 117,870 Foreign currency transactions................................................... (1,622,233) ----------- Net realized gain........................................................... 11,802,410 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency.................................................. 73,363,341 Forward contracts................................................................. (7,108,205) Futures contracts................................................................. 149,118 Translation of other assets and liabilities denominated in foreign currency....... 44,141 ----------- Change in net unrealized appreciation or depreciation....................... 66,448,395 ----------- Net realized and unrealized gain.................................................... 78,250,805 ----------- Net increase in net assets resulting from operations................................ $79,051,504 ===========
See accompanying notes to financial statements. 14 Global (Ex-U.S.) Equity Fund -- Financial Statements STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year December 31, 1999 Ended (Unaudited) June 30, 1999 ----------------- ------------- OPERATIONS: Net investment income.............................................................. $ 800,699 $ 6,208,221 Net realized gain (loss)........................................................... 11,802,410 (1,916,922) Change in net unrealized appreciation or depreciation.............................. 66,448,395 19,559,006 ------------ ------------- Net increase in net assets resulting from operations............................... 79,051,504 23,850,305 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.................................................................. (2,727,974) (4,564,403) Brinson Class N.................................................................. -- (121) UBS Investment Funds Class....................................................... (9,831) (23,356) Distributions from net realized gain: Brinson Class I.................................................................. (5,283,152) (4,498,729) Brinson Class N.................................................................. (13) (126) UBS Investment Funds Class....................................................... (74,353) (52,439) ------------ ------------- Total distributions to shareholders................................................ (8,095,323) (9,139,174) ------------ ------------- CAPITAL SHARE TRANSACTIONS: Shares sold........................................................................ 366,304,838 842,598,303 Shares issued in connection with acquisition of UBS International Equity Fund...... -- 21,515,034 Shares issued on reinvestment of distributions..................................... 7,789,808 8,583,385 Shares redeemed.................................................................... (412,201,341) (834,980,130) ------------ ------------- Net increase (decrease) in net assets resulting from capital share transactions.... (38,106,695) 37,716,592 ------------ ------------- TOTAL INCREASE IN NET ASSETS.................................................. 32,849,486 52,427,723 ------------ ------------- NET ASSETS: Beginning of period................................................................ 497,076,871 444,649,148 ------------ ------------- End of period (including accumulated undistributed net investment income of $801,068 and $2,738,174, respectively)........................................... $529,926,357 $ 497,076,871 ============ =============
See accompanying notes to financial statements. 15 Global (Ex-U.S.) Equity Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Six Months Ended Year Ended June 30, July 31, 1995* December 31, 1999 ------------------------------ Through UBS Investment Funds Class (Unaudited) 1999 1998 1997 June 30, 1996 - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............ $12.20 $12.05 $12.49 $11.12 $10.26 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss)................ (0.03) 0.05 0.08 0.11 0.12 Net realized and unrealized gain............ 1.95 0.27 0.30 1.93 1.45 ------ ------ ------ ------ ------ Total income from investment operations... 1.92 0.32 0.38 2.04 1.57 ------ ------ ------ ------ ------ Less distributions: Distributions from investment income........ (0.02) (0.05) (0.08) (0.11) (0.15) Distributions from net realized gain........ (0.14) (0.12) (0.74) (0.56) (0.56) ------ ------ ------ ------ ------ Total distributions....................... (0.16) (0.17) (0.82) (0.67) (0.71) ------ ------ ------ ------ ------ Net asset value, end of period.................. $13.96 $12.20 $12.05 $12.49 $11.12 ====== ====== ====== ====== ====== Total return (non-annualized)................... 18.15% 2.78% 3.90% 19.32% 15.78% Ratios/Supplemental data: Net assets, end of period (in 000s)........... $7,304 $6,739 $5,310 $7,797 $1,262 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits.......................... 1.82%** 1.83% 1.84% 1.81% 2.04%** After expense reimbursement and earnings credits.......................... N/A N/A N/A N/A 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits.......................... (0.51)%** 0.51% 0.68% 1.02% 0.83%** After expense reimbursement and earnings credits.......................... N/A N/A N/A N/A 1.03%** Portfolio turnover rate....................... 32% 74% 49% 25% 20%
* Commencement of UBS Investment Funds Class ** Annualized N/A = Not Applicable See accompanying notes to financial statements. 16 Global (Ex-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 eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex- U.S.) Equity Fund (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The financial highlights of the UBS Investment Funds Class are presented separately. On December 19, 1998, the Global (Ex-U.S.) Equity Fund (the "Fund") acquired all the net assets of the UBS International Equity Fund pursuant to a plan of reorganization approved by shareholders on December 11, 1998. The acquisition was accomplished by a tax-free exchange of 1,827,955 Brinson Class I shares of the Global (Ex-U.S.) Equity Fund for the shares of UBS International Equity Fund outstanding on December 18, 1998. The net assets of the UBS International Equity Fund, including $38,003 of net unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Global (Ex-U.S.) Equity Fund and the UBS International Equity Fund immediately before the merger were $463,315,718 and $21,515,034, respectively. The following is a summary of significant accounting policies consistently followed by the Global (Ex-U.S.) Equity 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. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. 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 Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1999, 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. 17 Global (Ex-U.S.) Equity Fund -- Notes To Financial Statements 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 UBS Investment Funds 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. I. Earnings Credits: The Funds have entered into an arrangement with their custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. This amount is reflected in the statement of operations. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized operating 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 UBS Investment Funds Class, respectively. Investment advisory fees for the six months ended December 31, 1999, were as follows:
Advisory Advisory Fee Fees -------- ---------- Global (Ex-U.S.) Equity Fund................................. 0.80% $1,997,182
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 for the six months ended December 31, 1999 were $4,078. The Fund invests in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments at December 31, 1999 were as follows:
% of Sales Interest Net Purchases Proceeds Income Value Assets ------------ ------------ -------- ---------- ------ Global (Ex-U.S.) Equity Fund.......... $312,583,848 $314,113,357 $279,916 $2,771,329 0.52%
3. INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales ------------ ------------ Global (Ex-U.S.) Equity Fund........................ $159,076,213 $189,257,631
4. FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the six months ended December 31, 1999, was an affiliate of 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 18 Global (Ex-U.S.) Equity Fund -- Notes To Financial Statements 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. SECURITY LENDING The Fund loaned securities to certain brokers with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. The Fund receives securities, which are not reflected in the statement of assets and liabilities, as collateral against the loaned securities. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 105% of the value of global (ex-U.S.) securities loaned. The value of loaned securities and related collateral at December 31, 1999 was $2,606,682 and $3,193,500, respectively. 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the daily net assets of the Brinson Class N. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the UBS Investment Funds Class. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is based on the Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08% per year of the average daily unutilized balance of the line of credit. During the six months ended December 31, 1999, the Global (Ex-U.S.) Equity Fund had borrowings of $19,700,000 outstanding for 1 day under the agreement. 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Six Months Ended December 31, 1999 Year Ended (Unaudited) June 30, 1999 ------------------------ ------------------------ Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I 28,442,308 $365,506,747 72,650,740* $857,199,838 Brinson Class N 30 373 365 4,263 UBS Investment Funds Class 63,305 797,718 587,229 6,909,236 ---------- ------------ ---------- ------------ Total Sales 28,505,643 $366,304,838 73,238,334 $864,113,337 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I 575,659 $ 7,708,071 726,832 $ 8,514,975 Brinson Class N 1 13 21 247 UBS Investment Funds Class 6,168 81,724 5,917 68,163 ---------- ------------ ---------- ------------ Total Dividend Reinvestment 581,828 $ 7,789,808 732,770 $ 8,583,385 ========== ============ ========== ============ Redemptions: Brinson Class I 31,747,436 $410,927,152 69,803,887 $829,422,705 Brinson Class N 1,174 14,890 41 487 UBS Investment Funds Class 98,658 1,259,299 481,376 5,556,938 ---------- ------------ ---------- ------------ Total Redemptions 31,847,268 $412,201,341 70,285,304 $834,980,130 ========== ============ ========== ============
*Includes shares issued in connection with acquisition of UBS International Equity Fund. 19 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] UBS Investment Funds P.O. Box 2798, Boston, Massachusetts 02208-2798 . Tel: (800) 794-7753 -----END PRIVACY-ENHANCED MESSAGE-----