-----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, UmXjpkmqLtGxgjp9io9rgv4x01Gn8rCrUKhhTXj0/S1eUtJrRHhzrHA5rVDI+XR/ SK8RLU9oYvoR0TEGXJ//pQ== 0000950131-98-001526.txt : 19980306 0000950131-98-001526.hdr.sgml : 19980306 ACCESSION NUMBER: 0000950131-98-001526 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980305 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRINSON FUNDS INC CENTRAL INDEX KEY: 0000886244 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06637 FILM NUMBER: 98558452 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 THE BRINSON FUNDS -------------------------- The Brinson Funds Brinson Global Fund Brinson Global Equity Fund Brinson Global Bond Fund Semi-Annual Report December 31, 1997 [LOGO] Global Institutional Asset Management -------------------------- Trustees and Officers - ------------------------------------------------------------------------------- [LOGO] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA 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 Catherine E. Macrae Assistant Secretary - ------------------------------------------------------------------------------- 1 The Funds' Advisor--Brinson Partners, Inc. - ------------------------------------------------------------------------------- [LOGO] Brinson Partners is the global institutional asset management division of Swiss Bank Corporation (SBC) and manages assets of over $140 billion. We have $90 billion of discretionary institutional assets with active management mandates and we are the investment manager for SBC Private Banking mutual fund assets which total over $50 billion. In addition, we act as an investment advisor to SBC Private Banking. Our organization manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. We employ over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, an established U.S.-based leader in the investment field located in Chicago, acts as the headquarters of our worldwide investment management process. Brinson Partners pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients. Private market and venture capital investing was established in the 1970s and today we represent a major worldwide presence in this asset class. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. - ------------------------------------------------------------------------------- 2 Table of Contents - -------------------------------------------------------------------------------- [LOGO]
Shareholder Letter.......................................................... 4 Global Economic and Market Highlights....................................... 6 Global Fund................................................................. 7 Schedule of Investments................................................. 11 Financial Statements.................................................... 20 Financial Highlights.................................................... 23 Global Equity Fund.......................................................... 26 Schedule of Investments................................................. 30 Financial Statements.................................................... 36 Financial Highlights.................................................... 39 Global Bond Fund............................................................ 42 Schedule of Investments................................................. 45 Financial Statements.................................................... 49 Financial Highlights.................................................... 52 The Brinson Funds--Notes to Financial Statements............................ 55
- -------------------------------------------------------------------------------- 3 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO] February 20, 1998 Dear Shareholder: We are very pleased to present the December 31, 1997 Semi-Annual Report for the Global Fund, Global Equity Fund and Global Bond Fund. Within this Report, we will focus on the current global economic outlook as well as our current strategies and performance updates for the three Global Funds. Swiss Bank Corporation announced on December 8, 1997, their intention to merge with Union Bank of Switzerland into a single global financial institution. As part of this merger, Brinson Partners and UBS Asset Management will be combined into Brinson. Brinson will be the Institutional Asset Management Division of the new organization with assets under management in excess of $340 billion and will provide investment advisory services for the Private Banking Division with assets over $400 billion. The Consumer & Corporate Banking Division and Brinson combined will manage assets in excess of $940 billion. We are excited about the formation of Brinson and the additional resources we will bring together to further the tradition of delivering value-added investment performance and the highest level of professional client service. The Brinson Global Fund, the Brinson Global Equity Fund and the Brinson Global Bond Fund are all actively managed Funds that provide integrated asset management across and within security markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. This philosophy offers the greatest potential for achieving enhanced, long-term returns while controlling risk. Brinson Global Fund Since its inception on August 31, 1992, the Brinson Global Fund has produced an annualized total return of 11.30% compared to the return of 13.13% of its benchmark, the Global Securities Markets Mutual Fund Index (GSMI). The Brinson Global Fund achieved this performance with a volatility of 5.37%, below the benchmark volatility of 6.87%. - -------------------------------------------------------------------------------- 4 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO] Brinson Global Equity Fund The Brinson Global Equity Fund has provided an annualized return of 11.17% since its performance inception on January 31, 1994. This is compared to a 12.48% return for the benchmark, the MSCI World Equity (Free) Index. This performance was achieved with volatility of 8.76%, below the benchmark volatility of 10.41%. Brinson Global Bond Fund The Brinson Global Bond Fund has provided an annualized return of 6.84% since its performance inception on July 31, 1993. Over the same period, the return of the Fund's benchmark, the Salomon World Government Bond Index, was 6.46%. This performance was achieved with volatility of 4.20%, below the 5.35% volatility of the benchmark. Each of our Funds employs the same value-oriented investment philosophy applied across the global spectrum. Each Fund also uses the resources of our entire worldwide research team. All of our analysts apply the same value philosophy to their work. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent. The Report that follows highlights the investment characteristics of the respective Funds. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /S/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. - -------------------------------------------------------------------------------- 5 Global Economic and Market Highlights - -------------------------------------------------------------------------------- While financial markets seem to be signaling that the worst of the crisis in Asia has passed, those economies still have substantial problems to overcome before they are recovered. Substantial amounts of foreign currency borrowing will require rescheduling or forgiveness, and excess capacity will need to be worked off. The Japanese, as particularly important lenders to these Asian borrowers, will remain vulnerable. The adverse impact on the U.S. from the Asian crisis is likely to remain relatively limited. Because non-Japan Asia represents a small portion of U.S. trade, direct effects, such as a drop in real growth due to a collapse in exports, are not expected to be sizable. The economy remains strong, as evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and 3.8%, respectively. Continental European economies continue to benefit from weaker currencies although the expansions have not been terribly strong. While output growth is moderate, there has been no discernible improvement in the high unemployment rates. Sterling remains strong on concerns of a weak euro and hikes in short- term rates by the Bank of England. 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 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 - ---------------------------------------------------------------------------------------------------- U.S. Equity 11.60% 31.29% 29.49% 19.28% 19.81% Non-U.S. Equities (currency unhedged) -8.22 2.07 6.90 11.67 9.68 Non-U.S. Equities (currency hedged) -1.40 16.12 14.32 13.22 13.15 U.S. Bonds 6.37 9.62 10.43 7.54 7.34 Non-U.S. Bonds (currency unhedged) -1.18 -4.26 6.01 7.77 6.09 Non-U.S. Bonds (currency hedged) 6.12 11.07 13.57 9.78 10.03 U.S. Cash Equivalents 2.60 5.18 5.30 4.54 4.44 - ---------------------------------------------------------------------------------------------------- 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 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 - ---------------------------------------------------------------------------------------------------- Yen -11.99% -10.73% -8.45% -0.81% -1.00% Pound -1.14 -3.85 1.69 1.68 -3.43 Deutschemark -3.08 -14.29 -4.83 -2.07 -4.49 Canadian Dollar -3.60 -4.22 -0.66 -2.34 -3.30 - ---------------------------------------------------------------------------------------------------- * Inception date of the Brinson Global Fund
All total returns in excess of 1 year are average annualized returns. 6 Global Fund - -------------------------------------------------------------------------------- The Global Fund is diversified across the equity and fixed income markets of the U.S. and a broad range of other countries. The Fund is actively managed within an asset allocation framework, involving value-based market, currency and individual security selection. Our senior asset allocation, equity and fixed income professionals form the investment team for the Fund, supported by a globally integrated market analysis system. Security selection within each market is based on the fundamental research of our analytical teams in our offices worldwide. The Brinson Global Fund has provided an annualized return of 11.30% since its inception on August 31, 1992, while its benchmark, the GSMI Mutual Fund Index returned 13.13%. The Fund performance over this period was achieved with an annualized volatility of 5.37%, below the benchmark volatility of 6.87%. For the year ended December 31, 1997, the Fund returned 11.00%, underperforming the benchmark return of 14.30%. Contributing positively to performance was security selection in the Japanese equity market and the emerging debt and equity markets. Currency risk hedge was a substantial contributor to added value in 1997. The primary negative contributor was the underweight in most equity markets and the overweight in bonds. Bond returns were the highest in Australia, Italy and the U.K. The U.S. bond market return of 9.62% was in the middle of the pack. The peripheral European bond markets performed well, as spreads over German yields declined substantially due to the market's anticipation of a single currency. The U.S. equity market return of about 30% was outdone by many of the European markets which were driven by a combination of lower interest rates and the anticipation of a profits recovery. Southeast Asian equity markets stood in stark contrast with local currency losses ranging from 10% to 60% for the year. The emerging debt and equity markets failed to produce the spectacular gains of prior years. Emerging debt posted a total return of 13.02% while emerging equity declined by 14.84%. Returns in the high yield bond market, at about 12.63%, not surprisingly fell between equity and bond returns. Currency risk hedges were beneficial during the year, as the overpriced Japanese yen depreciated against the U.S. dollar. The risk hedges also benefited from interest rates in the U.S. exceeding rates in the overpriced currencies. Asset allocation strategy continues to underweight equity markets, as prices remain in excess of fundamental values. Bond markets, apart from Japan, remain overweight as they provide the most attractive relative value. Emerging market debt is also overweight, with a small overweight in emerging market equity and a small underweight in high yield bonds. Exchange rate changes during the year have reduced the magnitude of overpricing and led to reductions in many of the risk hedges. 7 Global Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year 3 years 5 years 8/31/92* ended ended ended ended to 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 - -------------------------------------------------------------------------------- Brinson Global Fund 1.95% 11.00% 16.26% 11.38% 11.30% GSMI Mutual Fund Index** 3.26 14.30 17.28 13.37 13.13 - --------------------------------------------------------------------------------
*Inception date of the Brinson Global Fund. **An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Fund and the GSMI Mutual Fund Index 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, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Fund vs. GSMI Mutual Fund Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE] Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. 8 Global Fund - -------------------------------------------------------------------------------- Asset Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ----------------------------------------------------------------------- U.S. Equity 40.0% 23.0% Non-U.S. Equities 22.0 17.0 Japan Equities 5.3 2.3 Other Equities 16.7 14.7 Emerging Markets Equities 3.0 4.0 Dollar Bonds 21.0 30.5 U.S. Bonds 19.0 26.5 International $ Bonds 2.0 4.0 High Yield Bonds 3.0 2.5 Non-U.S. Bonds 9.0 18.0 Japan Bonds 2.5 0.0 Other Bonds 6.5 18.0 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, 1997 (Unaudited)
Percent of Net Assets - -------------------------------------------------------------------- 1. Lockheed Martin Corp. 1.09% 2. Xerox Corp. 1.05 3. Philip Morris Companies, Inc. 1.00 4. CIGNA Corp. 0.89 5. Aon Corp. 0.88 6. Schering Plough Corp. 0.78 7. Burlington Northern Santa Fe Corp. 0.76 8. Federal Express Corp. 0.74 9. Goodyear Tire & Rubber Co. 0.72 10. Automatic Data Processing, Inc. 0.63 - --------------------------------------------------------------------
Currency Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ----------------------------------------------------------------------- U.S. 66.0% 72.2% Japan 7.8 3.8 U.K. 5.4 2.2 Continental Europe 14.6 14.6 Canada 1.5 1.5 Emerging Markets 3.0 4.0 Other 1.7 1.7 - ----------------------------------------------------------------------- 100.0% 100.0%
Top Ten Non-U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - -------------------------------------------------------------------- 1. Glaxo Wellcome PLC 0.30% 2. Royal Dutch Petroleum Co. 0.25 3. Telecom Corp. of New Zealand Ltd. 0.24 4. Lloyds TSB Group PLC 0.23 5. Novartis AG(Reg.) 0.22 6. B.A.T. Industries PLC 0.22 7. Allianz AG 0.19 8. British Petroleum Co. PLC 0.19 9. British Telecommunications PLC 0.17 10. Roche Holding AG (Gen.) 0.15 - --------------------------------------------------------------------
9 Global Fund - -------------------------------------- Industry Diversification As a Percentage of Net Assets As of December 31, 1997 (Unaudited) - --------------------------------------
U.S. EQUITIES Energy........................ 1.04% ------ Capital Investment Capital Goods................ 1.82 Technology................... 2.22 ------ 4.04 ------ Basic Industries Chemicals.................... 0.54 Housing/Paper................ 1.31 Metals....................... 0.23 ------ 2.08 ------ Consumer Non-Durables................. 2.50 Retail/Apparel............... 1.32 Autos/Durables............... 1.01 Discretionary................ 0.94 Health: Drugs................ 2.09 Health: Non-Drugs............ 1.10 ------ 8.96 ------ Financial Banks........................ 2.03 Non-Banks.................... 1.80 ------ 3.83 ------ Utilities Electric..................... 1.59 Telephone.................... 0.28 ------ 1.87 ------ Transportation................ 1.59 Services/Misc................. 2.43 Post Venture.................. 1.30 ------ Total U.S. Equities....... 27.14* ------ NON-U.S. EQUITIES Aerospace & Military.......... 0.03% Airlines...................... 0.06 Appliances & Household........ 0.33 Automobiles................... 0.53 Banking....................... 2.04 Beverages & Tobacco........... 0.44 Broadcasting & Publishing..... 0.35 Building Materials............ 0.22 Business & Public Service..... 0.62 Chemicals..................... 0.49 Construction.................. 0.15 Data Processing............... 0.15 Electric Components........... 0.26 Electronics................... 0.59 Energy........................ 1.35 Financial Services............ 0.35 Food & House Products......... 0.61 Forest Products............... 0.23 Gold Mining................... 0.01 Health; Drugs................. 0.29 Health; Non-Drugs............. 0.91 Industrial Components......... 0.26 Insurance..................... 1.08 Leisure & Tourism............. 0.13 Machinery & Engineering....... 0.05 Merchandising................. 0.82 Metals--Steel................. 0.25 Miscellaneous Materials....... 0.06 Miscellaneous Services........ 0.02 Multi-Industry................ 0.88 Non-Ferrous Metals............ 0.32 Real Estate................... 0.15 Recreation.................... 0.08 Retail/Apparel................ 0.09 Shipping...................... 0.01 Telecommunications............ 1.43 Textiles & Apparel............ 0.03 Transportation................ 0.18 Utilities..................... 0.85 Wholesale & International Trade........................ 0.09 ------ Total Non-U.S. Equities... 16.79 ------ EMERGING MARKETS EQUITIES..... 3.37 ------ U.S. BONDS Corporate Bonds Asset-Backed................. 2.04 CMO.......................... 0.64 Consumer..................... 1.52 Financial.................... 3.03 Industrial................... 0.03 Transportation............... 0.67 ------ 7.93 ------ U.S. Government Agencies...... 7.33 U.S. Government Obligations... 5.13 International Dollar Bonds.... 4.10 ------ Total U.S. Bonds.......... 24.49* ------ HIGH YIELD BONDS.............. 2.64 ------ NON-U.S.BONDS Foreign Financial Bonds...... 0.56 Foreign Government Bonds..... 15.87 ------ Total Non-U.S.Bonds....... 16.43 ------ EMERGING MARKETS DEBT......... 5.24 ------ SHORT-TERM INVESTMENTS........ 16.74* ------ TOTAL INVESTMENTS......... 112.84 LIABILITIES, LESS CASH AND OTHER ASSETS............. (12.84) ------ NET ASSETS.................... 100.00% ======
* The Fund held a long position in U.S. Treasury futures on December 31, 1997 which increased U.S. bond exposure from 24.49% to 28.17%. The Fund held a short position in stock index futures on December 31, 1997 which reduced U.S. equity exposure from 27.14% to 23.09%. These adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 16.74% to 17.11%. 10 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------ Equities -- 47.30% U.S. EQUITIES -- 27.14% Allergan, Inc........................................ 52,400 $ 1,758,675 Alza Corp. (b)....................................... 51,100 1,625,619 American Home Products Corp.......................... 40,900 3,128,850 Aon Corp............................................. 97,899 5,739,300 Automatic Data Processing, Inc....................... 67,000 4,112,125 Baxter International, Inc............................ 66,100 3,333,919 Beckman Instruments, Inc............................. 20,800 832,000 Biogen, Inc. (b)..................................... 20,000 727,500 Birmingham Steel Corp................................ 20,500 322,875 Boston Technology, Inc. (b).......................... 20,400 512,550 Briggs & Stratton Corp............................... 3,500 169,969 Brinson Post-Venture Fund (b)........................ 423,765 8,502,119 Burlington Northern Santa Fe Corp.................... 53,700 4,990,744 Champion Enterprises, Inc. (b)....................... 33,100 680,619 Champion International Corp.......................... 2,700 122,344 Chase Manhattan Corp................................. 27,400 3,000,300 CIGNA Corp........................................... 33,400 5,780,287 Circuit City Stores-Circuit City Group............... 75,500 2,684,969 Citicorp............................................. 24,800 3,135,650 CMS Energy Corp...................................... 65,900 2,903,719 Comerica, Inc........................................ 14,000 1,263,500 Commscope, Inc. (b).................................. 38,833 521,818 Comverse Technology, Inc. (b)........................ 10,100 393,900 Corning, Inc......................................... 110,200 4,091,175 Covance, Inc. (b).................................... 25,672 510,231 CPC International, Inc............................... 22,400 2,419,200 Crown Cork & Seal Co., Inc........................... 24,300 1,218,037 CVS Corp............................................. 32,400 2,075,625 Dial Corp............................................ 26,400 549,450 Eastman Chemical Co.................................. 28,200 1,679,662 Echlin, Inc.......................................... 14,300 517,481 EMC Corp. (b)........................................ 146,100 4,008,619 Enron Corp........................................... 68,500 2,847,031 Entergy Corp......................................... 133,400 3,993,662 Federal Express Corp. (b)............................ 79,300 4,842,256 First American Corp. of Tennessee.................... 13,400 666,650 First Data Corp...................................... 123,530 3,613,252 First Security Corp.................................. 16,850 705,594 FirstEnergy Corp..................................... 40,005 1,160,145 Fleetwood Enterprises, Inc........................... 15,300 649,294 Food Lion, Inc. Class A.............................. 108,700 917,156 Forest Laboratories, Inc. (b)........................ 23,500 1,158,844 Fort James Corp...................................... 59,700 2,283,525 Gannett Co., Inc..................................... 50,700 3,133,894 General Semiconductor, Inc. (b)...................... 26,450 305,828 Genzyme Corp......................................... 20,600 571,650 Geon Co.............................................. 14,100 329,587 Goodyear Tire & Rubber Co............................ 73,400 4,670,075 Harnischfeger Industries, Inc........................ 38,800 1,370,125 Health Care and Retirement Corp. (b)................. 25,600 1,030,400 Hibernia Corp........................................ 28,400 534,275 Informix Corp. (b)................................... 26,800 127,300 Interpublic Group of Companies, Inc.................. 33,350 1,661,247 Kimberly Clark Corp.................................. 60,900 3,003,131 Lear Corp. (b)....................................... 22,000 1,045,000
SHARES VALUE ------------ ------------ Lockheed Martin Corp................................. 72,523 $ 7,143,515 Lyondell Petrochemical Co............................ 55,800 1,478,700 Manor Care, Inc...................................... 38,198 1,336,930 Martin Marietta Materials, Inc....................... 15,000 548,437 Masco Corp........................................... 59,600 3,032,150 Nabisco Holdings Corp................................ 52,000 2,518,750 National Service Industries, Inc..................... 10,000 495,625 Nextel Communications, Inc. (b)...................... 69,800 1,814,800 NextLevel Systems, Inc. (b).......................... 116,500 2,082,437 Old Republic International Corp...................... 9,596 356,851 Peco Energy Co....................................... 152,500 3,698,125 Pentair, Inc......................................... 27,096 973,762 Pharmacia & UpJohn, Inc.............................. 27,600 1,010,850 Philip Morris Companies, Inc......................... 144,200 6,534,062 Raytheon Co., Class B................................ 60,500 3,055,250 Regions Financial Corp............................... 13,100 552,656 Reynolds & Reynolds Co............................... 49,800 918,188 Schering Plough Corp................................. 81,500 5,063,188 Seagate Technology, Inc. (b)......................... 45,600 877,800 Sears, Roebuck and Co................................ 5,700 257,925 Timken Co............................................ 14,400 495,000 Tyson Foods, Inc., Class A........................... 103,998 2,131,959 Ultramar Diamond Shamrock Corp....................... 58,108 1,852,193 US Bancorp........................................... 34,960 3,913,335 Vencor, Inc. (b)..................................... 52,200 1,275,638 Viad Corp............................................ 50,100 967,556 Westvaco Corp........................................ 12,198 383,475 Witco Corp........................................... 8,300 338,744 Xerox Corp........................................... 93,000 6,864,563 York International Corp.............................. 31,800 1,258,088 ------------ Total U.S. Equities ................................. 177,163,304 ------------ NON-U.S. EQUITIES -- 16.79% AUSTRALIA -- 0.84% Amcor Ltd............................................ 23,770 104,548 Boral Ltd............................................ 69,240 175,053 Brambles Industries Ltd.............................. 12,590 249,801 Broken Hill Proprietary Co., Ltd..................... 84,200 781,824 Coca-Cola Amatil Ltd................................. 14,270 106,615 CSR Ltd.............................................. 42,930 145,461 David Jones Ltd...................................... 182,010 205,174 Lend Lease Corp., Ltd................................ 11,596 226,679 Mayne Nickless Ltd................................... 20,000 105,690 M.I.M. Holdings Ltd.................................. 88,056 53,935 National Australia Bank Ltd.......................... 58,467 816,423 News Corp. Ltd....................................... 122,030 673,492 News Corp. Ltd., Preferred........................... 27,886 137,987 Pacific Dunlop Ltd................................... 85,210 180,450 Rio Tinto Ltd........................................ 31,145 363,326 Qantas Airways Ltd................................... 81,435 144,120 Santos Ltd........................................... 16,610 68,402 Telstra Corp., Ltd. (b).............................. 33,000 69,669 Westpac Banking Corp., Ltd........................... 93,408 597,449 WMC Ltd.............................................. 52,840 184,204 Woolworth's Ltd...................................... 30,790 102,922 ------------ 5,493,224 ------------
- -------------------------------------------------------------------------------- 11 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------- BELGIUM -- 0.66% Delhaize-Le Lion S.A............................... 8,420 $ 427,238 Electrabel S.A..................................... 3,330 770,238 Fortis AG.......................................... 216 29 Fortis AG Strip (b)................................ 2,943 614,002 Generale de Banque S.A............................. 770 335,113 Groupe Bruxelles Lambert S.A....................... 1,670 241,591 Kredietbank NV..................................... 800 335,754 Kredietbank VVPR................................... 25 10,492 Petrofina S.A...................................... 1,525 562,856 Societe Generale de Belgique....................... 2,433 222,609 Solvay S.A., Class A............................... 4,890 307,514 Tractebel.......................................... 3,875 337,811 Tractebel Warrants "99" (b)........................ 605 1,551 Union Miniere Group S.A. (b)....................... 2,255 156,416 ------------ 4,323,214 ------------ CANADA -- 0.59% Agrium, Inc........................................ 9,500 115,506 Alcan Aluminum Ltd................................. 7,250 199,602 Bank of Montreal................................... 5,290 234,170 Barrick Gold Corp.................................. 4,200 78,213 Canadian National Railway Co....................... 5,150 242,188 Canadian Pacific Ltd............................... 15,650 421,022 Hudson's Bay Co.................................... 6,400 142,436 Imasco, Ltd........................................ 3,000 105,863 Imperial Oil Ltd................................... 5,720 367,717 Magna International Inc., Class A.................. 1,800 112,696 Moore Corp., Ltd................................... 5,800 87,136 Newbridge Networks Corp. (b)....................... 2,200 76,941 Noranda, Inc....................................... 7,440 127,890 Northern Telecom Ltd............................... 1,290 114,614 NOVA Corp.......................................... 19,520 185,502 Potash Corporation of Saskatchewan, Inc............ 2,200 183,013 Royal Bank of Canada............................... 6,250 330,166 Seagram Co., Ltd................................... 4,290 138,643 TELUS Corp......................................... 10,300 228,153 TransCanada Pipelines Ltd.......................... 10,020 223,351 Westcoast Energy, Inc.............................. 5,000 115,296 ------------ 3,830,118 ------------ FINLAND -- 0.13% Cultor Oyj......................................... 1,200 65,226 Merita Ltd., Class A............................... 19,550 106,982 Metsa Serla Oyj, Class B........................... 5,000 39,022 Nokia Oyj, Class A Preferred....................... 5,250 373,092 Outokumpu Oyj, Class A............................. 4,480 54,707 Pohjola Insurance Group, Class B................... 350 12,983 Sampo Insurance Co., Ltd., Series A................ 1,520 50,241 The Rauma Group.................................... 200 3,122 UPM-Kymmene Corp................................... 6,870 137,508 ------------ 842,883 ------------
SHARES VALUE ------------ ------------- FRANCE -- 0.93% Accor S.A.......................................... 1,092 $ 203,116 Alcatel Alsthom.................................... 1,932 245,675 AXA-UAP............................................ 4,058 314,131 AXA-UAP Rights (b)................................. 4,328 4,245 Banque Nationale de Paris.......................... 4,620 245,668 Cie Bancaire S.A................................... 331 53,644 Cie de Saint Gobain................................ 2,267 322,188 Cie Financiere de Paribas.......................... 2,500 217,337 Cie Generale des Eaux.............................. 2,444 341,250 Cie Generale des Eaux Warrants "01" (b)............ 4,224 2,872 Dexia France....................................... 1,899 220,014 Elf Aquitaine S.A.................................. 3,194 371,642 France Telecom S.A. (b)............................ 9,400 341,094 Groupe Danone...................................... 800 142,952 Lafarge S.A........................................ 1,880 123,406 Lagardere S.C.A.................................... 6,600 218,318 Lyonnaise des Eaux S.A............................. 2,771 306,814 Michelin, Class B.................................. 4,449 224,077 Pechiney S.A., Class A............................. 4,884 192,892 Peugeot S.A........................................ 2,480 312,886 Pinault-Printemps-Redoute S.A...................... 350 186,810 Rhone-Poulenc, Class A............................. 6,944 311,187 SEITA.............................................. 6,810 244,508 Societe Generale................................... 2,295 312,816 Thomson CSF........................................ 6,900 217,575 Total S.A., Class B................................ 2,886 314,217 Usinor Sacilor..................................... 5,980 86,380 ------------ 6,077,714 ------------ GERMANY -- 1.81% Allianz AG Holding................................. 4,810 1,241,221 BASF AG............................................ 7,530 268,854 Bayer AG........................................... 16,990 630,712 Bayerische Motoren Werke AG........................ 590 441,327 Commerzbank AG..................................... 14,340 558,256 Continental AG..................................... 14,400 324,342 Daimler-Benz AG.................................... 6,750 476,753 Deutsche Bank AG................................... 13,611 952,263 Deutsche Telekom AG................................ 51,930 961,720 Henkel KGaA-Vorzug AG, Preferred................... 5,290 330,974 Hochtief AG........................................ 3,500 144,041 Hoechst AG......................................... 5,910 204,768 M.A.N. AG.......................................... 750 216,687 Mannesmann AG...................................... 897 450,471 Metro AG........................................... 9,608 340,910 Muenchener Rueckver AG............................. 2,410 916,768 Muenchener Rueckver AG Warrants "98" (b)........... 2 1,212 Preussag AG........................................ 1,322 406,577 RWE AG............................................. 9,820 527,017 Schering AG........................................ 5,405 521,533 Siemens AG......................................... 10,700 645,654 Veba AG............................................ 11,339 772,497 Volkswagen AG...................................... 860 480,674 ------------ 11,815,231 ------------
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------ HONG KONG -- 0.18% Cheung Kong Holdings Ltd........................... 38,000 $ 248,887 China Light & Power Co., Ltd....................... 18,500 102,665 Citic Pacific Ltd.................................. 17,000 67,574 Hang Seng Bank Ltd................................. 9,700 93,576 Hong Kong and China Gas Co., Ltd................... 79,000 152,933 Hong Kong Telecommunications Ltd................... 81,000 166,736 Hutchison Whampoa Ltd.............................. 26,000 163,077 Sun Hung Kai Properties Ltd........................ 15,000 104,536 Swire Pacific Ltd., Class A........................ 11,500 63,077 ------------ 1,163,061 ------------ ITALY -- 0.82% Aeroporti Di Roma Spa (b).......................... 3,000 31,136 Assicurazioni Generali............................. 21,380 525,416 Banca Commerciale Italiana......................... 55,000 191,312 Credito Italiano Spa............................... 97,000 299,276 Danieli & Co. Savings (Risp)....................... 43,000 154,679 Edison Spa......................................... 22,200 134,351 ENI ADR (c)........................................ 7,600 433,675 ENI Spa............................................ 76,000 431,142 Fiat Spa-Priv Preferred............................ 185,600 283,431 INA-Istituto Nazionale delle Assicurazioni......... 87,000 176,406 Instituto Mobiliare Italiano Spa................... 28,800 342,072 Italgas Spa........................................ 35,800 147,813 La Rinascente Spa.................................. 32,040 239,206 La Rinascente Spa RNC.............................. 27,200 101,536 La Rinascente Spa Warrants "99" (b)................ 1,400 1,694 Mediobanca Spa..................................... 11,000 86,417 Montedison Spa..................................... 331,700 298,109 SAI-Savings (Risp)................................. 24,500 108,085 Telecom Italia Mobile Spa.......................... 60,000 277,085 Telecom Italia Mobile Spa RNC...................... 161,500 459,458 Telecom Italia Spa................................. 26,666 170,428 Telecom Italia Spa RNC............................. 110,081 485,638 ------------ 5,378,365 ------------ JAPAN -- 2.73% Amada Co., Ltd..................................... 40,000 149,202 Asahi Glass Co., Ltd............................... 22,000 104,903 Bank of Tokyo-Mitsubishi, Ltd...................... 32,000 442,992 Canon, Inc......................................... 30,000 701,404 Canon Sales Co., Inc............................... 12,000 137,512 Citizen Watch Co., Ltd............................. 34,000 228,802 Dai Nippon Printing Co., Ltd....................... 36,000 678,331 Daiichi Pharmaceutical Co., Ltd.................... 30,000 339,166 Daikin Industries Ltd.............................. 36,000 136,220 Daiwa House Industry Co., Ltd...................... 18,000 95,520 Fanuc.............................................. 15,900 604,084 Fujitsu............................................ 24,000 258,412 Hitachi Ltd........................................ 75,000 536,435 Honda Motor Co..................................... 10,000 368,391 Hoya Corp.......................................... 4,000 126,130 Inax............................................... 26,000 75,785 Ito Yokado Co., Ltd................................ 15,000 767,160 Kaneka Corp........................................ 36,000 163,076
SHARES VALUE ------------ ------------ Keio Teito Electric Railway............................ 41,000 $ 157,347 Kinki Nippon Railway................................... 45,000 241,223 Kirin Brewery Co., Ltd................................. 43,000 314,170 Kokuyo................................................. 11,000 190,348 Kuraray Co., Ltd....................................... 46,000 382,080 Kyocera Corp........................................... 4,000 182,119 Marui Co., Ltd......................................... 20,000 312,248 Matsushita Electric Industrial Co...................... 57,000 837,301 Mitsubishi Paper Mills................................. 39,000 54,889 NGK Insulators......................................... 64,000 570,967 Nintendo Co., Ltd...................................... 2,900 285,484 Nippon Denso Co., Ltd.................................. 19,000 343,396 Nippon Meat Packers, Inc............................... 25,000 342,242 Nippon Steel Co........................................ 27,000 40,077 Okumura................................................ 37,000 88,214 Osaka Gas Co........................................... 69,000 158,139 Sankyo Co., Ltd........................................ 29,000 657,950 Secom Co., Ltd......................................... 10,000 641,415 Seino Transportation................................... 25,000 125,168 Sekisui House Ltd...................................... 56,000 361,346 Shinmaywa Industries Ltd............................... 13,000 31,994 Sony Corp.............................................. 9,200 820,765 Sumitomo Bank.......................................... 41,000 469,833 Sumitomo Chemical Co................................... 36,000 83,061 Sumitomo Electric Industries........................... 32,000 438,070 Takeda Chemical Industries............................. 22,000 629,417 TDK Corp............................................... 7,000 529,744 Tokio Marine & Fire Insurance Co....................... 36,000 409,767 Tokyo Electric Power................................... 9,900 181,211 Tokyo Steel Mfg........................................ 19,000 64,441 Tonen Corp............................................. 26,000 140,773 Toray Industries, Inc.................................. 132,000 593,886 Toshiba Corp........................................... 93,000 388,379 Toyo Suisan Kaisha..................................... 22,000 152,955 Toyota Motor Corp...................................... 19,000 546,510 Yamazaki Baking Co., Ltd............................... 17,000 166,045 ----------- 17,846,499 ----------- MALAYSIA -- 0.25% Hume Industries (Malaysia) Bhd......................... 35,000 36,686 Kuala Lumpur Kepong Bhd................................ 90,500 194,136 Land & General Holdings Bhd............................ 73,000 13,503 Malayan Banking Bhd.................................... 39,000 113,218 Malaysia International Shipping Bhd (Frgn.)............ 32,000 46,859 Nestle (Malaysia) Bhd.................................. 22,000 101,734 New Straits Times Press Bhd............................ 33,000 40,863 Perusahaan Otomobil Nasional Bhd....................... 22,000 21,477 Petronas Gas Bhd....................................... 26,000 59,114 Public Bank Bhd........................................ 27,600 8,580 Public Bank Bhd (Frgn.)................................ 78,000 26,852 Public Bank Bhd Rights (b)............................. 4,600 248 Public Bank Bhd Rights (Frgn.) (b)..................... 13,000 668 Resorts World Bhd...................................... 30,000 50,482 Rothmans of Pall Mall Bhd.............................. 24,000 186,513 Sime Darby Bhd......................................... 127,000 122,024 Telekom Malaysia Bhd................................... 93,000 274,759 Tenaga Nasional Bhd.................................... 110,000 234,554
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- UMW Holdings Bhd........................................... 15,000 $ 11,368 United Engineers Bhd....................................... 33,000 27,468 YTL Corp. Bhd.............................................. 42,000 56,647 YTL Power International Bhd (b)............................ 1,400 1,075 ----------- 1,628,828 ----------- NETHERLANDS -- 0.81% ABN AMRO Holdings NV....................................... 22,202 432,585 Akzo Nobel NV.............................................. 760 131,059 Elsevier NV................................................ 26,480 428,424 Heineken NV................................................ 1,850 322,128 Hoogovens NV............................................... 2,360 96,737 ING Groep NV............................................... 12,962 546,024 KLM Royal Dutch Air Lines NV............................... 3,492 129,187 KPN NV..................................................... 13,020 543,329 Philips Electronics NV..................................... 6,850 410,872 Royal Dutch Petroleum Co................................... 29,420 1,615,176 Royal Dutch Petroleum Co., NY Shares (c)................... 700 37,931 Unilever NV................................................ 9,600 591,920 ----------- 5,285,372 ----------- NEW ZEALAND -- 0.57% Brierley Investments Ltd................................... 756,530 540,360 Carter Holt Harvey Ltd..................................... 261,110 403,326 Fletcher Challenge Building................................ 86,775 177,374 Fletcher Challenge Energy.................................. 95,405 334,072 Fletcher Challenge Forests Ltd............................. 185,585 154,110 Fletcher Challenge Paper................................... 171,640 224,260 Lion Nathan Ltd............................................ 64,000 143,456 Telecom Corp. of New Zealand Ltd........................... 326,830 1,584,748 Telecom Corp. of New Zealand Ltd. ADS (c).................. 3,800 147,250 ----------- 3,708,956 ----------- SINGAPORE -- 0.35% City Developments Ltd...................................... 31,000 143,501 DBS Land Ltd............................................... 58,000 88,807 Development Bank of Singapore Ltd.......................... 28,000 239,288 Elec & Eltek International Co., Ltd........................ 12,100 55,418 Fraser & Neave Ltd......................................... 12,000 51,988 Hotel Properties Ltd....................................... 102,000 66,588 Keppel Corp., Ltd.......................................... 33,000 94,789 Keppel Land Ltd............................................ 35,000 48,190 NatSteel Ltd............................................... 25,000 33,828 Oversea-Chinese Banking Corp., Ltd......................... 43,000 250,089 Singapore Airlines Ltd. (Frgn.)............................ 50,000 326,410 Singapore Press Holdings Ltd. (Frgn.)...................... 11,000 137,745 Singapore Telecommunications, Ltd.......................... 221,000 411,834 United Overseas Bank Ltd. (Frgn.).......................... 48,000 266,350 Venture Manufacturing (Singapore) Ltd...................... 20,000 55,786 Wing Tai Holdings Ltd...................................... 38,000 44,427 ----------- 2,315,038 ----------- SPAIN -- 0.50% Acerinox S.A............................................... 370 54,789 Banco Bilbao-Vizcaya S.A................................... 11,720 379,081
SHARES VALUE ------- ----------- Banco Central Hispanoamericano.............................. 9,840 $ 239,512 Banco Popular Espanol S.A................................... 3,200 223,593 Banco Santander S.A......................................... 9,480 316,580 Empresa National de Electridad S.A.......................... 21,640 384,045 Fomento de Contrucciones y Contratas S.A.................... 4,400 167,432 Gas Natural SDG S.A......................................... 4,140 214,578 Iberdrola S.A............................................... 22,910 301,368 Mapfre Corp................................................. 3,860 102,312 Repsol S.A.................................................. 5,110 217,918 Repsol S.A. ADR (c)......................................... 1,000 42,563 Tabacalera S.A.............................................. 500 40,513 Telefonica de Espana........................................ 13,640 389,280 Vallehermoso S.A............................................ 3,470 106,317 Viscofan Envolturas Celulosicas S.A......................... 3,110 78,046 ----------- 3,257,927 ----------- SWEDEN -- 0.33% ABB AB, A Shares............................................ 9,400 111,360 Astra AB, A Shares.......................................... 21,800 377,776 Electrolux AB, B Shares..................................... 1,500 104,164 Hennes & Mauritz AB, B Shares............................... 5,200 229,375 Nordbanken Holding AB....................................... 50,400 285,202 Securitas AB, B Shares...................................... 3,700 111,915 Skanska AB, B Shares........................................ 2,800 114,864 Svenska Handelsbanken, A Shares............................. 4,500 155,679 Swedish Match AB............................................ 39,000 130,252 Telefonaktiebolaget LM Ericsson, B Shares................... 7,600 285,912 Volvo AB, B Shares.......................................... 8,100 217,440 ----------- 2,123,939 ----------- SWITZERLAND -- 0.87% ABB AG (Bearer)............................................. 105 132,096 CS Holdings AG (Reg.)....................................... 3,579 554,541 Holderbank Financiere Glarus, B Shares...................... 205 167,531 Nestle S.A. (Reg.).......................................... 460 690,347 Novartis AG (Reg.).......................................... 896 1,455,862 Roche Holding AG (Gen.)..................................... 101 1,004,391 Sairgroup (b)............................................... 113 154,943 Schweizerische Lebensversicherungs-und Rentenastalt............................................... 245 192,661 Sulzer AG................................................... 194 123,162 Swiss Reinsurance Co. (Reg.)................................ 255 477,622 UBS (Bearer)................................................ 261 377,919 Zurich Versicherungs (Reg.)................................. 702 334,973 ----------- 5,666,048 ----------- UNITED KINGDOM -- 4.42% Abbey National PLC.......................................... 31,620 567,625 Barclays PLC................................................ 15,000 399,342 Bass PLC.................................................... 19,070 296,365 B.A.T. Industries PLC....................................... 156,484 1,426,444 BG PLC...................................................... 166,864 752,296 Billiton PLC (b)............................................ 122,000 313,155 Booker PLC.................................................. 72,220 380,262
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------- ------------ British Energy PLC................................... 78,630 $ 547,273 British Petroleum Co. PLC............................ 93,091 1,225,385 British Sky Broadcating Group PLC.................... 42,000 315,130 British Steel PLC.................................... 116,470 250,092 British Telecommunications PLC....................... 142,980 1,125,725 BTR PLC.............................................. 61,420 185,953 Cable & Wireless PLC................................. 27,000 237,680 Cadbury Schweppes PLC................................ 56,000 565,298 Centrica PLC (b)..................................... 131,430 193,550 Charter PLC.......................................... 29,846 367,826 Coats Viyella PLC.................................... 123,860 185,459 Diageo PLC........................................... 65,150 599,777 FKI PLC.............................................. 158,500 498,124 General Electric Co. PLC............................. 139,550 905,841 Glaxo Wellcome PLC................................... 82,600 1,957,120 Greenalls Group PLC.................................. 32,000 230,621 Hanson PLC........................................... 53,102 237,332 Hillsdown Holdings PLC............................... 163,520 398,206 House of Fraser PLC.................................. 174,400 576,790 HSBC Holdings PLC.................................... 36,050 925,348 Inchcape PLC......................................... 87,470 234,597 Legal & General Group PLC............................ 79,400 695,036 Lloyds TSB Group PLC................................. 118,409 1,533,326 Marks & Spencer PLC.................................. 95,040 936,717 Mirror Group PLC..................................... 165,450 530,856 National Westminster Bank PLC........................ 33,380 555,830 Northern Foods PLC................................... 95,040 412,843 Peninsular & Oriental Steam Navigation Co............ 61,040 695,519 Reckitt & Colman PLC................................. 17,938 281,872 Reuters Holdings PLC................................. 36,530 399,711 Rio Tinto PLC........................................ 35,580 438,493 RJB Mining PLC....................................... 86,570 180,903 Royal & Sun Alliance Insurance Group PLC............. 52,943 534,003 Scottish Hydro-Electric PLC.......................... 37,480 309,584 Sears PLC............................................ 220,480 192,274 Sedgwick Group PLC................................... 146,360 341,968 SmithKline Beecham PLC............................... 86,180 883,425 Smurfit (Jefferson) Group PLC........................ 132,647 368,858 Tate & Lyle PLC...................................... 41,000 337,984 Tesco PLC............................................ 63,197 514,727 Thames Water PLC..................................... 43,210 644,506 The Great Universal Stores PLC....................... 51,000 643,636 Unilever PLC......................................... 36,040 308,957 Vodafone Group PLC................................... 86,090 621,859 Williams PLC......................................... 99,010 550,644 ------------ 28,812,147 ------------ Total Non-U.S.Equities............................... 109,568,564 ------------ EMERGING MARKETS EQUITIES -- 3.37% Brinson Emerging Markets Equity Fund (b)............................................ 2,402,916 22,017,923 ------------ Total Equities (Cost $270,775,791)................... 308,749,791 ------------
FACE AMOUNT VALUE ---------- ------------ Bonds -- 48.80% U.S. BONDS -- 24.49% U.S. CORPORATE BONDS -- 7.93% Aetna Services Inc. 6.970%, due 08/15/36.............. $ 265,000 $ 277,655 Aid-Israel Series 10-Z, 0.000%, due 02/15/03.................... 6,720,000 4,989,533 Asset Securitization Corp. 7.210%, due 10/13/26................................. 2,310,000 2,411,876 Associates Corp. N.A. 6.450%, due 10/15/01................................. 480,000 483,416 Bank of America FRN 6.110%, due 09/24/98............................. 2,000,000 1,999,156 Bellsouth Savings & Employee ESOP 9.125%, due 07/01/03............................ 278,657 289,255 Capital One Bank 6.830%, due 05/17/99................................. 1,946,000 1,959,490 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.......................... 1,000,000 1,001,570 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03........................... 1,050,000 1,060,059 Chemical Master Credit Card Trust 95-2A 6.230%, due 06/15/03........................... 1,430,000 1,438,852 Ches Pot Tel MD 8.000%, due 10/15/29................................. 98,000 116,730 Choice Credit Card 7.200%, due 03/15/98................................. 1,000,000 1,001,460 Chrysler Financial Corp. 4.220%, due 03/02/99................................. 1,192 1,182 7.400%, due 08/01/2097............................... 252,000 268,859 Citicorp 6.200%, due 11/10/00................................. 500,000 498,934 Coca-Cola Enterprises 6.375%, due 08/01/01................................. 550,000 553,936 Comcast Cable Communications 144A 8.500%, due 05/01/27............................ 1,720,000 2,028,819 Continental Airlines, Inc. 97-4A 6.900%, due 01/02/18........................... 1,850,000 1,849,722 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 08/20/06................................. 1,465,000 1,524,230 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02......................................... 132,000 132,115 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00............................. 600,000 607,359 First National Bank of Chicago Series E, 7.000%, due 05/08/00....................... 1,000,000 1,015,000 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00............................ 70,140 70,063 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09................. 1,637,884 1,594,234 General Motors Acceptance Corp. 6.375%, due 12/01/01................................. 500,000 502,194 9.625%, due 12/15/01................................. 331,000 369,814 GreenTree Financial Corp. 97-6 6.870%, due 01/15/29............................ 2,315,000 2,371,972 Lehman Brothers Holdings 7.250%, due 04/15/03................................. 1,250,000 1,290,470
- -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ----------- Lockheed Martin Corp. 7.700%, due 06/15/08................................ $ 148,000 $ 160,758 MBNA Global Capital Securities FRN 6.550%, due 02/01/27............................ 1,100,000 1,010,386 Nationsbanc Asset Securities, Inc. Series 1997-1, 6.375%, due 09/20/27................. 2,605,000 2,605,000 News America Holdings 7.750%, due 12/01/45................................ 1,877,000 1,954,160 Premier Auto Trust 96-4A Class A4, 6.400%, due 10/06/01................ 455,000 457,521 96-3A 6.500%, due 03/06/00.......................... 215,000 215,772 Prudential Home Mortgage Securities 94-3 A10, 6.500%, due 02/25/24...................... 1,000,000 960,700 Residential Asset Securitization Trust 97-A 11 P4, 7.000%, due 12/25/27.................... 200,000 200,625 Salomon, Inc. 6.500%, due 03/01/00................................ 2,520,000 2,533,414 6.750%, due 02/15/03................................ 550,000 557,808 Standard Credit Card Trust 95-1A 8.250%, due 01/01/07.......................... 500,000 553,740 Thrift Financial Corp. 11.250%, due 01/01/16............................... 84,445 91,074 Time Warner, Inc. 7.570%, due 02/01/24................................ 2,165,000 2,269,349 Time Warner Entertainment, Inc. 8.375%, due 03/15/23................................ 1,206,000 1,375,811 Turner Broadcasting 7.400%, due 02/01/04................................ 1,000,000 1,033,092 UCFC Home Equity Loan 97-C, Class A8, FRN 6.325%, due 09/15/27............ 1,573,947 1,572,640 Union Pacific 6.250%, due 03/15/99................................ 1,000,000 1,002,803 WMX Technologies, Inc. 7.000%, due 10/15/06................................ 1,500,000 1,523,497 ----------- 51,786,105 ----------- INTERNATIONAL DOLLAR BONDS -- 4.10% Abbey National PLC 7.350%, Resettable Perpetual Preferred.............. 250,000 259,942 ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01................................ 250,000 253,725 AT&T Corp. 8.250%, due 01/11/00................................ 945,000 982,777 Banca Commercial Italian 8.250%, due 07/15/07................................ 450,000 493,865 Banco Bilbao Vizcaya International Finance 7.000%, due 12/01/25................................ 2,200,000 2,175,862 Banco Santiago S.A. 7.000%, due 07/18/07................................ 2,000,000 2,005,432 Banque Centrale de Tunisie 8.250%, due 09/19/27................................ 1,750,000 1,592,833 Banque Paribas, Sub. Notes 6.875%, due 03/01/09................................ 175,000 174,239 Bayerische Landesbank 6.850%, due 07/19/01................................ 212,000 217,627
FACE AMOUNT VALUE ------------ ----------- Credit Suisse--London 144A 7.900%, Resettable Perpetual Preferred........ $ 2,600,000 $ 2,743,265 Den Danske Bank 144A 7.400%, due 06/15/10.......................... 2,050,000 2,138,896 DR Investments 144A 7.450%, due 05/15/07.......................... 320,000 338,218 Empresa Nacional Electric 7.875%, due 02/01/27............................... 316,000 334,590 Hanson PLC Notes 6.750%, due 09/15/05............................... 290,000 296,407 International Telecom Satellite 8.125%, due 02/28/05............................... 335,000 368,506 Japanese Development Bank 8.375%, due 02/15/01............................... 970,000 1,030,452 Korea Development Bank 7.125%, due 09/17/01............................... 200,000 170,240 LKB Baden-Wuerttemberg Finance NV 8.125%, due 01/27/00............................... 350,000 363,675 Pan Pacific Industry PLC 144A 0.000%, due 04/28/07.......................... 2,130,000 1,051,202 Petroliam Nasional 7.125%, due 08/15/05............................... 420,000 396,345 Poland Non-U.S. Global Regd FRN 6.940%, due 10/27/24........................... 300,000 289,125 Province of Quebec 7.500%, due 07/15/23............................... 325,000 350,428 Ras Laffan Liquified Natural Gas Co. Ltd. 144A 8.294%, due 03/15/14............................... 1,910,000 1,797,321 Repsol International Finance 7.000%, due 08/01/05............................... 735,000 771,860 Republic of South Africa 9.625%, due 12/15/99............................... 1,079,000 1,116,765 Royal Bank of Scotland 7.375%, Resettable Perpetual Preferred............. 690,000 716,362 Skandinaviska Enskilda Banken 144A 6.625%, Resettable Perpetual Preferred........ 500,000 502,000 Sociedad Quimica y Minera de Chiles SA, 144A 7.700%, due 09/15/06....................................... 1,500,000 1,559,369 Southern Investments UK 6.800%, due 12/01/06............................... 1,625,000 1,637,787 Swedbank 144A FRN 7.664%, Resettable Perpetual Preferred.... 270,000 274,050 Telstra Corp. Ltd. 6.500%, due 11/28/05............................... 350,000 351,226 ----------- 26,754,391 ----------- U.S. GOVERNMENT AGENCIES -- 7.33% Federal Home Loan Mortgage Corp. 6.200%, due 08/15/07............................... 700,000 690,375 6.200%, due 12/15/08............................... 700,000 690,703 7.000%, due 10/15/13............................... 2,275,469 2,323,850 6.500%, due 05/15/21............................... 1,248,829 1,248,891 7.500%, due 01/15/23............................... 787,978 827,440 7.000%, due 01/15/25............................... 1,100,000 1,095,267 7.238%, due 05/01/26............................... 334,042 345,941
- -------------------------------------------------------------------------------- 16 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ------------- Federal Home Loan Mortgage Corp. Gold 8.000%, due 11/01/22.............................. $ 144,007 $ 149,002 8.000%, due 05/01/23.............................. 1,496,337 1,548,242 9.000%, due 03/01/24.............................. 1,056,907 1,141,428 9.500%, due 04/01/25.............................. 48,223 51,509 Federal National Mortgage Association 5.000%, due 06/01/01.............................. 1,412,398 1,366,862 6.540%, due 09/18/02.............................. 4,690,000 4,743,020 6.220%, due 03/13/06.............................. 1,700,000 1,716,563 8.000%, due 02/25/07.............................. 1,635,000 1,697,272 6.500%, due 05/25/08.............................. 909,485 907,748 6.500%, due 12/01/11 TBA.......................... 435,000 435,272 8.000%, due 05/25/21.............................. 1,610,000 1,684,266 9.000%, due 08/01/21.............................. 278,492 299,176 8.000%, due 05/01/22.............................. 116,793 120,880 8.500%, due 07/01/22.............................. 668,918 708,591 7.500%, due 07/25/22.............................. 2,154,635 2,257,934 6.500%, due 12/15/23.............................. 2,610,000 2,601,791 9.000%, due 02/01/25.............................. 1,885 2,003 6.500%, due 04/01/26.............................. 1,543,380 1,523,124 6.500%, due 12/01/26 TBA.......................... 5,000,000 4,934,375 6.730%, due 04/25/27 FRN.......................... 1,561,566 1,571,621 6.175%, due 10/01/27.............................. 1,381,103 1,379,308 6.500%, due 12/01/27.............................. 2,608,650 2,574,411 Federal National Mortgage Association Strip 0.00%, due 04/01/27, principal only............... 2,733,923 2,076,141 Government National Mortgage Association 10.000%, due 09/15/00............................. 3,022 3,217 10.000%, due 05/15/01............................. 5,907 6,290 9.000%, due 11/15/04.............................. 17,025 17,893 8.500%, due 05/15/21.............................. 49,980 52,494 8.000%, due 08/15/22.............................. 524,142 543,470 8.000%, due 12/15/22.............................. 1,475,029 1,538,190 8.000%, due 11/15/22.............................. 431,844 450,335 7.500%, due 11/15/24.............................. 2,477,404 2,543,402 ------------ 47,868,297 ------------ U.S. GOVERNMENT OBLIGATIONS -- 5.13% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98.............................. 172,000 171,731 6.000%, due 06/30/99.............................. 13,740,000 13,808,700 5.875%, due 08/31/99.............................. 9,185,000 9,213,703 7.750%, due 11/30/99.............................. 215,000 222,928 6.625%, due 07/31/01.............................. 930,000 956,448 6.250%, due 08/31/02.............................. 2,975,000 3,036,359 6.000%, due 02/15/26.............................. 5,875,000 5,867,656 U.S. Treasury Strip 0.000%, due 02/15/03, principal only.............. 225,000 168,237 ------------ 33,445,762 ------------ Total U.S. Bonds................................... 159,854,555 ------------
SHARES ------------ HIGH YIELD BONDS -- 2.64% Brinson High Yield Fund (b)........................ 1,231,792 17,201,354 ------------
FACE AMOUNT VALUE ------------ ------------- NON - U.S. BONDS--16.43% AUSTRALIA -- 1.17% Government of Australia 7.00%, due 04/15/00 ..........................AUD 2,300,000 $ 1,550,958 9.75%, due 03/15/02.............................. 3,400,000 2,550,377 10.00%, due 10/15/07............................. 1,200,000 1,013,253 Queensland Treasury Global Notes 8.00%, due 05/14/03.............................. 3,500,000 2,504,390 ------------ 7,618,978 ------------ CANADA -- 2.00% Government of Canada 7.50%, due 09/01/00...........................CAD 3,380,000 2,487,043 6.50%, due 06/01/04.............................. 500,000 367,658 8.75%, due 12/01/05.............................. 2,600,000 2,179,977 7.00%, due 12/01/06.............................. 4,270,000 3,271,081 4.25%, due 12/01/21 (d).......................... 6,060,000 4,699,348 ------------ 13,005,107 ------------ DENMARK -- 1.88% Kingdom of Denmark 9.00%, due 11/15/98...........................DKK 3,200,000 485,417 9.00%, due 11/15/00.............................. 13,600,000 2,203,242 6.00%, due 11/15/02.............................. 10,000,000 1,520,869 7.00%, due 12/15/04.............................. 8,200,000 1,305,313 8.00%, due 03/15/06.............................. 40,000,000 6,767,532 ------------ 12,282,373 ------------ FRANCE -- 0.65% Government of France (OAT) 9.50%, due 01/25/01.......................... FRF 10,300,000 1,950,939 7.50%, due 04/25/05.............................. 9,300,000 1,767,711 8.50%, due 12/26/12.............................. 2,500,000 538,149 ------------ 4,256,799 ------------ GERMANY -- 4.06% Bundesrepublik Deutschland 7.000%, due 09/20/99..........................DEM 13,700,000 7,971,158 8.500%, due 08/21/00............................. 2,180,000 1,333,509 9.000%, due 01/22/01............................. 2,500,000 1,565,402 8.375%, due 05/21/01............................. 1,580,000 980,635 7.250%, due 10/21/02............................. 4,500,000 2,760,163 6.750%, due 04/22/03............................. 4,900,000 2,955,915 6.750%, due 07/15/04............................. 6,300,000 3,830,243 6.250%, due 01/04/24............................. 2,500,000 1,460,848 Treuhandanstalt 6.250% due 03/04/04.............................. 6,200,000 3,669,451 ------------ 26,527,324 ------------ ITALY -- 0.86% Republic of Italy (BTP) 9.50%, due 12/01/99...........................ITL 1,900,000,000 1,155,335 10.50%, due 04/01/00............................. 995,000,000 627,485 12.00%, due 09/01/02............................. 1,700,000,000 1,223,139 9.00%, due 10/01/03.............................. 900,000,000 600,407 8.50%, due 04/01/04.............................. 3,100,000,000 2,030,022 ------------ 5,636,388 ------------
- -------------------------------------------------------------------------------- 17 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ------------ NETHERLANDS -- 1.44% Government of Netherlands 6.25%, due 07/15/98...............................NLG 1,400,000 $ 698,515 8.50%, due 03/15/01.................................. 5,600,000 3,070,843 8.75%, due 09/15/01.................................. 700,000 391,314 6.50%, due 04/15/03.................................. 1,100,000 580,847 7.25%, due 10/01/04.................................. 3,200,000 1,763,133 8.25%, due 02/15/07.................................. 4,815,000 2,865,534 ----------- 9,370,186 ----------- SPAIN -- 1.06% Government of Spain 6.75%, due 04/15/00...............................ESP 415,000,000 2,847,578 7.90%, due 02/28/02.................................. 140,000,000 1,016,796 8.00%, due 05/30/04.................................. 300,000,000 2,250,689 10.00%, due 02/28/05................................. 100,000,000 832,057 ----------- 6,947,120 ----------- SWEDEN -- 0.50% Government of Sweden 5.50%, due 04/12/02...............................SEK 6,500,000 817,321 10.25%, due 05/05/03................................. 16,300,000 2,475,362 ----------- 3,292,683 ----------- UNITED KINGDOM -- 2.81% UK Treasury 8.00%, due 06/10/03...............................GBP 2,590,000 4,549,280 6.75%, due 11/26/04.................................. 380,000 637,762 8.50%, due 12/07/05.................................. 4,570,000 8,485,330 8.50%, due 07/16/07.................................. 1,200,000 2,266,351 7.25%, due 12/07/07.................................. 1,200,000 2,114,563 8.75%, due 08/25/17.................................. 130,000 272,193 ----------- 18,325,479 ----------- Total Non-U.S. Bonds.................................. 107,262,437 ----------- EMERGING MARKETS DEBT -- 5.24% SHARES ----------- Brinson Emerging Markets Debt Fund (b)............................................. 1,692,314 34,231,280 ----------- Total Bonds (Cost $307,234,717)....................... 318,549,626 ----------- Short-Term Investments -- 16.74% FACE U.S. GOVERNMENT OBLIGATIONS -- 0.25% AMOUNT ----------- U.S. Treasury Bill 5.420%, due 05/28/98............... $ 1,630,000 1,595,361 ----------- CERTIFICATES OF DEPOSIT -- 0.92% Canadian Imperial Bank 5.940%, due 10/23/98................................. 3,000,000 2,998,614 Societe General 6.000%, due 10/20/98................................. 3,000,000 2,997,715 ----------- 5,996,329 -----------
FACE AMOUNT VALUE ------------ ------------ COMMERCIAL PAPER -- 15.57% Bausch & Lomb Inc. 7.750%, due 01/02/98................................. $ 2,290,000 $ 2,289,507 6.750%, due 01/05/98................................. 15,000,000 14,991,562 Case Credit Corp. 6.110%, due 01/20/98................................. 2,800,000 2,790,971 6.030%, due 03/10/98................................. 1,000,000 988,610 6.020%, due 03/13/98................................. 1,500,000 1,482,191 ConAgra, Inc. 5.900%, due 01/23/98................................. 5,000,000 4,982,792 CSX Corp. 5.700%, due 01/05/98................................. 5,000,000 4,997,625 Cummins Engine Co., Inc. 7.000%, due 01/02/98................................. 6,175,000 6,175,000 General American Tranportation Corp. 7.500%, due 01/07/98................................. 682,000 681,147 GTE Corp. 6.120%, due 02/20/98................................. 1,500,000 1,487,250 6.020%, due 03/02/98................................. 1,500,000 1,484,950 ITT Industries, Inc. 7.250%, due 01/02/98................................. 10,000,000 9,997,986 6.250%, due 01/06/98................................. 1,909,000 1,907,674 Marriott Corp. 6.050%, due 02/09/98................................. 2,000,000 1,986,892 Nabisco, Inc. 6.100%, due 01/07/98................................. 5,000,000 4,995,764 6.120%, due 01/16/98................................. 2,500,000 2,493,625 Occidental Petroleum Corp. 6.900%, due 01/12/98................................. 5,000,000 4,990,417 6.000%, due 01/16/98................................. 2,500,000 2,493,750 Praxair, Inc. 6.550%, due 01/02/98................................. 1,000,000 999,818 5.750%, due 01/05/98................................. 5,000,000 4,997,604 Rite Aid Corp. 5.850%, due 01/20/98................................. 5,000,000 4,985,375 Safeway, Inc. 5.920%, due 01/22/98................................. 1,500,000 1,494,820 Solutia, Inc. 7.000%, due 01/02/98................................. 7,915,000 7,915,000 Tupperware, Corp. 7.050%, due 01/02/98................................. 4,590,000 4,590,000 Ultramar Diamond Shamrock Corp. 6.000%, due 01/06/98................................. 5,000,000 4,996,667 Vastar Resources, Inc. 7.100%, due 01/02/98................................. 451,000 450,911 ------------ 101,647,908 ------------ Total Short-Term Investments (Cost $109,239,959).................................. 109,239,598 ------------ Total Investments (Cost $687,250,467) -- 112.84% (a)................... 736,539,015 ------------ Liabilities, less cash and other assets--(12.84%)..... (83,850,246) ------------ Net Assets -- 100%.................................... $652,688,769 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $687,250,467; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $75,270,262 Gross unrealized depreciation................................ (25,981,714) ----------- Net unrealized appreciation............................... $49,288,548 ===========
(b) Non-income producing security (c) Denominated in U.S. dollars. (d) Linked to Canada's retail price index. Reset semi-annually. FRN: Floating rate note---The rate disclosed is that in effect at December 31, 1997. 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, 1997, the value of these securities amounted to $12,433,140 or 1.90% 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 (NOTE 4) The Global Fund had the following open forward currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar........... 2/5/98 7,300,000 $ 4,760,414 $ (529,176) Belgian Franc............... 2/5/98 176,000,000 4,759,921 (176,965) British Pound............... 2/5/98 2,000,000 3,285,151 (54,849) Canadian Dollar............. 2/5/98 9,700,000 6,785,684 (31,600) Danish Kroner............... 2/5/98 17,000,000 2,487,249 (13,486) Dutch Guilder............... 2/5/98 7,300,000 3,608,752 (70,412) French Franc................ 2/5/98 27,900,000 4,647,297 67,820 German Mark................. 2/5/98 8,500,000 4,736,986 (33,472) Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (14,258) Japanese Yen................ 2/5/98 4,950,000,000 38,269,152 (5,018,981) Spanish Peseta.............. 2/5/98 165,000,000 1,083,559 (7,855) Swiss Franc................. 2/5/98 8,700,000 5,989,384 59,237 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar........... 2/5/98 20,900,000 13,629,131 1,304,887 Belgian Franc............... 2/5/98 176,000,000 4,759,921 (51,899) British Pound............... 2/5/98 23,000,000 37,779,238 126,402 Canadian Dollar............. 2/5/98 19,800,000 13,851,191 527,685 Danish Kroner............... 2/5/98 86,600,000 12,670,340 (76,941) Dutch Guilder............... 2/5/98 17,600,000 8,700,553 10,137 German Mark................. 2/5/98 41,700,000 23,239,095 (97,035) Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (57,429) Japanese Yen................ 2/5/98 3,600,000,000 27,832,111 2,710,530 Spanish Peseta.............. 2/5/98 840,000,000 5,516,299 227,585 ----------- Total...................... $(1,200,075) ===========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of December 31, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) ---------- ----------- ----------- ----------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Note,182 contracts..................... March 1998 $19,709,740 $19,769,750 $ 60,010 10 year U.S. Treasury Note, 9 contracts..................... March 1998 1,002,723 1,009,406 6,683 30 year U.S. Treasury Bonds, 27 contracts..................... March 1998 3,258,765 3,252,656 (6,109) INDEX FUTURES SALES CONTRACTS Standard & Poor's 500,108 con- tracts........................ March 1998 26,240,844 26,435,700 (194,856) --------- Total......................... $(134,272) =========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1997 was $1,595,361. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $613,477,833)....................... $654,586,339 Affiliated issuers (Cost $73,772,634).......................... 81,952,676 Cash........................................................... 967,618 Foreign currency, at value (Cost $1,661,900).................... 1,650,073 Receivables: Investment securities sold..................................... 4,199,922 Dividends...................................................... 566,826 Interest....................................................... 5,279,895 Fund shares sold............................................... 2,750 Other assets.................................................... 68,200 ------------ TOTAL ASSETS................................................. 749,274,299 ------------ LIABILITIES: Payables: Securities loaned (Note 6)..................................... 79,523,767 Investment securities purchased................................ 15,247,486 Fund shares redeemed........................................... 63,989 Investment advisory fees (Note 2).............................. 451,581 Accrued expenses............................................... 98,632 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 1,200,075 ------------ TOTAL LIABILITIES............................................ 96,585,530 ------------ NET ASSETS....................................................... $652,688,769 ============ NET ASSETS CONSIST OF: Paid in capital (Note 8)........................................ $606,550,960 Accumulated distribution in excess of net investment income..... (19,500,419) Accumulated net realized gain................................... 17,760,003 Net unrealized appreciation..................................... 47,878,225 ------------ NET ASSETS................................................... $652,688,769 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $624,336,530 and 51,450,863 shares is- sued and outstanding) (Note 8)................................ $ 12.13 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,019 and 84 shares issued and outstanding) (Note 8)......... $ 12.13 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $28,351,220 and 2,346,083 shares is- sued and outstanding) (Note 8)................................ $ 12.08 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Interest (net of $10,982 for foreign taxes withheld; including securities lending income of $73,183)........................... $ 9,386,734 Dividends (net of $135,273 for foreign taxes withheld)........... 2,639,326 ----------- TOTAL INCOME.................................................. 12,026,060 ----------- EXPENSES: Advisory (Note 2)................................................ 2,635,060 Administration................................................... 247,037 Distribution (Note 7)............................................ 92,076 Custodian........................................................ 74,111 Other............................................................ 164,286 ----------- TOTAL EXPENSES................................................ 3,212,570 ----------- NET INVESTMENT INCOME ........................................ 8,813,490 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 20,050,524 Futures contracts............................................... (874,722) Foreign currency transactions................................... 4,235,588 ----------- Net realized gain............................................. 23,411,390 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ (14,119,807) Futures contracts............................................... 158,670 Forward contracts............................................... (7,317,967) Translation of other assets and liabilities denominated in for- eign currency.................................................. (43,884) ----------- Change in net unrealized appreciation or depreciation......... (21,322,988) ----------- Net realized and unrealized gain................................. 2,088,402 ----------- Net increase in net assets resulting from operations............. $10,901,892 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1997 ENDED (UNAUDITED) JUNE 30, 1997 ----------------- ------------- OPERATIONS: Net investment income........................ $ 8,813,490 $ 16,194,760 Net realized gain............................ 23,411,390 43,268,043 Change in net unrealized appreciation or de- preciation.................................. (21,322,988) 35,756,888 ------------ ------------- Net increase in net assets resulting from op- erations.................................... 10,901,892 95,219,691 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Brinson Class I.............................. (26,359,274) (23,918,105) Brinson Class N.............................. (40) -- SwissKey Class............................... (989,891) (742,228) Distributions from net realized gain Brinson Class I.............................. (33,973,096) (25,579,684) Brinson Class N.............................. (53) -- SwissKey Class............................... (1,492,307) (848,410) ------------ ------------- Total distributions to shareholders........... (62,814,661) (51,088,427) ------------ ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................. 102,712,225 192,297,100 Shares issued on reinvestment of distribu- tions....................................... 56,902,593 49,580,585 Shares redeemed.............................. (67,984,082) (145,001,283) ------------ ------------- Net increase in net assets resulting from capital share transactions (Note 8)......... 91,630,736 96,876,402 ------------ ------------- TOTAL INCREASE IN NET ASSETS.............. 39,717,967 141,007,666 ------------ ------------- NET ASSETS: Beginning of year............................ 612,970,802 471,963,136 ------------ ------------- End of year (including accumulated undistrib- uted net investment income of ($19,500,419) and ($964,704), respectively)............... $652,688,769 $ 612,970,802 ============ =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, AUGUST 31, 1992* 1997 -------------------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 1994 JUNE 30, 1993 - ------------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00 -------- -------- -------- -------- -------- -------- Income from investment operations: Net investment income. 0.24** 0.38 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... -- 1.79 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- -------- -------- Total income from investment operations......... 0.24 2.17 1.81 1.29 0.10 1.07 -------- -------- -------- -------- -------- -------- Less distributions: Distributions from and in excess of net investment income.... (0.54) (0.61) (0.62) (0.27) (0.27) (0.20) Distributions from and in excess of net realized gain........ (0.70) (0.65) (0.32) (0.10) (0.27) -- -------- -------- -------- -------- -------- -------- Total distributions. (1.24) (1.26) (0.94) (0.37) (0.54) (0.20) -------- -------- -------- -------- -------- -------- Net asset value, end of period................. $ 12.13 $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== ======== ======== Total return (non- annualized)............ 1.95% 18.79% 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $624,337 $586,667 $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.95%*** 0.99% 1.04% 1.09% 1.14% 1.35%*** After expense reim- bursement............ N/A N/A N/A N/A 1.10% 1.05%*** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.60%*** 3.03% 3.69% 4.27% 3.21% 3.26%*** After expense reim- bursement............ N/A N/A N/A N/A 3.25% 3.56%*** Portfolio turnover rate.................. 57% 150% 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0352 $ 0.0326 $ 0.0291 N/A N/A N/A
*Commencement of investment operations **The net investment income per share was determined by using average shares outstanding throughout the period. ***Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 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, 1997* BRINSON CLASS N (UNAUDITED) - ----------------------------------------------- Net asset value, beginning of period.................. $ 13.13 ------- Income from investment op- erations: 0.00 Net investment income..... 0.22** Net realized and unrealized gain.......... 0.00 ------- Total income from in- vestment operations.... 0.22 ------- Less distributions: Distributions from and in excess of net investment income................... (0.52) Distributions from net re- alized gain.............. (0.70) ------- Total distributions..... (1.22) ------- Net asset value, end of pe- riod....................... $ 12.13 ======= Total return (non- annualized)................ 1.79% Ratios/Supplemental Data: Net assets, end of period (in 000s)................. $ 1 Ratio of expenses to aver- age net assets............ 1.20%*** Ratio of net investment in- come to average net as- sets...................... 3.35%*** Portfolio turnover rate.... 57% Average commission rate paid per share............ $0.0352
* Commencement of Brinson Class N was June 30, 1997. ** The net investment income per share was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 13.05 $ 12.18 $ 11.60 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.19** 0.34 0.39 Net realized and unrealized gain......................... -- 1.75 1.10 ------- ------- ------- Total income from investment operations................. 0.19 2.09 1.49 ------- ------- ------- Less distributions: Distributions from and in excess of net investment income....................... (0.46) (0.57) (0.59) Distributions from net real- ized gain.................... (0.70) (0.65) (0.32) ------- ------- ------- Total distributions......... (1.16) (1.22) (0.91) ------- ------- ------- Net asset value, end of period.. $ 12.08 $ 13.05 $ 12.18 ======= ======= ======= Total return (non-annualized)... 1.58% 18.13% 13.24% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $28,351 $26,303 $14,030 Ratio of expenses to average net assets.................... 1.60%*** 1.64% 1.69%*** Ratio of net investment income to average net assets......... 2.94%*** 2.38% 3.04%*** Portfolio turnover rate........ 57% 150% 142% Average commission rate paid per share..................... $0.0352 $0.0326 $0.0291
* Commencement of SwissKey Class ** The net investment income per share was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 Global Equity Fund - -------------------------------------------------------------------------------- The Global Equity Fund is actively managed, providing a fully integrated approach to the primary equity markets across the world. Market selection and currency strategies are managed within a global asset allocation framework. Industry strategies and individual security selections are based on the fundamental research of our analytical teams in our offices worldwide. The Brinson Global Equity Fund has provided an annualized return of 11.17% since its inception on January 31, 1994, below the 12.48% return for the benchmark MSCI World Equity (Free) Index. Over this period, the Brinson Global Equity Fund experienced annualized volatility of 8.76%, below the volatility of the benchmark which was 10.41%. For the year ended December 31, 1997, the Fund returned 10.72%, compared to the benchmark return of 15.92%. Since inception, the Fund's largest contributor to performance has been currency allocation. For 1997, currency allocation made an important positive contribution to Fund performance. Market allocation strategies, notable for a U.S. equity market underweight and a cash risk hedge, detracted from performance. Security selection also reduced performance; with very strong stock selection in Japan more than offset by poor results in the U.S. As global equity markets in aggregate were strong in 1997, holding cash cost performance. Returns varied considerably, however, double-digit rises in Europe and North America contrasted sharply with very weak markets in the Pacific region. Despite a return of 34.1% for the MSCI U.S. component, the U.S. equity market was not the strongest developed market during 1997. Nine markets in the global equity index outperformed the U.S. market, led by Switzerland and Denmark, gaining U.S. dollar-hedged returns of 63.5% and 59.5% respectively. The performance of the MSCI World Equity (Free) Index was muted by the weakness of Japan, Southeast Asia, New Zealand and Australia. The worst performing market in 1997 was Malaysia, which declined 52.1% in U.S. dollar-hedged terms. Currency strategies contributed substantially to the performance of the Fund relative to the MSCI World Equity (Free) benchmark. At the start of the year, the Fund maintained a significant underweight to the Japanese yen and to the core European currencies. This position was gradually pared down and by the end of March was relatively neutral. In October, a small underweight of the yen was reinstated, increasing the size of the U.S. dollar overweight. For the full year, the U.S. dollar overweight and yen underweight made the greatest positive impact on returns. Japan stock selection made a very large positive contribution, benefiting from overweights of blue chip multinationals and other defensive securities, while avoiding all but the highest quality banks and financials. The U.S. equity portion of the Fund was hurt by its underexposure to large capitalization and consumer products issues, as companies with well-known brand names and stable cash flows outperformed. 26 Global Equity Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year 3 years 1/31/94* ended ended ended to 12/31/97 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------- Brinson Global Equity Fund -1.68% 10.72% 16.53% 11.17% MSCI World Equity (Free) Index 0.36 15.92 17.00 12.48 - -------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Equity Fund and the MSCI World Equity (Free) Index 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, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Equity Fund vs. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested
Brinson MSCI Global World Equity Equity (Free) Fund Index - ----------------------------------------- 1/31/94 1000000 1000000 2/28/94 978000 986865.04 3/31/94 935000 944348.6 4/30/94 957000 974077.96 5/31/94 964000 976963.08 6/30/94 953025.45 974100.89 7/31/94 967084.84 992749.02 8/31/94 1008258.75 1022750.51 9/30/94 981144.22 995748.08 10/31/94 983152.7 1024395.72 11/30/94 957042.42 980244.75 12/31/94 956520.48 989551.08 1/31/95 942319.75 975024.82 2/28/95 957534.82 989499.12 3/31/95 965649.52 1037236.46 4/30/95 991007.96 1073521.14 5/31/95 1004194.35 1083208.08 6/30/95 1010801.91 1082850.85 7/31/95 1057638.4 1137066.07 8/31/95 1075010.24 1111688.18 9/30/95 1094425.83 1144525.61 10/31/95 1092382.08 1126745.62 11/30/95 1131213.25 1166017.6 12/31/95 1166323.79 1200235.52 1/31/96 1201269.82 1222675.9 2/29/96 1206730.14 1230112.18 3/31/96 1227479.34 1250534.13 4/30/96 1261333.31 1279914.41 5/31/96 1264609.5 1280938.52 6/30/96 1270202.14 1287765.26 7/31/96 1229582.02 1242254.73 8/31/96 1251538.84 1256945.32 9/30/96 1293256.8 1306231.22 10/31/96 1297648.16 1315223.21 11/30/96 1363518.63 1389368.21 12/31/96 1367687.97 1367286.33 1/31/97 1379695.76 1384047.1 2/28/97 1398908.24 1399822.12 3/31/97 1392904.34 1371806.69 4/30/97 1401309.8 1416807.77 5/31/97 1484163.59 1504478.53 6/30/97 1540252.63 1579321.39 7/31/97 1590950.6 1652215.67 8/31/97 1517317.83 1540395.72 9/30/97 1582500.93 1624143.99 10/31/97 1496797.22 1538888.9 11/30/97 1495590.13 1565803.25 12/31/97 1514304.17 1584936.86
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. 27 Global Equity Fund - -------------------------------------------------------------------------------- Market Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - -------------------------------------------------------------- U.S. 49.8% 34.3% Japan 12.0 5.6 Australia 1.3 2.7 Belgium 0.6 1.8 Canada 2.5 1.6 France 3.8 3.7 Germany 4.7 4.5 Hong Kong 1.3 0.5 Italy 1.9 2.3 Malaysia 0.4 0.8 Netherlands 2.7 2.4 New Zealand 0.1 1.9 Spain 1.3 1.3 Sweden 1.2 0.9 Switzerland 3.7 2.6 U.K. 10.3 11.8 Other Markets 2.4 1.3 Cash Reserves 0.0 20.0 - -------------------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ---------------------------------------------------------------- 1. Lockheed Martin Corp. 2.02% 2. Xerox Corp. 1.95 3. Philip Morris Companies, Inc. 1.84 4. Aon Corp. 1.64 5. CIGNA Corp. 1.63 6. Schering Plough Corp. 1.44 7. Burlington Northern Santa Fe Corp. 1.41 8. Goodyear Tire & Rubber Co. 1.36 9. Federal Express Corp. 1.36 10. Automatic Data Processing, Inc. 1.17 - ----------------------------------------------------------------
Currency Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - -------------------------------------------------------------- U.S. 49.8% 57.4% Japan 12.0 8.0 Australia 1.3 1.3 Belgium 0.6 0.6 Canada 2.5 2.5 France 3.8 3.8 Germany 4.7 4.7 Hong Kong 1.3 -- Italy 1.9 1.9 Malaysia 0.4 0.4 Netherlands 2.7 2.7 New Zealand 0.1 1.9 Spain 1.3 1.3 Sweden 1.2 1.2 Switzerland 3.7 3.7 U.K. 10.3 6.3 Other Markets 2.4 2.3 - -------------------------------------------------------------- 100.0% 100.0%
Top Ten Non-U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ---------------------------------------------------------------- 1. Glaxo Wellcome PLC 0.77% 2. Telecom Corp. of New Zealand Ltd. 0.75 3. Royal Dutch Petroleum Co. 0.71 4. Novartis AG(Reg.) 0.67 5. Lloyds TSB Group PLC 0.61 6. B.A.T. Industries PLC 0.56 7. Allianz AG 0.53 8. British Petroleum Co. PLC 0.48 9. Roche Holding AG (Gen.) 0.46 10. British Telecommunications PLC 0.44
28 Global Equity Fund - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited)
- ------------------------------------------ U.S. EQUITIES Energy........................... 1.93% Capital Investment Capital Goods................... 3.37 Technology...................... 4.11 ------ 7.48 Basic Industries Chemicals....................... 1.00 Housing/Paper................... 2.43 Metals.......................... 0.42 ------ 3.85 ------ Consumer Non-Durables.................... 4.62 Retail/Apparel.................. 2.43 Autos/Durables.................. 1.87 Descretionary................... 1.74 Health: Drugs................... 3.86 Health: Non-Drugs............... 2.04 ------ 16.56 Financial Banks........................... 3.74 Non-Banks....................... 3.33 ------ 7.07 Utilities Electric........................ 2.93 Telephone....................... 0.51 ------ 3.44 Transportation................... 2.93 Services/Misc.................... 4.49 ------ Total U.S. Equities.......... 47.75* ------ NON-U.S. EQUITIES Aerospace & Military............. 0.09 Airplanes........................ 0.17 Appliances & Household........... 0.75 Autos/Durables................... 1.42 Banking.......................... 5.34 Beverages and Tobacco............ 1.14 Broadcasting & Publishing........ 0.80 Building Materials............... 0.63 Business & Public Service........ 1.47 Chemicals........................ 1.24 Construction..................... 0.36 Data Processing.................. 0.31 Electric Components.............. 0.46 Electronics...................... 1.61 Energy........................... 3.82 Financial Services............... 1.01 Food & House Products............ 1.59 Forest Products.................. 0.57 Gold Mining...................... 0.03 Health: Drugs.................... 0.72 Health: Non-Drugs................ 2.51 Industrial Components............ 0.58 Insurance........................ 2.92 Leisure & Tourism................ 0.25 Machinery & Engineering.......... 0.08 Merchandising.................... 2.03 Metals--Steel.................... 0.70 Miscellaneous Materials.......... 0.17 Miscellaneous Services........... 0.05 Multi-Industry................... 2.38 Non-Ferrous Metals............... 0.84 Real Estate...................... 0.49 Recreation....................... 0.17 Retail & Apparel................. 0.28 Shipping......................... 0.02 Telecommunications............... 3.94 Textiles &Apparel................ 0.08 Transportation................... 0.42 Utilities........................ 2.01 Wholesale & International Trade.. 0.24 ------ Total Non-U.S. Equities...... 43.69 ------ SHORT-TERM INVESTMENTS........... 8.78* ------ TOTAL INVESTMENTS............ 100.22 ------ LIABILITIES LESS CASH AND OTHER ASSETS................ (0.22) ------ NET ASSETS................... 100.00% ====== - ------------------------------------------
* The Fund held a short position in stock index futures on December 31, 1997 which reduced U.S. Equity exposure from 47.75% to 33.35%. This adjustment results in an increase in the Fund's exposure to Short-Term Investments from 8.78% to 23.18%. 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- Equities -- 91.44% U. S. EQUITIES -- 47.75% Allergan, Inc............................................... 12,100 $ 406,106 Alza Corp. (b).............................................. 11,800 375,387 American Home Products Corp................................. 9,500 726,750 Aon Corp.................................................... 22,750 1,333,719 Automatic Data Processing, Inc.............................. 15,500 951,312 Baxter International, Inc................................... 15,300 771,694 Beckman Instruments, Inc.................................... 4,600 184,000 Biogen, Inc. (b)............................................ 4,600 167,325 Birmingham Steel Corp....................................... 4,700 74,025 Boston Technology, Inc. (b)................................. 4,500 113,062 Briggs & Stratton Corp...................................... 600 29,137 Burlington Northern Santa Fe Corp........................... 12,400 1,152,425 Champion Enterprises, Inc. (b).............................. 7,600 156,275 Champion International Corp................................. 600 27,187 Chase Manhattan Corp........................................ 6,400 700,800 CIGNA Corp.................................................. 7,700 1,332,581 Circuit City Stores-Circuit City Group...................... 17,400 618,787 Citicorp.................................................... 5,700 720,694 CMS Energy Corp............................................. 15,200 669,750 Comerica, Inc............................................... 3,200 288,800 Commscope, Inc. (b)......................................... 8,933 120,037 Comverse Technology, Inc. (b)............................... 2,300 89,700 Corning, Inc................................................ 25,200 935,550 Covance, Inc. (b)........................................... 5,900 117,262 CPC International, Inc...................................... 5,200 561,600 Crown Cork & Seal Co., Inc.................................. 5,600 280,700 CVS Corp.................................................... 7,500 480,469 Dial Corp................................................... 6,100 126,956 Eastman Chemical Co......................................... 6,500 387,156 Echlin, Inc................................................. 3,300 119,419 EMC Corp. (b)............................................... 33,800 927,387 Enron Corp.................................................. 15,800 656,687 Entergy Corp................................................ 30,900 925,069 Federal Express Corp. (b)................................... 18,100 1,105,231 First American Corp. of Tennessee........................... 3,100 154,225 First Data Corp............................................. 28,604 836,667 First Security Corp......................................... 3,900 163,312 FirstEnergy Corp............................................ 9,227 267,583 Fleetwood Enterprises, Inc.................................. 3,600 152,775 Food Lion, Inc. Class A..................................... 23,500 198,281 Forest Laboratories, Inc. (b)............................... 5,400 266,287 Fort James Corp............................................. 13,800 527,850 Gannett Co., Inc............................................ 11,800 729,388 General Semiconductor, Inc. (b)............................. 7,425 85,852 Genzyme Corp................................................ 4,800 133,200 Geon Co..................................................... 3,200 74,800 Goodyear Tire & Rubber Co................................... 17,400 1,107,075 Harnischfeger Industries, Inc............................... 9,000 317,813 Health Care and Retirement Corp. (b)........................ 5,350 215,338 Hibernia Corp............................................... 6,600 124,163 Informix Corp. (b).......................................... 6,300 29,925 Interpublic Group of Companies, Inc......................... 7,650 381,066 Kimberly Clark Corp......................................... 14,100 695,306 Lear Corp. (b).............................................. 5,100 242,250 Lockheed Martin Corp........................................ 16,751 1,649,974
SHARES VALUE ------- ----------- Lyondell Petrochemical Co................................... 12,900 $ 341,850 Manor Care, Inc............................................. 9,100 318,500 Martin Marietta Materials, Inc.............................. 3,435 125,592 Masco Corp.................................................. 13,700 696,988 Nabisco Holdings Corp....................................... 12,000 581,250 National Service Industries, Inc............................ 2,300 113,994 Nextel Communications, Inc. (b)............................. 16,300 423,800 NextLevel Systems, Inc. (b)................................. 26,900 480,838 Old Republic International Corp............................. 2,450 91,109 Peco Energy Co.............................................. 35,100 851,175 Pentair, Inc................................................ 6,200 222,813 Pharmacia & UpJohn, Inc..................................... 6,300 230,738 Philip Morris Companies, Inc................................ 33,200 1,504,375 Raytheon Co., Class B....................................... 13,900 701,950 Regions Financial Corp...................................... 3,000 126,563 Reynolds & Reynolds Co...................................... 11,600 213,875 Schering Plough Corp........................................ 18,900 1,174,163 Seagate Technology, Inc. (b)................................ 10,500 202,125 Sears, Roebuck and Co....................................... 1,400 63,350 Timken Co................................................... 4,000 137,500 Tyson Foods, Inc., Class A.................................. 24,000 492,000 Ultramar Diamond Shamrock Corp.............................. 13,352 425,595 US Bancorp.................................................. 8,021 897,851 Vencor, Inc. (b)............................................ 12,000 293,250 Viad Corp................................................... 11,600 224,025 Westvaco Corp............................................... 2,850 89,597 Witco Corp.................................................. 1,300 53,056 Xerox Corp.................................................. 21,600 1,594,350 York International Corp..................................... 7,300 288,806 ----------- Total U.S. Equities......................................... 38,947,247 ----------- NON-U.S. EQUITIES -- 43.69% AUSTRALIA -- 2.35% Amcor Ltd................................................... 8,300 36,506 Boral Ltd................................................... 21,600 54,609 Brambles Industries Ltd..................................... 5,000 99,206 Broken Hill Proprietary Co., Ltd............................ 30,050 279,024 Coca-Cola Amatil Ltd........................................ 5,200 38,850 CSR Ltd..................................................... 15,000 50,825 David Jones Ltd............................................. 53,200 59,971 Lend Lease Corp., Ltd....................................... 3,697 72,269 Mayne Nickless Ltd.......................................... 7,500 39,634 M.I.M. Holdings Ltd......................................... 32,411 19,852 National Australia Bank Ltd................................. 21,075 294,288 News Corp. Ltd.............................................. 44,040 243,060 News Corp. Ltd., Preferred.................................. 9,700 47,998 Pacific Dunlop Ltd.......................................... 25,200 53,366 Qantas Airways Ltd.......................................... 26,764 47,365 Rio Tinto Ltd............................................... 9,663 112,725 Santos Ltd.................................................. 6,000 24,709 Telstra Corp., Ltd. (b)..................................... 10,000 21,112 Westpac Banking Corp., Ltd.................................. 34,945 223,512 WMC Ltd..................................................... 16,800 58,566 Woolworth's Ltd............................................. 12,000 40,113 ----------- 1,917,560 -----------
- -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- BELGIUM -- 1.75% Delhaize-Le Lion S.A........................................ 2,650 $ 134,463 Electrabel S.A.............................................. 1,140 263,685 Fortis AG................................................... 88 12 Fortis AG Strip (b)......................................... 1,018 212,387 Generale de Banque S.A...................................... 220 95,746 Groupe Bruxelles Lambert S.A................................ 550 79,566 Kredietbank NV.............................................. 275 115,415 Kredietbank VVPR............................................ 11 4,617 Petrofina S.A............................................... 530 195,616 Societe Generale de Belgique................................ 750 68,622 Solvay S.A., Class A........................................ 1,550 97,474 Tractebel................................................... 1,300 113,330 Tractebel Warrants "99" (b)................................. 200 513 Union Miniere Group S.A. (b)................................ 702 48,693 ----------- 1,430,139 ----------- CANADA -- 1.58% Agrium, Inc................................................. 3,100 37,691 Alcan Aluminum Ltd.......................................... 2,500 68,828 Bank of Montreal............................................ 1,700 75,253 Barrick Gold Corp........................................... 1,500 27,933 Canadian National Railway Co................................ 1,700 79,946 Canadian Pacific Ltd........................................ 5,216 140,323 Hudson's Bay Co............................................. 2,000 44,511 Imasco, Ltd................................................. 1,200 42,345 Imperial Oil Ltd............................................ 2,000 128,572 Magna International Inc., Class A........................... 700 43,826 Moore Corp., Ltd............................................ 2,400 36,056 Newbridge Networks Corp. (b)................................ 800 27,979 Noranda, Inc................................................ 2,500 42,974 Northern Telecom Ltd........................................ 400 35,539 NOVA Corp................................................... 6,900 65,572 Potash Corporation of Saskatchewan, Inc..................... 700 58,231 Royal Bank of Canada........................................ 2,000 105,653 Seagram Co., Ltd............................................ 1,400 45,245 TELUS Corp.................................................. 3,300 73,098 TransCanada Pipelines Ltd................................... 3,400 75,788 Westcoast Energy, Inc....................................... 1,600 36,895 ----------- 1,292,258 ----------- FINLAND -- 0.34% Cultor Oyj.................................................. 300 16,306 Merita Ltd., Class A........................................ 7,000 38,306 Metsa Serla Oyj, Class B.................................... 1,800 14,048 Nokia Oyj, Class A Preferred................................ 1,800 127,917 Outokumpu Oyj, Class A...................................... 1,500 18,317 Sampo Insurance Co., Ltd., Series A......................... 400 13,001 The Rauma Group............................................. 83 1,296 UPM-Kymmene Corp............................................ 2,200 44,035 ----------- 273,226 -----------
SHARES VALUE ------- ----------- FRANCE -- 2.75% Accor S.A................................................... 408 $ 75,843 Alcatel Alsthom............................................. 696 88,472 AXA-UAP..................................................... 1,441 111,587 AXA-UAP Rights (b).......................................... 1,291 1,267 Banque Nationale de Paris................................... 1,610 85,612 Cie Bancaire S.A............................................ 23 3,728 Cie de Saint Gobain......................................... 916 130,183 Cie Financiere de Paribas................................... 900 78,241 Cie Generale des Eaux....................................... 928 129,609 Cie Generale des Eaux Warrants "01" (b)..................... 1,771 1,204 Dexia France................................................ 677 78,465 Elf Aquitaine S.A........................................... 1,213 141,082 France Telecom S.A. (b)..................................... 3,100 112,488 Groupe Danone............................................... 250 44,673 Lafarge S.A................................................. 675 44,308 Lagardere S.C.A............................................. 2,250 74,427 LVMH........................................................ 1 83 Lyonnaise des Eaux S.A...................................... 1,157 128,093 Michelin, Class B........................................... 1,701 85,672 Pechiney S.A., Class A...................................... 1,775 70,113 Peugeot S.A................................................. 943 118,909 Pinault-Printemps-Redoute S.A............................... 200 106,749 Rhone-Poulenc, Class A...................................... 2,690 120,560 SEITA....................................................... 2,350 84,375 Societe Generale............................................ 903 123,116 Thomson CSF................................................. 2,325 73,313 Total S.A., Class B......................................... 1,019 110,972 Usinor Sacilor.............................................. 1,300 18,778 ----------- 2,241,922 ----------- GERMANY -- 5.10% Allianz AG Holding.......................................... 1,680 433,524 BASF AG..................................................... 2,500 89,261 Bayer AG.................................................... 6,140 227,932 Bayerische Motoren Werke AG................................. 210 157,083 Commerzbank AG.............................................. 5,050 196,596 Continental AG.............................................. 4,700 105,862 Daimler-Benz AG............................................. 2,200 155,386 Deutsche Bank AG............................................ 4,900 342,817 Deutsche Telekom AG......................................... 16,910 313,166 Henkel KGaA-Vorzug AG, Preferred............................ 1,810 113,245 Hochtief AG................................................. 1,310 53,912 Hoechst AG.................................................. 1,950 67,563 M.A.N. AG................................................... 310 89,564 Mannesmann AG............................................... 360 180,791 Metro AG.................................................... 3,118 110,633 Muenchener Rueckver AG...................................... 855 325,243 Muenchener Rueckver AG Warrants "98" (b).................... 3 1,819 Preussag AG................................................. 490 150,698 RWE AG...................................................... 3,470 186,227 Schering AG................................................. 1,910 184,297 Siemens AG.................................................. 3,770 227,487 Veba AG..................................................... 4,060 276,598 Volkswagen AG............................................... 300 167,677 ----------- 4,157,381 -----------
- -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- HONG KONG -- 0.59% Cheung Kong Holdings Ltd.................................... 14,000 $ 91,695 China Light & Power Co., Ltd................................ 6,500 36,071 Citic Pacific Ltd........................................... 5,000 19,875 Hang Seng Bank Ltd.......................................... 5,800 55,953 Hong Kong and China Gas Co., Ltd............................ 30,000 58,076 Hong Kong Telecommunications Ltd............................ 32,000 65,871 Hutchison Whampoa Ltd....................................... 15,000 94,083 Sun Hung Kai Properties Ltd................................. 5,000 34,845 Swire Pacific Ltd., Class A................................. 4,500 24,682 ----------- 481,151 ----------- ITALY -- 2.22% Aeroporti Di Roma Spa (b)................................... 1,000 10,379 Assicurazioni Generali...................................... 6,640 163,179 Banca Commerciale Italia.................................... 19,000 66,090 Credito Italiano Spa........................................ 35,000 107,986 Danieli & Co. Savings (Risp)................................ 16,400 58,994 Edison Spa.................................................. 6,000 36,311 ENI ADR (c)................................................. 1,700 97,006 ENI Spa..................................................... 33,000 187,206 Fiat Spa-Priv Preferred..................................... 58,300 89,030 INA-Istituto Nazionale delle Assicurazioni.................. 35,000 70,968 Instituto Mobiliare Italiano Spa............................ 9,700 115,212 Italgas Spa................................................. 13,700 56,565 La Rinascente Spa........................................... 10,600 79,138 La Rinascente Spa RNC....................................... 11,000 41,062 La Rinascente Spa Warrants "99" (b)......................... 550 666 Mediobanca Spa.............................................. 1,800 14,141 Montedison Spa.............................................. 116,560 104,756 SAI-Savings (Risp).......................................... 10,000 44,116 Telecom Italia Mobile Spa................................... 20,000 92,362 Telecom Italia Mobile Spa RNC............................... 49,000 139,402 Telecom Italia Spa.......................................... 10,111 64,622 Telecom Italia Spa RNC...................................... 38,813 171,229 ----------- 1,810,420 ----------- JAPAN -- 5.85% Amada Co., Ltd.............................................. 10,000 37,301 Asahi Glass Co., Ltd........................................ 11,000 52,451 Bank of Tokyo-Mitsubishi, Ltd............................... 9,000 124,591 Canon, Inc.................................................. 8,000 187,041 Canon Sales Co., Inc........................................ 3,000 34,378 Citizen Watch Co., Ltd...................................... 9,000 60,565 Dai Nippon Printing Co., Ltd................................ 9,000 169,583 Daiichi Pharmaceutical Co., Ltd............................. 8,000 90,444 Daikin Industries Ltd....................................... 10,000 37,839 Daiwa House Industry Co., Ltd............................... 5,000 26,533 Fanuc....................................................... 4,400 167,168 Fujitsu..................................................... 6,000 64,603 Hitachi Ltd................................................. 20,000 143,049 Honda Motor Co.............................................. 3,000 110,517 Hoya Corp................................................... 1,000 31,532 Inax........................................................ 7,000 20,404 Ito Yokado Co., Ltd......................................... 4,000 204,576 Kaneka Corp................................................. 10,000 45,299
SHARES VALUE ------- ----------- Keio Teito Electric Railway................................. 11,000 $ 42,215 Kinki Nippon Railway........................................ 12,000 64,326 Kirin Brewery Co., Ltd...................................... 11,000 80,369 Kokuyo...................................................... 3,000 51,913 Kuraray Co., Ltd............................................ 12,000 99,673 Kyocera Corp................................................ 1,200 54,636 Marui Co., Ltd.............................................. 5,000 78,062 Matsushita Electric Industrial Co........................... 15,000 220,342 NGK Insulators.............................................. 16,000 142,742 Nintendo Co., Ltd........................................... 800 78,754 Nippon Denso Co., Ltd....................................... 5,000 90,367 Nippon Meat Packers, Inc.................................... 6,000 82,138 Nippon Steel Co............................................. 8,000 11,875 Okumura..................................................... 10,000 23,842 Osaka Gas Co................................................ 19,000 43,545 Sankyo Co., Ltd............................................. 7,000 158,816 Secom Co., Ltd.............................................. 2,000 128,283 Seino Transportation........................................ 7,000 35,047 Sekisui House Ltd........................................... 15,000 96,789 Sony Corp................................................... 2,700 240,877 Sumitomo Bank............................................... 11,000 126,053 Sumitomo Chemical Co........................................ 12,000 27,687 Sumitomo Electric Industries................................ 8,000 109,517 Takeda Chemical Industries.................................. 6,000 171,659 TDK Corp.................................................... 2,000 151,356 Tokio Marine & Fire Insurance Co............................ 9,000 102,442 Tokyo Electric Power........................................ 2,300 42,100 Tokyo Steel Mfg............................................. 8,000 27,133 Tonen Corp.................................................. 7,000 37,900 Toray Industries, Inc....................................... 36,000 161,969 Toshiba Corp................................................ 24,000 100,227 Toyo Suisan Kaisha.......................................... 9,000 62,573 Toyota Motor Corp........................................... 6,000 172,582 Yamazaki Baking Co., Ltd.................................... 5,000 48,837 ----------- 4,774,520 ----------- MALAYSIA -- 0.60% Hume Industries (Malaysia) Bhd.............................. 13,000 13,626 Kuala Lumpur Kepong Bhd..................................... 26,000 55,774 Land & General Holdings Bhd................................. 18,000 3,330 Malayan Banking Bhd......................................... 14,600 42,384 Malaysia International Shipping Bhd (Frgn.)................. 12,000 17,572 Nestle (Malaysia) Bhd....................................... 5,000 23,121 New Straits Times Press Bhd................................. 10,000 12,383 Perusahaan Otomobil Nasional Bhd............................ 8,000 7,810 Petronas Gas Bhd............................................ 10,000 22,736 Public Bank Bhd............................................. 4,800 1,492 Public Bank Bhd (Frgn.)..................................... 13,999 4,819 Public Bank Bhd Rights (b).................................. 800 43 Public Bank Bhd Rights (Frgn.) (b).......................... 2,333 120 Resorts World Bhd........................................... 10,000 16,827 Rothmans of Pall Mall Bhd................................... 6,000 46,628 Sime Darby Bhd.............................................. 37,000 35,550 Telekom Malaysia Bhd........................................ 27,500 81,246 Tenaga Nasional Bhd......................................... 31,000 66,102 UMW Holdings Bhd............................................ 6,000 4,547
- -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- MALAYSIA (CONTINUED) United Engineers Bhd....................................... 10,000 $ 8,324 YTL Corp. Bhd.............................................. 15,000 20,231 YTL Power International Bhd (b)............................ 800 615 ----------- 485,280 ----------- NETHERLANDS -- 2.24% ABN AMRO Holdings NV....................................... 7,701 150,047 Akzo Nobel NV.............................................. 300 51,734 DSM NV..................................................... 1 23 Elsevier NV................................................ 8,700 140,759 Heineken NV................................................ 675 117,533 Hoogovens NV............................................... 786 32,231 ING Groep NV............................................... 4,458 187,814 KLM Royal Dutch Air Lines NV............................... 1,118 41,360 KPN NV..................................................... 4,317 180,140 Philips Electronics NV..................................... 2,337 140,206 Royal Dutch Petroleum Co................................... 10,475 575,084 Unilever NV................................................ 3,400 209,638 ----------- 1,826,569 ----------- NEW ZEALAND -- 1.56% Brierley Investments Ltd................................... 266,700 190,493 Carter Holt Harvey Ltd..................................... 91,600 141,491 Fletcher Challenge Building................................ 30,350 62,037 Fletcher Challenge Energy.................................. 33,950 118,880 Fletcher Challenge Forests Ltd............................. 58,095 48,242 Fletcher Challenge Paper................................... 53,600 70,032 Lion Nathan Ltd............................................ 15,000 33,623 Telecom Corp. of New Zealand Ltd. ADS (c).................. 125,700 609,500 ----------- 1,274,298 ----------- SINGAPORE -- 0.72% City Developments Ltd...................................... 7,000 32,404 DBS Land Ltd............................................... 14,000 21,436 Development Bank of Singapore Ltd.......................... 7,000 59,822 Elec & Eltek International Co., Ltd........................ 2,200 10,076 Fraser & Neave Ltd......................................... 3,000 12,997 Hotel Properties Ltd....................................... 25,000 16,320 Keppel Corp., Ltd.......................................... 7,750 22,261 Keppel Land Ltd............................................ 9,000 12,392 NatSteel Ltd............................................... 7,000 9,472 Oversea-Chinese Banking Corp. Ltd.......................... 12,600 73,282 Singapore Airlines Ltd. (Frgn.)............................ 13,000 84,866 Singapore Press Holdings Ltd. (Frgn.)...................... 3,000 37,567 Singapore Telecommunications, Ltd.......................... 61,000 113,674 United Overseas Bank Ltd. (Frgn.).......................... 13,000 72,136 Wing Tai Holdings Ltd...................................... 8,000 9,353 ----------- 588,058 ----------- SPAIN -- 1.21% Acerinox S.A............................................... 125 18,510 Banco Bilbao-Vizcaya S.A................................... 3,375 109,164 Banco Central Hispanoamericano............................. 2,550 62,069 Banco Popular Espanol S.A.................................. 1,200 83,847 Banco Santander S.A........................................ 2,700 90,165 Empresa National de Electridad S.A......................... 7,050 125,116
SHARES VALUE ------- ----------- Fomento de Construcciones y Contratas S.A.................. 1,500 $ 57,079 Gas Natural SDG S.A........................................ 1,200 62,197 Iberdrola S.A.............................................. 6,675 87,806 Mapfre Corp................................................ 1,200 31,807 Repsol S.A................................................. 1,725 73,563 Tabacalera S.A............................................. 200 16,205 Telefonica de Espana....................................... 4,050 115,585 Vallehermoso S.A........................................... 900 27,575 Viscofan Envolturas Celulosicas S.A........................ 1,100 27,605 ----------- 988,293 ----------- SWEDEN -- 0.88% ABB AB, A Shares........................................... 3,000 35,541 Astra AB, A Shares......................................... 7,000 121,304 Electrolux AB, B Shares.................................... 500 34,721 Hennes & Mauritz AB, B Shares.............................. 1,700 74,988 Nordbanken Holding AB...................................... 16,100 91,106 Securitas AB, B Shares..................................... 1,300 39,321 Skanska AB, B Shares....................................... 900 36,921 Svenska Handelsbanken, A Shares............................ 1,400 48,433 Swedish Match AB........................................... 22,400 74,812 Telefonaktiebolaget LM Ericsson, B Shares.................. 2,400 90,288 Volvo AB, B Shares......................................... 2,600 69,796 ----------- 717,231 ----------- SWITZERLAND -- 2.54% ABB AG (Bearer)............................................ 41 51,895 Alusuisse-Lonza Holdings AG (Reg.)......................... 1 240 CS Holdings AG (Reg.)...................................... 1,337 207,081 Holderbank Financiere Glarus, B Shares..................... 74 60,474 Nestle S.A. (Reg.)......................................... 160 240,121 Novartis AG (Reg.)......................................... 337 547,297 Roche Holding AG (Gen.).................................... 37 372,918 Sairgroup (b).............................................. 36 49,362 Schweizerische Lebensversicherungs-und Rentenastalt........ 82 64,482 Sulzer AG.................................................. 65 41,266 Swiss Reinsurance Co. (Reg.)............................... 97 181,684 UBS (Bearer)............................................... 88 126,697 Zurich Versicherungs (Reg.)................................ 266 126,808 ----------- 2,070,325 ----------- UNITED KINGDOM -- 11.41% Abbey National PLC......................................... 10,750 192,978 Barclays PLC............................................... 6,000 159,737 Bass PLC................................................... 6,100 94,800 B.A.T. Industries PLC...................................... 49,750 453,501 BG PLC..................................................... 52,709 237,633 Billiton PLC (b)........................................... 39,000 100,107 Booker PLC................................................. 23,870 125,683 British Energy PLC......................................... 25,250 175,742 British Petroleum Co. PLC.................................. 29,655 390,358 British Sky Broadcasting Group PLC......................... 13,000 97,540 British Steel PLC.......................................... 37,750 81,059 British Telecommunications PLC............................. 46,020 362,329 BTR PLC.................................................... 22,000 66,606 Cable & Wireless PLC....................................... 11,000 96,833
- -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- UNITED KINGDOM (CONTINUED) Cadbury Schweppes PLC...................................... 18,000 $ 181,703 Centrica PLC (b)........................................... 44,620 65,709 Charter PLC................................................ 9,422 116,118 Coats Viyella PLC.......................................... 41,250 61,765 Diageo PLC................................................. 21,720 199,956 FKI PLC.................................................... 50,405 158,410 General Electric Co. PLC................................... 44,320 287,688 Glaxo Wellcome PLC......................................... 26,620 630,733 Greenalls Group PLC........................................ 13,000 93,690 Hanson PLC................................................. 17,750 79,331 Hillsdown Holdings PLC..................................... 52,000 126,631 House of Fraser PLC........................................ 57,250 189,342 HSBC Holdings PLC.......................................... 11,000 282,353 Inchcape PLC............................................... 26,000 69,733 Legal & General Group PLC.................................. 25,250 221,028 Lloyds TSB Group PLC....................................... 38,220 494,926 Marks & Spencer PLC........................................ 30,120 296,864 Mirror Group PLC........................................... 53,000 170,053 National Westminster Bank PLC.............................. 10,350 172,344 Northern Foods PLC......................................... 28,500 123,801 Peninsular & Oriental Steam Navigation Co.................. 19,000 216,495 Reckitt & Colman PLC....................................... 5,635 88,547 Reuters Holdings PLC....................................... 11,000 120,362 Rio Tinto PLC.............................................. 12,020 148,136 RJB Mining PLC............................................. 27,500 57,466 Royal & Sun Alliance Insurance Group PLC................... 16,779 169,239 Scottish Hydro-Electric PLC................................ 12,650 104,489 Sears PLC.................................................. 68,250 59,519 Sedgwick Group PLC......................................... 49,000 114,488 SmithKline Beecham PLC..................................... 28,350 290,614 Smurfit (Jefferson) Group PLC.............................. 41,196 114,556 Tate & Lyle PLC............................................ 14,000 115,409 Tesco PLC.................................................. 20,250 164,932 Thames Water PLC........................................... 13,500 201,362 The Great Universal Stores PLC............................. 15,750 198,770 Unilever PLC............................................... 13,000 111,444 Vodafone Group PLC......................................... 26,700 192,864 Williams PLC............................................... 32,750 182,139 ----------- 9,307,915 ----------- Total Non-U.S. Equities.................................... 35,636,546 ----------- Total Equities (Cost $65,891,370).......................... 74,583,793 -----------
FACE AMOUNT VALUE ---------- ----------- Short-Term Investments -- 8.78% U.S. GOVERNMENT OBLIGATIONS -- 0.73% U.S. Treasury Bills 5.420%, due 05/28/98................ $ 605,000 $ 592,143 ----------- COMMERCIAL PAPER -- 8.05% Case Credit Corp. 6.030%, due 03/10/98................................... 500,000 494,305 Nabisco, Inc. 6.700%, due 01/05/98................................... 500,000 499,628 Praxair, Inc. 6.550%, due 01/02/98................................... 2,000,000 2,000,364 Vastar Resources, Inc. 7.100%, due 01/02/98................................... 3,574,000 3,573,295 ----------- 6,567,592 ----------- Total Short-Term Investments (Cost $7,159,869)...................................... 7,159,735 ----------- Total Investments (Cost $73,051,239) -- 100.22% (a)...................... 81,743,528 ----------- Liabilities, less cash and other assets -- (0.22%)...................................... (181,101) ----------- Net Assets -- 100%...................................... $81,562,427 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $73,051,239; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $13,188,118 Gross unrealized depreciation................................ (4,495,829) ----------- Net unrealized appreciation................................ $ 8,692,289 ===========
(b) Non-income producing security. (c) Denominated in U.S. dollars. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Equity Fund had the following open forward foreign currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ---------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar........................ 6/3/98 1,050,000 $ 736,496 $ (5,921) Danish Kroner.......................... 6/3/98 2,700,000 397,236 (5,839) Dutch Guilder.......................... 6/3/98 900,000 447,937 (6,608) French Franc........................... 6/3/98 5,100,000 855,042 (12,689) Japanese Yen........................... 6/3/98 376,000,000 2,959,420 9,634 Swedish Krona.......................... 6/3/98 7,900,000 999,249 (17,194) Swiss Franc............................ 6/3/98 1,600,000 1,116,321 (24,093) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar...................... 6/3/98 1,150,000 752,091 29,219 Belgian Franc.......................... 6/3/98 32,000,000 871,117 11,471 British Pound.......................... 6/3/98 2,800,000 4,573,295 78,785 German Mark............................ 6/3/98 1,000,000 560,991 9,388 Hong Kong Dollar....................... 2/5/98 3,600,000 463,395 373 Japanese Yen........................... 6/3/98 119,000,000 936,625 13,854 Swedish Krona.......................... 6/3/98 7,900,000 999,249 23,869 -------- Total............................... $104,249 ========
FUTURES CONTRACTS (NOTE 5) The Global Equity Fund had the following open index futures contracts as of December 31, 1997:
SETTLEMENT CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN ---------- ------------ ------------ ---------- INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 48 contracts...... March 1998 $ 11,916,264 $ 11,749,200 $ 167,064
The market value of investments pledged to cover margin requirements for the open positions at December 31, 1997 was $592,143. See accompanying notes to the financial statements. - -------------------------------------------------------------------------------- 35 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $73,051,239) (Note 1)................. $81,743,528 Cash.............................................................. 86,370 Foreign currency, at value (Cost $382,196)........................ 377,629 Receivables: Investment securities sold....................................... 395,917 Dividends........................................................ 199,603 Fund shares sold................................................. 20,275 Variation margin (Note 5)........................................ 1,752 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 104,065 Other assets...................................................... 46,146 ----------- TOTAL ASSETS................................................... 82,975,285 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 1,259,960 Investment advisory fees (Note 2)................................ 49,655 Accrued expenses................................................. 103,243 ----------- TOTAL LIABILITIES.............................................. 1,412,858 ----------- NET ASSETS......................................................... $81,562,427 =========== NET ASSETS CONSIST OF: Paid in capital (Note 8).......................................... $70,388,858 Accumulated undistributed net investment income................... 163,736 Accumulated net realized gain..................................... 2,047,204 Net unrealized appreciation....................................... 8,962,629 ----------- NET ASSETS..................................................... $81,562,427 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $17,948,691 and 1,579,621 shares issued and outstanding) (Note 8)....................................... $ 11.36 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $977 and 86 shares issued and outstanding) (Note 8)............. $ 11.36 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $63,612,759 and 5,608,122 shares issued and outstanding) (Note 8)....................................... $ 11.34 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $66,048 for foreign taxes withheld)............ $ 816,558 Interest......................................................... 189,569 ----------- TOTAL INCOME.................................................. 1,006,127 ----------- EXPENSES: Advisory (Note 2)................................................ 374,636 Distribution (Note 7)............................................ 254,282 Custodian........................................................ 12,878 Other............................................................ 91,731 ----------- TOTAL EXPENSES................................................ 733,527 Expenses deferred by Advisor (Note 2)......................... (12,446) ----------- NET EXPENSES.................................................. 721,081 ----------- NET INVESTMENT INCOME ........................................ 285,046 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 6,732,546 Futures contracts............................................... (1,530,284) Foreign currency transactions................................... (114,366) ----------- Net realized gain............................................. 5,087,896 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ (8,123,416) Futures contracts............................................... 470,554 Forward contracts............................................... 105,523 Translation of other assets and liabilities denominated in for- eign currency.................................................. 893 ----------- Change in net unrealized appreciation or depreciation......... (7,546,446) ----------- Net realized and unrealized loss.................................. (2,458,550) ----------- Net decrease in net assets resulting from operations.............. $(2,173,504) ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 285,046 $ 960,262 Net realized gain............................. 5,087,896 5,232,778 Change in net unrealized appreciation or depreciation................................. (7,546,446) 10,619,517 ----------- ------------ Net increase (decrease) in net assets result- ing from operations.......................... (2,173,504) 16,812,557 ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................... (148,933) (425,929) Brinson Class N............................... (8) -- SwissKey Class................................ (308,930) (253,945) Distributions from net realized gain: Brinson Class I............................... (1,266,777) (3,076,886) Brinson Class N............................... (82) -- SwissKey Class................................ (5,307,194) (3,396,000) ----------- ------------ Total distributions to shareholders........... (7,031,924) (7,152,760) ----------- ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 26,867,326 42,520,630 Shares issued on reinvestment of distribu- tions........................................ 6,217,910 6,711,937 Shares redeemed............................... (52,052,229) (9,295,598) ----------- ------------ Net increase (decrease) in net assets result- ing from capital share transactions (Note 8). (18,966,993) 39,936,969 ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS.... (28,172,421) 49,596,766 ----------- ------------ NET ASSETS: Beginning of year............................. 109,734,848 60,138,082 ----------- ------------ End of year (including accumulated undistrib- uted net investment income of $163,736 and $336,561, respectively)...................... $81,562,427 $109,734,848 =========== ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 38 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, JANUARY 28, 1994* DECEMBER 31, 1997 ------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 12.76 $ 11.57 $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- ------- ------- Income from investment operations: Net investment income. 0.14 0.16 0.18 0.18 0.07 Net realized and unrealized gain (loss)............... (0.37) 2.14 2.29 0.39 (0.54) ------- ------- ------- ------- ------- Total income (loss) from investment operations......... (0.23) 2.30 2.47 0.57 (0.47) ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income.... (0.12) (0.12) (0.14) (0.04) (0.04) Distributions from and in excess of net realized gain........ (1.05) (0.99) (0.69) (0.09) -- ------- ------- ------- ------- ------- Total distributions. (1.17) (1.11) (0.83) (0.13) (0.04) ------- ------- ------- ------- ------- Net asset value, end of period................. $ 11.36 $ 12.76 $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= ======= ======= Total return (non- annualized)............ (1.68)% 21.26% 25.66% 6.06% (4.70)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $17,949 $48,054 $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reimbursement........ 1.03%** 1.25% 1.77% 2.06% 2.65%** After expense reimbursement........ 1.00%** 1.00% 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimbursement........ 1.18%** 1.35% 0.57% 0.71% 0.24%** After expense reimbursement........ 1.21%** 1.60% 1.34% 1.77% 1.89%** Portfolio turnover rate.................. 26% 32% 74% 36% 21% Average commission rate paid per share........ $0.0308 $0.0246 $0.0288 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 39 GLOBAL EQUITY 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, 1997* BRINSON CLASS N (UNAUDITED) - ----------------------------------------------- Net asset value, beginning of period.................. $ 12.76 ------- Income from investment op- erations: Net investment income..... 0.06 Net realized and unrealized gain.......... (0.31) ------- Total loss from invest- ment operations........ (0.25) ------- Less distributions: Distributions from and in excess of net investment income................... (0.10) Distributions from net re- alized gain.............. (1.05) ------- Total distributions..... (1.15) ------- Net asset value, end of pe- riod....................... $ 11.36 ======= Total return (non- annualized)................ (1.87)% Ratios/Supplemental data Net assets, end of period (in 000s)................. $ 1 Ratio of expenses to aver- age net assets: Before expense reimburse- ment..................... 1.28%** After expense reimburse- ment..................... 1.25%** Ratio of net investment in- come to average net as- sets: Before expense reimburse- ment..................... 0.84%** After expense reimburse- ment..................... 0.87%** Portfolio turnover rate.... 26% Average commission rate paid per share............ $0.0308
* Commencement of Brinson Class N was June 30, 1997. ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 40 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.73 $ 11.57 $ 10.35 ------- ------- ------- Income from investment opera- tions: Net investment gain (loss).... 0.02 0.08 (0.01) Net realized and unrealized gain (loss).................. (0.30) 2.13 1.93 ------- ------- ------- Total income from investment operations................. (0.28) 2.21 1.92 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.06) (0.06) (0.01) Distributions from net real- ized gain.................... (1.05) (0.99) (0.69) ------- ------- ------- Total distributions......... (1.11) (1.05) (0.70) ------- ------- ------- Net asset value, end of period.. $ 11.34 $ 12.73 $ 11.57 ======= ======= ======= Total return (non-annualized)... (2.11)% 20.34% 19.25% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $63,613 $61,680 $33,012 Ratio of expenses to average net assets: Before expense reimbursement.. 1.78%** 2.00% 2.53%** After expense reimbursement... 1.76%** 1.75% 1.76%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement.. 0.35%** 0.60% (0.19)%** After expense reimbursement... 0.37%** 0.85% 0.58%** Portfolio turnover rate........ 26% 32% 74% Average commission rate paid per share..................... $0.0308 $0.0246 $0.0288
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 41 Global Bond Fund - -------------------------------------------------------------------------------- The Global Bond Fund is actively managed, providing a fully integrated treatment of the U.S. and other major fixed income markets across the world. This global approach takes full advantage of relationships both within and across markets, based on consistent analysis of macroeconomic and market conditions. Market and currency strategies are developed in a global asset allocation framework, in conjunction with senior fixed income professionals in our offices worldwide. The Brinson Global Bond Fund has provided an annualized return of 6.84% since its performance inception on July 31, 1993, outperforming the 6.46% return of its benchmark, the Salomon World Government Bond Index. The Fund's annualized volatility of 4.20% was below the benchmark volatility of 5.35% over this period. For the year ended December 31, 1997, the Fund returned 1.63%, compared to the benchmark return of 0.24%. The sustained strength in global bond markets which began late in 1994 continued during 1997 (the Salomon Index returned a total of 41.90% in dollar-hedged terms in the three years ending December 31, 1997). In most economies inflation was lower than had been expected at the start of the year, and investors became more willing to believe that it would remain low (particularly in light of the economic turmoil in Asia late in the year). In this benign environment long yields fell, even though some central banks raised short-term interest rates. Market allocation strategies contributed positively to relative Fund performance in 1997. The portfolio move from a neutral to an overweight position in U.S. bonds in February, maintained through the end of the year, had little effect overall on performance. The Fund benefited in particular from the timing of its exposure to Australia, from its underweighting of France, and from its overweighting of Denmark. Bond selection strategies within markets detracted slightly from performance overall. Positive returns in the U.S., due to successful issue selection, were more than offset by the impact of the short duration strategy in Japan. As bond prices rose during the year, we lowered duration across markets (U.S. duration was lowered from 1.3 times to equal to the index average in the middle of the year). At the end of the year, duration was 0.5 times the index average in Japan, 0.9 times the index in most other markets, and equal to the index in Denmark, Sweden and the U.S. Currency allocation was the largest source of Fund outperformance of the benchmark in 1997. All the main non-U.S. currencies lost value against the dollar. The Japanese yen fell by 15.2%, the Deutschemark by 16.2%, and the U.K. pound by 2.8%. Defensive underweightings of the yen and of European currencies in the first part of the year, and the resultant position in the U.S. dollar, were extremely successful, while underweighting the U.K. pound detracted from performance. The scale of most positions was sharply reduced as non-U.S. currencies fell to and below fair value. 42 Global Bond Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year 3 years 7/31/93* ended ended ended to 12/31/97 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------- Brinson Global Bond Fund 1.00% 1.63% 10.15% 6.84% Salomon World Government Bond Index 1.49 0.24 7.34 6.46 - -------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Bond Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund and the Salomon World Government Bond Index 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, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Bond Fund vs. Salomon World Government Bond Index Wealth Value with Dividends Reinvested [CHART REFLECTING DATA LISTED BELOW APPEARS HERE]
Branson Global Salomon World Bond Fund Index 7/31/93 1000000 1000000 8/31/93 1019000 1030100 9/30/93 1022009.85 1042358.19 10/31/93 1032059.11 1040586.18 11/30/93 1023014.78 1033198.02 12/31/93 1038591.13 1041928.54 1/31/94 1045817.91 1050263.97 2/28/94 1021040.39 1043437.25 3/31/94 1007619.23 1041976.44 4/30/94 1002457.25 1043122.62 5/31/94 994198.07 1033943.14 6/30/94 992146.28 1048831.92 7/31/94 999418.56 1057222.57 8/31/94 1000457.45 1053522.3 9/30/94 1001496.35 1061107.66 10/31/94 1005651.94 1078085.38 11/30/94 1003574.14 1063207.8 12/31/94 1002396.01 1066184.78 1/31/95 1012826.77 1088574.66 2/28/95 1030559.06 1116442.17 3/31/95 1044119.05 1182758.84 4/30/95 1069152.87 1204639.88 5/31/95 1106703.61 1238610.72 6/30/95 1104637.55 1245918.53 7/31/95 1122711.51 1248908.73 8/31/95 1134406.42 1205946.27 9/30/95 1148227.68 1232838.87 10/31/95 1167364.81 1241961.88 11/30/95 1190754.63 1255996.05 12/31/95 1206118.72 1269184.01 1/31/96 1212149.31 1253573.04 2/29/96 1200088.13 1247179.82 3/31/96 1204912.6 1245433.77 4/30/96 1216973.79 1240452.03 5/31/96 1220592.15 1240700.12 6/30/96 1231653.49 1250501.66 7/31/96 1243920.96 1274511.29 8/31/96 1253734.93 1279481.88 9/30/96 1274589.62 1284727.76 10/31/96 1301578.04 1308752.17 11/30/96 1326112.97 1326027.69 12/31/96 1318299.16 1315286.87 1/31/97 1297657.74 1280168.71 2/28/97 1299033.83 1270567.45 3/31/97 1279768.5 1260911.13 4/30/97 1272888.02 1249815.11 5/31/97 1310042.59 1283810.09 6/30/97 1326555.74 1299087.43 7/31/97 1321051.35 1288954.54 8/31/97 1316923.07 1288181.17 9/30/97 1343068.88 1315619.43 10/31/97 1360958.11 1342984.31 11/30/97 1343068.88 1322436.65 12/31/97 1339835.05 1318469.34
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. 43 Global Bond Fund - -------------------------------------------------------------------------------- Asset Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ------------------------------------------------------------ U.S. 34.4% 40.4% Japan 18.5 5.0 Australia 0.9 4.1 Austria 0.9 0.0 Belgium 2.4 0.0 Canada 3.3 6.2 Denmark 1.5 6.3 Finland 0.6 0.0 France 7.3 2.2 Germany 8.8 13.1 Ireland 0.4 0.0 Italy 6.7 3.2 Netherlands 2.9 5.2 Spain 2.8 3.7 Sweden 1.6 1.6 Switzerland 0.5 0.0 U.K. 6.5 9.0 - ------------------------------------------------------------ 100.0% 100.0% Currency Allocation As of December 31, 1997 (Unaudited) Current Benchmark Strategy - ------------------------------------------------------------ U.S. 34.4% 41.9% Japan 18.5 14.5 Australia 0.9 0.9 Austria 0.9 0.9 Belgium 2.4 2.4 Canada 3.3 3.3 Denmark 1.5 1.5 Finland 0.6 0.6 France 7.3 7.3 Germany 8.8 8.8 Ireland 0.4 0.4 Italy 6.7 6.7 Netherlands 2.9 2.9 Spain 2.8 2.8 Sweden 1.6 1.6 Switzerland 0.5 0.5 U.K. 6.5 3.0 - ------------------------------------------------------------ 100.0% 100.0%
Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited) - ----------------------------------------------------------------
U.S. BONDS Corporate Bonds Asset-Backed........................................... 2.54% CMO.................................................... 2.19 Consumer............................................... 1.02 Financial.............................................. 2.67 Industrial............................................. 2.82 Transportation......................................... .35 ------ 11.59 ------ International Dollar Bonds............................. 4.58 U.S. Government Agencies............................... 9.61 U.S. Government Obligations............................ 9.91 ------ Total U.S. Bonds.................................... 35.69 ------ NON-U.S. BONDS Foreign Financial Bonds................................. 7.91 Foreign Government Bonds................................ 47.07 ------ Total Non-U.S. Bonds................................ 54.98 ------ SHORT-TERM INVESTMENTS.................................. 9.08 ------ TOTAL INVESTMENTS................................... 99.75 CASH AND OTHER ASSETS, LESS LIABILITIES....................................... 0.25 ------ NET ASSETS.......................................... 100.00% ====== - -------------------------------------------------------
44 GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- Bonds -- 90.67% U.S. BONDS -- 35.69% U.S. CORPORATE BONDS -- 11.59% Aid Jordan 8.750%, due 09/01/19.................................. $ 193,941 $ 237,638 Bear Stearns Mortgage Securities, Inc. 96-7A4 6.000%, due 01/28/09........................... 200,000 193,578 Capital One Bank 6.830%, due 05/17/99.................................. 200,000 201,386 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02........................... 125,000 125,196 Continental Airlines, Inc. 97-4A 6.900%, due 01/02/18.................................. 210,000 209,969 Countrywide Capital, Inc. 8.000%, due 12/15/26.................................. 250,000 265,286 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00.................................. 375,000 379,599 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03............................ 240,000 241,949 First Union Lehman Brothers 97-C2 A2 6.600%, due 05/18/07......................... 240,000 242,225 First USA Credit Card Master Trust 97-6A 6.420%, due 03/17/05............................ 240,000 242,750 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.................................. 36,823 36,783 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09....................... 332,540 323,678 Lockheed Martin Corp. 7.700%, due 06/15/08.................................. 125,000 135,775 Metlife Funding 6.850%, due 05/20/08.................................. 225,000 231,830 News America Holdings 7.750%, due 12/01/45.................................. 275,000 286,305 PNC Mortgage Securities Corp. 94-3A8 7.500%, due 07/25/24........................... 190,000 196,263 Premier Auto Trust 96-3A 6.750%, due 11/06/00............................ 475,000 480,225 Prudential Home Mortgage Securities 96-7 Cl A4 6.750%, due 06/25/11....................... 150,000 150,186 93-43 A9 6.750%, due 10/25/23......................... 220,433 217,362 Residential Asset Securitization Trust 97-A 11 P4 7.000%, due 12/25/27....................... 260,000 260,813 Salomon, Inc. 6.500%, due 03/01/00.................................. 300,000 301,597 Structured Mortgage Asset Residential Trust 93-5C CI 7.150%, due 03/25/23.................................. 925,000 931,114 The Money Store 94-A3 5.525%, due 09/15/18.................................. 68,226 67,309 Time Warner, Inc. 7.570%, due 02/01/24.................................. 315,000 330,182 UCFC Home Equity Loan 97-C, Class A8, 6.325%, FRN, due 09/15/27................... 171,081 170,939 USA Waste Services 7.000%, due 10/01/04.................................. 300,000 306,791 World Omni Automobile Lease Securitization Trust 6.850%, due 06/25/03.................................. 255,000 256,877 ----------- 7,023,605 -----------
FACE AMOUNT VALUE ----------- ----------- INTERNATIONAL DOLLAR BONDS -- 4.58% Banco Santiago S.A. 7.000%, due 07/18/07.................................. $ 400,000 $ 401,086 Banque Centrale de Tunisie 8.250%, due 09/19/27.................................. 400,000 364,076 DR Investments 144A 7.450%, due 05/15/07.................................. 455,000 480,903 Empresa National Electric 7.875%, due 10/01/2097................................ 500,000 484,230 Pan Pacific Industry PLC 144A 0.000%, due 04/28/07.................................. 715,000 352,868 Province of Quebec 7.500%, due 07/15/23.................................. 235,000 253,386 Republic of South Africa 9.625%, due 12/15/99.................................. 125,000 129,375 Royal Bank of Scotland 7.375%, Resettable Perpetual Preferred........................ 300,000 311,462 ----------- 2,777,386 ----------- U.S. GOVERNMENT AGENCIES -- 9.61% Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13.................................. 68,215 69,666 7.500%, due 01/15/23.................................. 78,941 82,895 7.238%, due 05/01/26.................................. 56,787 58,810 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.............................................. 93,222 96,456 9.000%, due 03/01/24.................................. 264,889 286,072 9.500%, due 04/01/25.................................. 23,409 25,004 Federal National Mortgage Association 7.875%, due 02/24/05.................................. 500,000 553,431 6.220%, due 03/13/06.................................. 150,000 151,461 9.000%, due 08/01/21.................................. 24,591 26,417 8.500%, due 07/01/22.................................. 18,885 20,005 7.500%, due 05/18/25.................................. 250,000 255,318 6.500%, due 03/01/26.................................. 74,623 73,644 6.500%, due 12/01/26 TBA.............................. 2,325,000 2,294,484 6.175%, due 10/01/27.................................. 197,990 197,733 Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only.................... 1,019 237 0.000%, due 04/01/27 principal only................... 405,375 307,842 0.000%, due 07/01/27 principal only................... 169,691 126,898 Government National Mortgage Association 7.500%, due 08/15/23.................................. 108,615 111,228 7.000%, due 08/15/24.................................. 502,936 508,221 7.000%, due 07/15/25.................................. 69,491 70,077 Tennessee Valley Authority 6.375%, due 06/15/05.................................. 500,000 510,197 ----------- 5,826,096 ----------- U.S. GOVERNMENT OBLIGATIONS -- 9.91% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01.................................. 730,000 750,760 7.000%, due 07/15/06.................................. 650,000 701,797 8.125%, due 05/15/21.................................. 375,000 472,500 6.000%, due 06/03/99.................................. 2,785,000 2,798,925 5.875%, due 08/31/99.................................. 385,000 386,203
- -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- U.S. Treasury Principal Strip 0.000%, due 08/15/03................................. $ 1,235,000 $ 896,610 ----------- 6,006,795 ----------- Total U.S. Bonds...................................... 21,633,882 ----------- NON-U.S. BONDS -- 54.98% AUSTRALIA -- 3.78% Government of Australia 7.000%, due 04/15/00 .............................AUD 800,000 539,464 9.750%, due 03/15/02................................. 760,000 570,084 Queensland Treasury Corp.-Global Bond 8.000%, due 05/14/03................................. 980,000 701,229 6.500%, due 06/14/05................................. 730,000 482,148 ----------- 2,292,925 ----------- CANADA -- 5.75% British Columbia 7.750%, due 06/16/03 .............................CAD 1,700,000 1,302,130 Government of Canada 4.250%, due 12/01/21 (b)............................. 1,820,000 1,411,355 Province of Ontario 7.500%, due 01/19/06................................. 1,000,000 774,451 ----------- 3,487,936 ----------- DENMARK -- 5.98% City of Copenhagen 6.250%, due 03/15/01 .............................DKK 2,400,000 363,204 Great Belt 7.000%, due 09/02/03....................... 10,650,000 1,675,873 Kingdom of Denmark.................................... 8.000%, due 11/15/01................................. 5,000,000 806,364 7.000%, due 12/15/04................................. 3,500,000 557,146 7.000%, due 11/15/07................................. 1,400,000 224,453 ----------- 3,627,040 ----------- FRANCE -- 2.07% Government of France (OAT) 9.500%, due 01/25/01 .............................FRF 1,200,000 227,294 8.500%, due 04/25/23................................. 1,600,000 357,713 KFW International Finance 7.750%, due 02/17/98................................. 2,600,000 434,342 Republic of Finland 9.000%, due 08/13/03................................. 1,200,000 237,616 ----------- 1,256,965 ----------- GERMANY -- 12.21% Bundesrepublik Deutschland 6.500%, due 03/15/00 .............................DEM 2,900,000 1,687,326 6.000%, due 07/04/07................................. 1,000,000 584,172 European Economic Community 6.500%, due 03/10/00................................. 1,910,000 1,107,377 International Bank for Reconstruction & Development- Global Bond 7.125%, due 04/12/05................................. 650,000 400,353 Kingdom of Norway 6.125%, due 05/05/98................................. 1,040,000 582,437 LKB Baden-Wuerttemberg Finance 6.500%, due 09/15/08................................. 1,300,000 775,763
FACE AMOUNT VALUE ----------- ----------- Republic of Ireland 7.250%, due 03/18/03...............................DEM 2,900,000 $ 1,770,869 Treuhandanstalt 7.125%, due 01/29/03................... 800,000 489,317 ----------- 7,397,614 ----------- ITALY -- 2.68% Bayerische Landesbank 10.750%, due 03/01/03 .............................ITL 250,000,000 174,451 Landesbank Rheinland-Pfalz Girozentrale 8.250%, due 06/02/98..................... 750,000,000 428,438 LKB Baden-Wuerttemberg Finance 10.750%, due 04/14/03................................. 650,000,000 454,950 Republic of Italy (BTP) 7.750%, due 09/15/01.................................. 200,000,000 123,469 9.000%, due 10/01/03.................................. 350,000,000 233,492 9.500%, due 02/01/06.................................. 300,000,000 212,454 ----------- 1,627,254 ----------- JAPAN -- 4.13% International Bank for Reconstruction & Development-Global Bond 4.500%, due 06/20/00 ..............................JPY 40,000,000 335,897 4.500%, due 03/20/03.................................. 47,000,000 419,078 4.750%, due 12/20/04.................................. 44,000,000 408,402 Republic of Austria 5.000%, due 01/22/01.................................. 130,000,000 1,123,534 Republic of Italy 3.500%, due 06/20/01.................................. 26,000,000 216,833 ----------- 2,503,744 ----------- NETHERLANDS -- 4.93% Government of Netherlands 5.750%, due 09/15/02...............................NLG 500,000 255,586 7.250%, due 10/01/04.................................. 1,500,000 826,469 7.500%, due 11/15/99.................................. 1,850,000 964,559 International Nederland GRP Verzekeringen 6.250%, due 12/28/05.................................. 1,800,000 939,714 ----------- 2,986,328 ----------- SPAIN -- 3.57% Kingdom of Spain 6.750%, due 04/15/00 ..............................ESP 100,000,000 686,163 7.900%, due 02/28/02.................................. 100,000,000 726,283 8.000%, due 05/30/04.................................. 100,000,000 750,230 ----------- 2,162,676 ----------- SWEDEN -- 1.43% Kingdom of Sweden 10.250%, due 05/05/03 .............................SEK 5,700,000 865,618 ----------- UNITED KINGDOM -- 8.45% Abbey National 8.750%, due 05/24/04 ..............................GBP 350,000 623,046 British Gas PLC 8.125%, due 03/31/03................... 545,000 932,620 European Investment Bank 7.625%, due 12/07/06.......... 110,000 192,534
- -------------------------------------------------------------------------------- 46 GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- UK Treasury 10.000%, due 09/08/03..............................GBP 700,000 $ 1,339,675 7.750%, due 09/08/06.................................. 555,000 993,395 9.000%, due 10/13/08.................................. 340,000 677,273 8.000%, due 09/27/13.................................. 190,000 363,626 ----------- 5,122,169 ----------- Total Non-U.S. Bonds................................... 33,330,269 ----------- Total Bonds (Cost $55,386,825)......................... 54,964,151 ----------- Short-Term Investments -- 9.08% COMMERCIAL PAPER -- 9.08% Case Credit Corp. 6.110%, due 01/20/98.................................. $ 500,000 498,388 6.030%, due 03/10/98.................................. 500,000 494,305 Marriott Corp. 6.050%, due 02/09/98.................... 500,000 496,723 Nabisco, Inc. 6.700%, due 01/05/98.................................. 500,000 499,628 6.120%, due 01/16/98.................................. 500,000 498,725 Praxair Inc. 6.550%, due 01/02/98...................... 1,000,000 999,818 Vastar Resources Inc. 7.100%, due 01/02/98............. 2,020,000 2,019,602 ----------- Total Short-Term Investments (Cost $5,507,188)..................................... 5,507,189 ----------- Total Investments (Cost $60,894,013) -- 99.75% (a)...................... 60,471,340 ----------- Cash and other assets, less liabilities -- 0.25%.................................. 149,794 ----------- Net Assets -- 100%..................................... $60,621,134 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 47 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES T O SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $60,894,013; and net unrealized depreciation consisted of: Gross unrealized appreciation............................... $ 1,261,433 Gross unrealized depreciation............................... (1,684,106) ----------- Net unrealized depreciation............................. $ (422,673) ===========
(b) Linked to Canada's retail price index. Reset semi-annually. FRN: Floating Rate Note--The rate disclosed is that in effect December 31, 1997. 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, 1997, the value of these securities amounted to $833,771 or 1.38% 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 (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Austrian Schilling...... 5/28/98 6,800,000 $ 541,695 $ (2,044) Belgian Franc........... 5/28/98 50,000,000 1,360,834 (49,762) Canadian Dollar......... 5/28/98 2,000,000 1,402,849 (12,779) Finnish Markka.......... 5/28/98 2,000,000 370,386 (1,292) French Franc............ 5/28/98 17,200,000 2,882,835 (107,690) Italian Lira............ 5/28/98 3,800,000,000 2,150,320 (82,544) Japanese Yen............ 5/28/98 770,000,000 6,054,915 (196,608) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 5/28/98 2,700,000 1,765,491 70,555 British Pound........... 5/28/98 2,200,000 3,594,184 94,776 Canadian Dollar......... 5/28/98 4,300,000 3,016,126 33,520 Danish Kroner........... 5/28/98 19,900,000 2,927,185 109,592 German Mark............. 5/28/98 4,400,000 2,467,668 92,407 Netherlands Guilder..... 5/28/98 2,800,000 1,393,236 52,821 Spanish Peseta.......... 5/28/98 74,000,000 487,642 20,042 --------- Total............... $ 20,994 =========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 48 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $60,894,013) (Note 1)................ $60,471,340 Cash............................................................. 81,299 Foreign currency, at value (Cost $1,438,584)..................... 1,433,395 Receivables: Investment securities sold...................................... 962,824 Interest........................................................ 1,392,529 Fund shares sold................................................ 3,100 Net unrealized appreciation on forward foreign currency con- tracts......................................................... 20,994 Other assets..................................................... 46,110 ----------- TOTAL ASSETS.................................................. 64,411,591 ----------- LIABILITIES: Payables: Investment securities purchased................................. 3,716,457 Fund shares redeemed............................................ 5,998 Investment advisory fees (Note 2)............................... 33,990 Accrued expenses................................................ 34,012 ----------- TOTAL LIABILITIES............................................. 3,790,457 ----------- NET ASSETS........................................................ $60,621,134 =========== NET ASSETS CONSIST OF: Paid in capital (Note 8)......................................... $61,719,136 Accumulated undistributed net investment income.................. 499,811 Accumulated net realized loss.................................... (1,167,122) Net unrealized depreciation...................................... (430,691) ----------- NET ASSETS.................................................... $60,621,134 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $56,096,121 and 6,006,282 shares issued and outstanding) (Note 8)............................................................. $ 9.34 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,009 and 108 shares issued and outstanding) (Note 8)......... $ 9.34 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $4,524,004 and 485,179 shares issued and outstanding) (Note 8). $ 9.32 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 49 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Interest (net of $17,423 for foreign taxes withheld).............. $1,672,363 ---------- TOTAL INCOME................................................... 1,672,363 ---------- EXPENSES: Advisory (Note 2)................................................. 224,325 Professional...................................................... 23,184 Distribution (Note 7)............................................. 10,139 Other............................................................. 45,267 ---------- TOTAL EXPENSES................................................. 302,915 ---------- Expenses deferred by Advisor (Note 2).......................... (23,486) ---------- NET EXPENSES................................................... 279,429 ---------- NET INVESTMENT INCOME.......................................... 1,392,934 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 803,295 Futures contracts................................................ 21,780 Foreign currency transactions.................................... (1,272,922) ---------- Net realized loss............................................... (447,847) ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. (234,033) Futures contracts................................................ (12,019) Forward contracts................................................ (116,285) Translation of other assets and liabilities denominated in for- eign currency................................................... (17,257) ---------- Change in net unrealized appreciation or depreciation........... (379,594) ---------- Net realized and unrealized loss.................................. (827,441) ---------- Net increase in net assets resulting from operations.............. $ 565,493 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 50 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE (UNAUDITED) 30, 1997 ----------------- ----------- OPERATIONS: Net investment income.......................... $ 1,392,934 $ 2,426,764 Net realized gain (loss)....................... (447,847) 1,723,264 Change in net unrealized appreciation or depre- ciation ...................................... (379,594) (381,459) ----------- ----------- Net increase in net assets resulting from oper- ations........................................ 565,493 3,768,569 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income....... (1,382,269) (3,479,707) Distributions in excess of net investment in- come.......................................... -- (340,005) Distributions from net realized gain........... (1,041,855) (769,789) ----------- ----------- Total distributions to shareholders*........... (2,424,124) (4,589,501) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................... 5,329,669 23,164,253 Shares issued on reinvestment of distributions. 1,730,859 3,667,961 Shares redeemed................................ (2,848,777) (12,462,273) ----------- ----------- Net increase in net assets resulting from capi- tal share transactions (Note 8)............... 4,211,751 14,369,941 ----------- ----------- TOTAL INCREASE IN NET ASSETS................ 2,353,120 13,549,009 ----------- ----------- NET ASSETS: Beginning of year.............................. 58,268,014 44,719,005 ----------- ----------- End of year (including accumulated undistrib- uted net investment income of $499,811 and $489,146, respectively)....................... $60,621,134 $58,268,014 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net invest- ment income Brinson Class I............................... $(1,302,948) $(3,503,032) Brinson Class N............................... (22) -- SwissKey Class................................ (79,299) (316,680) Distributions from net realized gain Brinson Class I............................... (969,902) (704,236) Brinson Class N............................... (18) -- SwissKey Class................................ (71,935) (65,553) ----------- ----------- Total distributions to shareholders............ $(2,424,124) $(4,589,501) =========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 51 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, JULY 30, 1993* DECEMBER 31, 1997 ------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- ------- ------- Income (loss) from in- vestment operations: Net investment income ..................... 0.22 0.67 0.84 0.50 0.45 Net realized and unrealized gain (loss)............... (0.13) 0.08 0.31 0.58 (0.52) ------- ------- ------- ------- ------- Total income (loss) from investment operations......... 0.09 0.75 1.15 1.08 (0.07) ------- ------- ------- ------- ------- Less distributions: Distributions from and in excess of net investment income.... (0.22) (0.96) (1.40) (0.24) (0.28) Distributions from net realized gain........ (0.17) (0.19) (0.10) -- (0.10) ------- ------- ------- ------- ------- Total distributions. (0.39) (1.15) (1.50) (0.24) (0.38) ------- ------- ------- ------- ------- Net asset value, end of period................. $ 9.34 $ 9.64 $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= ======= ======= Total return (non- annualized)............ 1.00 % 7.71% 11.50% 11.34% (0.79)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $56,096 $54,157 $41,066 $51,863 $36,849 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.98 %** 1.32% 1.65% 1.43% 1.78%** After expense reim- bursement............ 0.90 %** 0.90% 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 4.61 %** 4.90% 4.98% 5.53% 4.03%** After expense reim- bursement............ 4.69 %** 5.32% 5.73% 6.06% 4.91%** Portfolio turnover rate.................. 93 % 235% 184% 199% 189%
* Commencement of investment operations ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 52 GLOBAL 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, 1997* BRINSON CLASS N (UNAUDITED) - ----------------------------------------------- Net asset value, beginning of period.................. $ 9.64 ------ Income from investment op- erations: Net investment income..... 0.21 Net realized and unrealized loss.......... (0.13) ------ Total income from in- vestment operations.... 0.08 ------ Less distributions: Distributions from and in excess of net investment income................... (0.21) Distributions from net re- alized gain.............. (0.17) ------ Total distributions..... (0.38) ------ Net asset value, end of pe- riod....................... $ 9.34 ====== Total return (non- annualized)................ 0.82% Ratios/Supplemental Data: Net assets, end of period (in 000s)................. $ 1 Ratio of expenses to aver- age net assets: Before expense reimburse- ment..................... 1.23%** After expense reimburse- ment..................... 1.15%** Ratio of net investment in- come to average net as- sets: Before expense reimburse- ment..................... 4.44%** After expense reimburse- ment..................... 4.52%** Portfolio turnover rate.... 93%
* Commencement of Brinson Fund Class N was June 30, 1997. ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 53 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 9.61 $10.02 $10.56 ------ ------ ------ Income from investment opera- tions: Net investment income......... 0.21 0.62 0.78 Net realized and unrealized gain (loss).................. (0.15) 0.10 0.15 ------ ------ ------ Total income from investment operations................. 0.06 0.72 0.93 ------ ------ ------ Less distributions: Distributions from and in excess of net investment income....................... (0.18) (0.94) (1.37) Distributions from net real- ized gain.................... (0.17) (0.19) (0.10) ------ ------ ------ Total distributions......... (0.35) (1.13) (1.47) ------ ------ ------ Net asset value, end of period.. $ 9.32 $ 9.61 $10.02 ====== ====== ====== Total return (non-annualized)... 0.75% 7.20% 9.17% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $4,524 $4,110 $3,653 Ratio of expenses to average net assets: Before expense reimbursement.. 1.47%** 1.81% 2.14%** After expense reimbursement... 1.39%** 1.39% 1.39%** Ratio of net investment income to average net assets: Before expense reimbursement.. 4.12%** 4.41% 4.49%** After expense reimbursement... 4.20%** 4.83% 5.24%** Portfolio turnover rate........ 93% 235% 184%
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 54 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the fund. U.S. equity securities traded over the counter are priced at the most recent bid price. Debt securities are valued at the most recent bid price by using market quotations or independent services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1997, 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. - -------------------------------------------------------------------------------- 55 THE BRINSON FUNDS -- 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 shares will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, the Funds pay the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates, for the six months ended December 31, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES DEFERRED -------- --------------- --------------- -------------- ---------- -------- Global Fund............. 0.80% 1.10% 1.35% 1.75% $2,635,060 $ -- Global Equity Fund...... 0.80 1.00 1.25 1.76 374,636 12,446 Global Bond Fund........ 0.75 0.90 1.15 1.39 224,325 23,486
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $5,888, $2,392 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 Brinson Partners, Inc. These investments represented 12.55% of the Fund's total net assets at December 31, 1997. Activity for the six months ended December 31, 1997 was as follows:
NET NET SALES REALIZED UNREALIZED AFFILIATES PURCHASES PROCEEDS GAINS GAINS/(LOSSES) VALUE - ---------- ----------- -------- -------- -------------- ----------- Brinson Post-Venture Fund................... $ -- $ -- -- $ 2,502,119 $ 8,502,119 Brinson High Yield Fund. 3,000,000 -- -- 2,753,354 17,201,354 Brinson Emerging Markets Equity Fund............ 12,300,000 -- -- (4,996,711) 22,017,923 Brinson Emerging Markets Debt Fund.............. 12,000,000 -- -- 7,921,280 34,231,280 ----------- ----- ----- ----------- ----------- $27,300,000 $ -- $ -- $ 8,180,042 $81,952,676 =========== ===== ===== =========== ===========
3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $388,265,758 $354,100,300 Global Equity Fund.................................... 22,827,077 46,825,950 Global Bond Fund...................................... 52,650,977 51,300,135
- -------------------------------------------------------------------------------- 56 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4.FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the six months ended December 31, 1997, was the Funds' custodian. 5.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.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 maintains 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 commercial paper. The value of loaned securities and related collateral outstanding at December 31, 1997 are as follows:
VALUE OF LOANED VALUE OF SECURITIES COLLATERAL --------------- ----------- Global Fund......................................... $73,566,441 $79,523,767 =========== ===========
7.DISTRIBUTION PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 as amended for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class and, effective June 30, 1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the Global Fund, Global Equity Fund and Global Bond Fund. - -------------------------------------------------------------------------------- 57 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 8.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND ---------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ---------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ------------ ---------- ------------ Sales: Brinson Class I................ 7,360,093 $ 97,696,477 14,513,488 $180,787,534 Brinson Class N................ -- -- 76 1,000 SwissKey Class................. 383,268 5,015,748 932,414 11,508,566 --------- ------------ ---------- ------------ Total Sales................. 7,743,361 $102,712,225 15,445,978 $192,297,100 ========= ============ ========== ============ Dividend Reinvestment: Brinson Class I................ 4,544,864 $ 54,492,919 4,022,259 $ 48,025,771 Brinson Class N................ 8 93 -- -- SwissKey Class................. 201,931 2,409,581 130,547 1,554,814 --------- ------------ ---------- ------------ Total Dividend Reinvestment. 4,746,803 $ 56,902,593 4,152,806 $ 49,580,585 ========= ============ ========== ============ Redemptions: Brinson Class I................ 5,125,386 $ 64,663,733 11,346,380 $142,532,012 Brinson Class N................ -- -- -- -- SwissKey Class................. 254,713 3,320,349 198,888 2,469,271 --------- ------------ ---------- ------------ Total Redemptions........... 5,380,099 $ 67,984,082 11,545,268 $145,001,283 ========= ============ ========== ============ GLOBAL EQUITY FUND ---------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ---------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ------------ ---------- ------------ Sales: Brinson Class I................ 781,871 $ 9,537,833 1,338,623 $ 15,816,109 Brinson Class N................ -- -- 78 1,000 SwissKey Class................. 1,380,824 17,329,493 2,271,465 26,703,521 --------- ------------ ---------- ------------ Total Sales................. 2,162,695 $ 26,867,326 3,610,166 $ 42,520,630 ========= ============ ========== ============ Dividend Reinvestment: Brinson Class I................ 119,737 $ 1,339,853 308,273 $ 3,485,504 Brinson Class N................ 8 90 -- -- SwissKey Class................. 436,312 4,877,967 286,226 3,226,433 --------- ------------ ---------- ------------ Total Dividend Reinvestment. 556,057 $ 6,217,910 594,499 $ 6,711,937 ========= ============ ========== ============ Redemptions: Brinson Class I................ 3,087,436 $ 38,885,545 225,435 $ 2,683,391 Brinson Class N................ -- -- -- -- SwissKey Class................. 1,054,052 13,166,684 565,431 6,612,207 --------- ------------ ---------- ------------ Total Redemptions........... 4,141,488 $ 52,052,229 790,866 $ 9,295,598 ========= ============ ========== ============
- -------------------------------------------------------------------------------- 58 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL BOND FUND ---------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ------------------ --------------------- SHARES VALUE SHARES VALUE ------- ---------- --------- ----------- Sales: Brinson Class I....................... 425,982 $4,083,669 2,335,856 $22,155,311 Brinson Class N....................... -- -- 104 1,000 SwissKey Class........................ 129,575 1,246,000 103,968 1,007,942 ------- ---------- --------- ----------- Total Sales........................ 555,557 $5,329,669 2,439,928 $23,164,253 ======= ========== ========= =========== Dividend Reinvestment: Brinson Class I....................... 169,880 $1,586,679 348,609 $ 3,318,757 Brinson Class N....................... 4 39 -- -- SwissKey Class........................ 15,474 144,141 36,719 349,204 ------- ---------- --------- ----------- Total Dividend Reinvestment........ 185,358 $1,730,859 385,328 $ 3,667,961 ======= ========== ========= =========== Redemptions: Brinson Class I....................... 206,213 $1,999,170 1,159,373 $11,665,371 Brinson Class N....................... -- -- -- -- SwissKey Class........................ 87,685 849,607 77,300 796,902 ------- ---------- --------- ----------- Total Redemptions.................. 293,898 $2,848,777 1,236,673 $12,462,273 ======= ========== ========= ===========
- -------------------------------------------------------------------------------- 59 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- The Brinson Funds - -------------------------------------------------------------------------------- Chicago . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne . New York Paris . Singapore . Sydney . Tokyo . Zurich 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 -------------------------- The Brinson Funds Brinson U.S. Balanced Fund Brinson U.S. Equity Fund Brinson U.S. Bond Fund Semi-Annual Report December 31, 1997 Global Institutional Asset Management -------------------------- Trustees and Officers - -------------------------------------------------------------------------------- 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 Catherine E. Macrae Assistant Secretary 1 The Funds' Advisor--Brinson Partners, Inc. - -------------------------------------------------------------------------------- Brinson Partners is the global institutional asset management division of Swiss Bank Corporation (SBC) and manages assets of over $140 billion. We have $90 billion of discretionary institutional assets with active management mandates and we are the investment manager for SBC Private Banking mutual fund assets which total over $50 billion. In addition, we act as an investment advisor to SBC Private Banking. Our organization manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. We employ over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, an established U.S.-based leader in the investment field located in Chicago, acts as the headquarters of our worldwide investment management process. Brinson Partners pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients. Private market and venture capital investing was established in the 1970s and today we represent a major worldwide presence in this asset class. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. 2 Table of Contents - -------------------------------------------------------------------------------- Shareholder Letter......................................................... 4 U.S. Economic and Market Highlights........................................ 6 U.S. Balanced Fund......................................................... 7 Schedule of Investments................................................ 10 Financial Statements................................................... 14 Financial Highlights................................................... 17 U.S. Equity Fund........................................................... 20 Schedule of Investments................................................ 23 Financial Statements................................................... 25 Financial Highlights................................................... 28 U.S. Bond Fund............................................................. 31 Schedule of Investments................................................ 34 Financial Statements................................................... 36 Financial Highlights................................................... 39 The Brinson Funds--Notes to Financial Statements........................... 42
3 Shareholder Letter - -------------------------------------------------------------------------------- February 20, 1998 Dear Shareholder: We are very pleased to present the December 31, 1997 Semi-Annual Report for the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. Within this Report, we'll focus on current domestic economic outlook as well as our current strategies and performance updates for the three Domestic Funds. Swiss Bank Corporation and Union Bank of Switzerland announced on December 8, 1997 their intention to merge into a single global financial institution. As part of this merger, Brinson Partners and UBS Asset Management will be combined into Brinson. Brinson will be the Institutional Asset Management Division of the new organization with assets under management in excess of $340 billion and will provide investment advisory services for the Private Banking Division with assets over $400 billion. The Consumer & Corporate Banking Division and Brinson combined will manage assets in excess of $940 billion. We are excited about the formation of Brinson and the additional resources we will bring together to further the tradition of delivering value-added investment performance and the highest level of professional client service. Brinson U.S. Balanced Fund Since its inception on December 31, 1994, the Brinson U.S. Balanced Fund has produced an annualized total return of 16.49%, compared to the return of 22.47% of its benchmark, the U.S. Balanced Mutual Fund Index. The Brinson U.S. Balanced Fund achieved this performance with a volatility of 5.13% well below the benchmark volatility of 7.64% Brinson U.S. Equity Fund The Brinson U.S. Equity Fund has provided an annualized return of 22.32% since its performance inception on February 28, 1994. This is compared to a 22.13% return for the benchmark, the Wilshire 5000 Index. The Brinson U.S. Equity Fund achieved this performance with a volatility of 11.26% compared to the benchmark volatility of 11.02%. 4 Shareholder Letter - -------------------------------------------------------------------------------- Brinson U.S. Bond Fund The Brinson U.S. Bond Fund has provided an annualized return of 8.04% since its inception on August 31, 1995. This is compared to a 7.99% return for the benchmark, the Salomon Brothers BIG Bond Index. The Brinson U.S. Bond Fund achieved this performance with a volatility of 4.48% compared to the benchmark volatility of 3.71%. Each of our Funds employs the same value-oriented investment philosophy applied across the U.S. spectrum. Each Fund also uses the resources of our entire worldwide research team. All of our analysts apply the same value philosophy to their work. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent. The Report that follows highlights the investment characteristics of the respective Funds. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /S/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. 5 U.S. Economic and Market Highlights - -------------------------------------------------------------------------------- Consumer price inflation in 1997 turned out to be extraordinarily tame. Excluding the volatile food and energy components, the price level rise of 2.4% was the lowest since 1965. Although we do not foresee a strong resurgence in inflation, there is reason to believe that, looking forward, the risk of an upward move is heightened. After bottoming in the early 1990s, money supply growth has returned to levels last seen in the mid 1990s. In addition, there is some risk that any monetary policy mistake would tend toward ease rather than excessive tightness if the Federal Reserve reacts to Asian-induced deflation fears. The economy continues to expand at a relatively rapid pace. Real GDP grew during 1997 at a 3.8% rate, the best performance in almost 10 years. Strong investment spending by businesses contributed significantly, and spending by consumers remained solid. The economy's strength propelled the unemployment rate under 5%, to levels last seen in the early 1970s. The Asian crisis has yet to have a significant impact on the U.S. economy. While the direct effects are likely to be minor, the crisis does introduce new risks. Talk of the possible deflationary effects of depressed import prices could induce the Federal Reserve to err on the side of monetary ease. Although the strong rebound in money growth since the early 1990s has not produced any resurgence in goods price inflation, the combination of this monetary expansion and the risk from policy reactions to Asia skews the inflation risks upwards rather than toward further disinflation. U.S. Environment Major Markets One Year Ended December 31, 1997 [Bar Chart Appears Here] Top Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1997 [Bar Chart Appears Here] Trucking, Freight 35.78 Oil Service 31 Air Transport 15.15 Thrift Institutions 8.57 Real Property 7.91 Media 4.46 Beverages 3.15 Banks 2.76 Retail (Other) 2.1 Agriculture, Food 1.92 Salomon U.S. Treasury Benchmark Returns One Year Ended December 31, 1997 [Bar Chart Appears Here] Bottom Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1997 [Bar Chart Appears Here] 6 U.S. Balanced Fund - -------------------------------------------------------------------------------- The U.S. Balanced Fund is an actively managed portfolio that applies our value- based asset allocation process to U.S. stocks, bonds and cash. The Fund's investment strategy is developed in the context of our global asset allocation process and is based on analysis of long-term economic and market conditions. The U.S. Balanced Fund has provided an annualized return of 16.49% since its inception on December 31, 1994. This falls below the corresponding 22.47% return of its benchmark, the U.S. Balanced Mutual Fund Index. The U.S. Balanced Fund return over this time period was achieved at an annualized volatility of 5.13%, significantly below the benchmark volatility of 7.64%. For the year ended December 31, 1997, the U.S. Balanced Fund returned 13.22%, compared to the benchmark return of 23.50%. The equity underweight and bond overweight was the primary factor adversely affecting relative performance. Security selection in the U.S. equity market also contributed negatively to relative performance. Although inflation was relatively stable throughout 1997, the bond market experienced rising yields early in the year and then a substantial drop in yields from April through December. Coming out of 1996, yields continued to firm on the back of a strengthening domestic economy and fears of an increase in interest rates by the Federal Reserve. These fears diminished in the second half of the year as reported inflation remained moderate. Yields at the long end of the yield curve declined by over 100 basis points. Bonds ended the year with yields at their lowest levels in two years. The equity market turned in yet another banner year, with broad market indices showing returns of about 30%. As in the prior year, the equity market provided strong performance during January and February. However, after a brief setback, the market soared on the back of declining interest rates and robust earnings expectations. The equity market appears increasingly willing to extrapolate recent strong earnings growth into the future. At year-end, equity price gains had driven the market to an overpricing of around 20%. Looking forward, return expectations in stocks appear insufficient compensation for the risks. Therefore, we have maintained a reduced exposure in the allocation to equities, with an offsetting overweight in the allocation to bonds. The 5% cash risk hedge is above the neutral allocation of 0%. 7 U.S. Balanced Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year 12/31/94* ended ended to 12/31/97 12/31/97 12/31/97 - -------------------------------------------------------------------------------- Brinson U.S. Balanced Fund 5.89% 13.22% 16.49% - -------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 9.84 23.50 22.47 - --------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Balanced Fund. **An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. 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 and the U.S. Balanced Mutual Fund Index if you had invested $1,000,000 on December 31, 1994, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Balanced Fund vs. U.S. Balanced Mutual Fund Index Wealth Value with Dividends Reinvested [Bar Chart Appears Here] Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. 8 U.S. Balanced Fund - -------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited) - --------------------------------------
U.S. EQUITIES Energy........................ 1.43% Capital Investment Capital Goods................ 2.50 Technology................... 3.05 ------ 5.55 Basic Industries Chemicals.................... 0.74 Housing/Paper................ 1.80 Metals....................... 0.31 ------ 2.85 Consumer Non-Durables................. 3.44 Retail/Apparel............... 1.81 Autos/Durables............... 1.39 Discretionary................ 1.30 Health: Drugs................ 2.87 Health: Non-Drugs............ 1.52 ------ 12.33 Financial Banks........................ 2.78 Non-Banks.................... 2.47 ------ 5.25 Utilities Electric..................... 2.18 Telephone.................... 0.38 ------ 2.56 Transportation................ 2.18% Services/Misc................. 3.35 ------ Total U.S. Equities....... 35.50* U.S. BONDS Corporate Bonds Asset-Backed................. 1.22 CMO.......................... 0.42 Consumer..................... 1.36 Financial.................... 4.32 Industrial................... 3.05 Telecommunications........... 2.33 ------ 12.70 International Dollar Bonds.... 6.14 Mortgage-Backed Securities.... 4.25 U.S. Government Agencies...... 16.99 U.S. Government Obligations... 15.76 ------ Total U.S. Bonds.......... 55.84* ------ SHORT-TERM INVESTMENTS........ 11.85* ------ TOTAL INVESTMENTS......... 103.19 LIABILITIES, LESS CASH AND OTHER ASSETS............. (3.19) ------ NET ASSETS.................... 100.00% ======
* The Fund held a long position in U.S. Treasury futures on December 31, 1997 which increased U.S. bond exposure from 55.84% to 59.46%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 35.50% to 30.00%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 11.85% to 13.73%. Asset Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ------------------------------------------------- U.S. Equity 65% 30% U.S. Bonds 35 65 Cash Equivalents 0 5 - ------------------------------------------------- 100% 100%
Top Ten U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ------------------------------------------------- E1. Lockheed Martin Corp. 1.50% E2. Xerox Corp. 1.44 E3. Philip Morris Companies, Inc. 1.37 E4. Aon Corp. 1.23 E5. CIGNA Corp. 1.22 E6. Schering Plough Corp. 1.06 E7. Burlington Northern Santa Fe Corp. 1.05 E8. Federal Express Corp. 1.02 E9. Goodyear Tire & Rubber Co. 0.99 10. Automatic Data Processing, Inc. 0.86 - -------------------------------------------------
9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------ ------------ U.S. Equities -- 35.50% Allergan, Inc.............................................. 32,800 $ 1,100,850 Alza Corp. (b)............................................. 32,000 1,018,000 American Home Products Corp................................ 25,700 1,966,050 Aon Corp................................................... 62,500 3,664,062 Automatic Data Processing, Inc............................. 42,000 2,577,750 Baxter International, Inc.................................. 41,500 2,093,156 Beckman Instruments, Inc................................... 12,600 504,000 Biogen, Inc. (b)........................................... 12,600 458,325 Birmingham Steel Corp...................................... 12,800 201,600 Boston Technology, Inc. (b)................................ 12,800 321,600 Briggs & Stratton Corp..................................... 1,600 77,700 Burlington Northern Santa Fe Corp.......................... 33,700 3,131,994 Champion Enterprises, Inc. (b)............................. 20,400 419,475 Champion International Corp................................ 1,700 77,031 Chase Manhattan Corp....................................... 17,200 1,883,400 CIGNA Corp................................................. 21,000 3,634,312 Circuit City Stores-Circuit City Group..................... 47,300 1,682,106 Citicorp................................................... 15,600 1,972,425 CMS Energy Corp............................................ 41,400 1,824,188 Comerica, Inc.............................................. 8,800 794,200 Commscope, Inc. (b)........................................ 24,366 327,418 Comverse Technology, Inc. (b).............................. 6,300 245,700 Corning, Inc............................................... 69,200 2,569,050 Covance, Inc. (b).......................................... 16,175 321,478 CPC International, Inc..................................... 14,000 1,512,000 Crown Cork & Seal Co., Inc................................. 15,200 761,900 CVS Corp................................................... 20,400 1,306,875 Dial Corp.................................................. 16,500 343,406 Eastman Chemical Co........................................ 17,700 1,054,256 Echlin, Inc................................................ 9,000 325,687 EMC Corp. (b).............................................. 91,600 2,513,275 Enron Corp................................................. 43,100 1,791,344 Entergy Corp............................................... 83,700 2,505,769 Federal Express Corp. (b).................................. 49,900 3,047,019 First American Corp. of Tennessee.......................... 8,400 417,900 First Data Corp............................................ 77,557 2,268,542 First Security Corp........................................ 10,550 441,781 FirstEnergy Corp........................................... 24,975 724,275 Fleetwood Enterprises, Inc................................. 9,600 407,400 Food Lion, Inc., Class A................................... 66,400 560,250 Forest Laboratories, Inc. (b).............................. 14,700 724,894 Fort James Corp............................................ 37,100 1,419,075 Gannett Co., Inc........................................... 31,800 1,965,637 General Semiconductor, Inc. (b)............................ 16,550 191,359 Genzyme Corp............................................... 12,900 357,975 Geon Co.................................................... 8,800 205,700 Goodyear Tire & Rubber Co.................................. 46,200 2,939,475 Harnischfeger Industries, Inc.............................. 24,300 858,094 Health Care and Retirement Corp. (b)....................... 15,350 617,837 Hibernia Corp.............................................. 17,800 334,862 Informix Corp. (b)......................................... 17,000 80,750 Interpublic Group of Companies, Inc........................ 20,850 1,038,591 Kimberly Clark Corp........................................ 38,600 1,903,463 Lear Corp. (b)............................................. 13,800 655,500 Lockheed Martin Corp....................................... 45,471 4,478,894 Lyondell Petrochemical Co.................................. 35,000 927,500 Manor Care, Inc............................................ 24,700 864,500
SHARES VALUE ---------- ------------ Martin Marietta Materials, Inc......................... 9,436 $ 345,004 Masco Corp............................................. 37,400 1,902,725 Nabisco Holdings Corp.................................. 32,700 1,583,906 National Service Industries, Inc....................... 6,300 312,244 Nextel Communications, Inc. (b)........................ 44,000 1,144,000 NextLevel Systems, Inc. (b)............................ 73,000 1,304,875 Old Republic International Corp........................ 6,450 239,859 Peco Energy Co......................................... 95,600 2,318,300 Pentair, Inc........................................... 17,000 610,938 Pharmacia & UpJohn, Inc................................ 17,200 629,950 Philip Morris Companies, Inc........................... 90,400 4,096,250 Raytheon Co., Class B.................................. 38,000 1,919,000 Regions Financial Corp................................. 8,200 345,938 Reynolds & Reynolds Co................................. 31,200 575,250 Schering Plough Corp................................... 50,700 3,149,738 Seagate Technology, Inc. (b)........................... 28,600 550,550 Sears Roebuck & Co..................................... 3,900 176,475 Timken Co.............................................. 9,400 323,125 Tyson Foods, Inc., Class A............................. 65,200 1,336,600 Ultramar Diamond Shamrock Corp......................... 36,490 1,163,119 US Bancorp............................................. 21,953 2,457,364 Vencor, Inc. (b)....................................... 32,000 782,000 Viad Corp.............................................. 31,500 608,344 Westvaco Corp.......................................... 7,650 240,497 Witco Corp............................................. 5,000 204,062 Xerox Corp............................................. 58,300 4,303,269 York International Corp................................ 20,000 791,250 ------------ Total U.S. Equities (Cost $82,622,420)................. 105,826,287 ------------ FACE AMOUNT VALUE ---------- ------------ Bonds -- 55.84% U.S. CORPORATE BONDS -- 12.70% Aid-Israel 0.000%, due 08/15/19........................ $5,162,000 $ 1,355,954 Aid-Jordan 8.750%, due 09/01/19.................................. 3,620,237 4,435,912 Archer Daniels 6.950%, due 12/15/2097.................. 1,995,000 2,021,956 Capital One Bank 6.830%, due 05/17/99.................. 2,000,000 2,013,864 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02........................... 1,360,000 1,362,135 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03............................ 2,000,000 2,019,160 Chrysler Corp. 7.400%, due 08/01/2097.................. 2,380,000 2,539,220 Comcast Cable Communications 144-A 8.500%, due 05/01/27.................................. 2,000,000 2,359,092 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02............................ 2,000,000 2,001,740 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00.............................. 840,000 850,303 Enron Corp. 6.750%, due 08/01/09....................... 4,500,000 4,537,395 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09.................. 1,270,601 1,236,739 GMAC 6.375%, due 12/01/01.............................. 2,000,000 2,008,776 Lockheed Martin Corp. 7.700%, due 06/15/08.................................. 2,000,000 2,172,408 MBNA Global Capital Securities FRN 6.519%, due 02/01/27.................................. 215,000 197,485 New England Telephone & Telegraph 6.300%, due 12/16/02.................................. 1,835,000 1,838,764
- -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- News America Holdings 7.750%, due 12/01/45.................................. $ 1,000,000 $ 1,041,108 Residential Asset Securitization Trust 97-A 11 P4 7.000%, due 12/25/27....................... 280,000 280,875 Time Warner, Inc., 7.570%, due 02/01/24................ 1,790,000 1,876,274 USA Waste Services 6.500%, due 12/15/02.................................. 1,720,000 1,715,679 ----------- 37,864,839 ----------- INTERNATIONAL DOLLAR BONDS -- 6.14% Credit Suisse--London 144A 7.900%, Resettable Perpetual Preferred................ 2,170,000 2,289,571 Den Danske Bank 144A 7.400%, due 06/15/10.................................. 1,400,000 1,460,710 Empressa Nacional Electric 7.875%, due 02/01/2097................................ 2,335,000 2,472,366 International Bank for Reconstruction & Development 6.375%, due 07/21/05...................... 1,500,000 1,538,438 LKB Baden-Wuerttemberg Finance NV 8.125%, due 01/27/00.................................. 1,780,000 1,849,546 Montell Finance Co. 144A 8.100%, due 03/15/27.................................. 1,610,000 1,890,022 Petroliam Nasional 7.125%, due 08/15/05.................................. 1,500,000 1,415,517 Province of Quebec 7.500%, due 07/15/23.................................. 750,000 808,680 Ras Laffan Liquefied Natural Gas Co. Ltd. 144A 8.294%, due 03/15/14............................. 1,735,000 1,632,645 Skandinaviska Enskilda Banken 144A 6.625%, Resettable Perpetual Preferred................ 2,000,000 2,008,000 Southern Investments UK 6.800%, due 12/01/06.................................. 930,000 937,318 ----------- 18,302,813 ----------- MORTGAGE-BACKED SECURITIES -- 4.25% Asset Securitization Corp. 96-D3A1B 7.210%, due 10/13/26.............................................. 2,600,000 2,714,665 Morgan Stanley Capital, Inc. 6.830%, due 10/15/06.................................. 1,227,297 1,253,082 PNC Mortgage Securities Corp. 94-3A8 7.500%, due 07/25/24........................... 1,350,000 1,394,501 Prudential Home Mortgage Securities 93-43 A9 6.750%, due 10/25/23......................... 1,387,428 1,368,102 94-3 A10 6.500%, due 02/25/24......................... 2,855,000 2,742,799 UCFC Home Equity Loan 97-Class A8 6.325%, FRN, due 09/15/27................. 1,236,672 1,235,646 Vanderbilt Mortgage Finance 97-B1A3 6.975%, due 08/07/03.......................... 1,925,000 1,978,631 ----------- 12,687,426 ----------- U.S. GOVERNMENT AGENCIES -- 16.99% Federal Home Loan Mortgage Corp. 6.500%, due 05/15/21.................................. 2,159,690 2,159,798 7.500%, due 01/15/23.................................. 1,075,979 1,129,864 0.000%, due 04/15/27 principal only................... 2,497,000 1,629,163
FACE AMOUNT VALUE ---------- ----------- Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23................................... $ 717,095 $ 741,969 9.000%, due 03/01/24................................... 346,379 374,079 9.500%, due 04/01/25................................... 1,030,008 1,100,177 Federal National Mortgage Association 6.540%, due 09/18/02................................... 2,415,000 2,442,302 6.959%, due 08/01/07................................... 3,065,973 3,196,277 6.789%, due 11/01/07................................... 504,259 525,377 6.500%, due 05/25/08................................... 1,491,555 1,488,706 6.500%, due 08/25/08................................... 1,550,096 1,552,577 8.000%, due 12/18/11................................... 1,000,000 1,074,974 6.500%, due 12/25/23................................... 2,000,000 1,993,710 7.000%, due 03/18/25................................... 2,190,000 2,191,778 6.500%, due 04/01/26................................... 557,317 550,002 6.500%, due 05/01/26................................... 2,007,715 1,981,364 6.500%, due 12/01/26 TBA............................... 11,545,000 11,393,472 Federal National Mortgage Association Strips 0.000%, due 04/01/27 principal only.................... 3,045,025 2,312,392 0.000%, due 07/01/27 principal only.................... 1,236,317 924,539 Government National Mortgage Association 8.000%, due 08/15/22................................... 871,861 904,010 8.000%, due 11/15/22................................... 2,018,583 2,105,019 7.500%, due 06/15/23................................... 2,900,313 2,970,103 7.500%, due 08/15/23................................... 1,031,840 1,056,669 7.500%, due 09/15/23................................... 1,052,633 1,077,963 7.000%, due 12/15/23................................... 860,100 869,638 9.000%, due 07/15/24................................... 136,239 145,690 8.500%, due 11/15/24................................... 144,212 151,467 8.500%, due 01/15/25................................... 281,633 295,803 9.000%, due 05/15/25................................... 340,348 363,959 7.500%, due 06/15/25................................... 1,885,081 1,932,416 ----------- 50,635,257 ----------- U.S. GOVERNMENT OBLIGATIONS-- 15.76% U.S. Treasury Notes and Bonds 6.000%, due 06/30/99................................... 30,805,000 30,959,025 5.875%, due 08/31/99................................... 4,520,000 4,534,125 7.750%, due 11/30/99................................... 1,110,000 1,150,931 6.625%, due 07/31/01................................... 1,660,000 1,707,207 6.250%, due 08/31/02................................... 5,500,000 5,613,438 8.125%, due 05/15/21................................... 1,195,000 1,505,700 U.S. Treasury Principal Strip 0.000%, due 08/15/03 principal only.................... 2,090,000 1,517,340 ----------- 46,987,766 ----------- Total U.S. Bonds (Cost $163,017,803).................... 166,478,101 ----------- Short-Term Investments -- 11.85% U.S. GOVERNMENT OBLIGATIONS -- 0.33% U.S. Treasury Bill 5.42%, due 05/28/98.................. 1,015,000 993,430 ----------- COMMERCIAL PAPER -- 11.52% Bausch & Lomb Inc., 7.750%, due 01/02/98................ 5,145,000 5,143,892
- -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ------------ Case Credit Corp. 6.110%, due 01/20/98................................. $1,300,000 $ 1,295,808 6.030%, due 03/10/98................................. 1,500,000 1,483,725 6.020%, due 03/13/98................................. 1,500,000 1,482,191 General American Transportation Corp. 7.500%, due 01/07/98............................................. 3,489,000 3,484,639 GTE Corp. 6.120%, due 02/20/98................................. 1,500,000 1,487,250 6.020%, due 03/02/98................................. 1,500,000 1,484,950 Marriott Corp. 6.300%, due 01/16/98................................. 2,000,000 1,994,750 6.050%, due 02/09/98................................. 2,500,000 2,483,615 Nabisco Corp. 6.120%, due 01/16/98.................... 2,000,000 1,994,900 Occidental Petroleum Corp. 6.000%, due 01/16/98....... 2,500,000 2,493,750 Praxair Corp. 6.550%, due 01/02/98.................... 6,000,000 5,998,909 Safeway, Inc. 6.700%, due 01/02/98................................. 2,000,000 1,999,628 5.920%, due 01/22/98................................. 1,500,000 1,494,820 ------------ 34,322,827 ------------ Total Short-Term Investments (Cost $35,315,671)................................... 35,316,257 ------------ Total Investments (Cost $280,955,894)--103.19% (a)..................... 307,620,645 ------------ Liabilities, less cash and other assets-- (3.19%)..................................... (9,510,432) ------------ Net Assets--100%...................................... $298,110,213 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $280,955,894; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $29,455,719 Gross unrealized depreciation................................ (2,790,968) ----------- Net unrealized appreciation................................ $26,664,751 ===========
(b) Non-income producing security FRN: Floating rate note--The rate disclosed is that in effect at December 31, 1997. 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, 1997, the value of these securities amounted to $11,640,040, or 3.90% 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. FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of December 31, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) ---------- ---------- ---------- ----------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 82 contracts............... March 1998 $8,874,678 $8,907,250 $ 32,572 10 Year U.S. Treasury Note, 4 contracts................ March 1998 445,655 448,625 2,970 30 Year U.S. Treasury Bond, 12 contracts............... March 1998 1,437,871 1,445,625 7,754 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 67 contracts.................. March 1998 16,329,119 16,399,925 (70,806) -------- Total..................... $(27,510) ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1997 was $993,430. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $280,955,894) (Note 1)............... $307,620,645 Receivables: Investment securities sold...................................... 4,674,233 Dividends....................................................... 160,170 Interest........................................................ 1,521,608 Fund shares sold................................................ 5,000 Other assets..................................................... 39,717 ------------ TOTAL ASSETS.................................................. 314,021,373 ------------ LIABILITIES: Payables: Investment securities purchased................................. 15,656,125 Due to custodian bank........................................... 36,637 Investment advisory fees (Note 2)............................... 170,379 Accrued expenses................................................ 48,019 ------------ TOTAL LIABILITIES............................................. 15,911,160 ------------ NET ASSETS........................................................ $298,110,213 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $270,389,706 Accumulated undistributed net investment income.................. 81,662 Accumulated net realized gain.................................... 1,001,604 Net unrealized appreciation...................................... 26,637,241 ------------ NET ASSETS.................................................... $298,110,213 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $296,444,401 and 24,918,886 shares is- sued and outstanding) (Note 6)................................. $ 11.90 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,059 and 89 shares issued and outstanding) (Note 6).......... $ 11.90 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,664,753 and 140,637 shares issued and outstanding) (Note 6). $ 11.84 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME Interest.......................................................... $ 5,689,651 Dividends......................................................... 958,489 ----------- TOTAL INCOME................................................... 6,648,140 ----------- EXPENSES: Advisory (Note 2)................................................. 1,005,745 Administration.................................................... 51,918 Distribution (Note 5)............................................. 4,384 Other............................................................. 91,325 ----------- TOTAL EXPENSES................................................. 1,153,372 ----------- NET INVESTMENT INCOME ......................................... 5,494,768 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 13,452,774 Futures contracts................................................ (2,376,619) ----------- Net realized gain.............................................. 11,076,155 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... (1,400,448) Futures contracts................................................ 1,164,080 ----------- Change in net unrealized appreciation or depreciation.......... (236,368) ----------- Net realized and unrealized gain.................................. 10,839,787 ----------- Net increase in net assets resulting from operations.............. $16,334,555 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 5,494,768 $ 9,809,363 Net realized gain............................. 11,076,155 16,067,241 Change in net unrealized appreciation or de- preciation................................... (236,368) 10,534,773 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 16,334,555 36,411,377 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.............................. (8,638,019) (7,953,731) Brinson Class N.............................. (30) -- SwissKey Class............................... (46,180) (43,714) Distributions from net realized gain: Brinson Class I.............................. (20,202,719) (10,324,917) Brinson Class N.............................. (75) -- SwissKey Class............................... (121,168) (65,778) ------------ ------------ Total distributions to shareholders............ (29,008,191) (18,388,140) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 28,640,454 80,528,530 Shares issued on reinvestment of distribu- tions........................................ 28,947,784 18,312,423 Shares redeemed............................... (31,314,203) (60,962,669) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)............. 26,274,035 37,878,284 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 13,600,399 55,901,521 ------------ ------------ NET ASSETS: Beginning of year............................. 284,509,814 228,608,293 ------------ ------------ End of year (including accumulated undistrib- uted net investment income of $81,662 and $3,271,123, respectively).................... $298,110,213 $284,509,814 ============ ============
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 30, 1994* DECEMBER 31, 1997 ENDED ENDED THROUGH BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 12.53 $ 11.71 $ 11.23 $ 10.00 -------- -------- -------- -------- Income from investment operations: Net investment income. 0.26 0.47 0.44 0.23 Net realized and unrealized gain...... 0.45 1.29 1.04 1.16 -------- -------- -------- -------- Total income from investment opera- tions.............. 0.71 1.76 1.48 1.39 -------- -------- -------- -------- Less distributions: Distributions from net investment income.... (0.40) (0.40) (0.43) (0.16) Distributions from net realized gain........ (0.94) (0.54) (0.57) -- -------- -------- -------- -------- Total distributions. (1.34) (0.94) (1.00) (0.16) -------- -------- -------- -------- Net asset value, end of period................. $ 11.90 $ 12.53 $ 11.71 $ 11.23 ======== ======== ======== ======== Total return (non- annualized)............ 5.89% 15.50% 13.52% 13.91% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $296,444 $282,860 $227,829 $157,724 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.80%** 0.88% 1.01% 1.06%** After expense reim- bursement............ N/A 0.80% 0.80% 0.80%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.83%** 3.78% 3.76% 4.36%** After expense reim- bursement............ N/A 3.86% 3.97% 4.63%** Portfolio turnover rate.................. 94% 329% 240% 196% Average commission rate paid per share........ $ 0.0536 $0.0441 $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
SIX MONTHS ENDED DECEMBER 31, 1997* BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.53 ------- Income from investment operations: Net investment income...................................... 0.25 Net realized and unrealized gain........................... 0.44 ------- Total income from investment operations.................. 0.69 ------- Less distributions: Distributions from net investment income................... (0.38) Distributions from net realized gain....................... (0.94) ------- Total distributions...................................... (1.32) ------- Net asset value, end of period............................... $ 11.90 ======= Total return (non-annualized)................................ 5.72% Ratios/Supplemental Data: Net assets, end of period (in 000s)......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement............................... 1.05%** Ratio of net investment income to average net assets: Before expense reimbursement............................... 3.64%** Portfolio turnover rate..................................... 94% Average commission rate paid per share...................... $0.0536
*Commencement of Brinson Class N was June 30, 1997. **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.46 $ 11.67 $ 11.38 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.23 0.38 0.42 Net realized and unrealized gain......................... 0.45 1.31 0.86 ------- ------- ------- Total income from investment operations................. 0.68 1.69 1.28 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.36) (0.36) (0.42) Distributions from net real- ized gain.................... (0.94) (0.54) (0.57) ------- ------- ------- Total distributions......... (1.30) (0.90) (0.99) ------- ------- ------- Net asset value, end of period.. $ 11.84 $ 12.46 $ 11.67 ======= ======= ======= Total return (non-annualized)... 5.56% 14.99% 11.54% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $ 1,665 $ 1,649 $ 779 Ratio of expenses to average net assets: Before expense reimbursement.. 1.30%** 1.38% 1.51%** After expense reimbursement... N/A 1.30% 1.30%** Ratio of net investment income to average net assets: Before expense reimbursement.. 3.33%** 3.28% 3.26%** After expense reimbursement... N/A 3.36% 3.47%** Portfolio turnover rate........ 94% 329% 240% Average commission rate paid per share..................... $0.0536 $0.0441 $0.0481
*Commencement of SwissKey Class **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 U.S. Equity Fund - -------------------------------------------------------------------------------- The U.S. Equity Fund is an actively managed portfolio invested in common stocks of U.S. corporations. The portfolio is diversified by issue and industry; it is typically 70% invested in large capitalization stocks, with the remaining 30% in intermediate and small capitalization stocks. Investment strategies emphasize stock selection with attention to the management of factor and industry exposures. Since its performance inception on February 28, 1994, the Brinson U.S. Equity Fund has provided an annualized return of 22.32% compared to 22.13% for the benchmark, the Wilshire 5000 Equity Index. The annualized volatility of the U.S. Equity Fund has been 11.26% since inception, only slightly above the 11.02% volatility for the Wilshire 5000 Equity Index. In 1997, the Brinson U.S. Equity Fund's total return of 24.76% trailed the 31.29% return for its benchmark. Almost all of the U.S. Equity Fund's underperformance occurred in the fourth quarter against the backdrop of a stock market environment heavily influenced by a "flight to quality" mentality on the part of investors. Such an environment was precipitated by difficulties in the Southeast Asian economies. There were indications of trouble in the region earlier in 1997, but the problems came to the fore in the final quarter as the magnitude of credit excesses became more apparent, future economic growth rates were revised sharply lower and currency values in country after country plummeted. U.S. financial markets and the dollar were viewed as a safe haven. Not surprisingly, the strongest relative performance within the stock market was posted by the highest quality, largest capitalization issues. The U.S. Equity Fund was not positioned well for these fourth quarter developments. The problem was not an unusually heavy weight in low quality, small capitalization issues. Rather, the problem was that the Fund was minimally weighted in those few very large, very high quality issues which have come to dominate the market in recent years and which performed strongly in the fourth quarter. The 20 largest U.S. stocks now account for over 30% of the total market value of the S&P 500, and most of them are concentrated in the relatively defensive consumer nondurable, international oil and telephone utility industries. Our researchers recognize the strong products, capable managements and worldwide market positions which characterize most of these companies, and they have taken these factors into account in formulating their future estimates of profitability and growth. However, based upon their work, we found these stocks to be relatively overvalued throughout 1997, a mispricing that by the end of the year was as high as we have observed since the inception of our present organization in 1981. As we enter 1998, our price/value discipline leads us to maintain an underweight in such issues. More specifically, the Fund is positioned with factor overweightings in the traditional value measures of book-price, earnings-price and yield, and underweights in growth, size and foreign earnings. From an industry standpoint, meaningful deviations from the benchmark include overweightings in healthcare, defense and electric utilities. Important underweights include energy, telephone utilities, miscellaneous finance and semiconductor/personal computer issues. 20 U.S. Equity Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year 3 years 2/28/94* ended ended ended to 12/31/97 12/31/97 12/31/97 12/31/97 - -------------------------------------------------------------------------- Brinson U.S. Equity Fund 6.87% 24.76% 30.10% 22.32% - -------------------------------------------------------------------------- Wilshire 5000 Index 11.60 31.29 29.49 22.13 - --------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Equity Fund and the Wilshire 5000 Index if you had invested $1,000,000 on February 28, 1994, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Equity Fund vs. Wilshire 5000 Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
Brinson U.S. Wilshire Equity 500 Fund Index - ----------------------------------- 2/28/94 1000000 1000000 6/30/94 970003 947285 12/31/94 983676 991086 6/30/95 1178023 1181470 12/31/95 1382877 1352348 6/30/96 1538200 1491255 12/31/96 1737594 1639211 6/30/97 2028487 1928453 12/31/97 2165710 2152124
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. 21 U.S. Equity Fund - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited)
- ---------------------------------- U.S. EQUITIES Energy.................... 3.80% Capital Investment Capital Goods............ 6.64 Technology............... 8.10 ------ 14.74 Basic Industries Chemicals................ 1.97 Housing/Paper............ 4.78 Metals................... 0.83 ------ 7.58 Consumer Non-Durables............. 9.11 Retail/Apparel........... 4.79 Autos/Durables........... 3.68 Discretionary............ 3.44 Health: Drugs............ 7.61 Health: Non-Drugs........ 4.02 ------ 32.65 Financial Banks.................... 7.38 Non-Banks................ 6.56 ------ 13.94 Utilities Electric................. 5.78 Telephone................ 1.01 ------ 6.79 Transportation............ 5.78 Services/Misc............. 8.86 ------ Total U.S. Equities... 94.14* ------ SHORT-TERM INVESTMENTS.... 5.45* ------ TOTAL INVESTMENTS..... 99.59 ------ CASH AND OTHER ASSETS, LESS LIABILITIES......... 0.41 ------ NET ASSETS................ 100.00% ======
* The Fund held a long position in stock index futures on December 31, 1997 which increased U.S. Equity exposure from 94.14% to 99.64% and reduced exposure to Short-Term Investments from 5.45% to -0.05%. Top Ten U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ------------------------------------------------------- 1. Lockheed Martin Corp. 4.02% 2. Xerox Corp. 3.86 3. Philip Morris Companies, Inc. 3.67 4. CIGNA Corp. 3.25 5. Aon Corp. 3.07 6. Schering Plough Corp. 2.85 7. Burlington Northern Santa Fe Corp. 2.80 8. Federal Express Corp. 2.65 9. Goodyear Tire & Rubber Co. 2.63 10. Automatic Data Processing, Inc. 2.31 - -------------------------------------------------------
22 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ---------- U.S. Equities -- 94.14% Allergan, Inc............................................... 162,500 $5,453,906 Alza Corp. (b).............................................. 158,500 5,042,281 American Home Products Corp................................. 128,000 9,792,000 Aon Corp.................................................... 288,750 16,927,969 Automatic Data Processing, Inc.............................. 207,800 12,753,725 Baxter International, Inc................................... 205,000 10,339,688 Beckman Instruments, Inc.................................... 62,000 2,480,000 Biogen, Inc. (b)............................................ 62,100 2,258,888 Birmingham Steel Corp....................................... 63,700 1,003,275 Boston Technology, Inc. (b)................................. 63,300 1,590,413 Briggs & Stratton Corp...................................... 10,900 529,331 Burlington Northern Santa Fe Corp. ......................... 166,500 15,474,094 Champion Enterprises, Inc. (b).............................. 100,200 2,060,363 Champion International Corp................................. 8,500 385,156 Chase Manhattan Corp........................................ 84,900 9,296,550 CIGNA Corp.................................................. 103,600 17,929,275 Circuit City Stores-Circuit City Group...................... 234,100 8,325,181 Citicorp.................................................... 77,000 9,735,687 CMS Energy Corp............................................. 204,600 9,015,188 Comerica, Inc............................................... 43,600 3,934,900 Commscope, Inc. (b)......................................... 120,599 1,620,549 Comverse Technology, Inc. (b)............................... 31,200 1,216,800 Corning, Inc................................................ 329,600 12,236,400 Covance, Inc (b)............................................ 79,850 1,587,019 CPC International, Inc...................................... 69,400 7,495,200 Crown Cork & Seal Co., Inc.................................. 75,400 3,779,425 CVS Corp.................................................... 100,600 6,444,688 Dial Corp................................................... 81,900 1,704,544 Eastman Chemical Co......................................... 87,300 5,199,806 Echlin, Inc................................................. 44,500 1,610,344 EMC Corp. (b)............................................... 453,100 12,431,931 Enron Corp.................................................. 212,400 8,827,875 Entergy Corp................................................ 413,700 12,385,144 Federal Express Corp. (b)................................... 239,500 14,624,469 First American Corp. of Tennessee........................... 41,500 2,064,625 First Data Corp............................................. 383,230 11,209,477 First Security Corp......................................... 52,300 2,190,062 FirstEnergy Corp............................................ 123,905 3,593,245 Fleetwood Enterprises, Inc.................................. 45,100 1,913,931 Food Lion, Inc., Class A.................................... 300,900 2,538,844 Forest Laboratories, Inc. (b)............................... 72,900 3,594,881 Fort James Corp............................................. 185,100 7,080,075 Gannett Co., Inc............................................ 157,400 9,729,287 General Semiconductor, Inc. (b)............................. 82,075 948,992 Genzyme Corp................................................ 64,100 1,778,775 Geon Co..................................................... 43,700 1,021,487 Goodyear Tire & Rubber Co................................... 227,700 14,487,412 Harnischfeger Industries, Inc............................... 120,400 4,251,625 Health Care and Retirement Corp. (b)........................ 71,450 2,875,863 Hibernia Corp............................................... 88,100 1,657,381 Informix Corp. (b).......................................... 66,900 317,775 Interpublic Group of Companies, Inc......................... 103,350 5,148,122 Kimberly Clark Corp......................................... 185,400 9,142,537 Lear Corp. (b).............................................. 68,300 3,244,250 Lockheed Martin Corp........................................ 225,026 22,165,061 Lyondell Petrochemical Co................................... 173,200 4,589,800 Manor Care, Inc............................................. 113,900 3,986,500 Martin Marietta Materials, Inc.............................. 46,357 1,694,928 Masco Corp.................................................. 184,800 9,401,700 Nabisco Holdings Corp....................................... 161,500 7,822,656 National Service Industries, Inc............................ 31,000 1,536,438 Nextel Communications, Inc. (b)............................. 221,500 5,759,000
SHARES VALUE ---------- ------------ NextLevel Systems, Inc. (b)......................... 361,400 $ 6,460,025 Old Republic International Corp..................... 28,150 1,046,828 Peco Energy Co...................................... 472,900 11,467,825 Pentair, Inc........................................ 83,800 3,011,563 Pharmacia & Upjohn, Inc............................. 82,900 3,036,213 Philip Morris Companies, Inc........................ 447,300 20,268,281 Raytheon Co., Class B .............................. 187,700 9,478,850 Regions Financial Corp.............................. 40,700 1,717,031 Reynolds & Reynolds Co.............................. 154,400 2,846,750 Schering Plough Corp................................ 252,800 15,705,200 Seagate Technology, Inc. (b)........................ 141,500 2,723,875 Sears, Roebuck and Co............................... 17,200 778,300 Timken Co........................................... 40,900 1,405,938 Tyson Foods, Inc., Class A.......................... 322,500 6,611,250 Ultramar Diamond Shamrock Corp...................... 180,318 5,747,636 US Bancorp.......................................... 104,448 11,691,592 Vencor, Inc. (b).................................... 157,600 3,851,350 Viad Corp........................................... 155,600 3,005,025 Westvaco Corp....................................... 37,800 1,188,337 Witco Corp. ........................................ 25,700 1,048,881 Xerox Corp.......................................... 288,400 21,287,525 York International Corp............................. 98,700 3,904,819 ------------ Total U.S. Equities (Cost $452,651,427)................................ 519,519,887 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 5.45% U.S. GOVERNMENT OBLIGATIONS -- 0.09% U.S. Treasury Bill 5.420%, due 05/28/98............................... $ 495,000 $ 484,481 ------------ COMMERCIAL PAPER -- 5.36% Bausch & Lomb Inc. 7.750%, due 01/02/98 2,565,000 2,564,448 Cummins Engine Company, Inc. 7.000%, due 01/02/98... 10,000,000 9,998,056 General American Transportation Corp. 7.500%, due 01/07/98............................... 951,000 949,811 Nabisco Inc. 6.700%, due 01/05/98............................... 1,000,000 999,256 Praxair Inc. 6.550%, due 01/02/98............................... 5,000,000 4,999,090 Solutia Inc. 7.000% due 01/02/98................................ 10,083,000 10,081,039 ------------ 29,591,700 ------------ Total Short-Term Investments (Cost $30,076,290) 30,076,181 ------------ Total Investments (Cost $482,727,717) -- 99.59% (a).................. 549,596,068 ------------ Cash and other assets, less liabilities--0.41%............................ 2,264,881 ------------ Net Assets -- 100%.................................. $551,860,949 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $482,727,717; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $78,689,103 Gross unrealized depreciation................................ (11,820,752) ----------- Net unrealized appreciation................................ $66,868,351 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of December 31, 1997:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN ---------- ----------- ----------- ---------- INDEX FUTURES BUY CONTRACTS Standard & Poor's 500, 124 contracts................. March 1998 $29,802,893 $30,352,100 $549,207 ========
The segregated cash and aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1997 were $815,000 and $484,481, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $482,727,717) (Note 1) .............. $549,596,068 Cash............................................................. 1,298,691 Receivables: Investment securities sold...................................... 3,932,114 Dividends....................................................... 775,755 Fund shares sold................................................ 17,912,366 Other assets..................................................... 97,684 ------------ TOTAL ASSETS.................................................. 573,612,678 ------------ LIABILITIES: Payables: Investment securities purchased................................. 19,694,740 Fund shares redeemed............................................ 1,672,529 Investment advisory fees (Note 2)............................... 302,102 Accrued expenses................................................ 82,358 ------------ TOTAL LIABILITIES............................................. 21,751,729 ------------ NET ASSETS........................................................ $551,860,949 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $483,976,569 Accumulated undistributed net investment income.................. 14,392 Accumulated net realized gain.................................... 452,430 Net unrealized appreciation...................................... 67,417,558 ------------ NET ASSETS.................................................... $551,860,949 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $507,739,810 and 28,880,535 shares is- sued and outstanding) (Note 6)................................. $ 17.58 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,072 and 61 shares issued and outstanding) (Note 6).......... $ 17.58 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $44,120,067 and 2,517,356 shares issued and outstanding) (Note 6)...................................... $ 17.53 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Dividends......................................................... $ 3,920,692 Interest.......................................................... 361,435 ----------- TOTAL INCOME................................................... 4,282,127 ----------- EXPENSES: Advisory (Note 2)................................................. 1,577,328 Administration.................................................... 116,010 Distribution (Note 5)............................................. 106,721 Other............................................................. 108,634 ----------- TOTAL EXPENSES................................................. 1,908,693 ----------- NET INVESTMENT INCOME.......................................... 2,373,434 ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments...................................................... 15,557,861 Futures contracts................................................ 1,061,031 ----------- Net realized gain ............................................. 16,618,892 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 8,599,085 Futures contracts ............................................... 314,472 ----------- Change in net unrealized appreciation or depreciation.......... 8,913,557 ----------- Net realized and unrealized gain ................................. 25,532,449 ----------- Net increase in net assets resulting from operations.............. $27,905,883 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE (UNAUDITED) 30, 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 2,373,434 $ 2,268,618 Net realized gain ............................ 16,618,892 21,580,018 Change in net unrealized appreciation or de- preciation .................................. 8,913,557 40,886,740 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 27,905,883 64,735,376 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................. (2,888,381) (1,717,943) Brinson Class N............................. (5) -- SwissKey Class.............................. (150,200) (87,137) Distributions from net realized gain: Brinson Class I............................. (28,383,478) (12,393,329) Brinson Class N............................. (64) -- SwissKey Class.............................. (2,678,144) (838,501) ------------ ------------ Total distributions to shareholders........... (34,100,272) (15,036,910) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 203,834,470 212,394,882 Shares issued on reinvestment of distribu- tions........................................ 30,526,642 14,138,565 Shares redeemed............................... (49,295,234) (34,971,198) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)............. 185,065,878 191,562,249 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 178,871,489 241,260,715 ------------ ------------ NET ASSETS: Beginning of year............................. 372,989,460 131,728,745 ------------ ------------ End of year (including accumulated undistrib- uted net investment income of $14,392 and $679,544, respectively)...................... $551,860,949 $372,989,460 ============ ============
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 YEAR ENDED JUNE 30, FEBRUARY 22, 1994* DECEMBER 31, 1997 --------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 17.64 $ 14.59 $ 11.53 $ 9.65 $10.00 -------- -------- -------- ------- ------ Income from investment operations: Net investment income. 0.08 0.15 0.17 0.16 0.05 Net realized and unrealized gain (loss)............... 1.10 4.27 3.31 1.89 (0.36) -------- -------- -------- ------- ------ Total income (loss) from investment operations......... 1.18 4.42 3.48 2.05 (0.31) -------- -------- -------- ------- ------ Less distributions: Distributions from net investment income.... (0.11) (0.14) (0.17) (0.14) (0.04) Distributions from net realized gain........ (1.13) (1.23) (0.25) (0.03) -- -------- -------- -------- ------- ------ Total distributions. (1.24) (1.37) (0.42) (0.17) (0.04) -------- -------- -------- ------- ------ Net asset value, end of period................. $ 17.58 $ 17.64 $ 14.59 $ 11.53 $ 9.65 ======== ======== ======== ======= ====== Total return (non- annualized)............ 6.87% 31.87% 30.57% 21.45% (3.10)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $507,740 $337,949 $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.80%** 0.89% 1.14% 1.70% 5.40% ** After expense reim- bursement............ N/A 0.80% 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reim- bursement............ 1.10%** 1.06% 1.13% 1.09% (2.82)%** After expense reim- bursement............ N/A 1.15% 1.47% 1.99% 1.78% ** Portfolio turnover rate.................. 19% 43% 36% 33% 9% Average commission rate paid per share........ $ 0.0426 $ 0.0422 $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 28 U.S. EQUITY 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, 1997* BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 17.64 ------- Income from investment operations: Net investment income...................................... 0.08 Net realized and unrealized gain........................... 1.07 ------- Total income from investment operations.................. 1.15 ------- Less distributions: Distributions from net investment income................... (0.09) Distributions from net realized gain....................... (1.12) ------- Total distributions...................................... (1.21) ------- Net asset value, end of period............................... $ 17.58 ======= Total return (non-annualized)................................ 6.73% Ratios/Supplemental Data: Net assets, end of period (in 000s)......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement............................... 1.05%** Ratio of net investment income to average net assets: Before expense reimbursement............................... 0.77%** Portfolio turnover rate..................................... 19% Average commission rate paid per share...................... $0.0426
*Commencement of Brinson Class N was June 30, 1997 **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 29 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 17.59 $ 14.58 $ 11.94 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.04 0.11 0.10 Net realized and unrealized gain......................... 1.09 4.22 2.92 ------- ------- ------- Total income from investment operations................. 1.13 4.33 3.02 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.06) (0.09) (0.13) Distributions from net real- ized gain.................... (1.13) (1.23) (0.25) ------- ------- ------- Total distributions......... (1.19) (1.32) (0.38) ------- ------- ------- Net asset value, end of period.. $ 17.53 $ 17.59 $ 14.58 ======= ======= ======= Total return (non-annualized)... 6.59% 31.28% 25.70% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $44,120 $35,039 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement.. 1.32%** 1.41% 1.66%** After expense reimbursement... N/A 1.32% 1.32%** Ratio of net investment income to average net assets: Before expense reimbursement.. 0.57%** 0.54% 0.61%** After expense reimbursement... N/A 0.63% 0.95%** Portfolio turnover rate........ 19% 43% 36% Average commission rate paid per share..................... $0.0426 $0.0422 $0.0457
*Commencement of SwissKey Class **Annualized N/A=Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 U.S. Bond Fund - -------------------------------------------------------------------------------- The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar- denominated investment-grade fixed income securities. Macroeconomic and monetary analysis are the key elements in our strategy. We develop expectations about the returns on U.S. bonds based on the divergence of current market yields from our estimates of equilibrium yields. Relative value analysis serves as the basis of both our sector and individual security selection. Since its inception on August 31, 1995, the Brinson U.S. Bond Fund has provided an annualized return of 8.04%, compared to the 7.99% for the benchmark Salomon Brothers Broad Investment Grade Bond Index. The Fund's annualized return volatility since inception of 4.55% exceeds the 3.76% volatility of the benchmark. In 1997, the Fund's return of 9.64% slightly exceeded the benchmark return of 9.62%. The positive incremental performance in 1997 was a function of successful duration and yield curve strategies as well as issue selection primarily within the mortgage-backed sector. Portfolio duration was targeted at 1.3 times benchmark duration from the beginning of 1997 until early in the third quarter, when duration was shortened to neutral. Following a 25 basis point increase in the overnight funds rate target in March, Federal Reserve interest rate policy was unchanged for the balance of the year. While short-term market interest rates generally rose in line with the overnight funds market, long-term interest rates showed substantial declines in 1997. Thirty-year Treasury bond yields fell by 70 basis points to end 1997 at the 5.9% level. Declines in reported inflation and in inflationary expectations were the major factors associated with falling long-term interest rates. Another positive for the bond market was the continued decline in the Federal deficits which reduced Treasury debt supply. The good inflation performance was achieved at a time when the underlying pace of real economic activity was quite robust. Strong job creation led to a decline in unemployment rates to levels not seen since the 1960s. During the year, fixed income investors responded more to the favorable inflation data than to the risks of above-trend growth and the tight labor market. Interest rates began the year slightly above 6.60% and moved higher well into the second quarter in conjunction with the March Federal Reserve tightening and Federal Reserve Chairman Greenspan's now famous "irrational exuberance" speech. By the end of the second quarter with inflation remaining contained and no further hints of additional Fed tightening, interest rates began a steady decline which carried through year-end. In the final quarter of 1997 domestic economic strength, which would typically be viewed as a negative by the fixed income markets, was more than offset by developments in Asia. A dramatic depreciation in the Asian equity and currency markets gave rise to concerns about global deflation, providing further support to U.S. bond markets. The Asian turmoil had a dual impact on the U.S. bond market as a "flight-to-quality" provided fuel to the interest rate decline while the prospective negative influence on the U.S. economy propelled corporate bond credit spreads to their widest levels of the decade. 31 U.S. Bond Fund - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited)
- ------------------------------------------------------ U.S. BONDS Corporate Bonds Asset-Backed................................ 7.89% CMO......................................... 6.89 Consumer.................................... 0.75 Financial................................... 11.68 Industrial.................................. 9.39 Telecommunications.......................... 2.21 ------ Total U.S. Corporate Bonds................ 38.81 U.S. Government Agencies...................... 23.90 U.S. Government Obligations................... 20.22 International Dollar Bonds.................... 8.72 ------ Total U.S. Bonds.......................... 91.65 ------ SHORT-TERM INVESTMENTS........................ 6.07 ------ TOTAL INVESTMENTS......................... 97.72 ------ LIABILITIES, LESS CASH AND OTHER ASSETS....... 2.28 ------ NET ASSETS.................................... 100.00% ======
32 U.S. Bond Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year Annualized ended ended 8/31/95* to 12/31/97 12/31/97 12/31/97 - ---------------------------------------------------------------------------------------------------- Brinson U.S. Bond Fund 6.58% 9.64% 8.04% Salomon Brothers Broad Investment Grade (BIG) Bond Index 6.37 9.62 7.99 - ----------------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Bond Fund. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if you had invested $1,000,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Bond Fund vs. Salomon Brothers BIG Bond Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
Brinson Salomon U.S. Brothers Bond BIG Bond Fund Index - ---------------------------------------- 8/31/95 1,000,000 1,000,000 9/30/95 1,009,000 1,009,400 12/31/95 1,054,932.13 1,053,220.2 3/31/96 1,031,398.24 1,034,955.91 6/30/96 1,035,997.04 1,040,029.1 9/30/96 1,054,776.54 1,059,391.07 12/31/96 1,092,168.78 1,091,410.94 3/31/97 1,081,323.01 1,085,686.1 6/30/97 1,123,558.26 1,124,790.4 9/30/97 1,164,155.58 1,162,173.33 12/31/97 1,197,457.59 1,196,412.93 - ----------------------------------------
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. 33 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Bonds -- 91.65% U.S. CORPORATE BONDS -- 38.81% Aetna Services, Inc. 6.970%, due 08/15/36............... $ 235,000 $ 246,223 Aid-Israel, Series 10 Z 0.000%, due 02/15/03................................... 805,000 597,704 Aid-Jordan 8.750%, due 09/01/19......................... 517,177 633,702 Bellsouth Savings & Employee ESOP 9.125%, due 07/01/03................................... 88,948 92,331 Capital One Bank 6.830%, due 05/17/99................... 359,000 361,489 Chase Mortgage Finance Corp. 93-J1 Class 1A5 6.625%, due 08/25/09......................... 68,131 66,570 Chemical Mortgage Securities, Inc. 93-1 Class A5 7.450%, due 02/25/23........................................... 785,000 796,238 Ches Pot Tel MD 8.000%, due 10/15/29.................... 87,000 103,628 Chrysler Financial Corp. 7.400%, due 08/01/2097................................. 223,000 237,919 Citicorp Mortgage Securities, Inc. 94-9 Class A8, 5.750%, due 06/25/09......................... 91,612 82,865 Comcast Cable Communications 144A 8.500%, due 05/01/27................................... 300,000 353,864 Con Edison 6.450%, due 12/01/07......................... 300,000 299,435 Countrywide Funding Corp. FRN 6.360%, due 12/01/03................................... 250,000 248,125 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 08/20/06............................. 245,000 254,905 Dayton Hudson Credit Card Master Trust 95-1A, 6.100%, due 02/25/02............................ 218,000 218,190 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03............................. 155,000 156,259 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09................... 178,678 173,916 97-HE4 A7 6.735%, due 12/25/28......................... 410,000 414,981 General Motors Acceptance Corp.......................... 6.375%, due 12/01/01................................... 400,000 401,755 9.625%, due 12/15/01................................... 294,000 328,475 Green Tree Financial Corp. 8.300%, due 11/15/19................................... 320,000 356,508 Hanson Overseas BV 6.750%, due 09/15/05................................... 100,000 102,209 Interamer Development Bank 6.800%, due 10/15/25................................... 100,000 105,772 Lehman Brothers Holdings 7.250%, due 04/15/03................................... 225,000 232,285 Lockheed Martin Corp. 7.700%, due 06/15/08................................... 282,000 306,310 MBNA Global Capital Securities FRN 6.550%, due 02/01/27................................... 90,000 82,668 News America Holdings 7.750%, due 12/01/45................................... 358,000 372,717 PNC Mortgage Securities Corp. 94-3A8 7.500%, due 07/25/24............................ 215,000 222,087
FACE AMOUNT VALUE ---------- ----------- Premier Auto Trust 96-3A 6.500%, due 03/06/00.............................. $ 190,000 $ 190,682 96-4A, Class A4, 6.400%, due 10/06/01................... 350,000 351,939 Prudential Home Mortgage Securities 93-43A9 6.750%, due 10/25/23............................ 293,910 289,816 94-3A10 6.500%, due 02/25/24............................ 170,000 163,319 Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 304,259 Thrift Financial Corp. 11.250%, due 01/01/16................................... 48,499 52,306 Time Warner, Inc. 7.570%, due 02/01/24................... 90,000 94,338 Time Warner Entertainment, Inc. 8.375%, due 03/15/23.................................... 94,000 107,236 UCFC Home Equity Loan 97-C, Class A8, 6.325%, FRN, due 09/15/27............................... 185,745 185,591 USA Waste Services 6.500%, due 12/15/02.................................... 400,000 398,995 USX Corp. 8.125%, due 07/15/23........................... 400,000 450,885 ----------- 10,438,496 ----------- INTERNATIONAL DOLLAR BONDS -- 8.72% Banco Santiago S.A. 7.000%, due 07/18/07.................................... 380,000 381,032 Bayerische Landesbank 6.850%, due 07/19/01.................................... 188,000 192,990 Den Danske Bank 144A 7.400%, due 06/15/10.................................... 445,000 464,297 Empressa Nacional Electric 7.875%, due 02/01/27.................................... 394,000 417,179 Province of Quebec 7.500%, due 07/15/23.................................... 200,000 215,648 Repsol International Finance 7.000%, due 08/01/05.................................... 200,000 210,030 Republic of South Africa 9.625%, due 12/15/99.................................... 71,000 73,485 Royal Bank of Scotland 7.375%, Resettable Perpetual Preferred.................. 80,000 83,056 Skandinaviska Enskilda Banken 144A 6.625%, Resettable Perpetual Preferred.................. 305,000 306,220 ----------- 2,343,937 ----------- U.S. GOVERNMENT AGENCIES -- 23.90% Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13.................................... 492,125 502,589 7.500%, due 01/15/23.................................... 139,328 146,306 7.000%, due 01/15/25.................................... 235,000 233,989 7.238%, due 05/01/26.................................... 38,252 39,615 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03............................... 98,672 97,531 8.000%, due 11/01/22.................................... 190,982 197,607 9.000%, due 03/01/24.................................... 148,338 160,200 9.500%, due 04/01/25.................................... 43,073 46,007
- -------------------------------------------------------------------------------- 34 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Federal Home Loan Mortgage Corp. Strip 0.000%, due 04/15/27 principal only..................... $ 300,000 $ 195,734 Federal National Mortgage Association 6.959%, due 08/01/07.................................... 488,562 509,325 6.500%, due 05/25/08.................................... 115,558 115,337 8.000%, due 12/18/11.................................... 100,000 107,497 8.000%, due 05/25/21.................................... 260,000 271,993 9.000%, due 08/01/21.................................... 28,894 31,040 8.500%, due 07/01/22.................................... 22,285 23,606 9.500%, due 08/01/22.................................... 134,383 143,874 8.500%, due 12/01/25.................................... 298,255 311,397 6.500%, due 02/01/26.................................... 118,416 116,862 6.500%, due 04/01/26.................................... 402,445 397,163 6.500%, due 12/01/26 TBA................................ 200,000 197,375 6.175%, due 10/01/27.................................... 511,877 511,212 6.500%, due 12/01/27.................................... 792,000 781,605 Federal National Mortgage Association Strips 7.500%, due 05/01/23 interest only...................... 175,961 44,798 0.000%, due 04/01/27 principal only..................... 608,062 461,763 Government National Mortgage Association 10.000%, due 09/15/00................................... 2,663 2,835 10.000%, due 05/15/01................................... 5,200 5,537 9.000%, due 11/15/04.................................... 15,025 15,790 9.000%, due 12/15/17.................................... 56,428 61,654 8.000%, due 08/15/22.................................... 78,467 81,361 7.500%, due 12/15/22.................................... 362,696 373,008 7.500%, due 06/15/25.................................... 118,808 121,791 7.000%, due 07/15/25.................................... 118,543 119,542 ----------- 6,425,943 ----------- U.S. GOVERNMENT OBLIGATIONS -- 20.22% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01.................................... 270,000 277,678 7.000%, due 07/15/06.................................... 250,000 269,922 8.125%, due 05/15/21.................................... 325,000 409,500 6.000%, due 02/15/26.................................... 380,000 379,525 5.500%, due 11/15/98.................................... 153,000 152,761 6.000%, due 06/30/99.................................... 3,830,000 3,849,150 5.875%, due 08/31/99.................................... 100,000 100,313 ----------- 5,438,849 ----------- Total U.S. Bonds (Cost $24,121,505)...................... 24,647,225 -----------
FACE AMOUNT VALUE ---------- ----------- Short-Term Investments -- 6.07% COMMERCIAL PAPER -- 6.07% Case Credit Corp. 6.110%, due 01/20/98.................. $ 300,000 $ 299,033 GTE Corp. 6.020%, due 03/02/98.......................... 500,000 494,983 Safeway, Inc. 5.920%, due 01/22/98...................... 183,000 182,368 Vastar Resources, Inc. 7.100%, due 01/02/98................................... 657,000 656,871 ----------- Total Short-Term Investments (Cost $1,633,255)...................................... 1,633,255 ----------- Total Investments (Cost $25,754,760) -- 97.72% (a)....................... 26,280,480 ----------- Cash and other assets, less liabilities -- 2.28%........ 613,309 ----------- Net Assets -- 100%...................................... $26,893,789 ===========
(a) Aggregate cost for federal income tax purposes was $25,754,760; and net unrealized appreciation consisted of: Gross unrealized ap- preciation........... $563,738 Gross unrealized de- preciation........... (38,018) -------- Net unrealized ap- preciation........... $525,720 ========
FRN: Floating rate note -- The rate disclosed is that in effect at December 31, 1997. 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, 1997, the value of these securities amounted to $1,124,381, or 4.18% 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. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $25,754,760) (Note 1)................ $26,280,480 Cash............................................................. 65,136 Receivables: Investment securities sold...................................... 908,528 Interest........................................................ 250,274 Other assets..................................................... 29,443 ----------- TOTAL ASSETS.................................................. 27,533,861 ----------- LIABILITIES: Payables: Investment securities purchased................................. 590,827 Investment advisory fees (Note 2)............................... 5,020 Accrued expenses................................................ 44,225 ----------- TOTAL LIABILITIES............................................. 640,072 ----------- NET ASSETS........................................................ $26,893,789 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $26,262,620 Accumulated undistributed net investment income.................. (13,078) Accumulated net realized gain.................................... 118,527 Net unrealized appreciation...................................... 525,720 ----------- NET ASSETS.................................................... $26,893,789 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $24,948,207 and 2,409,486 shares issued and outstanding) (Note 6)...................................... $ 10.35 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,067 and 103 shares issued and outstanding) (Note 6)......... $ 10.36 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,944,515 and 188,228 shares issued and outstanding) (Note 6). $ 10.33 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Interest........................................................... $ 844,224 ---------- TOTAL INCOME.................................................... 844,224 ---------- EXPENSES: Advisory (Note 2).................................................. 65,526 Professional....................................................... 18,768 Registration....................................................... 10,791 Distribution (Note 5).............................................. 4,144 Other.............................................................. 19,950 ---------- TOTAL EXPENSES.................................................. 119,179 Expenses deferred by Advisor (Note 2)........................... (36,523) ---------- NET EXPENSES.................................................... 82,656 ---------- NET INVESTMENT INCOME .......................................... 761,568 ---------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments................................... 548,792 Change in net unrealized appreciation or depreciation.............. 328,468 ---------- Net realized and unrealized gain................................... 877,260 ---------- Net increase in net assets resulting from operations............... $1,638,828 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 OPERATIONS: ----------------- ----------- Net investment income.......................... $ 761,568 $ 836,232 Net realized gain (loss)....................... 548,792 (36,166) Change in net unrealized appreciation or depre- ciation....................................... 328,468 343,515 ----------- ----------- Net increase in net assets resulting from oper- ations........................................ 1,638,828 1,143,581 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................... (976,512) (598,393) Brinson Class N............................... (39) -- SwissKey Class................................ (69,936) (31,712) Distributions from and in excess of net real- ized gain: Brinson Class I............................... (335,742) (675) Brinson Class N............................... (14) -- SwissKey Class................................ (25,812) (39) ----------- ----------- Total distributions to shareholders............ (1,408,055) (630,819) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................... 4,679,580 16,583,813 Shares issued on reinvestment of distributions. 641,561 461,917 Shares redeemed................................ (2,478,830) (3,420,321) ----------- ----------- Net increase in net assets resulting from capi- tal share transactions (Note 6)............... 2,842,311 13,625,409 ----------- ----------- TOTAL INCREASE IN NET ASSETS................ 3,073,084 14,138,171 ----------- ----------- NET ASSETS: Beginning of period............................ 23,820,705 9,682,534 ----------- ----------- End of period (including accumulated undistrib- uted net investment income of $(13,078) and $271,841, respective- ly)........................................... $26,893,789 $23,820,705 =========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 38 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, 1997 YEAR ENDED THROUGH BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $ 10.24 $ 9.93 $10.00 ------- ------- ------ Income from investment opera- tions: Net investment income....... 0.30 0.51** 0.50 Net realized and unrealized gain (loss)................ 0.37 0.32 (0.14) ------- ------- ------ Total income from invest- ment operations.......... 0.67 0.83 0.36 ------- ------- ------ Less distributions: Distributions from net in- vestment income............ (0.42) (0.52) (0.40) Distributions from and in excess of net realized gain....................... (0.14) -- (0.03) ------- ------- ------ Total distributions....... (0.56) (0.52) (0.43) ------- ------- ------ Net asset value, end of peri- od........................... $ 10.35 $ 10.24 $ 9.93 ======= ======= ====== Total return (non-annualized). 6.58% 8.45% 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $24,948 $22,421 $9,047 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 0.88%*** 1.65% 3.63%*** After expense reimbursement. 0.60%*** 0.60% 0.60%*** Ratio of net investment in- come to average net assets: Before expense reimburse- ment....................... 5.56%*** 5.14% 3.00%*** After expense reimbursement. 5.84%*** 6.19% 6.03%*** Portfolio turnover rate...... 132% 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. - -------------------------------------------------------------------------------- 39 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, 1997* BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period......................... $10.24 ------ Income from investment operations: Net investment income...................................... 0.30 Net realized and unrealized gain........................... 0.36 ------ Total income from investment operations.................. 0.66 ------ Less distributions: Distributions from net investment income................... (0.40) Distributions from net realized gain....................... (0.14) ------ Total distributions...................................... (0.54) ------ Net asset value, end of period............................... $10.36 ====== Total return (non-annualized)................................ 6.52% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement............................... 1.15%** After expense reimbursement................................ 0.85%** Ratio of net investment income to average net assets: Before expense reimbursement............................... 5.35%** After expense reimbursement................................ 5.65%** Portfolio turnover rate..................................... 132%
*Commencement of Brinson Class N was June 30, 1997. **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 40 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, 1997 YEAR ENDED THROUGH JUNE 30, SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $10.22 $ 9.92 $10.00 ------ ------ ------ Income from investment opera- tions: Net investment income....... 0.24 0.46** 0.46 Net realized and unrealized gain (loss)................ 0.40 0.32 (0.13) ------ ------ ------ Total income from invest- ment operations.......... 0.64 0.78 0.33 ------ ------ ------ Less distributions: Distributions from net in- vestment income............ (0.39) (0.48) (0.38) Distributions from and in excess of net realized gain....................... (0.14) -- (0.03) ------ ------ ------ Total distributions....... (0.53) (0.48) (0.41) ------ ------ ------ Net asset value, end of peri- od........................... $10.33 $10.22 $ 9.92 ====== ====== ====== Total return (non-annualized). 6.31% 7.91% 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $1,945 $1,399 $ 636 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 1.35%*** 2.12% 4.10%*** After expense reimbursement. 1.07%*** 1.07% 1.07%*** Ratio of net investment in- come to average net assets: Before expense reimburse- ment....................... 5.09%*** 4.67% 2.53%*** After expense reimbursement. 5.37%*** 5.72% 5.56%*** Portfolio turnover rate...... 132% 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. - -------------------------------------------------------------------------------- 41 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, and Non-U.S. Equity Fund. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which the most recent bid price or market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Equity securities, traded over-the-counter, are valued at the most recent bid price. Debt securities are valued at the most recent bid price by using market quotations or independent services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. C.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1997, therefore, no federal income tax provision was required. E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by the Funds will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. G.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. - -------------------------------------------------------------------------------- 42 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on the Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED -------- --------------- --------------- -------------- ---------- ------ U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,005,745 $ -- U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,577,328 -- U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 65,526 36,523
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $3,864, $3,128 and $2,024 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $253,281,640 $257,927,118 U.S. Equity Fund...................................... 225,510,580 82,326,482 U.S. Bond Fund........................................ 33,839,825 32,178,604
4.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5.DISTRIBUTION PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares, and effective June 30, 1997, the Brinson Class N shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. - -------------------------------------------------------------------------------- 43 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. BALANCED FUND ----------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I.............. 2,281,024 $ 28,309,870 6,578,157 $ 78,728,712 Brinson Class N.............. -- -- 80 1,000 SwissKey Class............... 25,739 330,584 148,317 1,798,818 ---------- ------------ ---------- ------------ Total Sales................ 2,306,763 $ 28,640,454 6,726,554 $ 80,528,530 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.............. 2,452,121 $ 28,812,427 1,541,262 $ 18,266,191 Brinson Class N.............. 9 105 -- -- SwissKey Class............... 11,570 135,252 3,904 46,232 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 2,463,700 $ 28,947,784 1,545,166 $ 18,312,423 ========== ============ ========== ============ Redemptions: Brinson Class I.............. 2,397,723 $ 30,943,131 4,988,208 $ 59,912,281 Brinson Class N.............. -- -- -- -- SwissKey Class............... 29,023 371,072 86,625 1,050,388 ---------- ------------ ---------- ------------ Total Redemptions.......... 2,426,746 $ 31,314,203 5,074,833 $ 60,962,669 ========== ============ ========== ============ U.S. EQUITY FUND ----------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I.............. 10,354,918 $189,157,887 11,551,336 $183,660,431 Brinson Class N.............. -- -- 57 1,000 SwissKey Class............... 800,195 14,676,583 1,834,556 28,733,451 ---------- ------------ ---------- ------------ Total Sales................ 11,155,113 $203,834,470 13,385,949 $212,394,882 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.............. 1,675,362 $ 28,698,745 907,559 $ 13,745,444 Brinson Class N.............. 4 69 -- -- SwissKey Class............... 107,016 1,827,828 25,905 393,121 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 1,782,382 $ 30,526,642 933,464 $ 14,138,565 ========== ============ ========== ============ Redemptions: Brinson Class I.............. 2,309,278 $ 42,289,711 1,959,184 $ 31,250,336 Brinson Class N.............. -- -- -- -- SwissKey Class............... 382,268 7,005,523 237,473 3,720,862 ---------- ------------ ---------- ------------ Total Redemptions.......... 2,691,546 $ 49,295,234 2,196,657 $ 34,971,198 ========== ============ ========== ============ U.S. BOND FUND ----------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I.............. 386,736 $ 4,064,958 1,521,821 $ 15,371,166 Brinson Class N.............. -- -- 98 1,000 SwissKey Class............... 58,318 614,622 119,951 1,211,647 ---------- ------------ ---------- ------------ Total Sales................ 445,054 $ 4,679,580 1,641,870 $ 16,583,813 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.............. 58,336 $ 599,697 44,351 $ 449,362 Brinson Class N.............. 5 53 -- -- SwissKey Class............... 4,075 41,811 1,239 12,555 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 62,416 $ 641,561 45,590 $ 461,917 ========== ============ ========== ============ Redemptions: Brinson Class I.............. 224,864 $ 2,363,677 288,064 $ 2,929,252 Brinson Class N.............. -- -- -- -- SwissKey Class............... 11,114 115,153 48,365 491,069 ---------- ------------ ---------- ------------ Total Redemptions.......... 235,978 $ 2,478,830 336,429 $ 3,420,321 ========== ============ ========== ============
- -------------------------------------------------------------------------------- 44 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- The Brinson Funds - -------------------------------------------------------------------------------- Chicago . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne . New York Paris . Singapore . Sydney . Tokyo . Zurich 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 -------------------------------- The Brinson Funds Brinson Non-U.S. Equity Fund Semi-Annual Report December 31, 1997 Global Institutional Asset Management -------------------------------- Trustees and Officers - ------------------------------------------------------------------------------- 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 Catherine E. Macrae Assistant Secretary 1 The Fund's Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- Brinson Partners is the global institutional asset management division of Swiss Bank Corporation (SBC) and manages assets of over $140 billion. We have $90 billion of discretionary institutional assets with active management mandates and we are the investment manager for SBC Private Banking mutual fund assets which total over $50 billion. In addition, we act as an investment advisor to SBC Private Banking. Our organization manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. We employ over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, an established U.S.-based leader in the investment field located in Chicago, acts as the headquarters of our worldwide investment management process. Brinson Partners pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients. Private market and venture capital investing was established in the 1970s and today we represent a major worldwide presence in this asset class. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. 2 Table of Contents - -------------------------------------------------------------------------------- Shareholder Letter..................................................... 4 Global Economic and Market Highlights.................................. 5 Non-U.S. Equity Fund................................................... 6 Schedule of Investments................................................ 9 Financial Statements...................................................14 Financial Highlights...................................................17 Notes to Financial Statements..........................................20 3 Shareholder Letter - -------------------------------------------------------------------------------- February 20, 1998 Dear Shareholder: We are very pleased to present the December 31, 1997 Semi-Annual Report for the Brinson Non-U.S. Equity Fund. Within this Report, we will focus on the current international economic outlook as well as our current strategy and performance update for the Non-U.S. Equity Fund. Swiss Bank Corporation and Union Bank of Switzerland announced on December 8, 1997 their intention to merge into a single global financial institution. As part of this merger, Brinson Partners and UBS Asset Management will be combined into Brinson. Brinson will be the Institutional Asset Management Division of the new organization with assets under management in excess of $340 billion and will provide investment advisory services for the Private Banking Division with assets over $400 billion. The Consumer & Corporate Banking Division and Brinson combined will manage assets in excess of $940 billion. We are excited about the formation of Brinson and the additional resources we will bring together to further the tradition of delivering value-added investment performance and the highest level of professional client service. Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund has produced an annualized total return of 7.03% versus 6.21% for the Morgan Stanley Capital International Non-U.S. Equity (Free) Index benchmark. This return was achieved at an annualized volatility of 11.14%, below the benchmark volatility of 13.04%. Our international fund employs the same value-oriented investment philosophy within and across the international spectrum, as do our other Funds. Each Fund uses the resources of our entire worldwide organization. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent. The Report that follows highlights the investment characteristics of the Brinson Non-U.S. Equity Fund. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds. Sincerely, /s/Gary P. Brinson Gary P. Brinson President and Chief Investment Officer Brinson Partners, Inc. 4 Global Economic and Market Highlights - -------------------------------------------------------------------------------- While financial markets seem to be signaling that the worst of the crisis in Asia has passed, those economies still have substantial problems to overcome before they are recovered. Substantial amounts of foreign currency borrowing will require rescheduling or forgiveness, and excess capacity will need to be worked off. The Japanese, as particularly important lenders to these Asian borrowers, will remain vulnerable. The adverse impact on the U.S. from the Asian crisis is likely to remain relatively limited. Because non-Japan Asia represents a small portion of U.S. trade, direct effects, such as a drop in real growth due to a collapse in exports, are not expected to be sizable. The economy remains strong, as evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and 3.8%, respectively. Continental European economies continue to benefit from weaker currencies although the expansions have not been terribly strong. While output growth is moderate, there has been no discernible improvement in the high unemployment rates. Sterling remains strong on concerns of a weak euro and hikes in short- term rates by the Bank of England.
Non-U.S. Equity Environment 6 months 1 year 3 years 8/31/93* Major Markets ended ended ended to Total Return in U.S. Dollar Hedged Terms 12/31/97 12/31/97 12/31/97 12/31/97 - ----------------------------------------------------------------------------------------- MSCI Non-US Equity (Free) Index -1.40% 16.12% 14.32% 9.78% Japan -18.31 -9.86 -0.52 -1.19 U.K. 12.62 26.17 20.97 14.63 Germany 11.51 49.01 26.73 19.13 France 6.44 32.75 21.81 11.31 Canada 6.26 20.84 21.54 16.59 Netherlands 8.11 48.94 36.27 26.53 Australia -2.48 9.85 10.71 7.83 - ----------------------------------------------------------------------------------------- 6 months 1 year 3 years 8/31/93* Major Currencies ended ended ended to Percent Change Relative to U.S. Dollars 12/31/97 12/31/97 12/31/97 12/31/97 - ----------------------------------------------------------------------------------------- Yen -11.99% -10.73% -8.45% -4.88% Pound -1.14 -3.85 1.69 2.35 Deutschemark -3.08 -14.29 -4.83 -1.58 Canadian Dollar -3.60 -4.22 -0.66 -1.83 - -----------------------------------------------------------------------------------------
*Inception date of the Non-U.S. Equity Fund All total returns in excess of 1 year are average annualized total returns 5 Non-U.S. Equity Fund - -------------------------------------------------------------------------------- The Non-U.S. Equity Fund invests in the common stocks of companies headquartered outside the U.S. We believe that in a non-U.S. investment program the country allocation decision is the most important. Country assessments are jointly developed by the non-U.S. strategy team in our offices worldwide. Currency strategies are separately developed and coordinated with market allocations. Our industry strategies and individual security selections are determined by fundamental research conducted by our analysts worldwide. Since its inception on August 31, 1993, the Non-U.S. Equity Fund has earned an annualized return of 7.03% versus 6.21% for its benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. This return was achieved at an annualized volatility of 11.14%, measurably below the benchmark volatility of 13.04%. For the year ended December 31, 1997, the Fund returned 5.74%, while the index returned 2.07%. Since inception, market allocation and currency management have added solidly to returns, while Japan stock selection has detracted. In 1997, market allocation reduced performance, largely due to underweights of Switzerland and Sweden, strategic cash and overweights of New Zealand and Australia. Although value was added from underweights of Hong Kong, Japan and Malaysia, and from overweights of the Netherlands, Belgium, the U.K. and Finland, these did not completely offset the negatives. During 1997, there was a clear split between the aggregate performance of the European markets and that of the Pacific region. All European countries earned double-digit returns, several in excess of 50%, building on the prior two years' strong performance. In sharp contrast, Japan and Southeast Asia ended with double-digit losses, New Zealand rose only 3.5% and Australia "merely" rose 9.9%. The best performing markets in dollar-hedged terms were Switzerland (63.5%) and Denmark (59.5%). In contrast, the worst performer was Malaysia (-52.1%). The Southeast Asian markets reacted to a period of turmoil stemming from a currency, banking and property crisis that placed considerable downward pressure on the region's economy. In addition, Japan's fragile economic recovery has been further imperiled by an unprecedented series of bankruptcies in its financial and industrial sectors. The entry of Korea in the category of "at-risk" countries has dealt yet another blow to Japan's economic revival. Currency management was the second greatest positive contributor to 1997 performance, primarily due to the strength of the U.S. dollar, where the Fund holds an overweight. With a few exceptions, the current strategy is close to neutral, but the Fund benefited tremendously from its positions earlier in the year, focusing on a sizable U.S. dollar overweight and underweights of the Japanese yen and the core European currencies. Stock selection over the past year added significantly to value, principally due to excellent Japan stock selection, combined with good results in France and Canada. Positive stock selection in Japan derived from the Fund's exposure to high-quality defensive issues and multinational exporters, and its underweight of banks and financials. A negative contribution came from Germany, due to underweighting specific technology stocks. 6 Non-U.S. Equity Fund
Total Return 6 months 1 year 3 years 8/31/93* ended ended ended to 12/31/97 12/31/97 12/31/97 12/31/97 - --------------------------------------------------------------------------------------------------- Brinson Non-U.S. Equity Fund -7.36% 5.74% 11.26% 7.03% MSCI Non-U.S. Equity (Free) Index** -8.22 2.07 6.90 6.21 ===================================================================================================
* Inception date of the Brinson Non-U.S. Equity Fund. ** Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Non- U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index 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, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Non-U.S. Equity Fund vs. MSCI Non-U.S. Equity (Free) Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
BRINSON MSCI NON-EQUITY NON-US EQUITY FUND (FREE) INDEX 8/31/93 1,000,000 1,000,000 12/31/93 965,500 988,754 6/30/94 975,546 1,068,786 12/31/94 974,540 1,062,773 6/30/95 974,540 1,095,524 12/31/95 1,126,102 1,187,455 6/30/96 1,204,890 1,244,668 12/31/96 1,269,637 1,271,886 6/30/97 1,449,115 1,414,421 12/31/97 1,342,508 1,298,199
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees ortransaction costs for rebalancing. 7 Non-U.S. Equity Fund - ----------------------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited)
NON-U.S. EQUITIES Airlines..................................... 0.35% Appliances & Household....................... 2.19 Autos/Durables............................... 3.25 Banking...................................... 11.65 Beverages & Tobacco.......................... 2.43 Broadcasting & Publishing.................... 1.90 Building Materials........................... 1.41 Business & Public Service.................... 3.66 Chemicals.................................... 2.95 Construction................................. 1.15 Data Processing.............................. 0.97 Electric Components.......................... 1.32 Electronics.................................. 3.72 Energy....................................... 7.13 Financial Services........................... 1.99 Food & House Products........................ 3.41 Forest Products.............................. 1.25 Gold Mining.................................. 0.07 Health & Personal Care....................... 6.87 Industrial Components........................ 1.75 Insurance.................................... 5.24 Leisure & Tourism............................ 0.76 Machinery & Engineering...................... 0.39 Merchandising................................ 4.68 Metals-Steel................................. 1.35 Miscellaneous Materials...................... 0.75 Miscellaneous Services....................... 0.09 Multi-Industry............................... 4.73 Non-Ferrous Metals........................... 1.69 Real Estate.................................. 0.76 Recreation................................... 0.61 Shipping..................................... 0.05 Telecommunications........................... 7.41 Textiles & Apparel........................... 0.16 Transportation............................... 1.05 Utilities.................................... 4.55 Wholesale & International Trade.............. 0.48 ------- Total Non-U.S. Equities.................. 94.17 ------- SHORT-TERM INVESTMENTS....................... 5.49 ------- TOTAL INVESTMENTS........................ 99.66 CASH AND OTHER ASSETS, LESS LIABILITIES............................ 0.34 ------- NET ASSETS............................... 100.00% =======
- --------------------------------------------------------------- Market and Currency Strategy As of December 31, 1997 (Unaudited)
Portfolio --------------------- Market Currency Strategy Strategy Index - --------------------------------------------------------------- U.S. Dollar 0.0% 7.3% 0.0% Japan 18.0 20.0 24.0 Australia 5.1 2.6 2.6 Belgium 3.6 1.2 1.2 Canada 3.2 4.9 4.9 Finland 0.8 0.7 0.7 France 7.1 7.6 7.6 Germany 8.6 9.4 9.4 Hong Kong 1.0 0.0 2.7 Italy 4.4 3.8 3.8 Malaysia 1.5 0.8 0.8 Netherlands 4.5 5.4 5.4 New Zealand 3.6 3.6 0.3 Spain 2.5 2.5 2.5 Sweden 1.8 2.5 2.5 Switzerland 5.1 7.4 7.4 U.K. 22.6 16.5 20.5 Cash Reserves 5.0 0.0 0.0 Other Markets 1.6 3.8 3.7 - --------------------------------------------------------------- 100.0% 100.0% 100.0%
Top Ten Non-U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ------------------------------------------------------- 1. Glaxo Wellcome PLC 1.47% 2. Royal Dutch Petroleum Co. 1.35 3. Novartis AG (Reg.) 1.34 4. Telecom Corp. of New Zealand Ltd 1.26 5. B.A.T. Industries PLC 1.09 6. Lloyds TSB Group PLC 1.09 7. Allianz AG Holding 1.03 8. British Petroleum Co. PLC 0.95 9. Matsushita Electric Industrial Co. 0.92 10. Roche Holding AG (Gen.) 0.91 - -------------------------------------------------------
8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- Non-U.S. Equities -- 94.17% AUSTRALIA -- 4.68% Amcor Ltd.................................................. 89,300 $ 392,769 Boral Ltd.................................................. 226,000 571,377 Brambles Industries Ltd.................................... 47,700 946,429 Broken Hill Proprietary Co., Ltd........................... 295,670 2,745,392 Coca-Cola Amatil Ltd....................................... 51,100 381,782 CSR Ltd.................................................... 162,000 548,909 David Jones Ltd............................................ 565,600 637,584 Lend Lease Corp., Ltd...................................... 38,778 758,034 Mayne Nickless Ltd......................................... 74,800 395,280 M.I.M. Holdings Ltd........................................ 322,943 197,804 National Australia Bank Ltd................................ 205,848 2,874,425 News Corp. Ltd............................................. 427,659 2,360,278 News Corp. Ltd., Preferred................................. 108,182 535,313 Pacific Dunlop Ltd......................................... 271,600 575,169 Qantas Airways Ltd......................................... 265,310 469,532 Rio Tinto Ltd.............................................. 103,810 1,211,008 Santos Ltd................................................. 60,300 248,323 Telstra Corp., Ltd. (b).................................... 102,000 215,341 Westpac Banking Corp., Ltd................................. 355,351 2,272,868 WMC Ltd.................................................... 179,500 625,749 Woolworth's Ltd............................................ 114,300 382,073 ----------- 19,345,439 ----------- BELGIUM -- 3.32%........................................... Delhaize-Le Lion S.A....................................... 21,770 1,104,629 Electrabel S.A............................................. 10,905 2,522,357 Fortis AG.................................................. 723 98 Fortis AG Strip (b)........................................ 9,603 2,003,487 Generale de Banque S.A..................................... 2,430 1,057,563 Groupe Bruxelles Lambert S.A............................... 5,690 823,146 Kredietbank NV............................................. 2,780 1,166,743 Kredietbank VVPR........................................... 76 31,896 Petrofina S.A.............................................. 4,550 1,679,341 Societe Generale de Belgique............................... 7,238 662,244 Solvay S.A., Class A....................................... 16,210 1,019,387 Tractebel.................................................. 12,650 1,102,791 Tractebel Warrants "99" (b)................................ 1,350 3,461 Union Miniere Group S.A. (b)............................... 7,750 537,570 ----------- 13,714,713 ----------- CANADA -- 3.18% Agrium, Inc................................................ 32,300 392,719 Alcan Aluminum Ltd......................................... 24,500 674,516 Bank of Montreal........................................... 18,700 827,786 Barrick Gold Corp.......................................... 15,000 279,331 Canadian National Railway Co............................... 17,000 799,455 Canadian Pacific Ltd....................................... 56,194 1,511,752 Hudson's Bay Co............................................ 20,100 447,338 Imasco, Ltd................................................ 8,900 314,059 Imperial Oil Ltd........................................... 20,200 1,298,582 Magna International Inc., Class A.......................... 6,200 388,177 Moore Corp., Ltd........................................... 20,900 313,989 Newbridge Networks Corp. (b)............................... 7,700 269,293 Noranda, Inc............................................... 25,300 434,896 Northern Telecom Ltd....................................... 4,600 408,700 NOVA Corp.................................................. 68,800 653,819 Potash Corporation of Saskatchewan, Inc.................... 7,500 623,908
SHARES VALUE ------- ----------- Royal Bank of Canada....................................... 21,900 $ 1,156,900 Seagram Co., Ltd........................................... 14,400 465,376 TELUS Corporation.......................................... 33,800 748,697 TransCanada Pipelines Ltd.................................. 33,400 744,504 Westcoast Energy, Inc...................................... 16,800 387,394 ----------- 13,141,191 ----------- FINLAND -- 0.66% Cultor Oyj................................................. 3,500 190,242 Merita Ltd., Class A....................................... 54,410 297,743 Metsa Serla Oyj, Class B................................... 17,090 133,376 Nokia Oyj, Class A, Preferred.............................. 17,680 1,256,433 Outokumpu Oyj, Class A..................................... 14,920 182,195 Pohjola Insurance Group, Class B........................... 790 29,304 Sampo Insurance Co., Ltd., Class A......................... 5,160 170,557 The Rauma Group............................................ 693 10,817 UPM-Kymmene Corp........................................... 22,930 458,962 ----------- 2,729,629 ----------- FRANCE -- 5.57% Accor S.A.................................................. 4,165 774,707 Alcatel Alsthom............................................ 7,305 928,910 AXA-UAP.................................................... 15,502 1,200,014 AXA-UAP Rights (b)......................................... 9,902 9,711 Banque Nationale de Paris.................................. 15,110 803,472 Cie Bancaire S.A........................................... 1,162 188,323 Cie de Saint Gobain........................................ 9,043 1,285,200 Cie Financiere de Paribas.................................. 7,800 678,092 Cie Generale des Eaux...................................... 9,734 1,359,136 Cie Generale des Eaux Warrants "01" (b).................... 13,864 9,425 Dexia France............................................... 6,640 769,295 Elf Aquitaine S.A.......................................... 12,714 1,479,355 France Telecom S.A. (b).................................... 32,500 1,179,313 Groupe Danone.............................................. 3,220 575,382 Lafarge S.A................................................ 7,690 504,784 Lagardere S.C.A............................................ 21,860 723,095 Lyonnaise des Eaux S.A..................................... 10,843 1,200,338 Michelin, Class B.......................................... 17,293 870,974 Pechiney S.A., Class A..................................... 19,385 765,604 Peugeot S.A................................................ 9,260 1,168,275 Pinault-Printemps-Redoute S.A.............................. 1,750 934,051 Rhone-Poulenc, Class A..................................... 27,230 1,220,281 SEITA...................................................... 24,930 895,093 Societe Generale........................................... 8,713 1,187,610 Thomson CSF................................................ 24,290 765,926 Total S.A., Class B........................................ 11,725 1,276,575 Usinor Sacilor............................................. 18,180 262,607 ----------- 23,015,548 ----------- GERMANY -- 9.77% Allianz AG Holding......................................... 16,480 4,252,667 BASF AG.................................................... 23,140 826,199 Bayer AG................................................... 59,750 2,218,071 Bayerische Motoren Werke AG................................ 1,990 1,488,544 Commerzbank AG............................................. 49,330 1,920,416 Continental AG............................................. 42,200 950,503 Daimler-Benz AG............................................ 22,870 1,615,311 Deutsche Bank AG........................................... 47,967 3,355,903 Deutsche Telekom AG........................................ 152,360 2,821,638 Henkel KGaA-Vorzug AG, Preferred........................... 17,780 1,112,424 Hochtief AG................................................ 13,990 575,752
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- GERMANY (CONTINUED) Hoechst AG............................................... 18,960 $ 656,920 M.A.N. AG................................................ 3,000 866,748 Mannesmann AG............................................ 3,447 1,731,072 Metro AG................................................. 33,303 1,181,661 Muenchener Rueckver AG................................... 8,370 3,183,961 Muenchener Rueckver AG Warrants "98" (b)................. 12 7,274 Preussag AG.............................................. 4,619 1,420,559 RWE AG................................................... 33,800 1,813,970 Schering AG.............................................. 19,022 1,835,447 Siemens AG............................................... 36,770 2,218,756 Veba AG.................................................. 39,558 2,694,986 Volkswagen AG............................................ 2,920 1,632,056 ----------- 40,380,838 ----------- HONG KONG -- 0.93% Cheung Kong Holdings Ltd................................. 104,000 681,164 China Light & Power Co., Ltd............................. 58,500 324,643 Citic Pacific Ltd........................................ 54,000 214,648 Hang Seng Bank Ltd....................................... 42,000 405,175 Hong Kong and China Gas Co., Ltd......................... 257,000 497,516 Hong Kong Telecommunications Ltd......................... 237,000 487,856 Hutchison Whampoa Ltd.................................... 113,000 708,756 Sun Hung Kai Properties Ltd.............................. 54,000 376,331 Swire Pacific Ltd., Class A.............................. 31,000 170,033 ----------- 3,866,122 ----------- ITALY -- 4.33% Aeroporti Di Roma Spa (b)................................ 13,000 134,923 Assicurazioni Generali................................... 69,350 1,704,283 Banca Commerciale Italiana............................... 194,000 674,811 Credito Italiano Spa..................................... 343,500 1,059,807 Danieli & Co. Savings (Risp)............................. 141,100 507,563 Edison Spa............................................... 79,600 481,728 ENI ADR (c).............................................. 20,300 1,158,369 ENI Spa.................................................. 292,000 1,656,492 Fiat Spa-Priv Preferred.................................. 607,220 927,289 INA-Istituto Nazionale delle Assicurazioni............... 311,100 630,804 Instituto Mobiliare Italiano Spa......................... 92,000 1,092,729 Italgas Spa.............................................. 122,000 503,719 La Rinascente Spa........................................ 91,300 340,816 La Rinascente Spa RNC.................................... 101,740 759,576 La Rinascente Spa Warrants "99" (b)...................... 2,800 3,389 Mediobanca Spa........................................... 31,600 248,253 Montedison Spa........................................... 1,120,280 1,006,830 SAI-Savings (Risp)....................................... 86,000 379,401 Telecom Italia Mobile Spa................................ 210,000 969,797 Telecom Italia Mobile Spa RNC............................ 510,000 1,450,921 Telecom Italia Spa....................................... 90,666 579,467 Telecom Italia Spa RNC................................... 368,034 1,623,633 ----------- 17,894,600 ----------- JAPAN -- 19.44% Amada Co., Ltd........................................... 186,000 693,790 Asahi Glass Co., Ltd..................................... 83,000 395,770 Bank of Tokyo-Mitsubishi, Ltd............................ 152,000 2,104,211 Canon, Inc............................................... 126,000 2,945,895 Canon Sales Co., Inc..................................... 61,000 699,019 Citizen Watch Co., Ltd................................... 149,000 1,002,692 Dai Nippon Printing Co., Ltd............................. 155,000 2,920,592
SHARES VALUE ------- ----------- Daiichi Pharmaceutical Co., Ltd............................ 152,000 $ 1,718,439 Daikin Industries Ltd...................................... 180,000 681,100 Daiwa House Industry Co., Ltd.............................. 93,000 493,521 Fanuc...................................................... 63,700 2,420,135 Fujitsu.................................................... 98,000 1,055,182 Hitachi Ltd................................................ 313,000 2,238,723 Honda Motor Co............................................. 54,000 1,989,310 Hoya Corp.................................................. 22,000 693,713 Inax....................................................... 132,000 384,757 Ito Yokado Co., Ltd........................................ 61,000 3,119,785 Kaneka Corp................................................ 177,000 801,792 Keio Teito Electric Railway................................ 195,000 748,356 Kinki Nippon Railway....................................... 195,000 1,045,299 Kirin Brewery Co., Ltd..................................... 184,000 1,344,357 Kokuyo..................................................... 56,000 969,044 Kuraray Co., Ltd........................................... 198,000 1,644,607 Kyocera Corp............................................... 20,300 924,253 Marui Co., Ltd............................................. 90,000 1,405,114 Matsushita Electric Industrial Co.......................... 258,000 3,789,887 Mitsubishi Paper Mills..................................... 168,000 236,447 NGK Insulators............................................. 284,000 2,533,667 Nintendo Corp., Ltd........................................ 15,500 1,525,860 Nippon Denso Co., Ltd...................................... 87,000 1,572,390 Nippon Meat Packers, Inc................................... 108,000 1,478,485 Nippon Steel Co............................................ 156,000 231,555 Okumura.................................................... 203,000 483,984 Osaka Gas Co............................................... 312,000 715,062 Sankyo Co., Ltd............................................ 162,000 3,675,447 Secom Co., Ltd............................................. 40,000 2,565,660 Seino Transportation....................................... 135,000 675,908 Sekisui House Ltd.......................................... 272,000 1,755,109 Shinmaywa Industries Ltd................................... 27,000 66,449 Sony Corp.................................................. 33,500 2,988,656 Sumitomo Bank.............................................. 183,000 2,097,058 Sumitomo Chemical Co....................................... 222,000 512,209 Sumitomo Electric Industries............................... 137,000 1,875,485 Takeda Chemical Industries................................. 103,000 2,946,818 TDK Corp................................................... 28,000 2,118,977 Tokio Marine & Fire Insurance Co........................... 162,000 1,843,953 Tokyo Electric Power....................................... 41,000 750,471 Tokyo Steel Mfg............................................ 67,000 227,241 Tonen Corp................................................. 120,000 649,721 Toray Industries, Inc...................................... 581,000 2,613,997 Toshiba Corp............................................... 424,000 1,770,675 Toyo Suisan Kaisha......................................... 86,000 597,916 Toyota Motor Corp.......................................... 100,000 2,876,370 Yamazaki Baking Co., Ltd................................... 80,000 781,388 ----------- 80,396,301 ----------- MALAYSIA -- 1.54% Hume Industries (Malaysia) Bhd............................. 151,000 158,274 Kuala Lumpur Kepong Bhd.................................... 337,000 722,916 Land & General Holdings Bhd................................ 324,500 60,023 Malayan Banking Bhd........................................ 136,000 394,811 Malaysia International Shipping Bhd (Frgn.)................ 147,000 215,260 Nestle (Malaysia) Bhd...................................... 83,000 383,815 New Straits Times Press Bhd................................ 169,000 209,269 Perusahaan Otomobil Nasional Bhd........................... 102,000 99,576 Petronas Gas Bhd........................................... 139,000 316,031 Public Bank Bhd............................................ 128,400 39,914
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- MALAYSIA (CONTINUED) Public Bank Bhd (Frgn.).................................. 204,000 $ 70,227 Public Bank Bhd Rights (b)............................... 21,400 1,155 Public Bank Bhd Rights (Frgn.) (b)....................... 34,000 1,747 Resorts World Bhd........................................ 152,000 255,774 Rothmans of Pall Mall Bhd................................ 91,000 707,193 Sime Darby Bhd........................................... 475,000 456,390 Telekom Malaysia Bhd..................................... 347,000 1,025,177 Tenaga Nasional Bhd...................................... 410,000 874,245 UMW Holdings Bhd......................................... 63,000 47,746 United Engineers Bhd..................................... 122,000 101,549 YTL Corp. Bhd............................................ 177,000 238,728 YTL Power International Bhd (b).......................... 4,900 3,764 ----------- 6,383,584 ----------- NETHERLANDS -- 4.31% ABN AMRO Holdings NV..................................... 75,352 1,468,162 Akzo Nobel NV............................................ 2,430 419,044 Elsevier NV.............................................. 88,210 1,427,163 Heineken NV.............................................. 6,310 1,098,717 Hoogovens NV............................................. 7,737 317,143 ING Groep NV............................................. 43,369 1,826,919 KLM Royal Dutch Air Lines NV............................. 11,150 412,494 KPN NV................................................... 43,716 1,824,285 Philips Electronics NV................................... 23,070 1,383,768 Royal Dutch Petroleum Co................................. 101,460 5,570,216 Unilever NV.............................................. 33,560 2,069,255 ----------- 17,817,166 ----------- NEW ZEALAND -- 3.12% Brierley Investments Ltd................................. 2,601,500 1,858,150 Carter Holt Harvey Ltd................................... 897,100 1,385,716 Fletcher Challenge Building.............................. 297,850 608,824 Fletcher Challenge Energy................................ 328,550 1,150,457 Fletcher Challenge Forests Ltd........................... 639,793 531,285 Fletcher Challenge Paper................................. 591,800 773,231 Lion Nathan Ltd.......................................... 298,000 667,967 Telecom Corp. of New Zealand Ltd......................... 1,071,500 5,195,536 Telecom Corp. of New Zealand Ltd. ADS (c)................ 19,300 747,875 ----------- 12,919,041 ----------- SINGAPORE -- 1.88% City Developments Ltd.................................... 97,000 449,021 DBS Land Ltd............................................. 184,000 281,733 Development Bank of Singapore Ltd........................ 92,000 786,231 Elec & Eltek International Co., Ltd...................... 28,600 130,988 Fraser & Neave Ltd....................................... 38,000 164,629 Hotel Properties Ltd..................................... 323,000 210,861 Keppel Corp., Ltd........................................ 106,750 306,629 Keppel Land Ltd.......................................... 115,000 158,338 NatSteel Ltd............................................. 82,000 110,956 Oversea-Chinese Banking Corp., Ltd....................... 159,400 927,074 Singapore Airlines Ltd. (Frgn.).......................... 165,000 1,077,151 Singapore Press Holdings Ltd. (Frgn.).................... 47,000 588,546 Singapore Telecommunications, Ltd........................ 767,000 1,429,306 United Overseas Bank Ltd. (Frgn.)........................ 174,000 965,519 Venture Manufacturing (Singapore) Ltd.................... 14,000 39,050 Wing Tai Holdings Ltd.................................... 126,000 147,312 ----------- 7,773,344 -----------
SHARES VALUE ------- ----------- SPAIN -- 2.44% Acerinox S.A............................................... 1,050 $ 155,482 Banco Bilbao-Vizcaya, S.A.................................. 37,590 1,215,843 Banco Central Hispanoamericano............................. 27,320 664,986 Banco Popular Espanol S.A.................................. 9,880 690,342 Banco Santander S.A........................................ 29,880 997,830 Empresa National de Electridad S.A......................... 72,480 1,286,304 Fomento Construcctiones y Contratas S.A.................... 12,880 490,119 Gas Natural SDG S.A........................................ 12,220 633,368 Iberdrola S.A.............................................. 67,710 890,687 Mapfre Corp................................................ 11,420 302,695 Repsol S.A................................................. 12,710 542,022 Repsol S.A. ADR (c)........................................ 7,130 303,471 Tabacalera S.A............................................. 1,600 129,642 Telefonica de Espana....................................... 43,960 1,254,599 Vallehermoso S.A........................................... 9,210 282,185 Viscofan Envolturas Celulosicas S.A........................ 10,060 252,457 ----------- 10,092,032 ----------- SWEDEN -- 1.69% ABB AB, A Shares........................................... 30,700 363,698 AssiDoman AB............................................... 2,000 50,664 Astra AB, A Shares......................................... 71,000 1,230,371 Electrolux AB, B Shares.................................... 4,800 333,325 Hennes & Mauritz AB, B Shares.............................. 16,800 741,058 Nordbanken Holding AB...................................... 163,700 926,339 Securitas AB, B Shares..................................... 12,400 375,066 Skanska AB, B Shares....................................... 9,200 377,410 Svenska Handelsbanken, A Shares............................ 14,600 505,092 Swedish Match AB........................................... 136,000 454,213 Telefonaktiebolaget LM Ericsson, B Shares.................. 24,700 929,215 Volvo AB, B Shares......................................... 26,200 703,325 ----------- 6,989,776 ----------- SWITZERLAND -- 5.03% ABB AG (Bearer)............................................ 373 469,255 CS Holdings AG (Reg.)...................................... 12,902 1,999,076 Holderbank Financiere Glarus, B Shares..................... 722 590,034 Nestle S.A. (Reg.)......................................... 1,635 2,453,733 Novartis AG (Reg.)......................................... 3,407 5,535,849 Roche Holding AG (Gen.).................................... 379 3,768,953 Sairgroup (b).............................................. 408 559,441 Schweizerische Lebensversicherungs-und Rentenastalt.............................................. 886 696,724 Sulzer AG.................................................. 697 442,494 Swiss Reinsurance Co. (Reg.)............................... 917 1,717,568 UBS (Bearer)............................................... 944 1,366,878 Zurich Versicherungs (Reg.)................................ 2,527 1,205,808 ----------- 20,805,813 ----------- UNITED KINGDOM -- 22.28% Abbey National PLC......................................... 100,100 1,796,941 Barclays PLC............................................... 47,000 1,251,271 Bass PLC................................................... 60,600 941,780 B.A.T. Industries PLC...................................... 495,200 4,514,040 BG PLC..................................................... 532,675 2,401,530 Billiton PLC (b)........................................... 384,000 985,668 Booker PLC................................................. 222,100 1,169,428 British Energy PLC......................................... 251,000 1,746,985 British Petroleum Co. PLC.................................. 297,069 3,910,410 British Sky Broadcating Group PLC.......................... 136,000 1,020,420
- -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ UNITED KINGDOM (CONTINUED) British Steel PLC......................................... 307,600 $ 660,499 British Telecommunications PLC............................ 454,800 3,580,778 BTR PLC................................................... 238,900 723,284 Cable & Wireless PLC...................................... 101,000 889,099 Cadbury Schweppes PLC..................................... 180,000 1,817,030 Centrica PLC (b).......................................... 414,500 610,411 Charter PLC............................................... 100,518 1,238,799 Coats Viyella PLC......................................... 441,700 661,369 Diageo PLC................................................ 209,300 1,926,834 FKI PLC................................................... 500,425 1,572,705 General Electric Co. PLC.................................. 439,800 2,854,810 Glaxo Wellcome PLC........................................ 256,200 6,070,391 Greenalls Group PLC....................................... 134,000 965,726 Hanson PLC................................................ 184,312 823,756 Hillsdown Holdings PLC.................................... 538,200 1,310,631 House of Fraser PLC....................................... 566,400 1,873,244 HSBC Holdings PLC......................................... 110,300 2,831,230 Inchcape PLC.............................................. 301,300 808,094 Legal & General Group PLC................................. 256,700 2,247,049 Lloyds TSB Group PLC...................................... 348,585 4,513,968 Marks & Spencer PLC....................................... 309,700 3,052,411 Mirror Group PLC.......................................... 535,500 1,718,182 National Westminster Bank PLC............................. 102,400 1,705,122 Northern Foods PLC........................................ 301,900 1,311,421 Peninsular & Oriental Steam Navigation Co................. 191,700 2,184,323 Reckitt & Colman PLC...................................... 54,346 853,977 Reuters Holdings PLC...................................... 115,100 1,259,424 Rio Tinto PLC............................................. 112,100 1,381,537 RJB Mining PLC............................................ 303,800 634,843 Royal & Sun Alliance Insurance Group PLC.................. 218,814 2,207,042 Scottish Hydro-Electric PLC............................... 124,400 1,027,541 Sears PLC................................................. 769,400 670,970 Sedgwick Group PLC........................................ 451,500 1,054,924 SmithKline Beecham PLC.................................... 266,600 2,732,897 Smurfit (Jefferson) Group PLC............................. 432,929 1,203,867 Tate & Lyle PLC........................................... 132,000 1,088,145 Tesco PLC................................................. 196,300 1,598,824 Thames Water PLC.......................................... 133,100 1,985,276 The Great Universal Stores PLC............................ 160,000 2,019,251 Unilever PLC.............................................. 116,600 999,566 Vodafone Group PLC........................................ 272,000 1,964,755 Williams PLC.............................................. 316,400 1,759,658 ------------ 92,132,136 ------------ Total Non-U.S. Equities (Cost $377,962,629)...................................... 389,397,273 ------------
FACE AMOUNT VALUE ---------- ------------ Short-Term Investments-- 5.49% COMMERCIAL PAPER -- 5.49% Case Credit Corp. 6.110%, due 01/20/98 $1,500,000 $ 1,495,163 6.030%, due 03/10/98 1,500,000 1,482,915 6.020%, due 03/13/98 1,500,000 1,482,191 GTE Corp. 6.120%, due 02/20/98 2,000,000 1,983,000 6.020%, due 03/02/98 1,500,000 1,484,950 Marriott Corp. 6.300%, due 01/16/98 3,000,000 2,992,125 Nabisco, Inc. 6.700%, due 01/05/98 5,000,000 4,996,278 Safeway, Inc. 6.700%, due 01/02/98 3,000,000 2,999,441 5.920%, due 01/22/98 1,500,000 1,494,820 Vastar Resources, Inc. 7.100%, due 01/02/98 2,298,000 2,297,547 ------------ Total Short-Term Investments (Cost $22,708,430) 22,708,430 ------------ Total Investments (Cost $400,671,059)--99.66% (a) 412,105,703 ------------ Cash and other assets, less liabilities -- 0.34% 1,397,658 ------------ Net Assets--100% $413,503,361 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $400,671,059; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $54,880,226 Gross unrealized depreciation................................ (43,445,582) ----------- Net unrealized appreciation................................ $11,434,644 ===========
(b) Non-income producing security (c) Denominated in U.S. dollars. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Non-U.S. Equity Fund had the following open forward currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar......... 2/19/98 9,200,000 $ 6,438,744 $ (245,359) Danish Kroner........... 2/19/98 25,200,000 3,689,615 63,716 Dutch Guilder........... 2/19/98 12,700,000 6,283,614 (75,607) French Franc............ 2/19/98 47,500,000 7,918,475 179,167 Hong Kong Dollar........ 2/19/98 15,500,000 1,993,151 13,197 Japanese Yen............ 2/19/98 2,952,000,000 22,868,948 (1,659,011) Norwegian Krona......... 2/19/98 15,700,000 2,135,842 (7,605) Swedish Krona........... 2/19/98 77,500,000 9,780,957 55,406 Swiss Franc............. 2/19/98 23,000,000 15,859,553 392,169 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 2/19/98 12,550,000 8,186,509 1,019,749 Belgian Franc........... 2/19/98 320,000,000 8,661,289 (173,226) British Pound........... 2/19/98 14,900,000 24,457,905 (841,405) Dutch Guilder........... 2/19/98 5,900,000 2,919,159 (42,794) German Mark............. 2/19/98 4,900,000 2,732,941 (42,851) Hong Kong Dollar........ 2/19/98 44,500,000 5,722,273 (63,215) Italian Lira............ 2/19/98 3,550,000,000 2,007,247 30,863 Japanese Yen............ 2/19/98 15,757,627 122,073 10,291 Malaysian Ringgit....... 2/19/98 9,900,000 2,541,994 978,632 Singapore Dollar........ 2/19/98 6,300,000 3,715,346 439,231 Swedish Krona........... 2/19/98 54,800,000 6,916,083 159,175 Swiss Franc............. 2/19/98 6,525,059 4,499,327 30,108 ---------- Total................. $ 220,631 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $400,671,059) (Note 1)............... $412,105,703 Cash............................................................. 919,098 Foreign currency, at value (Cost $466,106)....................... 462,654 Receivables: Investment securities sold...................................... 193,234 Dividends....................................................... 1,078,507 Fund shares sold................................................ 265,165 Variation margin (Note 5)....................................... 3,702 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 220,631 Other assets..................................................... 80,990 ------------ TOTAL ASSETS.................................................. 415,329,684 ------------ LIABILITIES: Payables: Investment securities purchased................................. 959,539 Investment advisory fees (Note 2)............................... 273,612 Variation margin (Note 5)....................................... 436,337 Accrued expenses................................................ 156,835 ------------ TOTAL LIABILITIES............................................. 1,826,323 ------------ NET ASSETS........................................................ $413,503,361 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $400,607,722 Accumulated undistributed net investment income.................. 55,030 Accumulated net realized gain.................................... 1,189,903 Net unrealized appreciation...................................... 11,650,706 ------------ NET ASSETS.................................................... $413,503,361 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $405,396,793 and 37,537,642 shares is- sued and outstanding) (Note 7)................................. $ 10.80 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $929 and 86 shares issued and outstanding) (Note 7)............ $ 10.80 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $8,105,639 and 756,307 shares issued and outstanding) (Note 7)...................................... $ 10.72 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $516,253 for foreign taxes withheld).......... $ 3,571,336 Interest........................................................ 788,825 ------------ TOTAL INCOME................................................. 4,360,161 ------------ EXPENSES: Advisory (Note 2)............................................... 1,633,467 Administrative.................................................. 142,058 Custodian....................................................... 127,605 Distribution (Note 6)........................................... 34,648 Other........................................................... 130,129 ------------ TOTAL EXPENSES............................................... 2,067,907 ------------ NET INVESTMENT INCOME ....................................... 2,292,254 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................... 7,396,068 Futures contracts.............................................. (1,031,399) Foreign currency transactions.................................. 821,079 ------------ Net realized gain............................................ 7,185,748 ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency .............................. (38,295,004) Futures contracts ............................................. (107,626) Forward contracts.............................................. (637,141) Translation of other assets and liabilities denominated in for- eign currency................................................. (37,238) ------------ Change in net unrealized appreciation or depreciation........ (39,077,009) ------------ Net realized and unrealized loss................................. (31,891,261) ------------ Net decrease in net assets resulting from operations............. $(29,599,007) ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 2,292,254 $ 5,529,755 Net realized gain............................. 7,185,748 24,421,499 Change in net unrealized appreciation or de- preciation .................................. (39,077,009) 35,391,730 ------------ ------------ Net increase (decrease) in net assets result- ing from operations.......................... (29,599,007) 65,342,984 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I ............................. (3,973,110) (4,371,883) Brinson Class N.............................. (8) -- SwissKey Class............................... (42,036) (40,369) Distributions from net realized gain: Brinson Class I.............................. (25,288,399) (12,209,010) Brinson Class N.............................. (59) -- SwissKey Class............................... (521,640) (94,152) ------------ ------------ Total distributions to shareholders........... (29,825,252) (16,715,414) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 132,897,867 232,045,893 Shares issued on reinvestment of distribu- tions........................................ 29,067,629 16,204,754 Shares redeemed............................... (117,690,199) (81,854,223) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 7)............. 44,275,297 166,396,424 ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS..... (15,148,962) 215,023,994 ------------ ------------ NET ASSETS: Beginning of year............................. 428,652,323 213,628,329 ------------ ------------ End of year (including accumulated undistrib- uted net investment income of $55,030 and $1,777,930, respectively).................... $413,503,361 $428,652,323 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR ENDED JUNE 30, AUGUST 31, 1993* DECEMBER 31, 1997 ----------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 12.59 $ 11.17 $ 9.68 $ 9.69 $ 10.00 -------- -------- -------- -------- ------- Income from investment operations: Net investment income. 0.07 0.18 0.18 0.15 0.10 Net realized and unrealized gain (loss)............... (1.00) 1.97 2.05 (0.16) (0.34) -------- -------- -------- -------- ------- Total income (loss) from investment operations......... (0.93) 2.15 2.23 (0.01) (0.24) -------- -------- -------- -------- ------- Less distributions: Distributions from net investment income.... (0.12) (0.17) (0.18) -- (0.07) Distributions from net realized gain........ (0.74) (0.56) (0.56) -- -- -------- -------- -------- -------- ------- Total distributions. (0.86) (0.73) (0.74) -- (0.07) -------- -------- -------- -------- ------- Net asset value, end of period................. $ 10.80 $ 12.59 $ 11.17 $ 9.68 $ 9.69 ======== ======== ======== ======== ======= Total return (non- annualized)............ (7.36)% 20.27% 23.64% (0.10)% (2.45)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $405,397 $420,855 $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.00%** 1.00% 1.20% 1.23% 1.60%** After expense reim- bursement............ N/A N/A 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 1.14%** 1.83% 1.67% 1.93% 1.28%** After expense reim- bursement............ N/A N/A 1.87% 2.16% 1.88%** Portfolio turnover rate.................. 22% 25% 20% 14% 12% Average commission rate paid per share........ $ 0.0269 $ 0.0245 $ 0.0219 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
SIX MONTHS ENDED DECEMBER 31, 1997 BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period.......................... $ 12.59 ------- Income from investment operations: Net investment income....................................... 0.06 Net realized and unrealized loss............................ (1.02) ------- Total loss from investment operations..................... (0.96) ------- Less distributions: Distributions from net investment income.................... (0.10) Distributions from net realized gain........................ (0.73) ------- Total distributions....................................... (0.83) ------- Net asset value, end of period................................ $ 10.80 ======= Total return (non-annualized)................................. (7.49)% Ratios/Supplemental data: Net assets, end of period (in 000s).......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement................................ 1.25%* After expense reimbursement................................. N/A Ratio of net investment income to average net assets: Before expense reimbursement................................ 0.89%* After expense reimbursement................................. N/A Portfolio turnover rate...................................... 22% Average commission rate paid per share....................... $0.0269
Commencement of Brinson Class N was June 30, 1997. * Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.49 $ 11.12 $ 10.26 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.00 0.11 0.12 Net realized and unrealized gain......................... (0.98) 1.93 1.45 ------- ------- ------- Total income (loss) from in- vestment operations........ (0.98) 2.04 1.57 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.05) (0.11) (0.15) Distributions from net real- ized gain.................... (0.74) (0.56) (0.56) ------- ------- ------- Total distributions......... (0.79) (0.67) (0.71) ------- ------- ------- Net asset value, end of period.. $ 10.72 $ 12.49 $ 11.12 ======= ======= ======= Total return (non-annualized)... (7.71)% 19.32% 15.78% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $ 8,106 $ 7,797 $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement.. 1.84%** 1.81% 2.04%** After expense reimbursement... N/A N/A 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement.. 0.29%** 1.02% 0.83%** After expense reimbursement... N/A N/A 1.03%** Portfolio turnover rate........ 22% 25% 20% Average commission rate paid per share..................... $0.0269 $0.0245 $0.0219
* Commencement of SwissKey Class ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. The Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N, and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share of the Fund represents an identical interest in the investments of the Fund and has the same rights. The following is a summary of significant accounting policies consistently followed by the Non-U.S. Equity Fund (the "Fund") in the preparation of its financial statements. A.INVESTMENT VALUATION:Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION:Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C.INVESTMENT TRANSACTIONS:Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME:Interest income, which includes amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES:It is the policy of the Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1997, therefore, no federal income tax provision was required. F.DISTRIBUTIONS TO SHAREHOLDERS:It is the policy of the Fund to distribute its net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing tax treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. G.INCOME AND EXPENSE ALLOCATION:All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. - -------------------------------------------------------------------------------- 20 NON-U.S. EQUITY FUND -- 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. 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 SwissKey Class, respectively. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1997, were as follows:
ADVISORY ADVISORY FEE FEES -------- ---------- Non-U.S. Equity Fund........................................ 0.80% $1,633,467
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees fees paid to unaffiliated trustees were $2,944. 3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ----------- Non-U.S. Equity Fund................................... $107,166,089 $82,459,445
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, 1997, was the Fund's custodian. 5.FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such contracts to hedge a portion of its portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. - -------------------------------------------------------------------------------- 21 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class, and effective June 30, 1997, the Brinson Class N shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of daily net assets of the Brinson Class N. 7.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I............... 10,958,617 $130,290,326 19,910,853 $225,344,857 Brinson Class N............... -- -- 79 1,000 SwissKey Class................ 217,732 2,607,541 590,377 6,700,036 ---------- ------------ ---------- ------------ Total Sales................ 11,176,349 $132,897,867 20,501,309 $232,045,893 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I............... 2,668,222 $ 28,549,975 1,461,013 $ 16,110,105 Brinson Class N............... 7 67 -- -- SwissKey Class................ 48,737 517,587 8,477 94,649 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 2,716,966 $ 29,067,629 1,469,490 $ 16,204,754 ========== ============ ========== ============ Redemptions: Brinson Class I............... 9,525,571 $116,078,085 6,945,571 $ 80,838,515 Brinson Class N............... -- -- -- -- SwissKey Class................ 134,550 1,612,114 87,985 1,015,708 ---------- ------------ ---------- ------------ Total Redemptions.......... 9,660,121 $117,690,199 7,033,556 $ 81,854,223 ========== ============ ========== ============
- -------------------------------------------------------------------------------- 22 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- The Brinson Funds - -------------------------------------------------------------------------------- Chicago . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne . New York Paris . Singapore . Sydney . Tokyo . Zurich 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 [LOGO OF SWISS KEY FUNDS] SWISSKEY GLOBAL FUND SWISSKEY GLOBAL EQUITY FUND SWISSKEY GLOBAL BOND FUND SEMI-ANNUAL REPORT DECEMBER 31, 1997 YOUR KEY TO PERFORMANCE ------------------------- Trustees and Officers - ------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] 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 Catherine E. Macrae Assistant Secretary =============================================================================== The Fund's Advisor - Brinson Partners, Inc. [SWISS KEY FUNDS LOGO APPEARS HERE] Brinson Partners is the global institutional asset management division of Swiss Bank Corporation (SBC) and manages assets of over $140 billion. We have $90 billion of discretionary institutional assets with active management mandates and we are the investment manager for SBC Private Banking mutual fund assets which total over $50 billion. In addition, we act as an investment advisor to SBC Private Banking. Our organization manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. We employ over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York, Paris, Singapore, Sydney, TokyoEand Zurich. Brinson Partners, an established U.S.-based leader in the investment field located in Chicago, acts as the headquarters of our worldwide investment management process. Brinson Partners pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients. Private market and venture capital investing was established in the 1970s and today we represent a major worldwide presence in this asset class. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. =============================================================================== 2 Table of Contents - ------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE]
Shareholder Letter................................... 4 Global Economic and Market Highlights................ 6 Global Fund.......................................... 7 Schedule of Investments........................... 11 Financial Statements.............................. 20 Financial Highlights.............................. 23 Global Equity Fund................................... 26 Schedule of Investments........................... 30 Financial Statements.............................. 36 Financial Highlights.............................. 39 Global Bond Fund..................................... 42 Schedule of Investments........................... 45 Financial Statements.............................. 49 Financial Highlights.............................. 52 The SwissKey Funds--Notes to Financial Statements.... 55 ===============================================================================
Shareholder Letter - ------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] February 20, 1998 Dear Shareholder: We are very pleased to present the December 31, 1997 Semi-Annual Report for the Global Fund, Global Equity Fund and Global Bond Fund. Within this Report, we will focus on the current global economic outlook as well as our current strategies and performance updates for the three Global Funds. Swiss Bank Corporation announced on December 8, 1997 their intention to merge with Union Bank of Switzerland into a single global financial institution. As part of this merger, Brinson Partners and UBS Asset Management will be combined into Brinson. Brinson will be the Institutional Asset Management Division of the new organization with assets under management in excess of $340 billion and will provide investment advisory services for the Private Banking Division with assets over $400 billion. The Consumer & Corporate Banking Division and Brinson combined will manage assets in excess of $940 billion. We are excited about the formation of Brinson and the additional resources we will bring together to further the tradition of delivering value-added investment performance and the highest level of professional client service. The SwissKey Global Fund, the SwissKey Global Equity Fund and the SwissKey Global Bond Fund are all actively managed Funds that provide integrated asset management across and within security markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. This philosophy offers the greatest potential for achieving enhanced, long-term returns while controlling risk. SwissKey Global Fund Since its inception on July 31, 1995, the SwissKey Global Fund has produced an annualized total return of 13.50% compared to the return of 13.97% of its benchmark, the Global Securities Markets Mutual Fund Index (GSMI). The SwissKey Global Fund achieved this performance with a volatility of 6.05%, below the benchmark volatility of 7.72%. =============================================================================== 4 Shareholder Letter - -------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] SwissKey Global Equity Fund The SwissKey Global Equity Fund has provided an annualized return of 15.07% since its inception on July 31, 1995. This is compared to a 14.73% return for the benchmark, the MSCI World Equity (Free) Index. This performance was achieved with volatility of 8.88%, below the benchmark volatility of 10.96%. SwissKey Global Bond Fund The SwissKey Global Bond Fund has provided an annualized return of 7.04% since its inception on July 31, 1995. Over the same period, the return of the Funds benchmark, the Salomon World Government Bond Index, was 2.27%. This performance was achieved with volatility of 4.06%, below the 5.11% volatility of the benchmark. Each of our Funds employs the same value-oriented investment philosophy applied across the global spectrum. Each Fund also uses the resources of our entire worldwide research team. All of our analysts apply the same value philosophy to their work. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent. The Report that follows highlights the investment characteristics of the respective Funds. We very much appreciate your continued trust and the confidence you have placed in the SwissKey Funds. Sincerely, /S/ Hanspeter A. Walder /S/ Raymond Simon - ---------------------- ----------------- Hanspeter A. Walder Raymond Simon Executive Director Executive Director Private Banking Private Banking =============================================================================== 5 Global Economic and Market Highlights - ------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] While financial markets seem to be signaling that the worst of the crisis in Asia has passed, those economies still have substantial problems to overcome before they are recovered. Substantial amounts of foreign currency borrowing will require rescheduling or forgiveness, and excess capacity will need to be worked off. The Japanese, as particularly important lenders to these Asian borrowers, will remain vulnerable. The adverse impact on the U.S. from the Asian crisis is likely to remain relatively limited. Because non-Japan Asia represents a small portion of U.S. trade, direct effects, such as a drop in real growth due to a collapse in exports, are not expected to be sizable. The economy remains strong, as evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and 3.8%, respectively. Continental European economies continue to benefit from weaker currencies although the expansions have not been terribly strong. While output growth is moderate, there has been no discernible improvement in the high unemployment rates. Sterling remains strong on concerns of a weak euro and hikes in short- term rates by the Bank of England.
Global Environment 6 months 1 year 7/31/95* Major Markets ended ended to Total Return in U.S. Dollars 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------- U.S. Equity 11.60% 31.29% 26.04% Non-U.S. Equities (currency unhedged) -8.22 2.07 4.70 Non-U.S. Equities (currency hedged) -1.40 16.12 17.57 U.S. Bonds 6.37 9.62 8.21 Non-U.S. Bonds (currency unhedged) -1.18 -4.26 -0.52 Non-U.S. Bonds (currency hedged) 6.12 11.07 12.24 U.S. Cash Equivalents 2.60 5.18 5.24 - ------------------------------------------------------------------------------- 6 months 1 year 7/31/95* Major Currencies ended ended to Percent Change Relative to U.S. Dollars 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------- Yen -11.99% -10.73% -14.90% Pound -1.14 -3.85 1.16 Deutschemark -3.08 -14.29 -10.35 Canadian Dollar -3.60 -4.22 1.72 - ------------------------------------------------------------------------------- * Inception date of the SwissKey Global Fund
All total returns in excess of 1 year are average annualized returns. =============================================================================== 6 Global Fund - -------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] The Global Fund is diversified across the equity and fixed income markets of the U.S. and a broad range of other countries. The Fund is actively managed within an asset allocation framework, involving value-based market, currency and individual security selection. Our senior asset allocation, equity and fixed income professionals form the investment team for the Fund, supported by a globally integrated market analysis system. Security selection within each market is based on the fundamental research of our analytical teams in our offices worldwide. The SwissKey Global Fund has provided an annualized return of 13.50% since its inception on July 31, 1995, while its benchmark, the GSMI Mutual Fund Index returned 13.97%. The Fund performance over this period was achieved with an annualized volatility of 6.05%, below the benchmark volatility of 7.72%. For the year ended December 31, 1997, the Fund returned 10.20%, underperforming the benchmark return of 14.30%. Contributing positively to performance was security selection in the Japanese equity market and the emerging debt and equity markets. Currency risk hedge was a substantial contributor to added value in 1997. The primary negative contributor was the underweight in most equity markets and the overweight in bonds. Bond returns were the highest in Australia, Italy and the U.K. The U.S. bond market return of 9.62% was in the middle of the pack. The peripheral European bond markets performed well, as spreads over German yields declined substantially due to the market's anticipation of a single currency. The U.S. equity market return of about 30% was outdone by many of the European markets which were driven by a combination of lower interest rates and the anticipation of a profits recovery. Southeast Asian equity markets stood in stark contrast with local currency losses ranging from 10% to 60% for the year. The emerging debt and equity markets failed to produce the spectacular gains of prior years. Emerging debt posted a total return of 13.02% while emerging equity declined by 14.84%. Returns in the high yield bond market, at about 12.63%, not surprisingly fell between equity and bond returns. Currency risk hedges were beneficial during the year, as the overpriced Japanese yen depreciated against the U.S. dollar. The risk hedges also benefited from interest rates in the U.S. exceeding rates in the overpriced currencies. Asset allocation strategy continues to underweight equity markets, as prices remain in excess of fundamental values. Bond markets, apart from Japan, remain overweight as they provide the most attractive relative value. Emerging market debt is also overweight, with a small overweight in emerging market equity and a small underweight in high yield bonds. Exchange rate changes during the year have reduced the magnitude of overpricing and led to reductions in many of the risk hedges. - -------------------------------------------------------------------------------- 7 Global Fund
Total Return 6 months 1 year 7/31/95* ended ended to 12/31/97 12/31/97 12/31/97 - ----------------------------------------------------------------------- SwissKey Global Fund 1.58% 10.20% 13.50% GSMI Mutual Fund Index** 3.27 14.30 13.97 - -----------------------------------------------------------------------
* Inception date of the SwissKey Global Fund. ** An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Fund and the GSMI Mutual Fund Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SwissKey Global Fund vs. GSMI Mutual Fund Index Wealth Value with Dividends Reinvested [Graph Chart Appears Here]
SwissKey GSMI Mutual Global Fund Fund Index ----------- ----------- 7/31/95 10000 10000 8/31/95 10129 9965 9/30/95 10293 10232 10/31/95 10362 10168 11/30/95 10655 10472 12/31/95 10861 10665 1/31/95 11063 10839 2/29/96 11008 10870 3/31/96 11091 10963 4/30/96 11229 11152 5/31/96 11266 11235 6/30/96 11324 11258 7/31/96 11157 10962 8/31/96 11334 11139 9/30/96 11687 11505 10/31/96 11873 11620 11/30/96 12329 12109 12/31/96 12332 12001 1/31/97 12475 12177 2/28/97 12567 12234 3/31/97 12373 11965 4/30/97 12506 12208 5/31/97 13008 12825 6/30/97 13377 13284 7/31/97 13797 13813 8/31/97 13428 13306 9/30/97 13838 13883 10/31/97 13428 13435 11/30/97 13449 13555 12/31/97 13589 13718
7/31/95=$10,000 Data through 12/31/97 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. 8 [SWISS KEY FUNDS LOGO APPEARS HERE] Global Fund - ----------------------------------------------------------------
Asset Allocation As of December 31, 1997 (Unaudited) Current Benchmark Strategy - ----------------------------------------------------------------- U.S. Equity 40.0% 23.0% Non-U.S. Equities 22.0 17.0 Japan Equities 5.3 2.3 Other Equities 16.7 14.7 Emerging Markets Equities 3.0 4.0 Dollar Bonds 21.0 30.5 U.S. Bonds 19.0 26.5 International $ Bonds 2.0 4.0 High Yield Bonds 3.0 2.5 Non-U.S. Bonds 9.0 18.0 Japan Bonds 2.5 0.0 Other Bonds 6.5 18.0 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, 1997 (Unaudited) Percent of Net Assets - ----------------------------------------------------------------- 1. Lockheed Martin Corp. 1.09% 2. Xerox Corp. 1.05 3. Philip Morris Companies, Inc. 1.00 4. CIGNA Corp. 0.89 5. Aon Corp. 0.88 6. Schering Plough Corp. 0.78 7. Burlington Northern Santa Fe Corp. 0.76 8. Federal Express Corp. 0.74 9. Goodyear Tire & Rubber Co. 0.72 10. Automatic Data Processing, Inc. 0.63 - ----------------------------------------------------------------
Currency Allocation As of December 31, 1997 (Unaudited) Current Benchmark Strategy - --------------------------------------------------------------- U.S. 66.0% 72.2% Japan 7.8 3.8 U.K. 5.4 2.2 Continental Europe 14.6 14.6 Canada 1.5 1.5 Emerging Markets 3.0 4.0 Other 1.7 1.7 - --------------------------------------------------------------- 100.0% 100.0% Top Ten Non-U.S. Equity Holdings As of December 31, 1997 (Unaudited) Percent of Net Assets - --------------------------------------------------------------- 1. Glaxo Wellcome PLC 0.30% 2. Royal Dutch Petroleum Co. 0.25 3. Telecom Corp. of New Zealand Ltd. 0.24 4. Lloyds TSB Group PLC 0.23 5. Novartis AG (Reg.) 0.22 6. B.A.T. Industries PLC 0.22 7. Allianz AG 0.19 8. British Petroleum Co. PLC 0.19 9. British Telecommunications PLC 0.17 10. Roche Holding AG (Gen.) 0.15 - ---------------------------------------------------------------
9 [SWISS KEY FUNDS LOGO APPEARS HERE] Global Fund - --------------------------------------- Industry Diversification As a Percentage of Net Assets As of December 31, 1997 (Unaudited)
U.S. EQUITIES Energy......................... 1.04% ------ Capital Investment Capital Goods................. 1.82 Technology.................... 2.22 ------ 4.04 ------ Basic Industries Chemicals..................... 0.54 Housing/Paper................. 1.31 Metals........................ 0.23 ------ 2.08 ------ Consumer Non-Durables.................. 2.50 Retail/Apparel................ 1.32 Autos/Durables................ 1.01 Discretionary................. 0.94 Health: Drugs................. 2.09 Health: Non-Drugs............. 1.10 ------ 8.96 ------ Financial Banks......................... 2.03 Non-Banks..................... 1.80 ------ 3.83 ------ Utilities Electric...................... 1.59 Telephone..................... 0.28 ------ 1.87 ------ Transportation................. 1.59 Services/Misc.................. 2.43 Post Venture................... 1.30 ------ Total U.S. Equities........ 27.14* ------ NON-U.S. EQUITIES Aerospace & Military........... 0.03% Airlines....................... 0.06 Appliances & Household......... 0.33 Automobiles.................... 0.53 Banking........................ 2.04 Beverages & Tobacco............ 0.44 Broadcasting & Publishing...... 0.35 Building Materials............. 0.22 Business & Public Service...... 0.62 Chemicals...................... 0.49 Construction................... 0.15 Data Processing................ 0.15 Electric Components............ 0.26 Electronics.................... 0.59 Energy......................... 1.35 Financial Services............. 0.35 Food & House Products.......... 0.61 Forest Products................ 0.23 Gold Mining.................... 0.01 Health: Drugs.................. 0.29 Health: Non-Drugs.............. 0.91 Industrial Components.......... 0.26 Insurance...................... 1.08 Leisure & Tourism.............. 0.13 Machinery & Engineering........ 0.05 Merchandising.................. 0.82 Metals--Steel.................. 0.25 Miscellaneous Materials........ 0.06 Miscellaneous Services......... 0.02 Multi-Industry................. 0.88 Non-Ferrous Metals............. 0.32 Real Estate.................... 0.15 Recreation..................... 0.08 Retail/Apparel................. 0.09 Shipping....................... 0.01 Telecommunications............. 1.43 Textiles & Apparel............. 0.03 Transportation................. 0.18 Utilities...................... 0.85 Wholesale & International Trade 0.09 ------ Total Non-U.S. Equities.... 16.79 ------ EMERGING MARKETS EQUITIES...... 3.37 ------ U.S. BONDS Corporate Bonds Asset-Backed.................. 2.04 CMO........................... 0.64 Consumer...................... 1.52 Financial..................... 3.03 Industrial.................... 0.03 Transportation................ 0.67 ------ 7.93 ------ U.S. Government Agencies....... 7.33 U.S. Government Obligations.... 5.13 International Dollar Bonds..... 4.10 ------ Total U.S. Bonds........... 24.49* ------ HIGH YIELD BONDS............... 2.64 ------ NON-U.S. BONDS Foreign Financial Bonds....... 0.56 Foreign Government Bonds...... 15.87 ------ Total Non-U.S. Bonds....... 16.43 ------ EMERGING MARKETS DEBT.......... 5.24 ------ SHORT TERM INVESTMENTS......... 16.74* ------ TOTAL INVESTMENTS.......... 112.84 LIABILITIES, LESS CASH AND OTHER ASSETS.................. (12.84) ------ NET ASSETS................. 100.00% ======
- ------------------------------------------------------------------------------- * The Fund held a long position in U.S. Treasury futures on December 31, 1997 which increased U.S. Bond exposure from 24.49% to 28.17%. The Fund held a short position in stock index futures on December 31, 1997 which reduced U.S. Equity exposure from 27.14% to 23.09%. These adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 16.74% to 17.11%. 10 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------ Equities -- 47.30% U.S. EQUITIES -- 27.14% Allergan, Inc........................................ 52,400 $ 1,758,675 Alza Corp. (b)....................................... 51,100 1,625,619 American Home Products Corp.......................... 40,900 3,128,850 Aon Corp............................................. 97,899 5,739,300 Automatic Data Processing, Inc....................... 67,000 4,112,125 Baxter International, Inc............................ 66,100 3,333,919 Beckman Instruments, Inc............................. 20,800 832,000 Biogen, Inc. (b)..................................... 20,000 727,500 Birmingham Steel Corp................................ 20,500 322,875 Boston Technology, Inc. (b).......................... 20,400 512,550 Briggs & Stratton Corp............................... 3,500 169,969 Brinson Post-Venture Fund (b)........................ 423,765 8,502,119 Burlington Northern Santa Fe Corp.................... 53,700 4,990,744 Champion Enterprises, Inc. (b)....................... 33,100 680,619 Champion International Corp.......................... 2,700 122,344 Chase Manhattan Corp................................. 27,400 3,000,300 CIGNA Corp........................................... 33,400 5,780,287 Circuit City Stores-Circuit City Group............... 75,500 2,684,969 Citicorp............................................. 24,800 3,135,650 CMS Energy Corp...................................... 65,900 2,903,719 Comerica, Inc........................................ 14,000 1,263,500 Commscope, Inc. (b).................................. 38,833 521,818 Comverse Technology, Inc. (b)........................ 10,100 393,900 Corning, Inc......................................... 110,200 4,091,175 Covance, Inc. (b).................................... 25,672 510,231 CPC International, Inc............................... 22,400 2,419,200 Crown Cork & Seal Co., Inc........................... 24,300 1,218,037 CVS Corp............................................. 32,400 2,075,625 Dial Corp............................................ 26,400 549,450 Eastman Chemical Co.................................. 28,200 1,679,662 Echlin, Inc.......................................... 14,300 517,481 EMC Corp. (b)........................................ 146,100 4,008,619 Enron Corp........................................... 68,500 2,847,031 Entergy Corp......................................... 133,400 3,993,662 Federal Express Corp. (b)............................ 79,300 4,842,256 First American Corp. of Tennessee.................... 13,400 666,650 First Data Corp...................................... 123,530 3,613,252 First Security Corp.................................. 16,850 705,594 FirstEnergy Corp..................................... 40,005 1,160,145 Fleetwood Enterprises, Inc........................... 15,300 649,294 Food Lion, Inc. Class A.............................. 108,700 917,156 Forest Laboratories, Inc. (b)........................ 23,500 1,158,844 Fort James Corp...................................... 59,700 2,283,525 Gannett Co., Inc..................................... 50,700 3,133,894 General Semiconductor, Inc. (b)...................... 26,450 305,828 Genzyme Corp......................................... 20,600 571,650 Geon Co.............................................. 14,100 329,587 Goodyear Tire & Rubber Co............................ 73,400 4,670,075 Harnischfeger Industries, Inc........................ 38,800 1,370,125 Health Care and Retirement Corp. (b)................. 25,600 1,030,400 Hibernia Corp........................................ 28,400 534,275 Informix Corp. (b)................................... 26,800 127,300 Interpublic Group of Companies, Inc.................. 33,350 1,661,247 Kimberly Clark Corp.................................. 60,900 3,003,131 Lear Corp. (b)....................................... 22,000 1,045,000
SHARES VALUE ------------ ------------ Lockheed Martin Corp................................. 72,523 $ 7,143,515 Lyondell Petrochemical Co............................ 55,800 1,478,700 Manor Care, Inc...................................... 38,198 1,336,930 Martin Marietta Materials, Inc....................... 15,000 548,437 Masco Corp........................................... 59,600 3,032,150 Nabisco Holdings Corp................................ 52,000 2,518,750 National Service Industries, Inc..................... 10,000 495,625 Nextel Communications, Inc. (b)...................... 69,800 1,814,800 NextLevel Systems, Inc. (b).......................... 116,500 2,082,437 Old Republic International Corp...................... 9,596 356,851 Peco Energy Co....................................... 152,500 3,698,125 Pentair, Inc......................................... 27,096 973,762 Pharmacia & UpJohn, Inc.............................. 27,600 1,010,850 Philip Morris Companies, Inc......................... 144,200 6,534,062 Raytheon Co., Class B................................ 60,500 3,055,250 Regions Financial Corp............................... 13,100 552,656 Reynolds & Reynolds Co............................... 49,800 918,188 Schering Plough Corp................................. 81,500 5,063,188 Seagate Technology, Inc. (b)......................... 45,600 877,800 Sears, Roebuck and Co................................ 5,700 257,925 Timken Co............................................ 14,400 495,000 Tyson Foods, Inc., Class A........................... 103,998 2,131,959 Ultramar Diamond Shamrock Corp....................... 58,108 1,852,193 US Bancorp........................................... 34,960 3,913,335 Vencor, Inc. (b)..................................... 52,200 1,275,638 Viad Corp............................................ 50,100 967,556 Westvaco Corp........................................ 12,198 383,475 Witco Corp........................................... 8,300 338,744 Xerox Corp........................................... 93,000 6,864,563 York International Corp.............................. 31,800 1,258,088 ------------ Total U.S. Equities ................................. 177,163,304 ------------ NON-U.S. EQUITIES -- 16.79% AUSTRALIA -- 0.84% Amcor Ltd............................................ 23,770 104,548 Boral Ltd............................................ 69,240 175,053 Brambles Industries Ltd.............................. 12,590 249,801 Broken Hill Proprietary Co., Ltd..................... 84,200 781,824 Coca-Cola Amatil Ltd................................. 14,270 106,615 CSR Ltd.............................................. 42,930 145,461 David Jones Ltd...................................... 182,010 205,174 Lend Lease Corp., Ltd................................ 11,596 226,679 Mayne Nickless Ltd................................... 20,000 105,690 M.I.M. Holdings Ltd.................................. 88,056 53,935 National Australia Bank Ltd.......................... 58,467 816,423 News Corp. Ltd....................................... 122,030 673,492 News Corp. Ltd., Preferred........................... 27,886 137,987 Pacific Dunlop Ltd................................... 85,210 180,450 Rio Tinto Ltd........................................ 31,145 363,326 Qantas Airways Ltd................................... 81,435 144,120 Santos Ltd........................................... 16,610 68,402 Telstra Corp., Ltd. (b).............................. 33,000 69,669 Westpac Banking Corp., Ltd........................... 93,408 597,449 WMC Ltd.............................................. 52,840 184,204 Woolworth's Ltd...................................... 30,790 102,922 ------------ 5,493,224 ------------
- -------------------------------------------------------------------------------- 11 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------- BELGIUM -- 0.66% Delhaize-Le Lion S.A............................... 8,420 $ 427,238 Electrabel S.A..................................... 3,330 770,238 Fortis AG.......................................... 216 29 Fortis AG Strip (b)................................ 2,943 614,002 Generale de Banque S.A............................. 770 335,113 Groupe Bruxelles Lambert S.A....................... 1,670 241,591 Kredietbank NV..................................... 800 335,754 Kredietbank VVPR................................... 25 10,492 Petrofina S.A...................................... 1,525 562,856 Societe Generale de Belgique....................... 2,433 222,609 Solvay S.A., Class A............................... 4,890 307,514 Tractebel.......................................... 3,875 337,811 Tractebel Warrants "99" (b)........................ 605 1,551 Union Miniere Group S.A. (b)....................... 2,255 156,416 ------------ 4,323,214 ------------ CANADA -- 0.59% Agrium, Inc........................................ 9,500 115,506 Alcan Aluminum Ltd................................. 7,250 199,602 Bank of Montreal................................... 5,290 234,170 Barrick Gold Corp.................................. 4,200 78,213 Canadian National Railway Co....................... 5,150 242,188 Canadian Pacific Ltd............................... 15,650 421,022 Hudson's Bay Co.................................... 6,400 142,436 Imasco, Ltd........................................ 3,000 105,863 Imperial Oil Ltd................................... 5,720 367,717 Magna International Inc., Class A.................. 1,800 112,696 Moore Corp., Ltd................................... 5,800 87,136 Newbridge Networks Corp. (b)....................... 2,200 76,941 Noranda, Inc....................................... 7,440 127,890 Northern Telecom Ltd............................... 1,290 114,614 NOVA Corp.......................................... 19,520 185,502 Potash Corporation of Saskatchewan, Inc............ 2,200 183,013 Royal Bank of Canada............................... 6,250 330,166 Seagram Co., Ltd................................... 4,290 138,643 TELUS Corp......................................... 10,300 228,153 TransCanada Pipelines Ltd.......................... 10,020 223,351 Westcoast Energy, Inc.............................. 5,000 115,296 ------------ 3,830,118 ------------ FINLAND -- 0.13% Cultor Oyj......................................... 1,200 65,226 Merita Ltd., Class A............................... 19,550 106,982 Metsa Serla Oyj, Class B........................... 5,000 39,022 Nokia Oyj, Class A Preferred....................... 5,250 373,092 Outokumpu Oyj, Class A............................. 4,480 54,707 Pohjola Insurance Group, Class B................... 350 12,983 Sampo Insurance Co., Ltd., Series A................ 1,520 50,241 The Rauma Group.................................... 200 3,122 UPM-Kymmene Corp................................... 6,870 137,508 ------------ 842,883 ------------
SHARES VALUE ------------ ------------- FRANCE -- 0.93% Accor S.A.......................................... 1,092 $ 203,116 Alcatel Alsthom.................................... 1,932 245,675 AXA-UAP............................................ 4,058 314,131 AXA-UAP Rights (b)................................. 4,328 4,245 Banque Nationale de Paris.......................... 4,620 245,668 Cie Bancaire S.A................................... 331 53,644 Cie de Saint Gobain................................ 2,267 322,188 Cie Financiere de Paribas.......................... 2,500 217,337 Cie Generale des Eaux.............................. 2,444 341,250 Cie Generale des Eaux Warrants "01" (b)............ 4,224 2,872 Dexia France....................................... 1,899 220,014 Elf Aquitaine S.A.................................. 3,194 371,642 France Telecom S.A. (b)............................ 9,400 341,094 Groupe Danone...................................... 800 142,952 Lafarge S.A........................................ 1,880 123,406 Lagardere S.C.A.................................... 6,600 218,318 Lyonnaise des Eaux S.A............................. 2,771 306,814 Michelin, Class B.................................. 4,449 224,077 Pechiney S.A., Class A............................. 4,884 192,892 Peugeot S.A........................................ 2,480 312,886 Pinault-Printemps-Redoute S.A...................... 350 186,810 Rhone-Poulenc, Class A............................. 6,944 311,187 SEITA.............................................. 6,810 244,508 Societe Generale................................... 2,295 312,816 Thomson CSF........................................ 6,900 217,575 Total S.A., Class B................................ 2,886 314,217 Usinor Sacilor..................................... 5,980 86,380 ------------ 6,077,714 ------------ GERMANY -- 1.81% Allianz AG Holding................................. 4,810 1,241,221 BASF AG............................................ 7,530 268,854 Bayer AG........................................... 16,990 630,712 Bayerische Motoren Werke AG........................ 590 441,327 Commerzbank AG..................................... 14,340 558,256 Continental AG..................................... 14,400 324,342 Daimler-Benz AG.................................... 6,750 476,753 Deutsche Bank AG................................... 13,611 952,263 Deutsche Telekom AG................................ 51,930 961,720 Henkel KGaA-Vorzug AG, Preferred................... 5,290 330,974 Hochtief AG........................................ 3,500 144,041 Hoechst AG......................................... 5,910 204,768 M.A.N. AG.......................................... 750 216,687 Mannesmann AG...................................... 897 450,471 Metro AG........................................... 9,608 340,910 Muenchener Rueckver AG............................. 2,410 916,768 Muenchener Rueckver AG Warrants "98" (b)........... 2 1,212 Preussag AG........................................ 1,322 406,577 RWE AG............................................. 9,820 527,017 Schering AG........................................ 5,405 521,533 Siemens AG......................................... 10,700 645,654 Veba AG............................................ 11,339 772,497 Volkswagen AG...................................... 860 480,674 ------------ 11,815,231 ------------
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------------ ------------- HONG KONG -- 0.18% Cheung Kong Holdings Ltd........................... 38,000 $ 248,887 China Light & Power Co., Ltd....................... 18,500 102,665 Citic Pacific Ltd.................................. 17,000 67,574 Hang Seng Bank Ltd................................. 9,700 93,576 Hong Kong and China Gas Co., Ltd................... 79,000 152,933 Hong Kong Telecommunications Ltd................... 81,000 166,736 Hutchison Whampoa Ltd.............................. 26,000 163,077 Sun Hung Kai Properties Ltd........................ 15,000 104,536 Swire Pacific Ltd., Class A........................ 11,500 63,077 ------------ 1,163,061 ------------ ITALY -- 0.82% Aeroporti Di Roma Spa (b).......................... 3,000 31,136 Assicurazioni Generali............................. 21,380 525,416 Banca Commerciale Italiana......................... 55,000 191,312 Credito Italiano Spa............................... 97,000 299,276 Danieli & Co. Savings (Risp)....................... 43,000 154,679 Edison Spa......................................... 22,200 134,351 ENI ADR (c)........................................ 7,600 433,675 ENI Spa............................................ 76,000 431,142 Fiat Spa-Priv Preferred............................ 185,600 283,431 INA-Istituto Nazionale delle Assicurazioni......... 87,000 176,406 Instituto Mobiliare Italiano Spa................... 28,800 342,072 Italgas Spa........................................ 35,800 147,813 La Rinascente Spa.................................. 32,040 239,206 La Rinascente Spa RNC.............................. 27,200 101,536 La Rinascente Spa Warrants "99" (b)................ 1,400 1,694 Mediobanca Spa..................................... 11,000 86,417 Montedison Spa..................................... 331,700 298,109 SAI-Savings (Risp)................................. 24,500 108,085 Telecom Italia Mobile Spa.......................... 60,000 277,085 Telecom Italia Mobile Spa RNC...................... 161,500 459,458 Telecom Italia Spa................................. 26,666 170,428 Telecom Italia Spa RNC............................. 110,081 485,638 ------------ 5,378,365 ------------ JAPAN -- 2.73% Amada Co., Ltd..................................... 40,000 149,202 Asahi Glass Co., Ltd............................... 22,000 104,903 Bank of Tokyo-Mitsubishi, Ltd...................... 32,000 442,992 Canon, Inc......................................... 30,000 701,404 Canon Sales Co., Inc............................... 12,000 137,512 Citizen Watch Co., Ltd............................. 34,000 228,802 Dai Nippon Printing Co., Ltd....................... 36,000 678,331 Daiichi Pharmaceutical Co., Ltd.................... 30,000 339,166 Daikin Industries Ltd.............................. 36,000 136,220 Daiwa House Industry Co., Ltd...................... 18,000 95,520 Fanuc.............................................. 15,900 604,084 Fujitsu............................................ 24,000 258,412 Hitachi Ltd........................................ 75,000 536,435 Honda Motor Co..................................... 10,000 368,391 Hoya Corp.......................................... 4,000 126,130 Inax............................................... 26,000 75,785 Ito Yokado Co., Ltd................................ 15,000 767,160 Kaneka Corp........................................ 36,000 163,076
SHARES VALUE ------------ ----------- Keio Teito Electric Railway............................ 41,000 $ 157,347 Kinki Nippon Railway................................... 45,000 241,223 Kirin Brewery Co., Ltd................................. 43,000 314,170 Kokuyo................................................. 11,000 190,348 Kuraray Co., Ltd....................................... 46,000 382,080 Kyocera Corp........................................... 4,000 182,119 Marui Co., Ltd......................................... 20,000 312,248 Matsushita Electric Industrial Co...................... 57,000 837,301 Mitsubishi Paper Mills................................. 39,000 54,889 NGK Insulators......................................... 64,000 570,967 Nintendo Co., Ltd...................................... 2,900 285,484 Nippon Denso Co., Ltd.................................. 19,000 343,396 Nippon Meat Packers, Inc............................... 25,000 342,242 Nippon Steel Co........................................ 27,000 40,077 Okumura................................................ 37,000 88,214 Osaka Gas Co........................................... 69,000 158,139 Sankyo Co., Ltd........................................ 29,000 657,950 Secom Co., Ltd......................................... 10,000 641,415 Seino Transportation................................... 25,000 125,168 Sekisui House Ltd...................................... 56,000 361,346 Shinmaywa Industries Ltd............................... 13,000 31,994 Sony Corp.............................................. 9,200 820,765 Sumitomo Bank.......................................... 41,000 469,833 Sumitomo Chemical Co................................... 36,000 83,061 Sumitomo Electric Industries........................... 32,000 438,070 Takeda Chemical Industries............................. 22,000 629,417 TDK Corp............................................... 7,000 529,744 Tokio Marine & Fire Insurance Co....................... 36,000 409,767 Tokyo Electric Power................................... 9,900 181,211 Tokyo Steel Mfg........................................ 19,000 64,441 Tonen Corp............................................. 26,000 140,773 Toray Industries, Inc.................................. 132,000 593,886 Toshiba Corp........................................... 93,000 388,379 Toyo Suisan Kaisha..................................... 22,000 152,955 Toyota Motor Corp...................................... 19,000 546,510 Yamazaki Baking Co., Ltd............................... 17,000 166,045 ----------- 17,846,499 ----------- MALAYSIA -- 0.25% Hume Industries (Malaysia) Bhd......................... 35,000 36,686 Kuala Lumpur Kepong Bhd................................ 90,500 194,136 Land & General Holdings Bhd............................ 73,000 13,503 Malayan Banking Bhd.................................... 39,000 113,218 Malaysia International Shipping Bhd (Frgn.)............ 32,000 46,859 Nestle (Malaysia) Bhd.................................. 22,000 101,734 New Straits Times Press Bhd............................ 33,000 40,863 Perusahaan Otomobil Nasional Bhd....................... 22,000 21,477 Petronas Gas Bhd....................................... 26,000 59,114 Public Bank Bhd........................................ 27,600 8,580 Public Bank Bhd (Frgn.)................................ 78,000 26,852 Public Bank Bhd Rights (b)............................. 4,600 248 Public Bank Bhd Rights (Frgn.) (b)..................... 13,000 668 Resorts World Bhd...................................... 30,000 50,482 Rothmans of Pall Mall Bhd.............................. 24,000 186,513 Sime Darby Bhd......................................... 127,000 122,024 Telekom Malaysia Bhd................................... 93,000 274,759 Tenaga Nasional Bhd.................................... 110,000 234,554
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- UMW Holdings Bhd........................................... 15,000 $ 11,368 United Engineers Bhd....................................... 33,000 27,468 YTL Corp. Bhd.............................................. 42,000 56,647 YTL Power International Bhd (b)............................ 1,400 1,075 ----------- 1,628,828 ----------- NETHERLANDS -- 0.81% ABN AMRO Holdings NV....................................... 22,202 432,585 Akzo Nobel NV.............................................. 760 131,059 Elsevier NV................................................ 26,480 428,424 Heineken NV................................................ 1,850 322,128 Hoogovens NV............................................... 2,360 96,737 ING Groep NV............................................... 12,962 546,024 KLM Royal Dutch Air Lines NV............................... 3,492 129,187 KPN NV..................................................... 13,020 543,329 Philips Electronics NV..................................... 6,850 410,872 Royal Dutch Petroleum Co................................... 29,420 1,615,176 Royal Dutch Petroleum Co., NY Shares (c)................... 700 37,931 Unilever NV................................................ 9,600 591,920 ----------- 5,285,372 ----------- NEW ZEALAND -- 0.57% Brierley Investments Ltd................................... 756,530 540,360 Carter Holt Harvey Ltd..................................... 261,110 403,326 Fletcher Challenge Building................................ 86,775 177,374 Fletcher Challenge Energy.................................. 95,405 334,072 Fletcher Challenge Forests Ltd............................. 185,585 154,110 Fletcher Challenge Paper................................... 171,640 224,260 Lion Nathan Ltd............................................ 64,000 143,456 Telecom Corp. of New Zealand Ltd........................... 326,830 1,584,748 Telecom Corp. of New Zealand Ltd. ADS (c).................. 3,800 147,250 ----------- 3,708,956 ----------- SINGAPORE -- 0.35% City Developments Ltd...................................... 31,000 143,501 DBS Land Ltd............................................... 58,000 88,807 Development Bank of Singapore Ltd.......................... 28,000 239,288 Elec & Eltek International Co., Ltd........................ 12,100 55,418 Fraser & Neave Ltd......................................... 12,000 51,988 Hotel Properties Ltd....................................... 102,000 66,588 Keppel Corp., Ltd.......................................... 33,000 94,789 Keppel Land Ltd............................................ 35,000 48,190 NatSteel Ltd............................................... 25,000 33,828 Oversea-Chinese Banking Corp., Ltd......................... 43,000 250,089 Singapore Airlines Ltd. (Frgn.)............................ 50,000 326,410 Singapore Press Holdings Ltd. (Frgn.)...................... 11,000 137,745 Singapore Telecommunications, Ltd.......................... 221,000 411,834 United Overseas Bank Ltd. (Frgn.).......................... 48,000 266,350 Venture Manufacturing (Singapore) Ltd...................... 20,000 55,786 Wing Tai Holdings Ltd...................................... 38,000 44,427 ----------- 2,315,038 ----------- SPAIN -- 0.50% Acerinox S.A............................................... 370 54,789 Banco Bilbao-Vizcaya S.A................................... 11,720 379,081
SHARES VALUE --------- ----------- Banco Central Hispanoamericano.............................. 9,840 $ 239,512 Banco Popular Espanol S.A................................... 3,200 223,593 Banco Santander S.A......................................... 9,480 316,580 Empresa National de Electridad S.A.......................... 21,640 384,045 Fomento de Contrucciones y Contratas S.A.................... 4,400 167,432 Gas Natural SDG S.A......................................... 4,140 214,578 Iberdrola S.A............................................... 22,910 301,368 Mapfre Corp................................................. 3,860 102,312 Repsol S.A.................................................. 5,110 217,918 Repsol S.A. ADR (c)......................................... 1,000 42,563 Tabacalera S.A.............................................. 500 40,513 Telefonica de Espana........................................ 13,640 389,280 Vallehermoso S.A............................................ 3,470 106,317 Viscofan Envolturas Celulosicas S.A......................... 3,110 78,046 ----------- 3,257,927 ----------- SWEDEN -- 0.33% ABB AB, A Shares............................................ 9,400 111,360 Astra AB, A Shares.......................................... 21,800 377,776 Electrolux AB, B Shares..................................... 1,500 104,164 Hennes & Mauritz AB, B Shares............................... 5,200 229,375 Nordbanken Holding AB....................................... 50,400 285,202 Securitas AB, B Shares...................................... 3,700 111,915 Skanska AB, B Shares........................................ 2,800 114,864 Svenska Handelsbanken, A Shares............................. 4,500 155,679 Swedish Match AB............................................ 39,000 130,252 Telefonaktiebolaget LM Ericsson, B Shares................... 7,600 285,912 Volvo AB, B Shares.......................................... 8,100 217,440 ----------- 2,123,939 ----------- SWITZERLAND -- 0.87% ABB AG (Bearer)............................................. 105 132,096 CS Holdings AG (Reg.)....................................... 3,579 554,541 Holderbank Financiere Glarus, B Shares...................... 205 167,531 Nestle S.A. (Reg.).......................................... 460 690,347 Novartis AG (Reg.).......................................... 896 1,455,862 Roche Holding AG (Gen.)..................................... 101 1,004,391 Sairgroup (b)............................................... 113 154,943 Schweizerische Lebensversicherungs-und Rentenastalt............................................... 245 192,661 Sulzer AG................................................... 194 123,162 Swiss Reinsurance Co. (Reg.)................................ 255 477,622 UBS (Bearer)................................................ 261 377,919 Zurich Versicherungs (Reg.)................................. 702 334,973 ----------- 5,666,048 ----------- UNITED KINGDOM -- 4.42% Abbey National PLC.......................................... 31,620 567,625 Barclays PLC................................................ 15,000 399,342 Bass PLC.................................................... 19,070 296,365 B.A.T. Industries PLC....................................... 156,484 1,426,444 BG PLC...................................................... 166,864 752,296 Billiton PLC (b)............................................ 122,000 313,155 Booker PLC.................................................. 72,220 380,262
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ------------ British Energy PLC................................... 78,630 $ 547,273 British Petroleum Co. PLC............................ 93,091 1,225,385 British Sky Broadcating Group PLC.................... 42,000 315,130 British Steel PLC.................................... 116,470 250,092 British Telecommunications PLC....................... 142,980 1,125,725 BTR PLC.............................................. 61,420 185,953 Cable & Wireless PLC................................. 27,000 237,680 Cadbury Schweppes PLC................................ 56,000 565,298 Centrica PLC (b)..................................... 131,430 193,550 Charter PLC.......................................... 29,846 367,826 Coats Viyella PLC.................................... 123,860 185,459 Diageo PLC........................................... 65,150 599,777 FKI PLC.............................................. 158,500 498,124 General Electric Co. PLC............................. 139,550 905,841 Glaxo Wellcome PLC................................... 82,600 1,957,120 Greenalls Group PLC.................................. 32,000 230,621 Hanson PLC........................................... 53,102 237,332 Hillsdown Holdings PLC............................... 163,520 398,206 House of Fraser PLC.................................. 174,400 576,790 HSBC Holdings PLC.................................... 36,050 925,348 Inchcape PLC......................................... 87,470 234,597 Legal & General Group PLC............................ 79,400 695,036 Lloyds TSB Group PLC................................. 118,409 1,533,326 Marks & Spencer PLC.................................. 95,040 936,717 Mirror Group PLC..................................... 165,450 530,856 National Westminster Bank PLC........................ 33,380 555,830 Northern Foods PLC................................... 95,040 412,843 Peninsular & Oriental Steam Navigation Co............ 61,040 695,519 Reckitt & Colman PLC................................. 17,938 281,872 Reuters Holdings PLC................................. 36,530 399,711 Rio Tinto PLC........................................ 35,580 438,493 RJB Mining PLC....................................... 86,570 180,903 Royal & Sun Alliance Insurance Group PLC............. 52,943 534,003 Scottish Hydro-Electric PLC.......................... 37,480 309,584 Sears PLC............................................ 220,480 192,274 Sedgwick Group PLC................................... 146,360 341,968 SmithKline Beecham PLC............................... 86,180 883,425 Smurfit (Jefferson) Group PLC........................ 132,647 368,858 Tate & Lyle PLC...................................... 41,000 337,984 Tesco PLC............................................ 63,197 514,727 Thames Water PLC..................................... 43,210 644,506 The Great Universal Stores PLC....................... 51,000 643,636 Unilever PLC......................................... 36,040 308,957 Vodafone Group PLC................................... 86,090 621,859 Williams PLC......................................... 99,010 550,644 ------------ 28,812,147 ------------ Total Non-U.S.Equities............................... 109,568,564 ------------ EMERGING MARKETS EQUITIES -- 3.37% Brinson Emerging Markets Equity Fund (b)............................................ 2,402,916 22,017,923 ------------ Total Equities (Cost $270,775,791)................... 308,749,791 ------------
FACE AMOUNT VALUE ---------- ------------ Bonds -- 48.80% U.S. BONDS -- 24.49% U.S. CORPORATE BONDS -- 7.93% Aetna Services Inc. 6.970%, due 08/15/36.............. $ 265,000 $ 277,655 Aid-Israel Series 10-Z, 0.000%, due 02/15/03.................... 6,720,000 4,989,533 Asset Securitization Corp. 7.210%, due 10/13/26................................. 2,310,000 2,411,876 Associates Corp. N.A. 6.450%, due 10/15/01................................. 480,000 483,416 Bank of America FRN 6.110%, due 09/24/98............................. 2,000,000 1,999,156 Bellsouth Savings & Employee ESOP 9.125%, due 07/01/03............................ 278,657 289,255 Capital One Bank 6.830%, due 05/17/99................................. 1,946,000 1,959,490 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02.......................... 1,000,000 1,001,570 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03........................... 1,050,000 1,060,059 Chemical Master Credit Card Trust 95-2A 6.230%, due 06/15/03........................... 1,430,000 1,438,852 Ches Pot Tel MD 8.000%, due 10/15/29................................. 98,000 116,730 Choice Credit Card 7.200%, due 03/15/98................................. 1,000,000 1,001,460 Chrysler Financial Corp. 4.220%, due 03/02/99................................. 1,192 1,182 7.400%, due 08/01/2097............................... 252,000 268,859 Citicorp 6.200%, due 11/10/00................................. 500,000 498,934 Coca-Cola Enterprises 6.375%, due 08/01/01................................. 550,000 553,936 Comcast Cable Communications 144A 8.500%, due 05/01/27............................ 1,720,000 2,028,819 Continental Airlines, Inc. 97-4A 6.900%, due 01/02/18........................... 1,850,000 1,849,722 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 08/20/06................................. 1,465,000 1,524,230 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02......................................... 132,000 132,115 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00............................. 600,000 607,359 First National Bank of Chicago Series E, 7.000%, due 05/08/00....................... 1,000,000 1,015,000 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00............................ 70,140 70,063 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09................. 1,637,884 1,594,234 General Motors Acceptance Corp. 6.375%, due 12/01/01................................. 500,000 502,194 9.625%, due 12/15/01................................. 331,000 369,814 GreenTree Financial Corp. 97-6 6.870%, due 01/15/29............................ 2,315,000 2,371,972 Lehman Brothers Holdings 7.250%, due 04/15/03................................. 1,250,000 1,290,470
- -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ----------- Lockheed Martin Corp. 7.700%, due 06/15/08................................ $ 148,000 $ 160,758 MBNA Global Capital Securities FRN 6.550%, due 02/01/27............................ 1,100,000 1,010,386 Nationsbanc Asset Securities, Inc. Series 1997-1, 6.375%, due 09/20/27................. 2,605,000 2,605,000 News America Holdings 7.750%, due 12/01/45................................ 1,877,000 1,954,160 Premier Auto Trust 96-4A Class A4, 6.400%, due 10/06/01................ 455,000 457,521 96-3A 6.500%, due 03/06/00.......................... 215,000 215,772 Prudential Home Mortgage Securities 94-3 A10, 6.500%, due 02/25/24...................... 1,000,000 960,700 Residential Asset Securitization Trust 97-A 11 P4, 7.000%, due 12/25/27.................... 200,000 200,625 Salomon, Inc. 6.500%, due 03/01/00................................ 2,520,000 2,533,414 6.750%, due 02/15/03................................ 550,000 557,808 Standard Credit Card Trust 95-1A 8.250%, due 01/01/07.......................... 500,000 553,740 Thrift Financial Corp. 11.250%, due 01/01/16............................... 84,445 91,074 Time Warner, Inc. 7.570%, due 02/01/24................................ 2,165,000 2,269,349 Time Warner Entertainment, Inc. 8.375%, due 03/15/23................................ 1,206,000 1,375,811 Turner Broadcasting 7.400%, due 02/01/04................................ 1,000,000 1,033,092 UCFC Home Equity Loan 97-C, Class A8, FRN 6.325%, due 09/15/27............ 1,573,947 1,572,640 Union Pacific 6.250%, due 03/15/99................................ 1,000,000 1,002,803 WMX Technologies, Inc. 7.000%, due 10/15/06................................ 1,500,000 1,523,497 ----------- 51,786,105 ----------- INTERNATIONAL DOLLAR BONDS -- 4.10% Abbey National PLC 7.350%, Resettable Perpetual Preferred.............. 250,000 259,942 ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01................................ 250,000 253,725 AT&T Corp. 8.250%, due 01/11/00................................ 945,000 982,777 Banca Commercial Italian 8.250%, due 07/15/07................................ 450,000 493,865 Banco Bilbao Vizcaya International Finance 7.000%, due 12/01/25................................ 2,200,000 2,175,862 Banco Santiago S.A. 7.000%, due 07/18/07................................ 2,000,000 2,005,432 Banque Centrale de Tunisie 8.250%, due 09/19/27................................ 1,750,000 1,592,833 Banque Paribas, Sub. Notes 6.875%, due 03/01/09................................ 175,000 174,239 Bayerische Landesbank 6.850%, due 07/19/01................................ 212,000 217,627
FACE AMOUNT VALUE ------------ ----------- Credit Suisse--London 144A 7.900%, Resettable Perpetual Preferred........ $ 2,600,000 $ 2,743,265 Den Danske Bank 144A 7.400%, due 06/15/10.......................... 2,050,000 2,138,896 DR Investments 144A 7.450%, due 05/15/07.......................... 320,000 338,218 Empresa Nacional Electric 7.875%, due 02/01/27............................... 316,000 334,590 Hanson PLC Notes 6.750%, due 09/15/05............................... 290,000 296,407 International Telecom Satellite 8.125%, due 02/28/05............................... 335,000 368,506 Japanese Development Bank 8.375%, due 02/15/01............................... 970,000 1,030,452 Korea Development Bank 7.125%, due 09/17/01............................... 200,000 170,240 LKB Baden-Wuerttemberg Finance NV 8.125%, due 01/27/00............................... 350,000 363,675 Pan Pacific Industry PLC 144A 0.000%, due 04/28/07.......................... 2,130,000 1,051,202 Petroliam Nasional 7.125%, due 08/15/05............................... 420,000 396,345 Poland Non-U.S. Global Regd FRN 6.940%, due 10/27/24........................... 300,000 289,125 Province of Quebec 7.500%, due 07/15/23............................... 325,000 350,428 Ras Laffan Liquified Natural Gas Co. Ltd. 144A 8.294%, due 03/15/14............................... 1,910,000 1,797,321 Repsol International Finance 7.000%, due 08/01/05............................... 735,000 771,860 Republic of South Africa 9.625%, due 12/15/99............................... 1,079,000 1,116,765 Royal Bank of Scotland 7.375%, Resettable Perpetual Preferred............. 690,000 716,362 Skandinaviska Enskilda Banken 144A 6.625%, Resettable Perpetual Preferred........ 500,000 502,000 Sociedad Quimica y Minera de Chiles SA, 144A 7.700%, due 09/15/06....................................... 1,500,000 1,559,369 Southern Investments UK 6.800%, due 12/01/06............................... 1,625,000 1,637,787 Swedbank 144A FRN 7.664%, Resettable Perpetual Preferred.... 270,000 274,050 Telstra Corp. Ltd. 6.500%, due 11/28/05............................... 350,000 351,226 ----------- 26,754,391 ----------- U.S. GOVERNMENT AGENCIES -- 7.33% Federal Home Loan Mortgage Corp. 6.200%, due 08/15/07............................... 700,000 690,375 6.200%, due 12/15/08............................... 700,000 690,703 7.000%, due 10/15/13............................... 2,275,469 2,323,850 6.500%, due 05/15/21............................... 1,248,829 1,248,891 7.500%, due 01/15/23............................... 787,978 827,440 7.000%, due 01/15/25............................... 1,100,000 1,095,267 7.238%, due 05/01/26............................... 334,042 345,941
- -------------------------------------------------------------------------------- 16 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------------ ------------- Federal Home Loan Mortgage Corp. Gold 8.000%, due 11/01/22.............................. $ 144,007 $ 149,002 8.000%, due 05/01/23.............................. 1,496,337 1,548,242 9.000%, due 03/01/24.............................. 1,056,907 1,141,428 9.500%, due 04/01/25.............................. 48,223 51,509 Federal National Mortgage Association 5.000%, due 06/01/01.............................. 1,412,398 1,366,862 6.540%, due 09/18/02.............................. 4,690,000 4,743,020 6.220%, due 03/13/06.............................. 1,700,000 1,716,563 8.000%, due 02/25/07.............................. 1,635,000 1,697,272 6.500%, due 05/25/08.............................. 909,485 907,748 6.500%, due 12/01/11 TBA.......................... 435,000 435,272 8.000%, due 05/25/21.............................. 1,610,000 1,684,266 9.000%, due 08/01/21.............................. 278,492 299,176 8.000%, due 05/01/22.............................. 116,793 120,880 8.500%, due 07/01/22.............................. 668,918 708,591 7.500%, due 07/25/22.............................. 2,154,635 2,257,934 6.500%, due 12/15/23.............................. 2,610,000 2,601,791 9.000%, due 02/01/25.............................. 1,885 2,003 6.500%, due 04/01/26.............................. 1,543,380 1,523,124 6.500%, due 12/01/26 TBA.......................... 5,000,000 4,934,375 6.730%, due 04/25/27 FRN.......................... 1,561,566 1,571,621 6.175%, due 10/01/27.............................. 1,381,103 1,379,308 6.500%, due 12/01/27.............................. 2,608,650 2,574,411 Federal National Mortgage Association Strip 0.00%, due 04/01/27, principal only............... 2,733,923 2,076,141 Government National Mortgage Association 10.000%, due 09/15/00............................. 3,022 3,217 10.000%, due 05/15/01............................. 5,907 6,290 9.000%, due 11/15/04.............................. 17,025 17,893 8.500%, due 05/15/21.............................. 49,980 52,494 8.000%, due 08/15/22.............................. 524,142 543,470 8.000%, due 12/15/22.............................. 1,475,029 1,538,190 8.000%, due 11/15/22.............................. 431,844 450,335 7.500%, due 11/15/24.............................. 2,477,404 2,543,402 ------------ 47,868,297 ------------ U.S. GOVERNMENT OBLIGATIONS -- 5.13% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98.............................. 172,000 171,731 6.000%, due 06/30/99.............................. 13,740,000 13,808,700 5.875%, due 08/31/99.............................. 9,185,000 9,213,703 7.750%, due 11/30/99.............................. 215,000 222,928 6.625%, due 07/31/01.............................. 930,000 956,448 6.250%, due 08/31/02.............................. 2,975,000 3,036,359 6.000%, due 02/15/26.............................. 5,875,000 5,867,656 U.S. Treasury Strip 0.000%, due 02/15/03, principal only.............. 225,000 168,237 ------------ 33,445,762 ------------ Total U.S. Bonds................................... 159,854,555 ------------
SHARES ------------ HIGH YIELD BONDS -- 2.64% Brinson High Yield Fund (b)........................ 1,231,792 17,201,354 ------------
FACE AMOUNT VALUE ------------ ------------- NON - U.S. BONDS--16.43% AUSTRALIA -- 1.17% Government of Australia 7.00%, due 04/15/00 ..........................AUD 2,300,000 $ 1,550,958 9.75%, due 03/15/02.............................. 3,400,000 2,550,377 10.00%, due 10/15/07............................. 1,200,000 1,013,253 Queensland Treasury Global Notes 8.00%, due 05/14/03.............................. 3,500,000 2,504,390 ------------ 7,618,978 ------------ CANADA -- 2.00% Government of Canada 7.50%, due 09/01/00...........................CAD 3,380,000 2,487,043 6.50%, due 06/01/04.............................. 500,000 367,658 8.75%, due 12/01/05.............................. 2,600,000 2,179,977 7.00%, due 12/01/06.............................. 4,270,000 3,271,081 4.25%, due 12/01/21 (d).......................... 6,060,000 4,699,348 ------------ 13,005,107 ------------ DENMARK -- 1.88% Kingdom of Denmark 9.00%, due 11/15/98...........................DKK 3,200,000 485,417 9.00%, due 11/15/00.............................. 13,600,000 2,203,242 6.00%, due 11/15/02.............................. 10,000,000 1,520,869 7.00%, due 12/15/04.............................. 8,200,000 1,305,313 8.00%, due 03/15/06.............................. 40,000,000 6,767,532 ------------ 12,282,373 ------------ FRANCE -- 0.65% Government of France (OAT) 9.50%, due 01/25/01.......................... FRF 10,300,000 1,950,939 7.50%, due 04/25/05.............................. 9,300,000 1,767,711 8.50%, due 12/26/12.............................. 2,500,000 538,149 ------------ 4,256,799 ------------ GERMANY -- 4.06% Bundesrepublik Deutschland 7.000%, due 09/20/99..........................DEM 13,700,000 7,971,158 8.500%, due 08/21/00............................. 2,180,000 1,333,509 9.000%, due 01/22/01............................. 2,500,000 1,565,402 8.375%, due 05/21/01............................. 1,580,000 980,635 7.250%, due 10/21/02............................. 4,500,000 2,760,163 6.750%, due 04/22/03............................. 4,900,000 2,955,915 6.750%, due 07/15/04............................. 6,300,000 3,830,243 6.250%, due 01/04/24............................. 2,500,000 1,460,848 Treuhandanstalt 6.250% due 03/04/04.............................. 6,200,000 3,669,451 ------------ 26,527,324 ------------ ITALY -- 0.86% Republic of Italy (BTP) 9.50%, due 12/01/99...........................ITL 1,900,000,000 1,155,335 10.50%, due 04/01/00............................. 995,000,000 627,485 12.00%, due 09/01/02............................. 1,700,000,000 1,223,139 9.00%, due 10/01/03.............................. 900,000,000 600,407 8.50%, due 04/01/04.............................. 3,100,000,000 2,030,022 ------------ 5,636,388 ------------
- -------------------------------------------------------------------------------- 17 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ------------ NETHERLANDS -- 1.44% Government of Netherlands 6.25%, due 07/15/98...............................NLG 1,400,000 $ 698,515 8.50%, due 03/15/01.................................. 5,600,000 3,070,843 8.75%, due 09/15/01.................................. 700,000 391,314 6.50%, due 04/15/03.................................. 1,100,000 580,847 7.25%, due 10/01/04.................................. 3,200,000 1,763,133 8.25%, due 02/15/07.................................. 4,815,000 2,865,534 ----------- 9,370,186 ----------- SPAIN -- 1.06% Government of Spain 6.75%, due 04/15/00...............................ESP 415,000,000 2,847,578 7.90%, due 02/28/02.................................. 140,000,000 1,016,796 8.00%, due 05/30/04.................................. 300,000,000 2,250,689 10.00%, due 02/28/05................................. 100,000,000 832,057 ----------- 6,947,120 ----------- SWEDEN -- 0.50% Government of Sweden 5.50%, due 04/12/02...............................SEK 6,500,000 817,321 10.25%, due 05/05/03.............................. 16,300,000 2,475,362 ----------- 3,292,683 ----------- UNITED KINGDOM -- 2.81% UK Treasury 8.00%, due 06/10/03...............................GBP 2,590,000 4,549,280 6.75%, due 11/26/04.................................. 380,000 637,762 8.50%, due 12/07/05.................................. 4,570,000 8,485,330 8.50%, due 07/16/07.................................. 1,200,000 2,266,351 7.25%, due 12/07/07.................................. 1,200,000 2,114,563 8.75%, due 08/25/17.................................. 130,000 272,193 ----------- 18,325,479 ----------- Total Non-U.S. Bonds.................................. 107,262,437 ----------- EMERGING MARKETS DEBT -- 5.24% SHARES ----------- Brinson Emerging Markets Debt Fund (b)............................................. 1,692,314 34,231,280 ----------- Total Bonds (Cost $307,234,717)....................... 318,549,626 ----------- Short-Term Investments -- 16.74% FACE U.S. GOVERNMENT OBLIGATIONS -- 0.25% AMOUNT ----------- U.S. Treasury Bill 5.420%, due 05/28/98............... $ 1,630,000 1,595,361 ----------- CERTIFICATES OF DEPOSIT -- 0.92% Canadian Imperial Bank 5.940%, due 10/23/98................................. 3,000,000 2,998,614 Societe General 6.000%, due 10/20/98................................. 3,000,000 2,997,715 ----------- 5,996,329 -----------
FACE AMOUNT VALUE ----------- ------------ COMMERCIAL PAPER -- 15.57% Bausch & Lomb Inc. 7.750%, due 01/02/98................................. $ 2,290,000 $ 2,289,507 6.750%, due 01/05/98................................. 15,000,000 14,991,562 Case Credit Corp. 6.110%, due 01/20/98................................. 2,800,000 2,790,971 6.030%, due 03/10/98................................. 1,000,000 988,610 6.020%, due 03/13/98................................. 1,500,000 1,482,191 ConAgra, Inc. 5.900%, due 01/23/98................................. 5,000,000 4,982,792 CSX Corp. 5.700%, due 01/05/98................................. 5,000,000 4,997,625 Cummins Engine Co., Inc. 7.000%, due 01/02/98................................. 6,175,000 6,175,000 General American Tranportation Corp. 7.500%, due 01/07/98................................. 682,000 681,147 GTE Corp. 6.120%, due 02/20/98................................. 1,500,000 1,487,250 6.020%, due 03/02/98................................. 1,500,000 1,484,950 ITT Industries, Inc. 7.250%, due 01/02/98................................. 10,000,000 9,997,986 6.250%, due 01/06/98................................. 1,909,000 1,907,674 Marriott Corp. 6.050%, due 02/09/98................................. 2,000,000 1,986,892 Nabisco, Inc. 6.100%, due 01/07/98................................. 5,000,000 4,995,764 6.120%, due 01/16/98................................. 2,500,000 2,493,625 Occidental Petroleum Corp. 6.900%, due 01/12/98................................. 5,000,000 4,990,417 6.000%, due 01/16/98................................. 2,500,000 2,493,750 Praxair, Inc. 6.550%, due 01/02/98................................. 1,000,000 999,818 5.750%, due 01/05/98................................. 5,000,000 4,997,604 Rite Aid Corp. 5.850%, due 01/20/98................................. 5,000,000 4,985,375 Safeway, Inc. 5.920%, due 01/22/98................................. 1,500,000 1,494,820 Solutia, Inc. 7.000%, due 01/02/98................................. 7,915,000 7,915,000 Tupperware, Corp. 7.050%, due 01/02/98................................. 4,590,000 4,590,000 Ultramar Diamond Shamrock Corp. 6.000%, due 01/06/98................................. 5,000,000 4,996,667 Vastar Resources, Inc. 7.100%, due 01/02/98................................. 451,000 450,911 ------------ 101,647,908 ------------ Total Short-Term Investments (Cost $109,239,959).................................. 109,239,598 ------------ Total Investments (Cost $687,250,467) -- 112.84% (a)................... 736,539,015 ------------ Liabilities, less cash and other assets--(12.84%)..... (83,850,246) ------------ Net Assets -- 100%.................................... $652,688,769 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $687,250,467; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $75,270,262 Gross unrealized depreciation................................ (25,981,714) ----------- Net unrealized appreciation............................... $49,288,548 ===========
(b) Non-income producing security (c) Denominated in U.S. dollars. (d) Linked to Canada's retail price index. Reset semi-annually. FRN: Floating rate note---The rate disclosed is that in effect at December 31, 1997. 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, 1997, the value of these securities amounted to $12,433,140 or 1.90% 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 (NOTE 4) The Global Fund had the following open forward currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar........... 2/5/98 7,300,000 $ 4,760,414 $ (529,176) Belgian Franc............... 2/5/98 176,000,000 4,759,921 (176,965) British Pound............... 2/5/98 2,000,000 3,285,151 (54,849) Canadian Dollar............. 2/5/98 9,700,000 6,785,684 (31,600) Danish Kroner............... 2/5/98 17,000,000 2,487,249 (13,486) Dutch Guilder............... 2/5/98 7,300,000 3,608,752 (70,412) French Franc................ 2/5/98 27,900,000 4,647,297 67,820 German Mark................. 2/5/98 8,500,000 4,736,986 (33,472) Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (14,258) Japanese Yen................ 2/5/98 4,950,000,000 38,269,152 (5,018,981) Spanish Peseta.............. 2/5/98 165,000,000 1,083,559 (7,855) Swiss Franc................. 2/5/98 8,700,000 5,989,384 59,237 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar........... 2/5/98 20,900,000 13,629,131 1,304,887 Belgian Franc............... 2/5/98 176,000,000 4,759,921 (51,899) British Pound............... 2/5/98 23,000,000 37,779,238 126,402 Canadian Dollar............. 2/5/98 19,800,000 13,851,191 527,685 Danish Kroner............... 2/5/98 86,600,000 12,670,340 (76,941) Dutch Guilder............... 2/5/98 17,600,000 8,700,553 10,137 German Mark................. 2/5/98 41,700,000 23,239,095 (97,035) Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (57,429) Japanese Yen................ 2/5/98 3,600,000,000 27,832,111 2,710,530 Spanish Peseta.............. 2/5/98 840,000,000 5,516,299 227,585 ----------- Total...................... $(1,200,075) ===========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of December 31, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) ---------- ----------- ----------- ----------- FUTURES BUY CONTRACTS 5 year U.S. Treasury Note,182 contracts..................... March 1998 $19,709,740 $19,769,750 $ 60,010 10 year U.S. Treasury Note, 9 contracts..................... March 1998 1,002,723 1,009,406 6,683 30 year U.S. Treasury Bonds, 27 contracts..................... March 1998 3,258,765 3,252,656 (6,109) INDEX FUTURES SALES CONTRACTS Standard & Poor's 500,108 con- tracts........................ March 1998 26,240,844 26,435,700 (194,856) --------- Total......................... $(134,272) =========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1997 was $1,595,361. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $613,477,833)....................... $654,586,339 Affiliated issuers (Cost $73,772,634).......................... 81,952,676 Cash........................................................... 967,618 Foreign currency, at value (Cost $1,661,900).................... 1,650,073 Receivables: Investment securities sold..................................... 4,199,922 Dividends...................................................... 566,826 Interest....................................................... 5,279,895 Fund shares sold............................................... 2,750 Other assets.................................................... 68,200 ------------ TOTAL ASSETS................................................. 749,274,299 ------------ LIABILITIES: Payables: Securities loaned (Note 6)..................................... 79,523,767 Investment securities purchased................................ 15,247,486 Fund shares redeemed........................................... 63,989 Investment advisory fees (Note 2).............................. 451,581 Accrued expenses............................................... 98,632 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 1,200,075 ------------ TOTAL LIABILITIES............................................ 96,585,530 ------------ NET ASSETS....................................................... $652,688,769 ============ NET ASSETS CONSIST OF: Paid in capital (Note 8)........................................ $606,550,960 Accumulated distribution in excess of net investment income..... (19,500,419) Accumulated net realized gain................................... 17,760,003 Net unrealized appreciation..................................... 47,878,225 ------------ NET ASSETS................................................... $652,688,769 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $624,336,530 and 51,450,863 shares is- sued and outstanding) (Note 8)................................ $ 12.13 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,019 and 84 shares issued and outstanding) (Note 8)......... $ 12.13 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $28,351,220 and 2,346,083 shares is- sued and outstanding) (Note 8)................................ $ 12.08 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Interest (net of $10,982 for foreign taxes withheld; including securities lending income of $73,183)........................... $ 9,386,734 Dividends (net of $135,273 for foreign taxes withheld)........... 2,639,326 ----------- TOTAL INCOME.................................................. 12,026,060 ----------- EXPENSES: Advisory (Note 2)................................................ 2,635,060 Administration................................................... 247,037 Distribution (Note 7)............................................ 92,076 Custodian........................................................ 74,111 Other............................................................ 164,286 ----------- TOTAL EXPENSES................................................ 3,212,570 ----------- NET INVESTMENT INCOME ........................................ 8,813,490 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 20,050,524 Futures contracts............................................... (874,722) Foreign currency transactions................................... 4,235,588 ----------- Net realized gain............................................. 23,411,390 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ (14,119,807) Futures contracts............................................... 158,670 Forward contracts............................................... (7,317,967) Translation of other assets and liabilities denominated in for- eign currency.................................................. (43,884) ----------- Change in net unrealized appreciation or depreciation......... (21,322,988) ----------- Net realized and unrealized gain................................. 2,088,402 ----------- Net increase in net assets resulting from operations............. $10,901,892 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR DECEMBER 31, 1997 ENDED (UNAUDITED) JUNE 30, 1997 ----------------- ------------- OPERATIONS: Net investment income........................ $ 8,813,490 $ 16,194,760 Net realized gain............................ 23,411,390 43,268,043 Change in net unrealized appreciation or de- preciation.................................. (21,322,988) 35,756,888 ------------ ------------- Net increase in net assets resulting from op- erations.................................... 10,901,892 95,219,691 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Brinson Class I.............................. (26,359,274) (23,918,105) Brinson Class N.............................. (40) -- SwissKey Class............................... (989,891) (742,228) Distributions from net realized gain Brinson Class I.............................. (33,973,096) (25,579,684) Brinson Class N.............................. (53) -- SwissKey Class............................... (1,492,307) (848,410) ------------ ------------- Total distributions to shareholders........... (62,814,661) (51,088,427) ------------ ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................. 102,712,225 192,297,100 Shares issued on reinvestment of distribu- tions....................................... 56,902,593 49,580,585 Shares redeemed.............................. (67,984,082) (145,001,283) ------------ ------------- Net increase in net assets resulting from capital share transactions (Note 8)......... 91,630,736 96,876,402 ------------ ------------- TOTAL INCREASE IN NET ASSETS.............. 39,717,967 141,007,666 ------------ ------------- NET ASSETS: Beginning of year............................ 612,970,802 471,963,136 ------------ ------------- End of year (including accumulated undistrib- uted net investment income of ($19,500,419) and ($964,704), respectively)............... $652,688,769 $ 612,970,802 ============ =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, AUGUST 31, 1992* 1997 -------------------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 1994 JUNE 30, 1993 - ------------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00 -------- -------- -------- -------- -------- -------- Income from investment operations: Net investment income. 0.24** 0.38 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... -- 1.79 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- -------- -------- Total income from investment operations......... 0.24 2.17 1.81 1.29 0.10 1.07 -------- -------- -------- -------- -------- -------- Less distributions: Distributions from and in excess of net investment income.... (0.54) (0.61) (0.62) (0.27) (0.27) (0.20) Distributions from and in excess of net realized gain........ (0.70) (0.65) (0.32) (0.10) (0.27) -- -------- -------- -------- -------- -------- -------- Total distributions. (1.24) (1.26) (0.94) (0.37) (0.54) (0.20) -------- -------- -------- -------- -------- -------- Net asset value, end of period................. $ 12.13 $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== ======== ======== Total return (non- annualized)............ 1.95% 18.79% 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $624,337 $586,667 $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.95%*** 0.99% 1.04% 1.09% 1.14% 1.35%*** After expense reim- bursement............ N/A N/A N/A N/A 1.10% 1.05%*** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.60%*** 3.03% 3.69% 4.27% 3.21% 3.26%*** After expense reim- bursement............ N/A N/A N/A N/A 3.25% 3.56%*** Portfolio turnover rate.................. 57% 150% 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0352 $ 0.0326 $ 0.0291 N/A N/A N/A
*Commencement of investment operations **The net investment income per share was determined by using average shares outstanding throughout the period. ***Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 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, 1997* BRINSON CLASS N (UNAUDITED) - ----------------------------------------------- Net asset value, beginning of period.................. $ 13.13 ------- Income from investment op- erations: 0.00 Net investment income..... 0.22** Net realized and unrealized gain.......... 0.00 ------- Total income from in- vestment operations.... 0.22 ------- Less distributions: Distributions from and in excess of net investment income................... (0.52) Distributions from net re- alized gain.............. (0.70) ------- Total distributions..... (1.22) ------- Net asset value, end of pe- riod....................... $ 12.13 ======= Total return (non- annualized)................ 1.79% Ratios/Supplemental Data: Net assets, end of period (in 000s)................. $ 1 Ratio of expenses to aver- age net assets............ 1.20%*** Ratio of net investment in- come to average net as- sets...................... 3.35%*** Portfolio turnover rate.... 57% Average commission rate paid per share............ $0.0352
* Commencement of Brinson Class N was June 30, 1997. ** The net investment income per share was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 13.05 $ 12.18 $ 11.60 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.19** 0.34 0.39 Net realized and unrealized gain......................... -- 1.75 1.10 ------- ------- ------- Total income from investment operations................. 0.19 2.09 1.49 ------- ------- ------- Less distributions: Distributions from and in excess of net investment income....................... (0.46) (0.57) (0.59) Distributions from net real- ized gain.................... (0.70) (0.65) (0.32) ------- ------- ------- Total distributions......... (1.16) (1.22) (0.91) ------- ------- ------- Net asset value, end of period.. $ 12.08 $ 13.05 $ 12.18 ======= ======= ======= Total return (non-annualized)... 1.58% 18.13% 13.24% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $28,351 $26,303 $14,030 Ratio of expenses to average net assets.................... 1.60%*** 1.64% 1.69%*** Ratio of net investment income to average net assets......... 2.94%*** 2.38% 3.04%*** Portfolio turnover rate........ 57% 150% 142% Average commission rate paid per share..................... $0.0352 $0.0326 $0.0291
* Commencement of SwissKey Class ** The net investment income per share was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 [SWISS KEY FUNDS LOGO APPEARS HERE] Global Equity Fund - -------------------------------------------------------------------------------- The Global Equity Fund is actively managed, providing a fully integrated approach to the primary equity markets across the world. Market selection and currency strategies are managed within a global asset allocation framework. Industry strategies and individual security selections are based on the fundamental research of our analytical teams in our offices worldwide. The SwissKey Global Equity Fund has provided an annualized return of 15.07% since its inception on July 31, 1995, exceeding the 14.73% return for the benchmark MSCI World Equity (Free) Index. Over this period, the SwissKey Global Equity Fund experienced annualized volatility of 8.88%, below the volatility of the benchmark which was 10.96%. For the year ended December 31, 1997, the Fund returned 9.86%, compared to the benchmark return of 15.92%. Since inception, the Fund's largest contributor to performance has been currency allocation. For 1997, currency allocation made an important positive contribution to Fund performance. Market allocation strategies, notable for a U.S. equity market underweight and a cash risk hedge, detracted from performance. Security selection also reduced performance; with very strong stock selection in Japan more than offset by poor results in the U.S. As global equity markets in aggregate were strong in 1997, holding cash cost performance. Returns varied considerably, however, double-digit rises in Europe and North America contrasted sharply with very weak markets in the Pacific region. Despite a return of 34.1% for the MSCI U.S. component, the U.S. equity market was not the strongest developed market during 1997. Nine markets in the global equity index outperformed the U.S. market, led by Switzerland and Denmark, gaining U.S. dollar-hedged returns of 63.5% and 59.5% respectively. The performance of the MSCI World Equity (Free) Index was muted by the weakness of Japan, Southeast Asia, New Zealand and Australia. The worst performing market in 1997 was Malaysia, which declined 52.1% in U.S. dollar-hedged terms. Currency strategies contributed substantially to the performance of the Fund relative to the MSCI World Equity (Free) benchmark. At the start of the year, the Fund maintained a significant underweight to the Japanese yen and to the core European currencies. This position was gradually pared down and by the end of March was relatively neutral. In October, a small underweight of the yen was reinstated, increasing the size of the U.S. dollar overweight. For the full year, the U.S. dollar overweight and yen underweight made the greatest positive impact on returns. Japan stock selection made a very large positive contribution, benefiting from overweights of blue chip multinationals and other defensive securities, while avoiding all but the highest quality banks and financials. The U.S. equity portion of the Fund was hurt by its underexposure to large capitalization and consumer products issues, as companies with well-known brand names and stable cash flows outperformed. 26 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] Total Return
6 months 1 year 7/31/95* ended ended to 12/31/97 12/31/97 12/31/97 - -------------------------------------------------------------------------------- SwissKey Global Equity Fund -2.11% 9.86% 15.07% MSCI World Equity (Free) Index 0.36 15.92 14.73 - --------------------------------------------------------------------------------
*Inception date of the SwissKey Global Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Equity Fund and the MSCI World Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SwissKey Global Equity Fund vs. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
SwissKey Global MSCI World Equity Equity Fund (Free) Index 7/31/95 10000 10000 9/30/95 10329 10066 12/31/95 10993 10556 3/31/96 11539 10998 6/30/96 11925 11325 9/30/96 12110 11488 12/31/96 12787 12025 3/31/97 13011 12064 6/30/97 14351 13889 9/30/97 14711 14284 12/31/97 14048 13939
7/31/95=$10,000 Data through 12/31/97 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 27 Global Equity Fund - ------------------------------------------------------------------------------- [SWISSKEY LOGO APPEARS HERE] Market Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ------------------------------------------------------------------------------- U.S. 49.8% 34.3% Japan 12.0 5.6 Australia 1.3 2.7 Belgium 0.6 1.8 Canada 2.5 1.6 France 3.8 3.7 Germany 4.7 4.5 Hong Kong 1.3 0.5 Italy 1.9 2.3 Malaysia 0.4 0.8 Netherlands 2.7 2.4 New Zealand 0.1 1.9 Spain 1.3 1.3 Sweden 1.2 0.9 Switzerland 3.7 2.6 U.K. 10.3 11.8 Other Markets 2.4 1.3 Cash Reserves 0.0 20.0 - ---------------------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ----------------------------------------------------------------- 1. Lockheed Martin Corp. 2.02% 2. Xerox Corp. 1.95 3. Philip Morris Companies, Inc. 1.84 4. Aon Corp. 1.64 5. CIGNA Corp. 1.63 6. Schering Plough Corp. 1.44 7. Burlington Northern Santa Fe Corp. 1.41 8. Goodyear Tire & Rubber Co. 1.36 9. Federal Express Corp. 1.36 10. Automatic Data Processing, Inc. 1.17 - -----------------------------------------------------------------
Currency Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ----------------------------------------------------------------- U.S. 49.8% 57.4% Japan 12.0 8.0 Australia 1.3 1.3 Belgium 0.6 0.6 Canada 2.5 2.5 France 3.8 3.8 Germany 4.7 4.7 Hong Kong 1.3 -- Italy 1.9 1.9 Malaysia 0.4 0.4 Netherlands 2.7 2.7 New Zealand 0.1 1.9 Spain 1.3 1.3 Sweden 1.2 1.2 Switzerland 3.7 3.7 U.K. 10.3 6.3 Other Markets 2.4 2.3 - ----------------------------------------------------------------- 100.0% 100.0%
Top Ten Non-U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ----------------------------------------------------------------- 1. Glaxo Wellcome PLC 0.77% 2. Telecom Corp. of New Zealand Ltd. 0.75 3. Royal Dutch Petroleum Co. 0.71 4. Novartis AG(Reg.) 0.67 5. Lloyds TSB Group PLC 0.61 6. B.A.T. Industries PLC 0.56 7. Allianz AG 0.53 8. British Petroleum Co. PLC 0.48 9. Roche Holding AG (Gen.) 0.46 10. British Telecommunications PLC 0.44 - -----------------------------------------------------------------
================================================================= 28 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------- U.S. EQUITIES Energy.................................................................. 1.93% Capital Investment Capital Goods...................................................... 3.37 Technology......................................................... 4.11 ---- 7.48 Basic Industries Chemicals.......................................................... 1.00 Housing/Paper...................................................... 2.43 Metals............................................................. 0.42 ----- 3.85 ----- Consumer Non-Durables....................................................... 4.62 Retail/Apparel..................................................... 2.43 Autos/Durables..................................................... 1.87 Descretionary...................................................... 1.74 Health: Drugs...................................................... 3.86 Health: Non-Drugs.................................................. 2.04 ----- 16.56 Financial Banks.............................................................. 3.74 Non-Banks.......................................................... 3.33 ----- 7.07 Utilities Electric........................................................... 2.93 Telephone.......................................................... 0.51 ----- 3.44 Transportation.......................................................... 2.93 Services/Misc........................................................... 4.49 ----- Total U.S. Equities................................................ 47.75* ----- NON-U.S. EQUITIES Aerospace & Military.................................................... 0.09 Airplanes............................................................... 0.17 Appliances & Household.................................................. 0.75 Autos/Durables.......................................................... 1.42 Banking................................................................. 5.34 Beverages and Tobacco................................................... 1.14 Broadcasting & Publishing............................................... 0.80 Building Materials...................................................... 0.63 Business & Public Service............................................... 1.47 Chemicals............................................................... 1.24 Construction............................................................ 0.36 Data Processing......................................................... 0.31 Electric Components..................................................... 0.46 Electronics............................................................. 1.61 Energy.................................................................. 3.82 Financial Services...................................................... 1.01 Food & House Products................................................... 1.59 Forest Products......................................................... 0.57 Gold Mining............................................................. 0.03 Health: Drugs........................................................... 0.72 Health: Non-Drugs....................................................... 2.51 Industrial Components................................................... 0.58 Insurance............................................................... 2.92 Leisure & Tourism....................................................... 0.25 Machinery & Engineering................................................. 0.08 Merchandising........................................................... 2.03 Metals--Steel........................................................... 0.70 Miscellaneous Materials................................................. 0.17 Miscellaneous Services.................................................. 0.05 Multi-Industry.......................................................... 2.38 Non-Ferrous Metals...................................................... 0.84 Real Estate............................................................. 0.49 Recreation.............................................................. 0.17 Retail & Apparel........................................................ 0.28 Shipping................................................................ 0.02 Telecommunications...................................................... 3.94 Textiles & Apparel...................................................... 0.08 Transportation.......................................................... 0.42 Utilities............................................................... 2.01 Wholesale & International Trade......................................... 0.24 ------ Total Non-U.S. Equities............................................. 43.69 ------ SHORT-TERM INVESTMENTS.................................................. 8.78* ------ TOTAL INVESTMENTS................................................... 100.22 ------ LIABILITIES LESS CASH AND OTHER ASSETS.................................................... (0.22) ------ NET ASSETS.............................................. 100.00% ====== - --------------------------------------------------------------------------------
* The Fund held a short position in stock index futures on December 31, 1997 which reduced U.S. Equity exposure from 47.75% to 33.35%. This adjustment results in an increase in the Fund's exposure to Short-Term Investments from 8.78% to 23.18%. ================================================================================ 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- Equities -- 91.44% U.S. EQUITY -- 47.75% Allergan, Inc............................................... 12,100 $ 406,106 Alza Corp. (b).............................................. 11,800 375,387 American Home Products Corp................................. 9,500 726,750 Aon Corp.................................................... 22,750 1,333,719 Automatic Data Processing, Inc.............................. 15,500 951,312 Baxter International, Inc................................... 15,300 771,694 Beckman Instruments, Inc.................................... 4,600 184,000 Biogen, Inc. (b)............................................ 4,600 167,325 Birmingham Steel Corp....................................... 4,700 74,025 Boston Technology, Inc. (b)................................. 4,500 113,062 Briggs & Stratton Corp...................................... 600 29,137 Burlington Northern Santa Fe Corp........................... 12,400 1,152,425 Champion Enterprises, Inc. (b).............................. 7,600 156,275 Champion International Corp................................. 600 27,187 Chase Manhattan Corp........................................ 6,400 700,800 CIGNA Corp.................................................. 7,700 1,332,581 Circuit City Stores-Circuit City Group...................... 17,400 618,787 Citicorp.................................................... 5,700 720,694 CMS Energy Corp............................................. 15,200 669,750 Comerica, Inc............................................... 3,200 288,800 Commscope, Inc. (b)......................................... 8,933 120,037 Comverse Technology, Inc. (b)............................... 2,300 89,700 Corning, Inc................................................ 25,200 935,550 Covance, Inc. (b)........................................... 5,900 117,262 CPC International, Inc...................................... 5,200 561,600 Crown Cork & Seal Co., Inc.................................. 5,600 280,700 CVS Corp.................................................... 7,500 480,469 Dial Corp................................................... 6,100 126,956 Eastman Chemical Co......................................... 6,500 387,156 Echlin, Inc................................................. 3,300 119,419 EMC Corp. (b)............................................... 33,800 927,387 Enron Corp.................................................. 15,800 656,687 Entergy Corp................................................ 30,900 925,069 Federal Express Corp. (b)................................... 18,100 1,105,231 First American Corp. of Tennessee........................... 3,100 154,225 First Data Corp............................................. 28,604 836,667 First Security Corp......................................... 3,900 163,312 FirstEnergy Corp............................................ 9,227 267,583 Fleetwood Enterprises, Inc.................................. 3,600 152,775 Food Lion, Inc. Class A..................................... 23,500 198,281 Forest Laboratories, Inc. (b)............................... 5,400 266,287 Fort James Corp............................................. 13,800 527,850 Gannett Co., Inc............................................ 11,800 729,388 General Semiconductor, Inc. (b)............................. 7,425 85,852 Genzyme Corp................................................ 4,800 133,200 Geon Co..................................................... 3,200 74,800 Goodyear Tire & Rubber Co................................... 17,400 1,107,075 Harnischfeger Industries, Inc............................... 9,000 317,813 Health Care and Retirement Corp. (b)........................ 5,350 215,338 Hibernia Corp............................................... 6,600 124,163 Informix Corp. (b).......................................... 6,300 29,925 Interpublic Group of Companies, Inc......................... 7,650 381,066 Kimberly Clark Corp......................................... 14,100 695,306 Lear Corp. (b).............................................. 5,100 242,250 Lockheed Martin Corp........................................ 16,751 1,649,974
SHARES VALUE ------- ----------- Lyondell Petrochemical Co................................... 12,900 $ 341,850 Manor Care, Inc............................................. 9,100 318,500 Martin Marietta Materials, Inc.............................. 3,435 125,592 Masco Corp.................................................. 13,700 696,988 Nabisco Holdings Corp....................................... 12,000 581,250 National Service Industries, Inc............................ 2,300 113,994 Nextel Communications, Inc. (b)............................. 16,300 423,800 NextLevel Systems, Inc. (b)................................. 26,900 480,838 Old Republic International Corp............................. 2,450 91,109 Peco Energy Co.............................................. 35,100 851,175 Pentair, Inc................................................ 6,200 222,813 Pharmacia & UpJohn, Inc..................................... 6,300 230,738 Philip Morris Companies, Inc................................ 33,200 1,504,375 Raytheon Co., Class B....................................... 13,900 701,950 Regions Financial Corp...................................... 3,000 126,563 Reynolds & Reynolds Co...................................... 11,600 213,875 Schering Plough Corp........................................ 18,900 1,174,163 Seagate Technology, Inc. (b)................................ 10,500 202,125 Sears, Roebuck and Co....................................... 1,400 63,350 Timken Co................................................... 4,000 137,500 Tyson Foods, Inc., Class A.................................. 24,000 492,000 Ultramar Diamond Shamrock Corp.............................. 13,352 425,595 US Bancorp.................................................. 8,021 897,851 Vencor, Inc. (b)............................................ 12,000 293,250 Viad Corp................................................... 11,600 224,025 Westvaco Corp............................................... 2,850 89,597 Witco Corp.................................................. 1,300 53,056 Xerox Corp.................................................. 21,600 1,594,350 York International Corp..................................... 7,300 288,806 ----------- Total U.S. Equities......................................... 38,947,247 ----------- NON-U.S. EQUITIES -- 43.69% AUSTRALIA -- 2.35% Amcor Ltd................................................... 8,300 36,506 Boral Ltd................................................... 21,600 54,609 Brambles Industries Ltd..................................... 5,000 99,206 Broken Hill Proprietary Co., Ltd............................ 30,050 279,024 Coca-Cola Amatil Ltd........................................ 5,200 38,850 CSR Ltd..................................................... 15,000 50,825 David Jones Ltd............................................. 53,200 59,971 Lend Lease Corp., Ltd....................................... 3,697 72,269 Mayne Nickless Ltd.......................................... 7,500 39,634 M.I.M. Holdings Ltd......................................... 32,411 19,852 National Australia Bank Ltd................................. 21,075 294,288 News Corp. Ltd.............................................. 44,040 243,060 News Corp. Ltd., Preferred.................................. 9,700 47,998 Pacific Dunlop Ltd.......................................... 25,200 53,366 Qantas Airways Ltd.......................................... 26,764 47,365 Rio Tinto Ltd............................................... 9,663 112,725 Santos Ltd.................................................. 6,000 24,709 Telstra Corp., Ltd. (b)..................................... 10,000 21,112 Westpac Banking Corp., Ltd.................................. 34,945 223,512 WMC Ltd..................................................... 16,800 58,566 Woolworth's Ltd............................................. 12,000 40,113 ----------- 1,917,560 -----------
- -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- BELGIUM -- 1.75% Delhaize-Le Lion S.A........................................ 2,650 $ 134,463 Electrabel S.A.............................................. 1,140 263,685 Fortis AG................................................... 88 12 Fortis AG Strip (b)......................................... 1,018 212,387 Generale de Banque S.A...................................... 220 95,746 Groupe Bruxelles Lambert S.A................................ 550 79,566 Kredietbank NV.............................................. 275 115,415 Kredietbank VVPR............................................ 11 4,617 Petrofina S.A............................................... 530 195,616 Societe Generale de Belgique................................ 750 68,622 Solvay S.A., Class A........................................ 1,550 97,474 Tractebel................................................... 1,300 113,330 Tractebel Warrants "99" (b)................................. 200 513 Union Miniere Group S.A. (b)................................ 702 48,693 ----------- 1,430,139 ----------- CANADA -- 1.58% Agrium, Inc................................................. 3,100 37,691 Alcan Aluminum Ltd.......................................... 2,500 68,828 Bank of Montreal............................................ 1,700 75,253 Barrick Gold Corp........................................... 1,500 27,933 Canadian National Railway Co................................ 1,700 79,946 Canadian Pacific Ltd........................................ 5,216 140,323 Hudson's Bay Co............................................. 2,000 44,511 Imasco, Ltd................................................. 1,200 42,345 Imperial Oil Ltd............................................ 2,000 128,572 Magna International Inc., Class A........................... 700 43,826 Moore Corp., Ltd............................................ 2,400 36,056 Newbridge Networks Corp. (b)................................ 800 27,979 Noranda, Inc................................................ 2,500 42,974 Northern Telecom Ltd........................................ 400 35,539 NOVA Corp................................................... 6,900 65,572 Potash Corporation of Saskatchewan, Inc..................... 700 58,231 Royal Bank of Canada........................................ 2,000 105,653 Seagram Co., Ltd............................................ 1,400 45,245 TELUS Corp.................................................. 3,300 73,098 TransCanada Pipelines Ltd................................... 3,400 75,788 Westcoast Energy, Inc....................................... 1,600 36,895 ----------- 1,292,258 ----------- FINLAND -- 0.34% Cultor Oyj.................................................. 300 16,306 Merita Ltd., Class A........................................ 7,000 38,306 Metsa Serla Oyj, Class B.................................... 1,800 14,048 Nokia Oyj, Class A Preferred................................ 1,800 127,917 Outokumpu Oyj, Class A...................................... 1,500 18,317 Sampo Insurance Co., Ltd., Series A......................... 400 13,001 The Rauma Group............................................. 83 1,296 UPM-Kymmene Corp............................................ 2,200 44,035 ----------- 273,226 -----------
SHARES VALUE ------- ----------- FRANCE -- 2.75% Accor S.A................................................... 408 $ 75,843 Alcatel Alsthom............................................. 696 88,472 AXA-UAP..................................................... 1,441 111,587 AXA-UAP Rights (b).......................................... 1,291 1,267 Banque Nationale de Paris................................... 1,610 85,612 Cie Bancaire S.A............................................ 23 3,728 Cie de Saint Gobain......................................... 916 130,183 Cie Financiere de Paribas................................... 900 78,241 Cie Generale des Eaux....................................... 928 129,609 Cie Generale des Eaux Warrants "01" (b)..................... 1,771 1,204 Dexia France................................................ 677 78,465 Elf Aquitaine S.A........................................... 1,213 141,082 France Telecom S.A. (b)..................................... 3,100 112,488 Groupe Danone............................................... 250 44,673 Lafarge S.A................................................. 675 44,308 Lagardere S.C.A............................................. 2,250 74,427 LVMH........................................................ 1 83 Lyonnaise des Eaux S.A...................................... 1,157 128,093 Michelin, Class B........................................... 1,701 85,672 Pechiney S.A., Class A...................................... 1,775 70,113 Peugeot S.A................................................. 943 118,909 Pinault-Printemps-Redoute S.A............................... 200 106,749 Rhone-Poulenc, Class A...................................... 2,690 120,560 SEITA....................................................... 2,350 84,375 Societe Generale............................................ 903 123,116 Thomson CSF................................................. 2,325 73,313 Total S.A., Class B......................................... 1,019 110,972 Usinor Sacilor.............................................. 1,300 18,778 ----------- 2,241,922 ----------- GERMANY -- 5.10% Allianz AG Holding.......................................... 1,680 433,524 BASF AG..................................................... 2,500 89,261 Bayer AG.................................................... 6,140 227,932 Bayerische Motoren Werke AG................................. 210 157,083 Commerzbank AG.............................................. 5,050 196,596 Continental AG.............................................. 4,700 105,862 Daimler-Benz AG............................................. 2,200 155,386 Deutsche Bank AG............................................ 4,900 342,817 Deutsche Telekom AG......................................... 16,910 313,166 Henkel KGaA-Vorzug AG, Preferred............................ 1,810 113,245 Hochtief AG................................................. 1,310 53,912 Hoechst AG.................................................. 1,950 67,563 M.A.N. AG................................................... 310 89,564 Mannesmann AG............................................... 360 180,791 Metro AG.................................................... 3,118 110,633 Muenchener Rueckver AG...................................... 855 325,243 Muenchener Rueckver AG Warrants "98" (b).................... 3 1,819 Preussag AG................................................. 490 150,698 RWE AG...................................................... 3,470 186,227 Schering AG................................................. 1,910 184,297 Siemens AG.................................................. 3,770 227,487 Veba AG..................................................... 4,060 276,598 Volkswagen AG............................................... 300 167,677 ----------- 4,157,381 -----------
- -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- HONG KONG -- 0.59% Cheung Kong Holdings Ltd.................................... 14,000 $ 91,695 China Light & Power Co., Ltd................................ 6,500 36,071 Citic Pacific Ltd........................................... 5,000 19,875 Hang Seng Bank Ltd.......................................... 5,800 55,953 Hong Kong and China Gas Co., Ltd............................ 30,000 58,076 Hong Kong Telecommunications Ltd............................ 32,000 65,871 Hutchison Whampoa Ltd....................................... 15,000 94,083 Sun Hung Kai Properties Ltd................................. 5,000 34,845 Swire Pacific Ltd., Class A................................. 4,500 24,682 ----------- 481,151 ----------- ITALY -- 2.22% Aeroporti Di Roma Spa (b)................................... 1,000 10,379 Assicurazioni Generali...................................... 6,640 163,179 Banca Commerciale Italia.................................... 19,000 66,090 Credito Italiano Spa........................................ 35,000 107,986 Danieli & Co. Savings (Risp)................................ 16,400 58,994 Edison Spa.................................................. 6,000 36,311 ENI ADR (c)................................................. 1,700 97,006 ENI Spa..................................................... 33,000 187,206 Fiat Spa-Priv Preferred..................................... 58,300 89,030 INA-Istituto Nazionale delle Assicurazioni.................. 35,000 70,968 Instituto Mobiliare Italiano Spa............................ 9,700 115,212 Italgas Spa................................................. 13,700 56,565 La Rinascente Spa........................................... 10,600 79,138 La Rinascente Spa RNC....................................... 11,000 41,062 La Rinascente Spa Warrants "99" (b)......................... 550 666 Mediobanca Spa.............................................. 1,800 14,141 Montedison Spa.............................................. 116,560 104,756 SAI-Savings (Risp).......................................... 10,000 44,116 Telecom Italia Mobile Spa................................... 20,000 92,362 Telecom Italia Mobile Spa RNC............................... 49,000 139,402 Telecom Italia Spa.......................................... 10,111 64,622 Telecom Italia Spa RNC...................................... 38,813 171,229 ----------- 1,810,420 ----------- JAPAN -- 5.85% Amada Co., Ltd.............................................. 10,000 37,301 Asahi Glass Co., Ltd........................................ 11,000 52,451 Bank of Tokyo-Mitsubishi, Ltd............................... 9,000 124,591 Canon, Inc.................................................. 8,000 187,041 Canon Sales Co., Inc........................................ 3,000 34,378 Citizen Watch Co., Ltd...................................... 9,000 60,565 Dai Nippon Printing Co., Ltd................................ 9,000 169,583 Daiichi Pharmaceutical Co., Ltd............................. 8,000 90,444 Daikin Industries Ltd....................................... 10,000 37,839 Daiwa House Industry Co., Ltd............................... 5,000 26,533 Fanuc....................................................... 4,400 167,168 Fujitsu..................................................... 6,000 64,603 Hitachi Ltd................................................. 20,000 143,049 Honda Motor Co.............................................. 3,000 110,517 Hoya Corp................................................... 1,000 31,532 Inax........................................................ 7,000 20,404 Ito Yokado Co., Ltd......................................... 4,000 204,576 Kaneka Corp................................................. 10,000 45,299
SHARES VALUE ------- ----------- Keio Teito Electric Railway................................. 11,000 $ 42,215 Kinki Nippon Railway........................................ 12,000 64,326 Kirin Brewery Co., Ltd...................................... 11,000 80,369 Kokuyo...................................................... 3,000 51,913 Kuraray Co., Ltd............................................ 12,000 99,673 Kyocera Corp................................................ 1,200 54,636 Marui Co., Ltd.............................................. 5,000 78,062 Matsushita Electric Industrial Co........................... 15,000 220,342 NGK Insulators.............................................. 16,000 142,742 Nintendo Co., Ltd........................................... 800 78,754 Nippon Denso Co., Ltd....................................... 5,000 90,367 Nippon Meat Packers, Inc.................................... 6,000 82,138 Nippon Steel Co............................................. 8,000 11,875 Okumura..................................................... 10,000 23,842 Osaka Gas Co................................................ 19,000 43,545 Sankyo Co., Ltd............................................. 7,000 158,816 Secom Co., Ltd.............................................. 2,000 128,283 Seino Transportation........................................ 7,000 35,047 Sekisui House Ltd........................................... 15,000 96,789 Sony Corp................................................... 2,700 240,877 Sumitomo Bank............................................... 11,000 126,053 Sumitomo Chemical Co........................................ 12,000 27,687 Sumitomo Electric Industries................................ 8,000 109,517 Takeda Chemical Industries.................................. 6,000 171,659 TDK Corp.................................................... 2,000 151,356 Tokio Marine & Fire Insurance Co............................ 9,000 102,442 Tokyo Electric Power........................................ 2,300 42,100 Tokyo Steel Mfg............................................. 8,000 27,133 Tonen Corp.................................................. 7,000 37,900 Toray Industries, Inc....................................... 36,000 161,969 Toshiba Corp................................................ 24,000 100,227 Toyo Suisan Kaisha.......................................... 9,000 62,573 Toyota Motor Corp........................................... 6,000 172,582 Yamazaki Baking Co., Ltd.................................... 5,000 48,837 ----------- 4,774,520 ----------- MALAYSIA -- 0.60% Hume Industries (Malaysia) Bhd.............................. 13,000 13,626 Kuala Lumpur Kepong Bhd..................................... 26,000 55,774 Land & General Holdings Bhd................................. 18,000 3,330 Malayan Banking Bhd......................................... 14,600 42,384 Malaysia International Shipping Bhd (Frgn.)................. 12,000 17,572 Nestle (Malaysia) Bhd....................................... 5,000 23,121 New Straits Times Press Bhd................................. 10,000 12,383 Perusahaan Otomobil Nasional Bhd............................ 8,000 7,810 Petronas Gas Bhd............................................ 10,000 22,736 Public Bank Bhd............................................. 4,800 1,492 Public Bank Bhd (Frgn.)..................................... 13,999 4,819 Public Bank Bhd Rights (b).................................. 800 43 Public Bank Bhd Rights (Frgn.) (b).......................... 2,333 120 Resorts World Bhd........................................... 10,000 16,827 Rothmans of Pall Mall Bhd................................... 6,000 46,628 Sime Darby Bhd.............................................. 37,000 35,550 Telekom Malaysia Bhd........................................ 27,500 81,246 Tenaga Nasional Bhd......................................... 31,000 66,102 UMW Holdings Bhd............................................ 6,000 4,547
- -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- MALAYSIA (CONTINUED) United Engineers Bhd....................................... 10,000 $ 8,324 YTL Corp. Bhd.............................................. 15,000 20,231 YTL Power International Bhd (b)............................ 800 615 ----------- 485,280 ----------- NETHERLANDS -- 2.24% ABN AMRO Holdings NV....................................... 7,701 150,047 Akzo Nobel NV.............................................. 300 51,734 DSM NV..................................................... 1 23 Elsevier NV................................................ 8,700 140,759 Heineken NV................................................ 675 117,533 Hoogovens NV............................................... 786 32,231 ING Groep NV............................................... 4,458 187,814 KLM Royal Dutch Air Lines NV............................... 1,118 41,360 KPN NV..................................................... 4,317 180,140 Philips Electronics NV..................................... 2,337 140,206 Royal Dutch Petroleum Co................................... 10,475 575,084 Unilever NV................................................ 3,400 209,638 ----------- 1,826,569 ----------- NEW ZEALAND -- 1.56% Brierley Investments Ltd................................... 266,700 190,493 Carter Holt Harvey Ltd..................................... 91,600 141,491 Fletcher Challenge Building................................ 30,350 62,037 Fletcher Challenge Energy.................................. 33,950 118,880 Fletcher Challenge Forests Ltd............................. 58,095 48,242 Fletcher Challenge Paper................................... 53,600 70,032 Lion Nathan Ltd............................................ 15,000 33,623 Telecom Corp. of New Zealand Ltd. ADS (c).................. 125,700 609,500 ----------- 1,274,298 ----------- SINGAPORE -- 0.72% City Developments Ltd...................................... 7,000 32,404 DBS Land Ltd............................................... 14,000 21,436 Development Bank of Singapore Ltd.......................... 7,000 59,822 Elec & Eltek International Co., Ltd........................ 2,200 10,076 Fraser & Neave Ltd......................................... 3,000 12,997 Hotel Properties Ltd....................................... 25,000 16,320 Keppel Corp., Ltd.......................................... 7,750 22,261 Keppel Land Ltd............................................ 9,000 12,392 NatSteel Ltd............................................... 7,000 9,472 Oversea-Chinese Banking Corp. Ltd.......................... 12,600 73,282 Singapore Airlines Ltd. (Frgn.)............................ 13,000 84,866 Singapore Press Holdings Ltd. (Frgn.)...................... 3,000 37,567 Singapore Telecommunications, Ltd.......................... 61,000 113,674 United Overseas Bank Ltd. (Frgn.).......................... 13,000 72,136 Wing Tai Holdings Ltd...................................... 8,000 9,353 ----------- 588,058 ----------- SPAIN -- 1.21% Acerinox S.A............................................... 125 18,510 Banco Bilbao-Vizcaya S.A................................... 3,375 109,164 Banco Central Hispanoamericano............................. 2,550 62,069 Banco Popular Espanol S.A.................................. 1,200 83,847 Banco Santander S.A........................................ 2,700 90,165 Empresa National de Electridad S.A......................... 7,050 125,116
SHARES VALUE ------- ----------- Fomento de Construcciones y Contratas S.A.................. 1,500 $ 57,079 Gas Natural SDG S.A........................................ 1,200 62,197 Iberdrola S.A.............................................. 6,675 87,806 Mapfre Corp................................................ 1,200 31,807 Repsol S.A................................................. 1,725 73,563 Tabacalera S.A............................................. 200 16,205 Telefonica de Espana....................................... 4,050 115,585 Vallehermoso S.A........................................... 900 27,575 Viscofan Envolturas Celulosicas S.A........................ 1,100 27,605 ----------- 988,293 ----------- SWEDEN -- 0.88% ABB AB, A Shares........................................... 3,000 35,541 Astra AB, A Shares......................................... 7,000 121,304 Electrolux AB, B Shares.................................... 500 34,721 Hennes & Mauritz AB, B Shares.............................. 1,700 74,988 Nordbanken Holding AB...................................... 16,100 91,106 Securitas AB, B Shares..................................... 1,300 39,321 Skanska AB, B Shares....................................... 900 36,921 Svenska Handelsbanken, A Shares............................ 1,400 48,433 Swedish Match AB........................................... 22,400 74,812 Telefonaktiebolaget LM Ericsson, B Shares.................. 2,400 90,288 Volvo AB, B Shares......................................... 2,600 69,796 ----------- 717,231 ----------- SWITZERLAND -- 2.54% ABB AG (Bearer)............................................ 41 51,895 Alusuisse-Lonza Holdings AG (Reg.)......................... 1 240 CS Holdings AG (Reg.)...................................... 1,337 207,081 Holderbank Financiere Glarus, B Shares..................... 74 60,474 Nestle S.A. (Reg.)......................................... 160 240,121 Novartis AG (Reg.)......................................... 337 547,297 Roche Holding AG (Gen.).................................... 37 372,918 Sairgroup (b).............................................. 36 49,362 Schweizerische Lebensversicherungs-und Rentenastalt........ 82 64,482 Sulzer AG.................................................. 65 41,266 Swiss Reinsurance Co. (Reg.)............................... 97 181,684 UBS (Bearer)............................................... 88 126,697 Zurich Versicherungs (Reg.)................................ 266 126,808 ----------- 2,070,325 ----------- UNITED KINGDOM -- 11.41% Abbey National PLC......................................... 10,750 192,978 Barclays PLC............................................... 6,000 159,737 Bass PLC................................................... 6,100 94,800 B.A.T. Industries PLC...................................... 49,750 453,501 BG PLC..................................................... 52,709 237,633 Billiton PLC (b)........................................... 39,000 100,107 Booker PLC................................................. 23,870 125,683 British Energy PLC......................................... 25,250 175,742 British Petroleum Co. PLC.................................. 29,655 390,358 British Sky Broadcasting Group PLC......................... 13,000 97,540 British Steel PLC.......................................... 37,750 81,059 British Telecommunications PLC............................. 46,020 362,329 BTR PLC.................................................... 22,000 66,606 Cable & Wireless PLC....................................... 11,000 96,833
- -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- UNITED KINGDOM (CONTINUED) Cadbury Schweppes PLC...................................... 18,000 $ 181,703 Centrica PLC (b)........................................... 44,620 65,709 Charter PLC................................................ 9,422 116,118 Coats Viyella PLC.......................................... 41,250 61,765 Diageo PLC................................................. 21,720 199,956 FKI PLC.................................................... 50,405 158,410 General Electric Co. PLC................................... 44,320 287,688 Glaxo Wellcome PLC......................................... 26,620 630,733 Greenalls Group PLC........................................ 13,000 93,690 Hanson PLC................................................. 17,750 79,331 Hillsdown Holdings PLC..................................... 52,000 126,631 House of Fraser PLC........................................ 57,250 189,342 HSBC Holdings PLC.......................................... 11,000 282,353 Inchcape PLC............................................... 26,000 69,733 Legal & General Group PLC.................................. 25,250 221,028 Lloyds TSB Group PLC....................................... 38,220 494,926 Marks & Spencer PLC........................................ 30,120 296,864 Mirror Group PLC........................................... 53,000 170,053 National Westminster Bank PLC.............................. 10,350 172,344 Northern Foods PLC......................................... 28,500 123,801 Peninsular & Oriental Steam Navigation Co.................. 19,000 216,495 Reckitt & Colman PLC....................................... 5,635 88,547 Reuters Holdings PLC....................................... 11,000 120,362 Rio Tinto PLC.............................................. 12,020 148,136 RJB Mining PLC............................................. 27,500 57,466 Royal & Sun Alliance Insurance Group PLC................... 16,779 169,239 Scottish Hydro-Electric PLC................................ 12,650 104,489 Sears PLC.................................................. 68,250 59,519 Sedgwick Group PLC......................................... 49,000 114,488 SmithKline Beecham PLC..................................... 28,350 290,614 Smurfit (Jefferson) Group PLC.............................. 41,196 114,556 Tate & Lyle PLC............................................ 14,000 115,409 Tesco PLC.................................................. 20,250 164,932 Thames Water PLC........................................... 13,500 201,362 The Great Universal Stores PLC............................. 15,750 198,770 Unilever PLC............................................... 13,000 111,444 Vodafone Group PLC......................................... 26,700 192,864 Williams PLC............................................... 32,750 182,139 ----------- 9,307,915 ----------- Total Non-U.S. Equities.................................... 35,636,546 ----------- Total Equities (Cost $65,891,370).......................... 74,583,793 -----------
FACE AMOUNT VALUE ---------- ----------- Short-Term Investments -- 8.78% U.S. GOVERNMENT OBLIGATIONS -- 0.73% U.S. Treasury Bills 5.420%, due 05/28/98................ $ 605,000 $ 592,143 ----------- COMMERCIAL PAPER -- 8.05% Case Credit Corp. 6.030%, due 03/10/98................................... 500,000 494,305 Nabisco, Inc. 6.700%, due 01/05/98................................... 500,000 499,628 Praxair, Inc. 6.550%, due 01/02/98................................... 2,000,000 2,000,364 Vastar Resources, Inc. 7.100%, due 01/02/98................................... 3,574,000 3,573,295 ----------- 6,567,592 ----------- Total Short-Term Investments (Cost $7,159,869)...................................... 7,159,735 ----------- Total Investments (Cost $73,051,239) -- 100.22% (a)...................... 81,743,528 ----------- Liabilities, less cash and other assets -- (0.22%)...................................... (181,101) ----------- Net Assets -- 100%...................................... $81,562,427 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $73,051,239; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $13,188,118 Gross unrealized depreciation................................ (4,495,829) ----------- Net unrealized appreciation................................ $ 8,692,289 ===========
(b) Non-income producing security. (c) Denominated in U.S. dollars. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Equity Fund had the following open forward foreign currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ---------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar........................ 6/3/98 1,050,000 $ 736,496 $ (5,921) Danish Kroner.......................... 6/3/98 2,700,000 397,236 (5,839) Dutch Guilder.......................... 6/3/98 900,000 447,937 (6,608) French Franc........................... 6/3/98 5,100,000 855,042 (12,689) Japanese Yen........................... 6/3/98 376,000,000 2,959,420 9,634 Swedish Krona.......................... 6/3/98 7,900,000 999,249 (17,194) Swiss Franc............................ 6/3/98 1,600,000 1,116,321 (24,093) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar...................... 6/3/98 1,150,000 752,091 29,219 Belgian Franc.......................... 6/3/98 32,000,000 871,117 11,471 British Pound.......................... 6/3/98 2,800,000 4,573,295 78,785 German Mark............................ 6/3/98 1,000,000 560,991 9,388 Hong Kong Dollar....................... 2/5/98 3,600,000 463,395 373 Japanese Yen........................... 6/3/98 119,000,000 936,625 13,854 Swedish Krona.......................... 6/3/98 7,900,000 999,249 23,869 -------- Total............................... $104,249 ========
FUTURES CONTRACTS (NOTE 5) The Global Equity Fund had the following open index futures contracts as of December 31, 1997:
SETTLEMENT CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN ---------- ------------ ------------ ---------- INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 48 contracts...... March 1998 $ 11,916,264 $ 11,749,200 $ 167,064
The market value of investments pledged to cover margin requirements for the open positions at December 31, 1997 was $592,143. See accompanying notes to the financial statements. - -------------------------------------------------------------------------------- 35 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $73,051,239) (Note 1)................. $81,743,528 Cash.............................................................. 86,370 Foreign currency, at value (Cost $382,196)........................ 377,629 Receivables: Investment securities sold....................................... 395,917 Dividends........................................................ 199,603 Fund shares sold................................................. 20,275 Variation margin (Note 5)........................................ 1,752 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 104,065 Other assets...................................................... 46,146 ----------- TOTAL ASSETS................................................... 82,975,285 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 1,259,960 Investment advisory fees (Note 2)................................ 49,655 Accrued expenses................................................. 103,243 ----------- TOTAL LIABILITIES.............................................. 1,412,858 ----------- NET ASSETS......................................................... $81,562,427 =========== NET ASSETS CONSIST OF: Paid in capital (Note 8).......................................... $70,388,858 Accumulated undistributed net investment income................... 163,736 Accumulated net realized gain..................................... 2,047,204 Net unrealized appreciation....................................... 8,962,629 ----------- NET ASSETS..................................................... $81,562,427 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $17,948,691 and 1,579,621 shares issued and outstanding) (Note 8)....................................... $ 11.36 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $977 and 86 shares issued and outstanding) (Note 8)............. $ 11.36 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $63,612,759 and 5,608,122 shares issued and outstanding) (Note 8)....................................... $ 11.34 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $66,048 for foreign taxes withheld)............ $ 816,558 Interest......................................................... 189,569 ----------- TOTAL INCOME.................................................. 1,006,127 ----------- EXPENSES: Advisory (Note 2)................................................ 374,636 Distribution (Note 7)............................................ 254,282 Custodian........................................................ 12,878 Other............................................................ 91,731 ----------- TOTAL EXPENSES................................................ 733,527 Expenses deferred by Advisor (Note 2)......................... (12,446) ----------- NET EXPENSES.................................................. 721,081 ----------- NET INVESTMENT INCOME ........................................ 285,046 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments..................................................... 6,732,546 Futures contracts............................................... (1,530,284) Foreign currency transactions................................... (114,366) ----------- Net realized gain............................................. 5,087,896 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ (8,123,416) Futures contracts............................................... 470,554 Forward contracts............................................... 105,523 Translation of other assets and liabilities denominated in for- eign currency.................................................. 893 ----------- Change in net unrealized appreciation or depreciation......... (7,546,446) ----------- Net realized and unrealized loss.................................. (2,458,550) ----------- Net decrease in net assets resulting from operations.............. $(2,173,504) ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 285,046 $ 960,262 Net realized gain............................. 5,087,896 5,232,778 Change in net unrealized appreciation or depreciation................................. (7,546,446) 10,619,517 ----------- ------------ Net increase (decrease) in net assets result- ing from operations.......................... (2,173,504) 16,812,557 ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................... (148,933) (425,929) Brinson Class N............................... (8) -- SwissKey Class................................ (308,930) (253,945) Distributions from net realized gain: Brinson Class I............................... (1,266,777) (3,076,886) Brinson Class N............................... (82) -- SwissKey Class................................ (5,307,194) (3,396,000) ----------- ------------ Total distributions to shareholders........... (7,031,924) (7,152,760) ----------- ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 26,867,326 42,520,630 Shares issued on reinvestment of distribu- tions........................................ 6,217,910 6,711,937 Shares redeemed............................... (52,052,229) (9,295,598) ----------- ------------ Net increase (decrease) in net assets result- ing from capital share transactions (Note 8). (18,966,993) 39,936,969 ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS.... (28,172,421) 49,596,766 ----------- ------------ NET ASSETS: Beginning of year............................. 109,734,848 60,138,082 ----------- ------------ End of year (including accumulated undistrib- uted net investment income of $163,736 and $336,561, respectively)...................... $81,562,427 $109,734,848 =========== ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 38 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, JANUARY 28, 1994* DECEMBER 31, 1997 ------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 12.76 $ 11.57 $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- ------- ------- Income from investment operations: Net investment income. 0.14 0.16 0.18 0.18 0.07 Net realized and unrealized gain (loss)............... (0.37) 2.14 2.29 0.39 (0.54) ------- ------- ------- ------- ------- Total income (loss) from investment operations......... (0.23) 2.30 2.47 0.57 (0.47) ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income.... (0.12) (0.12) (0.14) (0.04) (0.04) Distributions from and in excess of net realized gain........ (1.05) (0.99) (0.69) (0.09) -- ------- ------- ------- ------- ------- Total distributions. (1.17) (1.11) (0.83) (0.13) (0.04) ------- ------- ------- ------- ------- Net asset value, end of period................. $ 11.36 $ 12.76 $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= ======= ======= Total return (non- annualized)............ (1.68)% 21.26% 25.66% 6.06% (4.70)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $17,949 $48,054 $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reimbursement........ 1.03%** 1.25% 1.77% 2.06% 2.65%** After expense reimbursement........ 1.00%** 1.00% 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimbursement........ 1.18%** 1.35% 0.57% 0.71% 0.24%** After expense reimbursement........ 1.21%** 1.60% 1.34% 1.77% 1.89%** Portfolio turnover rate.................. 26% 32% 74% 36% 21% Average commission rate paid per share........ $0.0308 $0.0246 $0.0288 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 39 GLOBAL EQUITY 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, 1997* BRINSON CLASS N (UNAUDITED) - ----------------------------------------------- Net asset value, beginning of period.................. $ 12.76 ------- Income from investment op- erations: Net investment income..... 0.06 Net realized and unrealized gain.......... (0.31) ------- Total loss from invest- ment operations........ (0.25) ------- Less distributions: Distributions from and in excess of net investment income................... (0.10) Distributions from net re- alized gain.............. (1.05) ------- Total distributions..... (1.15) ------- Net asset value, end of pe- riod....................... $ 11.36 ======= Total return (non- annualized)................ (1.87)% Ratios/Supplemental data Net assets, end of period (in 000s)................. $ 1 Ratio of expenses to aver- age net assets: Before expense reimburse- ment..................... 1.28%** After expense reimburse- ment..................... 1.25%** Ratio of net investment in- come to average net as- sets: Before expense reimburse- ment..................... 0.84%** After expense reimburse- ment..................... 0.87%** Portfolio turnover rate.... 26% Average commission rate paid per share............ $0.0308
* Commencement of Brinson Class N was June 30, 1997. ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 40 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.73 $ 11.57 $ 10.35 ------- ------- ------- Income from investment opera- tions: Net investment gain (loss).... 0.02 0.08 (0.01) Net realized and unrealized gain (loss).................. (0.30) 2.13 1.93 ------- ------- ------- Total income from investment operations................. (0.28) 2.21 1.92 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.06) (0.06) (0.01) Distributions from net real- ized gain.................... (1.05) (0.99) (0.69) ------- ------- ------- Total distributions......... (1.11) (1.05) (0.70) ------- ------- ------- Net asset value, end of period.. $ 11.34 $ 12.73 $ 11.57 ======= ======= ======= Total return (non-annualized)... (2.11)% 20.34% 19.25% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $63,613 $61,680 $33,012 Ratio of expenses to average net assets: Before expense reimbursement.. 1.78%** 2.00% 2.53%** After expense reimbursement... 1.76%** 1.75% 1.76%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement.. 0.35%** 0.60% (0.19)%** After expense reimbursement... 0.37%** 0.85% 0.58%** Portfolio turnover rate........ 26% 32% 74% Average commission rate paid per share..................... $0.0308 $0.0246 $0.0288
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 41 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] The Global Bond Fund is actively managed, providing a fully integrated treatment of the U.S. and other major fixed income markets across the world. This global approach takes full advantage of relationships both within and across markets, based on consistent analysis of macroeconomic and market conditions. Market and currency strategies are developed in a global asset allocation framework, in conjunction with senior fixed income professionals in our offices worldwide. The SwissKey Global Bond Fund has provided an annualized return of 7.04% since its inception on July 31, 1995, outperforming the 2.27% return of its benchmark, the Salomon World Government Bond Index. The Fund's annualized volatility of 4.06% was below the benchmark volatility of 5.11% over this period. For the year ended December 31, 1997, the Fund returned 1.17%, compared to the benchmark return of 0.24%. The sustained strength in global bond markets which began late in 1994 continued during 1997 (the Salomon Index returned a total of 41.90% in dollar-hedged terms in the three years ending December 31, 1997). In most economies inflation was lower than had been expected at the start of the year, and investors became more willing to believe that it would remain low (particularly in light of the economic turmoil in Asia late in the year). In this benign environment long yields fell, even though some central banks raised short-term interest rates. Market allocation strategies contributed positively to relative Fund performance in 1997. The portfolio move from a neutral to an overweight position in U.S. bonds in February, maintained through the end of the year, had little effect overall on performance. The Fund benefited in particular from the timing of its exposures to Australia, from its underweighting of France, and from its overweighting of Denmark. Bond selection strategies within markets detracted slightly from performance overall. Positive returns in the U.S., due to successful issue selection, were more than offset by the impact of the short duration strategy in Japan. As bond prices rose during the year, we lowered duration across markets (U.S. duration was lowered from 1.3 times to equal to the index average in the middle of the year). At the end of the year, duration was 0.5 times the index average in Japan, 0.9 times the index in most other markets, and equal to the index in Denmark, Sweden and the U.S. Currency allocation was the largest source of Fund outperformance of the benchmark in 1997. All the main non-U.S. currencies lost value against the dollar. The Japanese yen fell by 15.2%, the Deutschemark by 16.2%, and the U.K. pound by 2.8%. Defensive underweightings of the yen and of European currencies in the first part of the year, and the resultant position in the U.S. dollar, were extremely successful, while underweighting the U.K. pound detracted from performance. The scale of most positions was sharply reduced as non-U.S. currencies fell to and below fair value. =============================================================================== 42 Global Bond Fund - -------------------------------------------------------------------------------- [SWISSKEY FUNDS LOGO APPEARS HERE] Total Return
6 months 1 year 7/31/95* ended ended to 12/31/97 12/31/97 12/31/97 - -------------------------------------------------------------------------------- SwissKey Global Bond Fund 0.75% 1.17% 7.04% Salomon World Government Bond Index 1.49 0.24 2.27 - --------------------------------------------------------------------------------
*Inception date of the SwissKey Global Bond Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Bond Fund and the Salomon World Government Bond Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SwissKey Global Bond Fund vs. Salomon World Government Bond Index vs. [Graph Chart Appears Here] Swiss Key Salomon Global World Bond Government Fund Bond Index 7/31/95 10000 10000 9/30/95 10218 9871 12/31/95 10722 10162 3/31/96 10701 9972 6/30/96 10917 10013 9/30/96 11287 10287 12/31/96 11654 10531 3/31/97 11313 10096 6/30/97 11703 10402 9/30/97 11837 10534 12/31/97 11791 10557 Fund returns are ne t of all fees and costs, while the Index returns are based solely on market re turns without deduction for fees or transaction costs for rebalancing. ================================================================================ 43 Global Bond Fund - -------------------------------------------------------------------------------- [Swisskey Funds Logo Appears Here] Asset Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ------------------------------------------------------------ U.S. 34.4% 40.4% Japan 18.5 5.0 Australia 0.9 4.1 Austria 0.9 0.0 Belgium 2.4 0.0 Canada 3.3 6.2 Denmark 1.5 6.3 Finland 0.6 0.0 France 7.3 2.2 Germany 8.8 13.1 Ireland 0.4 0.0 Italy 6.7 3.2 Netherlands 2.9 5.2 Spain 2.8 3.7 Sweden 1.6 1.6 Switzerland 0.5 0.0 U.K. 6.5 9.0 - ------------------------------------------------------------ 100.0% 100.0% Currency Allocation As of December 31, 1997 (Unaudited) Current Benchmark Strategy - ------------------------------------------------------------ U.S. 34.4% 41.9% Japan 18.5 14.5 Australia 0.9 0.9 Austria 0.9 0.9 Belgium 2.4 2.4 Canada 3.3 3.3 Denmark 1.5 1.5 Finland 0.6 0.6 France 7.3 7.3 Germany 8.8 8.8 Ireland 0.4 0.4 Italy 6.7 6.7 Netherlands 2.9 2.9 Spain 2.8 2.8 Sweden 1.6 1.6 Switzerland 0.5 0.5 U.K. 6.5 3.0 - ------------------------------------------------------------ 100.0% 100.0% Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited) - ---------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed............................................ 2.54% CMO..................................................... 2.19 Consumer................................................ 1.02 Financial............................................... 2.67 Industrial.............................................. 2.82 Transportation.......................................... .35 ------- 11.59 ------- International Dollar Bonds.............................. 4.58 U.S. Government Agencies................................ 9.61 U.S. Government Obligations............................. 9.91 ------- Total U.S. Bonds..................................... 35.69 ------- NON-U.S. BONDS Foreign Financial Bonds.................................. 7.91 Foreign Government Bonds................................. 47.07 ------- Total Non-U.S. Bonds................................. 54.98 ------- SHORT-TERM INVESTMENTS................................... 9.08 ------- TOTAL INVESTMENTS.................................... 99.75 CASH AND OTHER ASSETS, LESS LIABILITIES........................................ 0.25 ------- NET ASSETS...........................................100.00% =======
- ---------------------------------------------------------------- ================================================================================ 44 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- Bonds -- 90.67% U.S. BONDS -- 35.69% U.S. CORPORATE BONDS -- 11.59% Aid Jordan 8.750%, due 09/01/19.................................. $ 193,941 $ 237,638 Bear Stearns Mortgage Securities, Inc. 96-7A4 6.000%, due 01/28/09........................... 200,000 193,578 Capital One Bank 6.830%, due 05/17/99.................................. 200,000 201,386 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02........................... 125,000 125,196 Continental Airlines, Inc. 97-4A 6.900%, due 01/02/18.................................. 210,000 209,969 Countrywide Capital, Inc. 8.000%, due 12/15/26.................................. 250,000 265,286 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00.................................. 375,000 379,599 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03............................ 240,000 241,949 First Union Lehman Brothers 97-C2 A2 6.600%, due 05/18/07......................... 240,000 242,225 First USA Credit Card Master Trust 97-6A 6.420%, due 03/17/05............................ 240,000 242,750 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.................................. 36,823 36,783 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09....................... 332,540 323,678 Lockheed Martin Corp. 7.700%, due 06/15/08.................................. 125,000 135,775 Metlife Funding 6.850%, due 05/20/08.................................. 225,000 231,830 News America Holdings 7.750%, due 12/01/45.................................. 275,000 286,305 PNC Mortgage Securities Corp. 94-3A8 7.500%, due 07/25/24........................... 190,000 196,263 Premier Auto Trust 96-3A 6.750%, due 11/06/00............................ 475,000 480,225 Prudential Home Mortgage Securities 96-7 Cl A4 6.750%, due 06/25/11....................... 150,000 150,186 93-43 A9 6.750%, due 10/25/23......................... 220,433 217,362 Residential Asset Securitization Trust 97-A 11 P4 7.000%, due 12/25/27....................... 260,000 260,813 Salomon, Inc. 6.500%, due 03/01/00.................................. 300,000 301,597 Structured Mortgage Asset Residential Trust 93-5C CI 7.150%, due 03/25/23.................................. 925,000 931,114 The Money Store 94-A3 5.525%, due 09/15/18.................................. 68,226 67,309 Time Warner, Inc. 7.570%, due 02/01/24.................................. 315,000 330,182 UCFC Home Equity Loan 97-C, Class A8, 6.325%, FRN, due 09/15/27................... 171,081 170,939 USA Waste Services 7.000%, due 10/01/04.................................. 300,000 306,791 World Omni Automobile Lease Securitization Trust 6.850%, due 06/25/03.................................. 255,000 256,877 ----------- 7,023,605 -----------
FACE AMOUNT VALUE ----------- ----------- INTERNATIONAL DOLLAR BONDS -- 4.58% Banco Santiago S.A. 7.000%, due 07/18/07.................................. $ 400,000 $ 401,086 Banque Centrale de Tunisie 8.250%, due 09/19/27.................................. 400,000 364,076 DR Investments 144A 7.450%, due 05/15/07.................................. 455,000 480,903 Empresa National Electric 7.875%, due 10/01/2097................................ 500,000 484,230 Pan Pacific Industry PLC 144A 0.000%, due 04/28/07.................................. 715,000 352,868 Province of Quebec 7.500%, due 07/15/23.................................. 235,000 253,386 Republic of South Africa 9.625%, due 12/15/99.................................. 125,000 129,375 Royal Bank of Scotland 7.375%, Resettable Perpetual Preferred........................ 300,000 311,462 ----------- 2,777,386 ----------- U.S. GOVERNMENT AGENCIES -- 9.61% Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13.................................. 68,215 69,666 7.500%, due 01/15/23.................................. 78,941 82,895 7.238%, due 05/01/26.................................. 56,787 58,810 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.............................................. 93,222 96,456 9.000%, due 03/01/24.................................. 264,889 286,072 9.500%, due 04/01/25.................................. 23,409 25,004 Federal National Mortgage Association 7.875%, due 02/24/05.................................. 500,000 553,431 6.220%, due 03/13/06.................................. 150,000 151,461 9.000%, due 08/01/21.................................. 24,591 26,417 8.500%, due 07/01/22.................................. 18,885 20,005 7.500%, due 05/18/25.................................. 250,000 255,318 6.500%, due 03/01/26.................................. 74,623 73,644 6.500%, due 12/01/26 TBA.............................. 2,325,000 2,294,484 6.175%, due 10/01/27.................................. 197,990 197,733 Federal National Mortgage Association Strips 8.000%, due 07/01/24 interest only.................... 1,019 237 0.000%, due 04/01/27 principal only................... 405,375 307,842 0.000%, due 07/01/27 principal only................... 169,691 126,898 Government National Mortgage Association 7.500%, due 08/15/23.................................. 108,615 111,228 7.000%, due 08/15/24.................................. 502,936 508,221 7.000%, due 07/15/25.................................. 69,491 70,077 Tennessee Valley Authority 6.375%, due 06/15/05.................................. 500,000 510,197 ----------- 5,826,096 ----------- U.S. GOVERNMENT OBLIGATIONS -- 9.91% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01.................................. 730,000 750,760 7.000%, due 07/15/06.................................. 650,000 701,797 8.125%, due 05/15/21.................................. 375,000 472,500 6.000%, due 06/03/99.................................. 2,785,000 2,798,925 5.875%, due 08/31/99.................................. 385,000 386,203
- -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- U.S. Treasury Principal Strip 0.000%, due 08/15/03................................. $ 1,235,000 $ 896,610 ----------- 6,006,795 ----------- Total U.S. Bonds...................................... 21,633,882 ----------- NON-U.S. BONDS -- 54.98% AUSTRALIA -- 3.78% Government of Australia 7.000%, due 04/15/00 .............................AUD 800,000 539,464 9.750%, due 03/15/02................................. 760,000 570,084 Queensland Treasury Corp.-Global Bond 8.000%, due 05/14/03................................. 980,000 701,229 6.500%, due 06/14/05................................. 730,000 482,148 ----------- 2,292,925 ----------- CANADA -- 5.75% British Columbia 7.750%, due 06/16/03 .............................CAD 1,700,000 1,302,130 Government of Canada 4.250%, due 12/01/21 (b)............................. 1,820,000 1,411,355 Province of Ontario 7.500%, due 01/19/06................................. 1,000,000 774,451 ----------- 3,487,936 ----------- DENMARK -- 5.98% City of Copenhagen 6.250%, due 03/15/01 .............................DKK 2,400,000 363,204 Great Belt 7.000%, due 09/02/03....................... 10,650,000 1,675,873 Kingdom of Denmark.................................... 8.000%, due 11/15/01................................. 5,000,000 806,364 7.000%, due 12/15/04................................. 3,500,000 557,146 7.000%, due 11/15/07................................. 1,400,000 224,453 ----------- 3,627,040 ----------- FRANCE -- 2.07% Government of France (OAT) 9.500%, due 01/25/01 .............................FRF 1,200,000 227,294 8.500%, due 04/25/23................................. 1,600,000 357,713 KFW International Finance 7.750%, due 02/17/98................................. 2,600,000 434,342 Republic of Finland 9.000%, due 08/13/03................................. 1,200,000 237,616 ----------- 1,256,965 ----------- GERMANY -- 12.21% Bundesrepublik Deutschland 6.500%, due 03/15/00 .............................DEM 2,900,000 1,687,326 6.000%, due 07/04/07................................. 1,000,000 584,172 European Economic Community 6.500%, due 03/10/00................................. 1,910,000 1,107,377 International Bank for Reconstruction & Development- Global Bond 7.125%, due 04/12/05................................. 650,000 400,353 Kingdom of Norway 6.125%, due 05/05/98................................. 1,040,000 582,437 LKB Baden-Wuerttemberg Finance 6.500%, due 09/15/08................................. 1,300,000 775,763
FACE AMOUNT VALUE ------------ ----------- Republic of Ireland 7.250%, due 03/18/03...............................DEM 2,900,000 $ 1,770,869 Treuhandanstalt 7.125%, due 01/29/03................... 800,000 489,317 ----------- 7,397,614 ----------- ITALY -- 2.68% Bayerische Landesbank 10.750%, due 03/01/03 .............................ITL 250,000,000 174,451 Landesbank Rheinland-Pfalz Girozentrale 8.250%, due 06/02/98..................... 750,000,000 428,438 LKB Baden-Wuerttemberg Finance 10.750%, due 04/14/03................................. 650,000,000 454,950 Republic of Italy (BTP) 7.750%, due 09/15/01.................................. 200,000,000 123,469 9.000%, due 10/01/03.................................. 350,000,000 233,492 9.500%, due 02/01/06.................................. 300,000,000 212,454 ----------- 1,627,254 ----------- JAPAN -- 4.13% International Bank for Reconstruction & Development-Global Bond 4.500%, due 06/20/00 ..............................JPY 40,000,000 335,897 4.500%, due 03/20/03.................................. 47,000,000 419,078 4.750%, due 12/20/04.................................. 44,000,000 408,402 Republic of Austria 5.000%, due 01/22/01.................................. 130,000,000 1,123,534 Republic of Italy 3.500%, due 06/20/01.................................. 26,000,000 216,833 ----------- 2,503,744 ----------- NETHERLANDS -- 4.93% Government of Netherlands 5.750%, due 09/15/02...............................NLG 500,000 255,586 7.250%, due 10/01/04.................................. 1,500,000 826,469 7.500%, due 11/15/99.................................. 1,850,000 964,559 International Nederland GRP Verzekeringen 6.250%, due 12/28/05.................................. 1,800,000 939,714 ----------- 2,986,328 ----------- SPAIN -- 3.57% Kingdom of Spain 6.750%, due 04/15/00 ..............................ESP 100,000,000 686,163 7.900%, due 02/28/02.................................. 100,000,000 726,283 8.000%, due 05/30/04.................................. 100,000,000 750,230 ----------- 2,162,676 ----------- SWEDEN -- 1.43% Kingdom of Sweden 10.250%, due 05/05/03 .............................SEK 5,700,000 865,618 ----------- UNITED KINGDOM -- 8.45% Abbey National 8.750%, due 05/24/04 ..............................GBP 350,000 623,046 British Gas PLC 8.125%, due 03/31/03................... 545,000 932,620 European Investment Bank 7.625%, due 12/07/06.......... 110,000 192,534
- -------------------------------------------------------------------------------- 46 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- UK Treasury 10.000%, due 09/08/03..............................GBP 700,000 $ 1,339,675 7.750%, due 09/08/06.................................. 555,000 993,395 9.000%, due 10/13/08.................................. 340,000 677,273 8.000%, due 09/27/13.................................. 190,000 363,626 ----------- 5,122,169 ----------- Total Non-U.S. Bonds................................... 33,330,269 ----------- Total Bonds (Cost $55,386,825)......................... 54,964,151 ----------- Short-Term Investments -- 9.08% COMMERCIAL PAPER -- 9.08% Case Credit Corp. 6.110%, due 01/20/98.................................. $ 500,000 498,388 6.030%, due 03/10/98.................................. 500,000 494,305 Marriott Corp. 6.050%, due 02/09/98.................... 500,000 496,723 Nabisco, Inc. 6.700%, due 01/05/98.................................. 500,000 499,628 6.120%, due 01/16/98.................................. 500,000 498,725 Praxair Inc. 6.550%, due 01/02/98...................... 1,000,000 999,818 Vastar Resources Inc. 7.100%, due 01/02/98............. 2,020,000 2,019,602 ----------- Total Short-Term Investments (Cost $5,507,188)..................................... 5,507,189 ----------- Total Investments (Cost $60,894,013) -- 99.75% (a)...................... 60,471,340 ----------- Cash and other assets, less liabilities -- 0.25%.................................. 149,794 ----------- Net Assets -- 100%..................................... $60,621,134 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 47 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $60,894,013; and net unrealized depreciation consisted of: Gross unrealized appreciation............................... $ 1,261,433 Gross unrealized depreciation............................... (1,684,106) ----------- Net unrealized depreciation............................. $ (422,673) ===========
(b) Linked to Canada's retail price index. Reset semi-annually. FRN: Floating Rate Note--The rate disclosed is that in effect December 31, 1997. 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, 1997, the value of these securities amounted to $833,771 or 1.38% 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 (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Austrian Schilling...... 5/28/98 6,800,000 $ 541,695 $ (2,044) Belgian Franc........... 5/28/98 50,000,000 1,360,834 (49,762) Canadian Dollar......... 5/28/98 2,000,000 1,402,849 (12,779) Finnish Markka.......... 5/28/98 2,000,000 370,386 (1,292) French Franc............ 5/28/98 17,200,000 2,882,835 (107,690) Italian Lira............ 5/28/98 3,800,000,000 2,150,320 (82,544) Japanese Yen............ 5/28/98 770,000,000 6,054,915 (196,608) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 5/28/98 2,700,000 1,765,491 70,555 British Pound........... 5/28/98 2,200,000 3,594,184 94,776 Canadian Dollar......... 5/28/98 4,300,000 3,016,126 33,520 Danish Kroner........... 5/28/98 19,900,000 2,927,185 109,592 German Mark............. 5/28/98 4,400,000 2,467,668 92,407 Netherlands Guilder..... 5/28/98 2,800,000 1,393,236 52,821 Spanish Peseta.......... 5/28/98 74,000,000 487,642 20,042 --------- Total............... $ 20,994 =========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 48 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $60,894,013) (Note 1)................ $60,471,340 Cash............................................................. 81,299 Foreign currency, at value (Cost $1,438,584)..................... 1,433,395 Receivables: Investment securities sold...................................... 962,824 Interest........................................................ 1,392,529 Fund shares sold................................................ 3,100 Net unrealized appreciation on forward foreign currency con- tracts......................................................... 20,994 Other assets..................................................... 46,110 ----------- TOTAL ASSETS.................................................. 64,411,591 ----------- LIABILITIES: Payables: Investment securities purchased................................. 3,716,457 Fund shares redeemed............................................ 5,998 Investment advisory fees (Note 2)............................... 33,990 Accrued expenses................................................ 34,012 ----------- TOTAL LIABILITIES............................................. 3,790,457 ----------- NET ASSETS........................................................ $60,621,134 =========== NET ASSETS CONSIST OF: Paid in capital (Note 8)......................................... $61,719,136 Accumulated undistributed net investment income.................. 499,811 Accumulated net realized loss.................................... (1,167,122) Net unrealized depreciation...................................... (430,691) ----------- NET ASSETS.................................................... $60,621,134 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $56,096,121 and 6,006,282 shares issued and outstanding) (Note 8)............................................................. $ 9.34 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,009 and 108 shares issued and outstanding) (Note 8)......... $ 9.34 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $4,524,004 and 485,179 shares issued and outstanding) (Note 8). $ 9.32 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 49 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Interest (net of $17,423 for foreign taxes withheld).............. $1,672,363 ---------- TOTAL INCOME................................................... 1,672,363 ---------- EXPENSES: Advisory (Note 2)................................................. 224,325 Professional...................................................... 23,184 Distribution (Note 7)............................................. 10,139 Other............................................................. 45,267 ---------- TOTAL EXPENSES................................................. 302,915 ---------- Expenses deferred by Advisor (Note 2).......................... (23,486) ---------- NET EXPENSES................................................... 279,429 ---------- NET INVESTMENT INCOME.......................................... 1,392,934 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 803,295 Futures contracts................................................ 21,780 Foreign currency transactions.................................... (1,272,922) ---------- Net realized loss............................................... (447,847) ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. (234,033) Futures contracts................................................ (12,019) Forward contracts................................................ (116,285) Translation of other assets and liabilities denominated in for- eign currency................................................... (17,257) ---------- Change in net unrealized appreciation or depreciation........... (379,594) ---------- Net realized and unrealized loss.................................. (827,441) ---------- Net increase in net assets resulting from operations.............. $ 565,493 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 50 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE (UNAUDITED) 30, 1997 ----------------- ----------- OPERATIONS: Net investment income.......................... $ 1,392,934 $ 2,426,764 Net realized gain (loss)....................... (447,847) 1,723,264 Change in net unrealized appreciation or depre- ciation ...................................... (379,594) (381,459) ----------- ----------- Net increase in net assets resulting from oper- ations........................................ 565,493 3,768,569 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income....... (1,382,269) (3,479,707) Distributions in excess of net investment in- come.......................................... -- (340,005) Distributions from net realized gain........... (1,041,855) (769,789) ----------- ----------- Total distributions to shareholders*........... (2,424,124) (4,589,501) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................... 5,329,669 23,164,253 Shares issued on reinvestment of distributions. 1,730,859 3,667,961 Shares redeemed................................ (2,848,777) (12,462,273) ----------- ----------- Net increase in net assets resulting from capi- tal share transactions (Note 8)............... 4,211,751 14,369,941 ----------- ----------- TOTAL INCREASE IN NET ASSETS................ 2,353,120 13,549,009 ----------- ----------- NET ASSETS: Beginning of year.............................. 58,268,014 44,719,005 ----------- ----------- End of year (including accumulated undistrib- uted net investment income of $499,811 and $489,146, respectively)....................... $60,621,134 $58,268,014 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net invest- ment income Brinson Class I............................... $(1,302,948) $(3,503,032) Brinson Class N............................... (22) -- SwissKey Class................................ (79,299) (316,680) Distributions from net realized gain Brinson Class I............................... (969,902) (704,236) Brinson Class N............................... (18) -- SwissKey Class................................ (71,935) (65,553) ----------- ----------- Total distributions to shareholders............ $(2,424,124) $(4,589,501) =========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 51 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, JULY 30, 1993* DECEMBER 31, 1997 ------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- ------- ------- Income (loss) from in- vestment operations: Net investment income ..................... 0.22 0.67 0.84 0.50 0.45 Net realized and unrealized gain (loss)............... (0.13) 0.08 0.31 0.58 (0.52) ------- ------- ------- ------- ------- Total income (loss) from investment operations......... 0.09 0.75 1.15 1.08 (0.07) ------- ------- ------- ------- ------- Less distributions: Distributions from and in excess of net investment income.... (0.22) (0.96) (1.40) (0.24) (0.28) Distributions from net realized gain........ (0.17) (0.19) (0.10) -- (0.10) ------- ------- ------- ------- ------- Total distributions. (0.39) (1.15) (1.50) (0.24) (0.38) ------- ------- ------- ------- ------- Net asset value, end of period................. $ 9.34 $ 9.64 $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= ======= ======= Total return (non- annualized)............ 1.00 % 7.71% 11.50% 11.34% (0.79)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $56,096 $54,157 $41,066 $51,863 $36,849 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.98 %** 1.32% 1.65% 1.43% 1.78%** After expense reim- bursement............ 0.90 %** 0.90% 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 4.61 %** 4.90% 4.98% 5.53% 4.03%** After expense reim- bursement............ 4.69 %** 5.32% 5.73% 6.06% 4.91%** Portfolio turnover rate.................. 93 % 235% 184% 199% 189%
* Commencement of investment operations ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 52 GLOBAL 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, 1997* BRINSON CLASS N (UNAUDITED) - ----------------------------------------------- Net asset value, beginning of period.................. $ 9.64 ------ Income from investment op- erations: Net investment income..... 0.21 Net realized and unrealized loss.......... (0.13) ------ Total income from in- vestment operations.... 0.08 ------ Less distributions: Distributions from and in excess of net investment income................... (0.21) Distributions from net re- alized gain.............. (0.17) ------ Total distributions..... (0.38) ------ Net asset value, end of pe- riod....................... $ 9.34 ====== Total return (non- annualized)................ 0.82% Ratios/Supplemental Data: Net assets, end of period (in 000s)................. $ 1 Ratio of expenses to aver- age net assets: Before expense reimburse- ment..................... 1.23%** After expense reimburse- ment..................... 1.15%** Ratio of net investment in- come to average net as- sets: Before expense reimburse- ment..................... 4.44%** After expense reimburse- ment..................... 4.52%** Portfolio turnover rate.... 93%
* Commencement of Brinson Fund Class N was June 30, 1997. ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 53 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 9.61 $10.02 $10.56 ------ ------ ------ Income from investment opera- tions: Net investment income......... 0.21 0.62 0.78 Net realized and unrealized gain (loss).................. (0.15) 0.10 0.15 ------ ------ ------ Total income from investment operations................. 0.06 0.72 0.93 ------ ------ ------ Less distributions: Distributions from and in excess of net investment income....................... (0.18) (0.94) (1.37) Distributions from net real- ized gain.................... (0.17) (0.19) (0.10) ------ ------ ------ Total distributions......... (0.35) (1.13) (1.47) ------ ------ ------ Net asset value, end of period.. $ 9.32 $ 9.61 $10.02 ====== ====== ====== Total return (non-annualized)... 0.75% 7.20% 9.17% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $4,524 $4,110 $3,653 Ratio of expenses to average net assets: Before expense reimbursement.. 1.47%** 1.81% 2.14%** After expense reimbursement... 1.39%** 1.39% 1.39%** Ratio of net investment income to average net assets: Before expense reimbursement.. 4.12%** 4.41% 4.49%** After expense reimbursement... 4.20%** 4.83% 5.24%** Portfolio turnover rate........ 93% 235% 184%
* Commencement of SwissKey Class ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 54 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the fund. U.S. equity securities traded over the counter are priced at the most recent bid price. Debt securities are valued at the most recent bid price by using market quotations or independent services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1997, 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. - -------------------------------------------------------------------------------- 55 THE SWISSKEY FUNDS -- 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 shares will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, the Funds pay the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates, for the six months ended December 31, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES DEFERRED -------- --------------- --------------- -------------- ---------- -------- Global Fund............. 0.80% 1.10% 1.35% 1.75% $2,635,060 $ -- Global Equity Fund...... 0.80 1.00 1.25 1.76 374,636 12,446 Global Bond Fund........ 0.75 0.90 1.15 1.39 224,325 23,486
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $5,888, $2,392 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 Brinson Partners, Inc. These investments represented 12.55% of the Fund's total net assets at December 31, 1997. Activity for the six months ended December 31, 1997 was as follows:
NET NET SALES REALIZED UNREALIZED AFFILIATES PURCHASES PROCEEDS GAINS GAINS/(LOSSES) VALUE - ---------- ----------- -------- -------- -------------- ----------- Brinson Post-Venture Fund................... $ -- $ -- -- $ 2,502,119 $ 8,502,119 Brinson High Yield Fund. 3,000,000 -- -- 2,753,354 17,201,354 Brinson Emerging Markets Equity Fund............ 12,300,000 -- -- (4,996,711) 22,017,923 Brinson Emerging Markets Debt Fund.............. 12,000,000 -- -- 7,921,280 34,231,280 ----------- ----- ----- ----------- ----------- $27,300,000 $ -- $ -- $ 8,180,042 $81,952,676 =========== ===== ===== =========== ===========
3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $388,265,758 $354,100,300 Global Equity Fund.................................... 22,827,077 46,825,950 Global Bond Fund...................................... 52,650,977 51,300,135
- -------------------------------------------------------------------------------- 56 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4.FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the six months ended December 31, 1997, was the Funds' custodian. 5.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.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 maintains 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 commercial paper. The value of loaned securities and related collateral outstanding at December 31, 1997 are as follows:
VALUE OF LOANED VALUE OF SECURITIES COLLATERAL --------------- ----------- Global Fund......................................... $73,566,441 $79,523,767 =========== ===========
7.DISTRIBUTION PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 as amended for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class and, effective June 30, 1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the Global Fund, Global Equity Fund and Global Bond Fund. - -------------------------------------------------------------------------------- 57 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 8.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND ---------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ---------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ------------ ---------- ------------ Sales: Brinson Class I................ 7,360,093 $ 97,696,477 14,513,488 $180,787,534 Brinson Class N................ -- -- 76 1,000 SwissKey Class................. 383,268 5,015,748 932,414 11,508,566 --------- ------------ ---------- ------------ Total Sales................. 7,743,361 $102,712,225 15,445,978 $192,297,100 ========= ============ ========== ============ Dividend Reinvestment: Brinson Class I................ 4,544,864 $ 54,492,919 4,022,259 $ 48,025,771 Brinson Class N................ 8 93 -- -- SwissKey Class................. 201,931 2,409,581 130,547 1,554,814 --------- ------------ ---------- ------------ Total Dividend Reinvestment. 4,746,803 $ 56,902,593 4,152,806 $ 49,580,585 ========= ============ ========== ============ Redemptions: Brinson Class I................ 5,125,386 $ 64,663,733 11,346,380 $142,532,012 Brinson Class N................ -- -- -- -- SwissKey Class................. 254,713 3,320,349 198,888 2,469,271 --------- ------------ ---------- ------------ Total Redemptions........... 5,380,099 $ 67,984,082 11,545,268 $145,001,283 ========= ============ ========== ============ GLOBAL EQUITY FUND ---------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ---------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ------------ ---------- ------------ Sales: Brinson Class I................ 781,871 $ 9,537,833 1,338,623 $ 15,816,109 Brinson Class N................ -- -- 78 1,000 SwissKey Class................. 1,380,824 17,329,493 2,271,465 26,703,521 --------- ------------ ---------- ------------ Total Sales................. 2,162,695 $ 26,867,326 3,610,166 $ 42,520,630 ========= ============ ========== ============ Dividend Reinvestment: Brinson Class I................ 119,737 $ 1,339,853 308,273 $ 3,485,504 Brinson Class N................ 8 90 -- -- SwissKey Class................. 436,312 4,877,967 286,226 3,226,433 --------- ------------ ---------- ------------ Total Dividend Reinvestment. 556,057 $ 6,217,910 594,499 $ 6,711,937 ========= ============ ========== ============ Redemptions: Brinson Class I................ 3,087,436 $ 38,885,545 225,435 $ 2,683,391 Brinson Class N................ -- -- -- -- SwissKey Class................. 1,054,052 13,166,684 565,431 6,612,207 --------- ------------ ---------- ------------ Total Redemptions........... 4,141,488 $ 52,052,229 790,866 $ 9,295,598 ========= ============ ========== ============
- -------------------------------------------------------------------------------- 58 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL BOND FUND ---------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ------------------ --------------------- SHARES VALUE SHARES VALUE ------- ---------- --------- ----------- Sales: Brinson Class I....................... 425,982 $4,083,669 2,335,856 $22,155,311 Brinson Class N....................... -- -- 104 1,000 SwissKey Class........................ 129,575 1,246,000 103,968 1,007,942 ------- ---------- --------- ----------- Total Sales........................ 555,557 $5,329,669 2,439,928 $23,164,253 ======= ========== ========= =========== Dividend Reinvestment: Brinson Class I....................... 169,880 $1,586,679 348,609 $ 3,318,757 Brinson Class N....................... 4 39 -- -- SwissKey Class........................ 15,474 144,141 36,719 349,204 ------- ---------- --------- ----------- Total Dividend Reinvestment........ 185,358 $1,730,859 385,328 $ 3,667,961 ======= ========== ========= =========== Redemptions: Brinson Class I....................... 206,213 $1,999,170 1,159,373 $11,665,371 Brinson Class N....................... -- -- -- -- SwissKey Class........................ 87,685 849,607 77,300 796,902 ------- ---------- --------- ----------- Total Redemptions.................. 293,898 $2,848,777 1,236,673 $12,462,273 ======= ========== ========= ===========
- -------------------------------------------------------------------------------- 59 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS] 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY.http://www.swisskeyfunds.com [SWISS KEY FUNDS LOGO APPEARS HERE] SWISSKEY U.S. BALANCED FUND SWISSKEY U.S. EQUITY FUND SWISSKEY U.S. BOND FUND SEMI-ANNUAL REPORT DECEMBER 31, 1997 YOUR KEY TO PERFORMANCE --------------------------- Trustees and Officers - -------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] 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 Catherine E. Macrae Assistant Secretary 1 The Funds' Advisor--Brinson Partners, Inc. - -------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] Brinson Partners is the global institutional asset management division of Swiss Bank Corporation (SBC) and manages assets of over $140 billion. We have $90 billion of discretionary institutional assets with active management mandates and we are the investment manager for SBC Private Banking mutual fund assets which total over $50 billion. In addition, we act as an investment advisor to SBC Private Banking. Our organization manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. We employ over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, an established U.S.-based leader in the investment field located in Chicago, acts as the headquarters of our worldwide investment management process. Brinson Partners pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients. Private market and venture capital investing was established in the 1970s and today we represent a major worldwide presence in this asset class. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS] Shareholder Letter.................................. 4 U.S. Economic and Market Highlights................. 6 U.S. Balanced Fund.................................. 7 Schedule of Investments......................... 10 Financial Statements............................ 14 Financial Highlights............................ 17 U.S. Equity Fund.................................... 20 Schedule of Investments......................... 23 Financial Statements............................ 25 Financial Highlights............................ 28 U.S. Bond Fund...................................... 31 Schedule of Investments......................... 34 Financial Statements............................ 36 Financial Highlights............................ 39 The SwissKey Funds--Notes to Financial Statements... 42
3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] February 20, 1998 Dear Shareholder: We are very pleased to present the December 31, 1997 Semi-Annual Report for the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. Within this Report, we'll focus on the current domestic economic outlook as well as our current strategies and performance updates for the three Domestic Funds. Swiss Bank Corporation and Union Bank of Switzerland announced on December 8, 1997 their intention to merge into a single global financial institution. As part of this merger, Brinson Partners and UBS Asset Management will be combined into Brinson. Brinson will be the Institutional Asset Management Division of the new organization with assets under management in excess of $340 billion and will provide investment advisory services for the Private Banking Division with assets over $400 billion. The Consumer & Corporate Banking Division and Brinson combined will manage assets in excess of $940 billion. We are excited about the formation of Brinson and the additional resources we will bring together to further the tradition of delivering value-added investment performance and the highest level of professional client service. SwissKey U.S. Balanced Fund Since its inception on July 31, 1995, the SwissKey U.S. Balanced Fund has produced an annualized total return of 13.33%, compared to the return of 19.67% of its benchmark, the U.S. Balanced Mutual Fund Index. The SwissKey U.S. Balanced Fund achieved this performance with a volatility of 5.35% well below the benchmark volatility of 8.35%. SwissKey U.S. Equity Fund The SwissKey U.S. Equity Fund has provided an annualized return of 26.25% since its inception on July 31, 1995. This is compared to a 26.04% return for the benchmark, the Wilshire 5000 Index. The SwissKey U.S. Equity Fund achieved this performance with a volatility of 11.47% compared to the benchmark volatility of 11.81%. 4 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- [SWISS KEY FUNDS LOGO APPEARS HERE] SwissKey U.S. Bond Fund The SwissKey U.S. Bond Fund has provided an annualized return of 7.53% since its inception on August 31, 1995. This is compared to a 7.99% return for the benchmark, the Salomon Brothers BIG Bond index. The SwissKey U.S. Bond Fund achieved this performance with a volatility of 4.57% compared to the benchmark volatility of 3.76%. Each of our Funds employs the same value-oriented investment philosophy applied across the U.S. spectrum. Each Fund also uses the resources of our entire worldwide research team. All of our analysts apply the same value philosophy to their work. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent. The Report that follows highlights the investment characteristics of the respective Funds. We very much appreciate your continued trust and the confidence you have placed in the SwissKey Funds. Sincerely, /S/ Hanspeter A. Walder Hanspeter A. Walder Executive Director Private [SWISS KEY FUNDS LOGO APPEARS HERE] Banking /S/ Raymond Simon Raymond Simon Executive Director Private [SWISS KEY FUNDS LOGO APPEARS HERE] Banking 5 U.S. Economic and Market Highlights - -------------------------------------------------------------------------------- Consumer price inflation in 1997 turned out to be extraordinarily tame. Excluding the volatile food and energy components, the price level rise of 2.4% was the lowest since 1965. Although we do not foresee a strong resurgence in inflation, there is reason to believe that, looking forward, the risk of an upward move is heightened. After bottoming in the early 1990s, money supply growth has returned to levels last seen in the mid 1990s. In addition, there is some risk that any monetary policy mistake would tend toward ease rather than excessive tightness if the Federal Reserve reacts to Asian-induced deflation fears. The economy continues to expand at a relatively rapid pace. Real GDP grew during 1997 at a 3.8% rate, the best performance in almost 10 years. Strong investment spending by businesses contributed significantly, and spending by consumers remained solid. The economy's strength propelled the unemployment rate under 5%, to levels last seen in the early 1970s. The Asian crisis has yet to have a significant impact on the U.S. economy. While the direct effects are likely to be minor, the crisis does introduce new risks. Talk of the possible deflationary effects of depressed import prices could induce the Federal Reserve to err on the side of monetary ease. Although the strong rebound in money growth since the early 1990s has not produced any resurgence in goods price inflation, the combination of this monetary expansion and the risk from policy reactions to Asia skews the inflation risks upwards rather than toward further disinflation. U.S. Environment Major Markets One Year Ended December 31, 1997 [BAR CHART APPEARS HERE] Top Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1997 [BAR CHART APPEARS HERE] Salomon U.S. Treasury Benchmark Returns One Year Ended December 31, 1997 [BAR CHART APPEARS HERE] Bottom Ten Industry Returns Relative to S&P 500 One Year Ended December 31, 1997 [BAR CHART APPEARS HERE] 6 U.S. Balanced Fund - -------------------------------------------------------------------------------- The U.S. Balanced Fund is an actively managed portfolio that applies our value- based asset allocation process to U.S. stocks, bonds and cash. The Fund's investment strategy is developed in the context of our global asset allocation process and is based on analysis of long-term economic and market conditions. The SwissKey U.S. Balanced Fund has provided an annualized return of 13.33% since its inception on July 31, 1995. This falls below the corresponding 19.67% return of its benchmark, the U.S. Balanced Mutual Fund Index. The SwissKey U.S. Balanced Fund return over this time period was achieved at an annualized volatility of 5.35%, significantly below the benchmark volatility of 8.35%. For the year ended December 31, 1997, the SwissKey U.S. Balanced Fund returned 12.66%, compared to the benchmark return of 23.50%. The equity underweight and bond overweight was the primary factor adversely affecting relative performance. Security selection in the U.S. equity market also contributed negatively to relative performance. Although inflation was relatively stable throughout 1997, the bond market experienced rising yields early in the year and then a substantial drop in yields from April through December. Coming out of 1996, yields continued to firm on the back of a strengthening domestic economy and fears of an increase in interest rates by the Federal Reserve. These fears diminished in the second half of the year as reported inflation remained moderate. Yields at the long end of the yield curve declined by over 100 basis points. Bonds ended the year with yields at their lowest levels in two years. The equity market turned in yet another banner year, with broad market indices showing returns of about 30%. As in the prior year, the equity market provided strong performance during January and February. However, after a brief setback, the market soared on the back of declining interest rates and robust earnings expectations. The equity market appears increasingly willing to extrapolate recent strong earnings growth into the future. At year-end, equity price gains had driven the market to an overpricing of around 20%. Looking forward, return expectations in stocks appear insufficient compensation for the risks. Therefore, we have maintained a reduced exposure in the allocation to equities, with an offsetting overweight in the allocation to bonds. The 5% cash risk hedge is above the neutral allocation of 0%. 7 U.S. Balanced Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year 7/31/95* ended ended to 12/31/97 12/31/97 12/31/97 - ---------------------------------------------------------------------------------------- SwissKey U.S. Balanced Fund 5.56% 12.66% 13.33% - ---------------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 9.84 23.50 19.67 - ----------------------------------------------------------------------------------------
* Inception date of the SwissKey U.S. Balanced Fund. ** An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. Total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the SwissKey U.S. Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SwissKey U.S. Balanced Fund vs. U.S. Balanced Mutual Fund Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
SwissKey U.S. U.S. Balanced Fund Balanced Fund Mutual Fund Index - ------------------------------------------------------ 7/31/95 $10,000 $10,000 8/31/95 $10,141 $10,104 9/30/95 $10,325 $10,387 10/31/95 $10,387 $10,368 11/30/95 $10,694 $10,710 12/31/95 $10,841 $10,876 1/31/96 $11,058 $11,091 2/29/96 $11,001 $11,152 3/31/96 $11,030 $11,203 4/30/96 $11,049 $11,354 5/31/96 $11,086 $11,554 6/30/96 $11,154 $11,544 7/31/96 $10,982 $11,150 8/31/96 $11,096 $11,376 9/30/96 $11,412 $11,839 10/31/96 $11,670 $12,040 11/30/96 $12,100 $12,628 12/31/96 $12,018 $12,496 1/31/97 $12,162 $12,948 2/28/97 $12,202 $12,949 3/31/97 $11,988 $12,531 4/30/97 $12,182 $12,949 5/31/97 $12,530 $13,588 6/30/97 $12,826 $14,050 7/31/97 $13,351 $14,886 8/31/97 $13,125 $14,477 9/30/97 $13,413 $15,107 10/31/97 $13,269 $14,855 11/30/97 $13,351 $15,196 12/31/97 $13,540 $15,433
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 - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited) - ---------------------------------------
U.S. EQUITIES Energy........................ 1.43% Capital Investment Capital Goods................ 2.50 Technology................... 3.05 ------ 5.55 Basic Industries Chemicals.................... 0.74 Housing/Paper................ 1.80 Metals....................... 0.31 ------ 2.85 Consumer Non-Durables................. 3.44 Retail/Apparel............... 1.81 Autos/Durables............... 1.39 Discretionary................ 1.30 Health: Drugs................ 2.87 Health: Non-Drugs............ 1.52 ------ 12.33 Financial Banks........................ 2.78 Non-Banks.................... 2.47 ------ 5.25 Utilities Electric..................... 2.18 Telephone.................... 0.38 ------ 2.56 Transportation................ 2.18% Services/Misc................. 3.35 ------ Total U.S. Equities....... 35.50* ------ U.S. BONDS Corporate Bonds Asset-Backed................. 1.22 CMO.......................... 0.42 Consumer..................... 1.36 Financial.................... 4.32 Industrial................... 3.05 Telecommunications........... 2.33 ------ 12.70 International Dollar Bonds.... 6.14 Mortgage-Backed Securities.... 4.25 U.S. Government Agencies...... 16.99 U.S. Government Obligations... 15.76 ------ Total U.S. Bonds.......... 55.84* ------ SHORT-TERM INVESTMENTS........ 11.85* ------ TOTAL INVESTMENTS......... 103.19 LIABILITIES, LESS CASH AND OTHER ASSETS............. (3.19) ------ NET ASSETS.................... 100.00% ======
- -------------------------------------------------------------------------------- * The Fund held a long position in U.S. Treasury futures on December 31, 1997 which increased U.S. bond exposure from 55.84% to 59.46%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 35.50% to 30.00%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 11.85% to 13.73%. Asset Allocation As of December 31, 1997 (Unaudited)
Current Benchmark Strategy - ---------------------------------------- U.S. Equity 65% 30% U.S. Bonds 35 65 Cash Equivalents 0 5 - ---------------------------------------- 100% 100%
Top Ten U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ---------------------------------------------------- 1. Lockheed Martin Corp. 1.50% 2. Xerox Corp. 1.44 3. Philip Morris Companies, Inc. 1.37 4. Aon Corp. 1.23 5. CIGNA Corp. 1.22 6. Schering Plough Corp. 1.06 7. Burlington Northern Santa Fe Corp. 1.05 8. Federal Express Corp. 1.02 9. Goodyear Tire & Rubber Co. 0.99 10. Automatic Data Processing, Inc. 0.86 - ----------------------------------------------------
9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------ ------------ U.S. Equities -- 35.50% Allergan, Inc.............................................. 32,800 $ 1,100,850 Alza Corp. (b)............................................. 32,000 1,018,000 American Home Products Corp................................ 25,700 1,966,050 Aon Corp................................................... 62,500 3,664,062 Automatic Data Processing, Inc............................. 42,000 2,577,750 Baxter International, Inc.................................. 41,500 2,093,156 Beckman Instruments, Inc................................... 12,600 504,000 Biogen, Inc. (b)........................................... 12,600 458,325 Birmingham Steel Corp...................................... 12,800 201,600 Boston Technology, Inc. (b)................................ 12,800 321,600 Briggs & Stratton Corp..................................... 1,600 77,700 Burlington Northern Santa Fe Corp.......................... 33,700 3,131,994 Champion Enterprises, Inc. (b)............................. 20,400 419,475 Champion International Corp................................ 1,700 77,031 Chase Manhattan Corp....................................... 17,200 1,883,400 CIGNA Corp................................................. 21,000 3,634,312 Circuit City Stores-Circuit City Group..................... 47,300 1,682,106 Citicorp................................................... 15,600 1,972,425 CMS Energy Corp............................................ 41,400 1,824,188 Comerica, Inc.............................................. 8,800 794,200 Commscope, Inc. (b)........................................ 24,366 327,418 Comverse Technology, Inc. (b).............................. 6,300 245,700 Corning, Inc............................................... 69,200 2,569,050 Covance, Inc. (b).......................................... 16,175 321,478 CPC International, Inc..................................... 14,000 1,512,000 Crown Cork & Seal Co., Inc................................. 15,200 761,900 CVS Corp................................................... 20,400 1,306,875 Dial Corp.................................................. 16,500 343,406 Eastman Chemical Co........................................ 17,700 1,054,256 Echlin, Inc................................................ 9,000 325,687 EMC Corp. (b).............................................. 91,600 2,513,275 Enron Corp................................................. 43,100 1,791,344 Entergy Corp............................................... 83,700 2,505,769 Federal Express Corp. (b).................................. 49,900 3,047,019 First American Corp. of Tennessee.......................... 8,400 417,900 First Data Corp............................................ 77,557 2,268,542 First Security Corp........................................ 10,550 441,781 FirstEnergy Corp........................................... 24,975 724,275 Fleetwood Enterprises, Inc................................. 9,600 407,400 Food Lion, Inc., Class A................................... 66,400 560,250 Forest Laboratories, Inc. (b).............................. 14,700 724,894 Fort James Corp............................................ 37,100 1,419,075 Gannett Co., Inc........................................... 31,800 1,965,637 General Semiconductor, Inc. (b)............................ 16,550 191,359 Genzyme Corp............................................... 12,900 357,975 Geon Co.................................................... 8,800 205,700 Goodyear Tire & Rubber Co.................................. 46,200 2,939,475 Harnischfeger Industries, Inc.............................. 24,300 858,094 Health Care and Retirement Corp. (b)....................... 15,350 617,837 Hibernia Corp.............................................. 17,800 334,862 Informix Corp. (b)......................................... 17,000 80,750 Interpublic Group of Companies, Inc........................ 20,850 1,038,591 Kimberly Clark Corp........................................ 38,600 1,903,463 Lear Corp. (b)............................................. 13,800 655,500 Lockheed Martin Corp....................................... 45,471 4,478,894 Lyondell Petrochemical Co.................................. 35,000 927,500 Manor Care, Inc............................................ 24,700 864,500
SHARES VALUE ---------- ------------ Martin Marietta Materials, Inc......................... 9,436 $ 345,004 Masco Corp............................................. 37,400 1,902,725 Nabisco Holdings Corp.................................. 32,700 1,583,906 National Service Industries, Inc....................... 6,300 312,244 Nextel Communications, Inc. (b)........................ 44,000 1,144,000 NextLevel Systems, Inc. (b)............................ 73,000 1,304,875 Old Republic International Corp........................ 6,450 239,859 Peco Energy Co......................................... 95,600 2,318,300 Pentair, Inc........................................... 17,000 610,938 Pharmacia & UpJohn, Inc................................ 17,200 629,950 Philip Morris Companies, Inc........................... 90,400 4,096,250 Raytheon Co., Class B.................................. 38,000 1,919,000 Regions Financial Corp................................. 8,200 345,938 Reynolds & Reynolds Co................................. 31,200 575,250 Schering Plough Corp................................... 50,700 3,149,738 Seagate Technology, Inc. (b)........................... 28,600 550,550 Sears Roebuck & Co..................................... 3,900 176,475 Timken Co.............................................. 9,400 323,125 Tyson Foods, Inc., Class A............................. 65,200 1,336,600 Ultramar Diamond Shamrock Corp......................... 36,490 1,163,119 US Bancorp............................................. 21,953 2,457,364 Vencor, Inc. (b)....................................... 32,000 782,000 Viad Corp.............................................. 31,500 608,344 Westvaco Corp.......................................... 7,650 240,497 Witco Corp............................................. 5,000 204,062 Xerox Corp............................................. 58,300 4,303,269 York International Corp................................ 20,000 791,250 ------------ Total U.S. Equities (Cost $82,622,420)................. 105,826,287 ------------ FACE AMOUNT VALUE ---------- ------------ Bonds -- 55.84% U.S. CORPORATE BONDS -- 12.70% Aid-Israel 0.000%, due 08/15/19........................ $5,162,000 $ 1,355,954 Aid-Jordan 8.750%, due 09/01/19.................................. 3,620,237 4,435,912 Archer Daniels 6.950%, due 12/15/2097.................. 1,995,000 2,021,956 Capital One Bank 6.830%, due 05/17/99.................. 2,000,000 2,013,864 Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due 03/15/02........................... 1,360,000 1,362,135 Chase Manhattan Credit Card Trust 96-4A 6.730%, due 02/15/03............................ 2,000,000 2,019,160 Chrysler Corp. 7.400%, due 08/01/2097.................. 2,380,000 2,539,220 Comcast Cable Communications 144-A 8.500%, due 05/01/27.................................. 2,000,000 2,359,092 Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due 02/25/02............................ 2,000,000 2,001,740 Donaldson Lufkin & Jenrette FRN 6.700%, due 06/30/00.............................. 840,000 850,303 Enron Corp. 6.750%, due 08/01/09....................... 4,500,000 4,537,395 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09.................. 1,270,601 1,236,739 GMAC 6.375%, due 12/01/01.............................. 2,000,000 2,008,776 Lockheed Martin Corp. 7.700%, due 06/15/08.................................. 2,000,000 2,172,408 MBNA Global Capital Securities FRN 6.519%, due 02/01/27.................................. 215,000 197,485 New England Telephone & Telegraph 6.300%, due 12/16/02.................................. 1,835,000 1,838,764
- -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ----------- ----------- News America Holdings 7.750%, due 12/01/45.................................. $ 1,000,000 $ 1,041,108 Residential Asset Securitization Trust 97-A 11 P4 7.000%, due 12/25/27....................... 280,000 280,875 Time Warner, Inc., 7.570%, due 02/01/24................ 1,790,000 1,876,274 USA Waste Services 6.500%, due 12/15/02.................................. 1,720,000 1,715,679 ----------- 37,864,839 ----------- INTERNATIONAL DOLLAR BONDS -- 6.14% Credit Suisse--London 144A 7.900%, Resettable Perpetual Preferred................ 2,170,000 2,289,571 Den Danske Bank 144A 7.400%, due 06/15/10.................................. 1,400,000 1,460,710 Empressa Nacional Electric 7.875%, due 02/01/2097................................ 2,335,000 2,472,366 International Bank for Reconstruction & Development 6.375%, due 07/21/05...................... 1,500,000 1,538,438 LKB Baden-Wuerttemberg Finance NV 8.125%, due 01/27/00.................................. 1,780,000 1,849,546 Montell Finance Co. 144A 8.100%, due 03/15/27.................................. 1,610,000 1,890,022 Petroliam Nasional 7.125%, due 08/15/05.................................. 1,500,000 1,415,517 Province of Quebec 7.500%, due 07/15/23.................................. 750,000 808,680 Ras Laffan Liquefied Natural Gas Co. Ltd. 144A 8.294%, due 03/15/14............................. 1,735,000 1,632,645 Skandinaviska Enskilda Banken 144A 6.625%, Resettable Perpetual Preferred................ 2,000,000 2,008,000 Southern Investments UK 6.800%, due 12/01/06.................................. 930,000 937,318 ----------- 18,302,813 ----------- MORTGAGE-BACKED SECURITIES -- 4.25% Asset Securitization Corp. 96-D3A1B 7.210%, due 10/13/26.............................................. 2,600,000 2,714,665 Morgan Stanley Capital, Inc. 6.830%, due 10/15/06.................................. 1,227,297 1,253,082 PNC Mortgage Securities Corp. 94-3A8 7.500%, due 07/25/24........................... 1,350,000 1,394,501 Prudential Home Mortgage Securities 93-43 A9 6.750%, due 10/25/23......................... 1,387,428 1,368,102 94-3 A10 6.500%, due 02/25/24......................... 2,855,000 2,742,799 UCFC Home Equity Loan 97-Class A8 6.325%, FRN, due 09/15/27................. 1,236,672 1,235,646 Vanderbilt Mortgage Finance 97-B1A3 6.975%, due 08/07/03.......................... 1,925,000 1,978,631 ----------- 12,687,426 ----------- U.S. GOVERNMENT AGENCIES -- 16.99% Federal Home Loan Mortgage Corp. 6.500%, due 05/15/21.................................. 2,159,690 2,159,798 7.500%, due 01/15/23.................................. 1,075,979 1,129,864 0.000%, due 04/15/27 principal only................... 2,497,000 1,629,163
FACE AMOUNT VALUE ---------- ----------- Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23................................... $ 717,095 $ 741,969 9.000%, due 03/01/24................................... 346,379 374,079 9.500%, due 04/01/25................................... 1,030,008 1,100,177 Federal National Mortgage Association 6.540%, due 09/18/02................................... 2,415,000 2,442,302 6.959%, due 08/01/07................................... 3,065,973 3,196,277 6.789%, due 11/01/07................................... 504,259 525,377 6.500%, due 05/25/08................................... 1,491,555 1,488,706 6.500%, due 08/25/08................................... 1,550,096 1,552,577 8.000%, due 12/18/11................................... 1,000,000 1,074,974 6.500%, due 12/25/23................................... 2,000,000 1,993,710 7.000%, due 03/18/25................................... 2,190,000 2,191,778 6.500%, due 04/01/26................................... 557,317 550,002 6.500%, due 05/01/26................................... 2,007,715 1,981,364 6.500%, due 12/01/26 TBA............................... 11,545,000 11,393,472 Federal National Mortgage Association Strips 0.000%, due 04/01/27 principal only.................... 3,045,025 2,312,392 0.000%, due 07/01/27 principal only.................... 1,236,317 924,539 Government National Mortgage Association 8.000%, due 08/15/22................................... 871,861 904,010 8.000%, due 11/15/22................................... 2,018,583 2,105,019 7.500%, due 06/15/23................................... 2,900,313 2,970,103 7.500%, due 08/15/23................................... 1,031,840 1,056,669 7.500%, due 09/15/23................................... 1,052,633 1,077,963 7.000%, due 12/15/23................................... 860,100 869,638 9.000%, due 07/15/24................................... 136,239 145,690 8.500%, due 11/15/24................................... 144,212 151,467 8.500%, due 01/15/25................................... 281,633 295,803 9.000%, due 05/15/25................................... 340,348 363,959 7.500%, due 06/15/25................................... 1,885,081 1,932,416 ----------- 50,635,257 ----------- U.S. GOVERNMENT OBLIGATIONS-- 15.76% U.S. Treasury Notes and Bonds 6.000%, due 06/30/99................................... 30,805,000 30,959,025 5.875%, due 08/31/99................................... 4,520,000 4,534,125 7.750%, due 11/30/99................................... 1,110,000 1,150,931 6.625%, due 07/31/01................................... 1,660,000 1,707,207 6.250%, due 08/31/02................................... 5,500,000 5,613,438 8.125%, due 05/15/21................................... 1,195,000 1,505,700 U.S. Treasury Principal Strip 0.000%, due 08/15/03 principal only.................... 2,090,000 1,517,340 ----------- 46,987,766 ----------- Total U.S. Bonds (Cost $163,017,803).................... 166,478,101 ----------- Short-Term Investments -- 11.85% U.S. GOVERNMENT OBLIGATIONS -- 0.33% U.S. Treasury Bill 5.42%, due 05/28/98.................. 1,015,000 993,430 ----------- COMMERCIAL PAPER -- 11.52% Bausch & Lomb Inc., 7.750%, due 01/02/98................ 5,145,000 5,143,892
- -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ------------ Case Credit Corp. 6.110%, due 01/20/98................................. $1,300,000 $ 1,295,808 6.030%, due 03/10/98................................. 1,500,000 1,483,725 6.020%, due 03/13/98................................. 1,500,000 1,482,191 General American Transportation Corp. 7.500%, due 01/07/98............................................. 3,489,000 3,484,639 GTE Corp. 6.120%, due 02/20/98................................. 1,500,000 1,487,250 6.020%, due 03/02/98................................. 1,500,000 1,484,950 Marriott Corp. 6.300%, due 01/16/98................................. 2,000,000 1,994,750 6.050%, due 02/09/98................................. 2,500,000 2,483,615 Nabisco Corp. 6.120%, due 01/16/98.................... 2,000,000 1,994,900 Occidental Petroleum Corp. 6.000%, due 01/16/98....... 2,500,000 2,493,750 Praxair Corp. 6.550%, due 01/02/98.................... 6,000,000 5,998,909 Safeway, Inc. 6.700%, due 01/02/98................................. 2,000,000 1,999,628 5.920%, due 01/22/98................................. 1,500,000 1,494,820 ------------ 34,322,827 ------------ Total Short-Term Investments (Cost $35,315,671)................................... 35,316,257 ------------ Total Investments (Cost $280,955,894)--103.19% (a)..................... 307,620,645 ------------ Liabilities, less cash and other assets-- (3.19%)..................................... (9,510,432) ------------ Net Assets--100%...................................... $298,110,213 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $280,955,894; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $29,455,719 Gross unrealized depreciation................................ (2,790,968) ----------- Net unrealized appreciation................................ $26,664,751 ===========
(b) Non-income producing security FRN: Floating rate note--The rate disclosed is that in effect at December 31, 1997. 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, 1997, the value of these securities amounted to $11,640,040, or 3.90% 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. FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of December 31, 1997:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/(LOSS) ---------- ---------- ---------- ----------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 82 contracts............... March 1998 $8,874,678 $8,907,250 $ 32,572 10 Year U.S. Treasury Note, 4 contracts................ March 1998 445,655 448,625 2,970 30 Year U.S. Treasury Bond, 12 contracts............... March 1998 1,437,871 1,445,625 7,754 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 67 contracts.................. March 1998 16,329,119 16,399,925 (70,806) -------- Total..................... $(27,510) ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1997 was $993,430. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $280,955,894) (Note 1)............... $307,620,645 Receivables: Investment securities sold...................................... 4,674,233 Dividends....................................................... 160,170 Interest........................................................ 1,521,608 Fund shares sold................................................ 5,000 Other assets..................................................... 39,717 ------------ TOTAL ASSETS.................................................. 314,021,373 ------------ LIABILITIES: Payables: Investment securities purchased................................. 15,656,125 Due to custodian bank........................................... 36,637 Investment advisory fees (Note 2)............................... 170,379 Accrued expenses................................................ 48,019 ------------ TOTAL LIABILITIES............................................. 15,911,160 ------------ NET ASSETS........................................................ $298,110,213 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $270,389,706 Accumulated undistributed net investment income.................. 81,662 Accumulated net realized gain.................................... 1,001,604 Net unrealized appreciation...................................... 26,637,241 ------------ NET ASSETS.................................................... $298,110,213 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $296,444,401 and 24,918,886 shares is- sued and outstanding) (Note 6)................................. $ 11.90 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,059 and 89 shares issued and outstanding) (Note 6).......... $ 11.90 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,664,753 and 140,637 shares issued and outstanding) (Note 6). $ 11.84 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME Interest.......................................................... $ 5,689,651 Dividends......................................................... 958,489 ----------- TOTAL INCOME................................................... 6,648,140 ----------- EXPENSES: Advisory (Note 2)................................................. 1,005,745 Administration.................................................... 51,918 Distribution (Note 5)............................................. 4,384 Other............................................................. 91,325 ----------- TOTAL EXPENSES................................................. 1,153,372 ----------- NET INVESTMENT INCOME ......................................... 5,494,768 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 13,452,774 Futures contracts................................................ (2,376,619) ----------- Net realized gain.............................................. 11,076,155 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... (1,400,448) Futures contracts................................................ 1,164,080 ----------- Change in net unrealized appreciation or depreciation.......... (236,368) ----------- Net realized and unrealized gain.................................. 10,839,787 ----------- Net increase in net assets resulting from operations.............. $16,334,555 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 5,494,768 $ 9,809,363 Net realized gain............................. 11,076,155 16,067,241 Change in net unrealized appreciation or de- preciation................................... (236,368) 10,534,773 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 16,334,555 36,411,377 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.............................. (8,638,019) (7,953,731) Brinson Class N.............................. (30) -- SwissKey Class............................... (46,180) (43,714) Distributions from net realized gain: Brinson Class I.............................. (20,202,719) (10,324,917) Brinson Class N.............................. (75) -- SwissKey Class............................... (121,168) (65,778) ------------ ------------ Total distributions to shareholders............ (29,008,191) (18,388,140) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 28,640,454 80,528,530 Shares issued on reinvestment of distribu- tions........................................ 28,947,784 18,312,423 Shares redeemed............................... (31,314,203) (60,962,669) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)............. 26,274,035 37,878,284 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 13,600,399 55,901,521 ------------ ------------ NET ASSETS: Beginning of year............................. 284,509,814 228,608,293 ------------ ------------ End of year (including accumulated undistrib- uted net investment income of $81,662 and $3,271,123, respectively).................... $298,110,213 $284,509,814 ============ ============
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 30, 1994* DECEMBER 31, 1997 ENDED ENDED THROUGH BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 12.53 $ 11.71 $ 11.23 $ 10.00 -------- -------- -------- -------- Income from investment operations: Net investment income. 0.26 0.47 0.44 0.23 Net realized and unrealized gain...... 0.45 1.29 1.04 1.16 -------- -------- -------- -------- Total income from investment opera- tions.............. 0.71 1.76 1.48 1.39 -------- -------- -------- -------- Less distributions: Distributions from net investment income.... (0.40) (0.40) (0.43) (0.16) Distributions from net realized gain........ (0.94) (0.54) (0.57) -- -------- -------- -------- -------- Total distributions. (1.34) (0.94) (1.00) (0.16) -------- -------- -------- -------- Net asset value, end of period................. $ 11.90 $ 12.53 $ 11.71 $ 11.23 ======== ======== ======== ======== Total return (non- annualized)............ 5.89% 15.50% 13.52% 13.91% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $296,444 $282,860 $227,829 $157,724 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.80%** 0.88% 1.01% 1.06%** After expense reim- bursement............ N/A 0.80% 0.80% 0.80%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.83%** 3.78% 3.76% 4.36%** After expense reim- bursement............ N/A 3.86% 3.97% 4.63%** Portfolio turnover rate.................. 94% 329% 240% 196% Average commission rate paid per share........ $ 0.0536 $0.0441 $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
SIX MONTHS ENDED DECEMBER 31, 1997* BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.53 ------- Income from investment operations: Net investment income...................................... 0.25 Net realized and unrealized gain........................... 0.44 ------- Total income from investment operations.................. 0.69 ------- Less distributions: Distributions from net investment income................... (0.38) Distributions from net realized gain....................... (0.94) ------- Total distributions...................................... (1.32) ------- Net asset value, end of period............................... $ 11.90 ======= Total return (non-annualized)................................ 5.72% Ratios/Supplemental Data: Net assets, end of period (in 000s)......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement............................... 1.05%** Ratio of net investment income to average net assets: Before expense reimbursement............................... 3.64%** Portfolio turnover rate..................................... 94% Average commission rate paid per share...................... $0.0536
*Commencement of Brinson Class N was June 30, 1997. **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.46 $ 11.67 $ 11.38 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.23 0.38 0.42 Net realized and unrealized gain......................... 0.45 1.31 0.86 ------- ------- ------- Total income from investment operations................. 0.68 1.69 1.28 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.36) (0.36) (0.42) Distributions from net real- ized gain.................... (0.94) (0.54) (0.57) ------- ------- ------- Total distributions......... (1.30) (0.90) (0.99) ------- ------- ------- Net asset value, end of period.. $ 11.84 $ 12.46 $ 11.67 ======= ======= ======= Total return (non-annualized)... 5.56% 14.99% 11.54% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $ 1,665 $ 1,649 $ 779 Ratio of expenses to average net assets: Before expense reimbursement.. 1.30%** 1.38% 1.51%** After expense reimbursement... N/A 1.30% 1.30%** Ratio of net investment income to average net assets: Before expense reimbursement.. 3.33%** 3.28% 3.26%** After expense reimbursement... N/A 3.36% 3.47%** Portfolio turnover rate........ 94% 329% 240% Average commission rate paid per share..................... $0.0536 $0.0441 $0.0481
*Commencement of SwissKey Class **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 U.S. Equity Fund - -------------------------------------------------------------------------------- The U.S. Equity Fund is an actively managed portfolio invested in common stocks of U.S. corporations. The portfolio is diversified by issue and industry; it is typically 70% invested in large capitalization stocks, with the remaining 30% in intermediate and small capitalization stocks. Investment strategies emphasize stock selection with attention to the management of factor and industry exposures. Since its performance inception on July 31, 1995, the SwissKey U.S. Equity Fund has provided an annualized return of 26.25% compared to 26.04% for the benchmark, the Wilshire 5000 Index. The annualized volatility of the SwissKey U.S. Equity Fund has been 11.47% since inception, slightly below the 11.81% volatility for the Wilshire 5000 Equity Index. In 1997, the SwissKey U.S. Equity Fund's total return of 24.23% trailed the 31.29% return for its benchmark. Almost all of the U.S. Equity Fund's underperformance occurred in the fourth quarter against the backdrop of a stock market environment heavily influenced by a "flight to quality" mentality on the part of investors. Such an environment was precipitated by difficulties in the Southeast Asian economies. There were indications of trouble in the region earlier in 1997, but the problems came to the fore in the final quarter as the magnitude of credit excesses became more apparent, future economic growth rates were revised sharply lower and currency values in country after country plummeted. U.S. financial markets and the dollar were viewed as a safe haven. Not surprisingly, the strongest relative performance within the stock market was posted by the highest quality, largest capitalization issues. The U.S. Equity Fund was not positioned well for these fourth quarter developments. The problem was not an unusually heavy weight in low quality, small capitalization issues. Rather, the problem was that the Fund was minimally weighted in those few very large, very high quality issues which have come to dominate the market in recent years and which performed strongly in the fourth quarter. The 20 largest U.S. stocks now account for over 30% of the total market value of the S&P 500, and most of them are concentrated in the relatively defensive consumer nondurable, international oil and telephone utility industries. Our researchers recognize the strong products, capable managements and worldwide market positions which characterize most of these companies, and they have taken these factors into account in formulating their future estimates of profitability and growth. However, based upon their work, we found these stocks to be relatively overvalued throughout 1997, a mispricing that by the end of the year was as high as we have observed since the inception of our present organization in 1981. As we enter 1998, our price/value discipline leads us to maintain an underweight in such issues. More specifically, the Fund is positioned with factor overweightings in the traditional value measures of book-price, earnings-price and yield, and underweights in growth, size and foreign earnings. From an industry standpoint, meaningful deviations from the benchmark include overweightings in healthcare, defense and electric utilities. Important underweights include energy, telephone utilities, miscellaneous finance and semiconductor/personal computer issues. 20 U.S. Equity Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year 7/31/95* ended ended to 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------------- SwissKey U.S. Equity Fund 6.59% 24.23% 26.25% Wilshire 5000 Index 11.60 31.29 26.04 - -------------------------------------------------------------------------------------
* Inception date of the SwissKey U.S. Equity Fund. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the SwissKey U.S. Equity Fund and the Wilshire 5000 Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SwissKey U.S. Equity Fund vs. Wilshire 5000 Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
SwissKey U.S. Equity Fund Wilshire 5000 Index - ------------------------------------------------------ 7/31/95 $10,000 $10,000 8/31/95 $10,184 $10,098 9/30/95 $10,570 $10,483 10/31/95 $10,528 $10,377 11/30/95 $11,122 $10,817 12/31/95 $11,335 $10,994 1/31/96 $11,790 $11,288 2/29/96 $11,971 $11,486 3/31/96 $12,194 $11,612 4/30/96 $12,418 $11,898 5/31/96 $12,615 $12,224 6/30/96 $12,570 $12,123 7/31/96 $11,958 $11,469 8/31/96 $12,415 $11,836 9/30/96 $12,966 $12,466 10/31/96 $13,242 $12,640 11/30/96 $14,156 $13,478 12/31/96 $14,157 $13,326 1/31/97 $14,663 $14,039 2/28/97 $14,757 $14,033 3/31/97 $14,260 $13,412 4/30/97 $14,691 $13,997 5/31/97 $15,759 $14,989 6/30/97 $16,499 $15,677 7/31/97 $17,756 $16,883 8/31/97 $17,053 $16,248 9/30/97 $17,812 $17,207 10/31/97 $16,865 $16,634 11/30/97 $17,193 $17,178 12/31/97 $17,587 $17,496
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. 21 U.S. Equity Fund - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited) - -----------------------------------
U.S. EQUITIES Energy.................... 3.80% Capital Investment Capital Goods............ 6.64 Technology............... 8.10 ------ 14.74 Basic Industries Chemicals................ 1.97 Housing/Paper............ 4.78 Metals................... 0.83 ------ 7.58 Consumer Non-Durables............. 9.11 Retail/Apparel........... 4.79 Autos/Durables........... 3.68 Discretionary............ 3.44 Health: Drugs............ 7.61 Health: Non-Drugs........ 4.02 ------ 32.65 Financial Banks.................... 7.38 Non-Banks................ 6.56 ------ 13.94 Utilities Electric................. 5.78 Telephone................ 1.01 ------ 6.79 Transportation............ 5.78 Services/Misc............. 8.86 ------ Total U.S. Equities... 94.14* ------ SHORT-TERM INVESTMENTS.... 5.45* ------ TOTAL INVESTMENTS..... 99.59 ------ CASH AND OTHER ASSETS, LESS LIABILITIES......... 0.41 ------ NET ASSETS................ 100.00% ======
- -------------------------------------------------------------------------------- * The Fund held a long position in stock index futures on December 31, 1997 which increased U.S. Equity exposure from 94.14% to 99.64% and reduced exposure to Short-Term Investments from 5.45% to -0.05%. Top Ten U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ---------------------------------------------------- 1. Lockheed Martin Corp. 4.02% 2. Xerox Corp. 3.86 3. Philip Morris Companies, Inc. 3.67 4. CIGNA Corp. 3.25 5. Aon Corp. 3.07 6. Schering Plough Corp. 2.85 7. Burlington Northern Santa Fe Corp. 2.80 8. Federal Express Corp. 2.65 9. Goodyear Tire & Rubber Co. 2.63 10. Automatic Data Processing, Inc. 2.31 - ----------------------------------------------------
22 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ---------- U.S. Equities -- 94.14% Allergan, Inc............................................... 162,500 $5,453,906 Alza Corp. (b).............................................. 158,500 5,042,281 American Home Products Corp................................. 128,000 9,792,000 Aon Corp.................................................... 288,750 16,927,969 Automatic Data Processing, Inc.............................. 207,800 12,753,725 Baxter International, Inc................................... 205,000 10,339,688 Beckman Instruments, Inc.................................... 62,000 2,480,000 Biogen, Inc. (b)............................................ 62,100 2,258,888 Birmingham Steel Corp....................................... 63,700 1,003,275 Boston Technology, Inc. (b)................................. 63,300 1,590,413 Briggs & Stratton Corp...................................... 10,900 529,331 Burlington Northern Santa Fe Corp. ......................... 166,500 15,474,094 Champion Enterprises, Inc. (b).............................. 100,200 2,060,363 Champion International Corp................................. 8,500 385,156 Chase Manhattan Corp........................................ 84,900 9,296,550 CIGNA Corp.................................................. 103,600 17,929,275 Circuit City Stores-Circuit City Group...................... 234,100 8,325,181 Citicorp.................................................... 77,000 9,735,687 CMS Energy Corp............................................. 204,600 9,015,188 Comerica, Inc............................................... 43,600 3,934,900 Commscope, Inc. (b)......................................... 120,599 1,620,549 Comverse Technology, Inc. (b)............................... 31,200 1,216,800 Corning, Inc................................................ 329,600 12,236,400 Covance, Inc (b)............................................ 79,850 1,587,019 CPC International, Inc...................................... 69,400 7,495,200 Crown Cork & Seal Co., Inc.................................. 75,400 3,779,425 CVS Corp.................................................... 100,600 6,444,688 Dial Corp................................................... 81,900 1,704,544 Eastman Chemical Co......................................... 87,300 5,199,806 Echlin, Inc................................................. 44,500 1,610,344 EMC Corp. (b)............................................... 453,100 12,431,931 Enron Corp.................................................. 212,400 8,827,875 Entergy Corp................................................ 413,700 12,385,144 Federal Express Corp. (b)................................... 239,500 14,624,469 First American Corp. of Tennessee........................... 41,500 2,064,625 First Data Corp............................................. 383,230 11,209,477 First Security Corp......................................... 52,300 2,190,062 FirstEnergy Corp............................................ 123,905 3,593,245 Fleetwood Enterprises, Inc.................................. 45,100 1,913,931 Food Lion, Inc., Class A.................................... 300,900 2,538,844 Forest Laboratories, Inc. (b)............................... 72,900 3,594,881 Fort James Corp............................................. 185,100 7,080,075 Gannett Co., Inc............................................ 157,400 9,729,287 General Semiconductor, Inc. (b)............................. 82,075 948,992 Genzyme Corp................................................ 64,100 1,778,775 Geon Co..................................................... 43,700 1,021,487 Goodyear Tire & Rubber Co................................... 227,700 14,487,412 Harnischfeger Industries, Inc............................... 120,400 4,251,625 Health Care and Retirement Corp. (b)........................ 71,450 2,875,863 Hibernia Corp............................................... 88,100 1,657,381 Informix Corp. (b).......................................... 66,900 317,775 Interpublic Group of Companies, Inc......................... 103,350 5,148,122 Kimberly Clark Corp......................................... 185,400 9,142,537 Lear Corp. (b).............................................. 68,300 3,244,250 Lockheed Martin Corp........................................ 225,026 22,165,061 Lyondell Petrochemical Co................................... 173,200 4,589,800 Manor Care, Inc............................................. 113,900 3,986,500 Martin Marietta Materials, Inc.............................. 46,357 1,694,928 Masco Corp.................................................. 184,800 9,401,700 Nabisco Holdings Corp....................................... 161,500 7,822,656 National Service Industries, Inc............................ 31,000 1,536,438 Nextel Communications, Inc. (b)............................. 221,500 5,759,000
SHARES VALUE ---------- ------------ NextLevel Systems, Inc. (b)......................... 361,400 $ 6,460,025 Old Republic International Corp..................... 28,150 1,046,828 Peco Energy Co...................................... 472,900 11,467,825 Pentair, Inc........................................ 83,800 3,011,563 Pharmacia & Upjohn, Inc............................. 82,900 3,036,213 Philip Morris Companies, Inc........................ 447,300 20,268,281 Raytheon Co., Class B .............................. 187,700 9,478,850 Regions Financial Corp.............................. 40,700 1,717,031 Reynolds & Reynolds Co.............................. 154,400 2,846,750 Schering Plough Corp................................ 252,800 15,705,200 Seagate Technology, Inc. (b)........................ 141,500 2,723,875 Sears, Roebuck and Co............................... 17,200 778,300 Timken Co........................................... 40,900 1,405,938 Tyson Foods, Inc., Class A.......................... 322,500 6,611,250 Ultramar Diamond Shamrock Corp...................... 180,318 5,747,636 US Bancorp.......................................... 104,448 11,691,592 Vencor, Inc. (b).................................... 157,600 3,851,350 Viad Corp........................................... 155,600 3,005,025 Westvaco Corp....................................... 37,800 1,188,337 Witco Corp. ........................................ 25,700 1,048,881 Xerox Corp.......................................... 288,400 21,287,525 York International Corp............................. 98,700 3,904,819 ------------ Total U.S. Equities (Cost $452,651,427)................................ 519,519,887 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 5.45% U.S. GOVERNMENT OBLIGATIONS -- 0.09% U.S. Treasury Bill 5.420%, due 05/28/98............................... $ 495,000 $ 484,481 ------------ COMMERCIAL PAPER -- 5.36% Bausch & Lomb Inc. 7.750%, due 01/02/98 2,565,000 2,564,448 Cummins Engine Company, Inc. 7.000%, due 01/02/98... 10,000,000 9,998,056 General American Transportation Corp. 7.500%, due 01/07/98............................... 951,000 949,811 Nabisco Inc. 6.700%, due 01/05/98............................... 1,000,000 999,256 Praxair Inc. 6.550%, due 01/02/98............................... 5,000,000 4,999,090 Solutia Inc. 7.000% due 01/02/98................................ 10,083,000 10,081,039 ------------ 29,591,700 ------------ Total Short-Term Investments (Cost $30,076,290) 30,076,181 ------------ Total Investments (Cost $482,727,717) -- 99.59% (a).................. 549,596,068 ------------ Cash and other assets, less liabilities--0.41%............................ 2,264,881 ------------ Net Assets -- 100%.................................. $551,860,949 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $482,727,717; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $78,689,103 Gross unrealized depreciation................................ (11,820,752) ----------- Net unrealized appreciation................................ $66,868,351 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of December 31, 1997:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN ---------- ----------- ----------- ---------- INDEX FUTURES BUY CONTRACTS Standard & Poor's 500, 124 contracts................. March 1998 $29,802,893 $30,352,100 $549,207 ========
The segregated cash and aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 1997 were $815,000 and $484,481, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $482,727,717) (Note 1) .............. $549,596,068 Cash............................................................. 1,298,691 Receivables: Investment securities sold...................................... 3,932,114 Dividends....................................................... 775,755 Fund shares sold................................................ 17,912,366 Other assets..................................................... 97,684 ------------ TOTAL ASSETS.................................................. 573,612,678 ------------ LIABILITIES: Payables: Investment securities purchased................................. 19,694,740 Fund shares redeemed............................................ 1,672,529 Investment advisory fees (Note 2)............................... 302,102 Accrued expenses................................................ 82,358 ------------ TOTAL LIABILITIES............................................. 21,751,729 ------------ NET ASSETS........................................................ $551,860,949 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $483,976,569 Accumulated undistributed net investment income.................. 14,392 Accumulated net realized gain.................................... 452,430 Net unrealized appreciation...................................... 67,417,558 ------------ NET ASSETS.................................................... $551,860,949 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $507,739,810 and 28,880,535 shares is- sued and outstanding) (Note 6)................................. $ 17.58 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,072 and 61 shares issued and outstanding) (Note 6).......... $ 17.58 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $44,120,067 and 2,517,356 shares issued and outstanding) (Note 6)...................................... $ 17.53 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Dividends......................................................... $ 3,920,692 Interest.......................................................... 361,435 ----------- TOTAL INCOME................................................... 4,282,127 ----------- EXPENSES: Advisory (Note 2)................................................. 1,577,328 Administration.................................................... 116,010 Distribution (Note 5)............................................. 106,721 Other............................................................. 108,634 ----------- TOTAL EXPENSES................................................. 1,908,693 ----------- NET INVESTMENT INCOME.......................................... 2,373,434 ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments...................................................... 15,557,861 Futures contracts................................................ 1,061,031 ----------- Net realized gain ............................................. 16,618,892 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 8,599,085 Futures contracts ............................................... 314,472 ----------- Change in net unrealized appreciation or depreciation.......... 8,913,557 ----------- Net realized and unrealized gain ................................. 25,532,449 ----------- Net increase in net assets resulting from operations.............. $27,905,883 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE (UNAUDITED) 30, 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 2,373,434 $ 2,268,618 Net realized gain ............................ 16,618,892 21,580,018 Change in net unrealized appreciation or de- preciation .................................. 8,913,557 40,886,740 ------------ ------------ Net increase in net assets resulting from op- erations..................................... 27,905,883 64,735,376 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................. (2,888,381) (1,717,943) Brinson Class N............................. (5) -- SwissKey Class.............................. (150,200) (87,137) Distributions from net realized gain: Brinson Class I............................. (28,383,478) (12,393,329) Brinson Class N............................. (64) -- SwissKey Class.............................. (2,678,144) (838,501) ------------ ------------ Total distributions to shareholders........... (34,100,272) (15,036,910) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 203,834,470 212,394,882 Shares issued on reinvestment of distribu- tions........................................ 30,526,642 14,138,565 Shares redeemed............................... (49,295,234) (34,971,198) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 6)............. 185,065,878 191,562,249 ------------ ------------ TOTAL INCREASE IN NET ASSETS............... 178,871,489 241,260,715 ------------ ------------ NET ASSETS: Beginning of year............................. 372,989,460 131,728,745 ------------ ------------ End of year (including accumulated undistrib- uted net investment income of $14,392 and $679,544, respectively)...................... $551,860,949 $372,989,460 ============ ============
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 YEAR ENDED JUNE 30, FEBRUARY 22, 1994* DECEMBER 31, 1997 --------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 17.64 $ 14.59 $ 11.53 $ 9.65 $10.00 -------- -------- -------- ------- ------ Income from investment operations: Net investment income. 0.08 0.15 0.17 0.16 0.05 Net realized and unrealized gain (loss)............... 1.10 4.27 3.31 1.89 (0.36) -------- -------- -------- ------- ------ Total income (loss) from investment operations......... 1.18 4.42 3.48 2.05 (0.31) -------- -------- -------- ------- ------ Less distributions: Distributions from net investment income.... (0.11) (0.14) (0.17) (0.14) (0.04) Distributions from net realized gain........ (1.13) (1.23) (0.25) (0.03) -- -------- -------- -------- ------- ------ Total distributions. (1.24) (1.37) (0.42) (0.17) (0.04) -------- -------- -------- ------- ------ Net asset value, end of period................. $ 17.58 $ 17.64 $ 14.59 $ 11.53 $ 9.65 ======== ======== ======== ======= ====== Total return (non- annualized)............ 6.87% 31.87% 30.57% 21.45% (3.10)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $507,740 $337,949 $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reim- bursement............ 0.80%** 0.89% 1.14% 1.70% 5.40% ** After expense reim- bursement............ N/A 0.80% 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reim- bursement............ 1.10%** 1.06% 1.13% 1.09% (2.82)%** After expense reim- bursement............ N/A 1.15% 1.47% 1.99% 1.78% ** Portfolio turnover rate.................. 19% 43% 36% 33% 9% Average commission rate paid per share........ $ 0.0426 $ 0.0422 $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 28 U.S. EQUITY 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, 1997* BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 17.64 ------- Income from investment operations: Net investment income...................................... 0.08 Net realized and unrealized gain........................... 1.07 ------- Total income from investment operations.................. 1.15 ------- Less distributions: Distributions from net investment income................... (0.09) Distributions from net realized gain....................... (1.12) ------- Total distributions...................................... (1.21) ------- Net asset value, end of period............................... $ 17.58 ======= Total return (non-annualized)................................ 6.73% Ratios/Supplemental Data: Net assets, end of period (in 000s)......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement............................... 1.05%** Ratio of net investment income to average net assets: Before expense reimbursement............................... 0.77%** Portfolio turnover rate..................................... 19% Average commission rate paid per share...................... $0.0426
*Commencement of Brinson Class N was June 30, 1997 **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 29 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 JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 17.59 $ 14.58 $ 11.94 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.04 0.11 0.10 Net realized and unrealized gain......................... 1.09 4.22 2.92 ------- ------- ------- Total income from investment operations................. 1.13 4.33 3.02 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.06) (0.09) (0.13) Distributions from net real- ized gain.................... (1.13) (1.23) (0.25) ------- ------- ------- Total distributions......... (1.19) (1.32) (0.38) ------- ------- ------- Net asset value, end of period.. $ 17.53 $ 17.59 $ 14.58 ======= ======= ======= Total return (non-annualized)... 6.59% 31.28% 25.70% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $44,120 $35,039 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement.. 1.32%** 1.41% 1.66%** After expense reimbursement... N/A 1.32% 1.32%** Ratio of net investment income to average net assets: Before expense reimbursement.. 0.57%** 0.54% 0.61%** After expense reimbursement... N/A 0.63% 0.95%** Portfolio turnover rate........ 19% 43% 36% Average commission rate paid per share..................... $0.0426 $0.0422 $0.0457
*Commencement of SwissKey Class **Annualized N/A=Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 U.S. Bond Fund - -------------------------------------------------------------------------------- The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar- denominated investment-grade fixed income securities. Macroeconomic and monetary analysis are the key elements in our strategy. We develop expectations about the returns on U.S. bonds based on the divergence of current market yields from our estimates of equilibrium yields. Relative value analysis serves as the basis of both our sector and individual security selection. Since its inception on August 31, 1995, the SwissKey U.S. Bond Fund has provided an annualized return of 7.53%, compared to 7.99% for the benchmark, Salomon Brothers Broad Investment Grade Bond Index. The Fund's annualized return volatility since inception of 4.57% exceeds the 3.76% volatility of the benchmark. In 1997, the Fund's return of 9.05% slightly trailed the benchmark return of 9.62%. The performance in 1997 was a function of successful duration and yield curve strategies as well as issue selection primarily within the mortgage-backed sector. Portfolio duration was targeted at 1.3 times benchmark duration from the beginning of 1997 until early in the third quarter, when duration was shortened to neutral. Following a 25 basis point increase in the overnight funds rate target in March, Federal Reserve interest rate policy was unchanged for the balance of the year. While short-term market interest rates generally rose in line with the overnight funds market, long-term interest rates showed substantial declines in 1997. Thirty-year Treasury bond yields fell by 70 basis points to end 1997 at the 5.9% level. Declines in reported inflation and in inflationary expectations were the major factors associated with falling long-term interest rates. Another positive for the bond market was the continued decline in the Federal deficits which reduced Treasury debt supply. The good inflation performance was achieved at a time when the underlying pace of real economic activity was quite robust. Strong job creation led to a decline in unemployment rates to levels not seen since the 1960s. During the year, fixed income investors responded more to the favorable inflation data than to the risks of above-trend growth and the tight labor market. Interest rates began the year slightly above 6.60% and moved higher well into the second quarter in conjunction with the March Federal Reserve tightening and Federal Reserve Chairman Greenspan's now famous "irrational exuberance" speech. By the end of the second quarter with inflation remaining contained and no further hints of additional Fed tightening, interest rates began a steady decline which carried through year-end. In the final quarter of 1997 domestic economic strength, which would typically be viewed as a negative by the fixed income markets, was more than offset by developments in Asia. A dramatic depreciation in the Asian equity and currency markets gave rise to concerns about global deflation, providing further support to U.S. bond markets. The Asian turmoil had a dual impact on the U.S. bond market as a "flight-to-quality" provided fuel to the interest rate decline while the prospective negative influence on the U.S. economy propelled corporate bond credit spreads to their widest levels of the decade. 31 U.S. Bond Fund - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited) - ----------------------------------------------------------
U.S. BONDS Corporate Bonds Asset-Backed.................................... 7.89% CMO............................................. 6.89 Consumer........................................ 0.75 Financial....................................... 11.68 Industrial...................................... 9.39 Telecommunications.............................. 2.21 ------ Total U.S. Corporate Bonds................... 38.81 U.S. Government Agencies......................... 23.90 U.S. Government Obligations...................... 20.22 International Dollar Bonds....................... 8.72 ------ Total U.S. Bonds............................. 91.65 SHORT-TERM INVESTMENTS........................... 6.07 ------ TOTAL INVESTMENTS............................ 97.72 LIABILITIES, LESS CASH AND OTHER ASSETS.......... 2.28 ------ NET ASSETS....................................... 100.00% ====== - ----------------------------------------------------------
32 U.S. Bond Fund - -------------------------------------------------------------------------------- Total Return
6 months 1 year Annualized ended ended 8/31/95* to 12/31/97 12/31/97 12/31/97 - --------------------------------------------------------------------------------------------- SwissKey U.S. Bond Fund 6.31% 9.05% 7.53% Salomon Brothers Broad Investment Grade (BIG) Bond Index 6.37 9.62 7.99 - ---------------------------------------------------------------------------------------------
* Inception date of the SwissKey U.S. Bond Fund. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the SwissKey U.S. Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if you had invested $10,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SwissKey U.S. Bond Fund vs. Salomon Brothers BIG Bond Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
SwissKey U.S. Bond Fund Salomon Brothers BIG - ------------------------------------------------------- 8/31/95 $10,000 $10,000 9/30/95 $10,080 $10,094 10/31/95 $10,230 $10,229 11/30/95 $10,390 $10,389 12/31/95 $10,529 $10,532 1/31/96 $10,591 $10,604 2/29/96 $10,366 $10,425 3/31/96 $10,284 $10,350 4/30/96 $10,202 $10,273 5/31/96 $10,161 $10,268 6/30/96 $10,324 $10,400 7/31/96 $10,345 $10,428 8/31/96 $10,283 $10,413 9/30/96 $10,491 $10,594 10/31/96 $10,762 $10,832 11/30/96 $11,032 $11,011 12/31/96 $10,861 $10,914 1/31/97 $10,871 $10,956 2/28/97 $10,893 $10,968 3/31/97 $10,731 $10,857 4/30/97 $10,893 $11,012 5/31/97 $11,001 $11,116 6/30/97 $11,141 $11,248 7/31/97 $11,479 $11,553 8/31/97 $11,370 $11,453 9/30/97 $11,522 $11,622 10/31/97 $11,675 $11,788 11/30/97 $11,708 $11,843 12/31/97 $11,844 $11,964
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. 33 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Bonds -- 91.65% U.S. CORPORATE BONDS -- 38.81% Aetna Services, Inc. 6.970%, due 08/15/36............... $ 235,000 $ 246,223 Aid-Israel, Series 10 Z 0.000%, due 02/15/03................................... 805,000 597,704 Aid-Jordan 8.750%, due 09/01/19......................... 517,177 633,702 Bellsouth Savings & Employee ESOP 9.125%, due 07/01/03................................... 88,948 92,331 Capital One Bank 6.830%, due 05/17/99................... 359,000 361,489 Chase Mortgage Finance Corp. 93-J1 Class 1A5 6.625%, due 08/25/09......................... 68,131 66,570 Chemical Mortgage Securities, Inc. 93-1 Class A5 7.450%, due 02/25/23........................................... 785,000 796,238 Ches Pot Tel MD 8.000%, due 10/15/29.................... 87,000 103,628 Chrysler Financial Corp. 7.400%, due 08/01/2097................................. 223,000 237,919 Citicorp Mortgage Securities, Inc. 94-9 Class A8, 5.750%, due 06/25/09......................... 91,612 82,865 Comcast Cable Communications 144A 8.500%, due 05/01/27................................... 300,000 353,864 Con Edison 6.450%, due 12/01/07......................... 300,000 299,435 Countrywide Funding Corp. FRN 6.360%, due 12/01/03................................... 250,000 248,125 CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due 08/20/06............................. 245,000 254,905 Dayton Hudson Credit Card Master Trust 95-1A, 6.100%, due 02/25/02............................ 218,000 218,190 First Bank Corporate Card Master Trust 97-1A 6.400%, due 02/15/03............................. 155,000 156,259 GE Capital Mtg. Services, Inc. 94-7 Class A12, 6.000%, due 02/25/09................... 178,678 173,916 97-HE4 A7 6.735%, due 12/25/28......................... 410,000 414,981 General Motors Acceptance Corp.......................... 6.375%, due 12/01/01................................... 400,000 401,755 9.625%, due 12/15/01................................... 294,000 328,475 Green Tree Financial Corp. 8.300%, due 11/15/19................................... 320,000 356,508 Hanson Overseas BV 6.750%, due 09/15/05................................... 100,000 102,209 Interamer Development Bank 6.800%, due 10/15/25................................... 100,000 105,772 Lehman Brothers Holdings 7.250%, due 04/15/03................................... 225,000 232,285 Lockheed Martin Corp. 7.700%, due 06/15/08................................... 282,000 306,310 MBNA Global Capital Securities FRN 6.550%, due 02/01/27................................... 90,000 82,668 News America Holdings 7.750%, due 12/01/45................................... 358,000 372,717 PNC Mortgage Securities Corp. 94-3A8 7.500%, due 07/25/24............................ 215,000 222,087
FACE AMOUNT VALUE ---------- ----------- Premier Auto Trust 96-3A 6.500%, due 03/06/00.............................. $ 190,000 $ 190,682 96-4A, Class A4, 6.400%, due 10/06/01................... 350,000 351,939 Prudential Home Mortgage Securities 93-43A9 6.750%, due 10/25/23............................ 293,910 289,816 94-3A10 6.500%, due 02/25/24............................ 170,000 163,319 Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 304,259 Thrift Financial Corp. 11.250%, due 01/01/16................................... 48,499 52,306 Time Warner, Inc. 7.570%, due 02/01/24................... 90,000 94,338 Time Warner Entertainment, Inc. 8.375%, due 03/15/23.................................... 94,000 107,236 UCFC Home Equity Loan 97-C, Class A8, 6.325%, FRN, due 09/15/27............................... 185,745 185,591 USA Waste Services 6.500%, due 12/15/02.................................... 400,000 398,995 USX Corp. 8.125%, due 07/15/23........................... 400,000 450,885 ----------- 10,438,496 ----------- INTERNATIONAL DOLLAR BONDS -- 8.72% Banco Santiago S.A. 7.000%, due 07/18/07.................................... 380,000 381,032 Bayerische Landesbank 6.850%, due 07/19/01.................................... 188,000 192,990 Den Danske Bank 144A 7.400%, due 06/15/10.................................... 445,000 464,297 Empressa Nacional Electric 7.875%, due 02/01/27.................................... 394,000 417,179 Province of Quebec 7.500%, due 07/15/23.................................... 200,000 215,648 Repsol International Finance 7.000%, due 08/01/05.................................... 200,000 210,030 Republic of South Africa 9.625%, due 12/15/99.................................... 71,000 73,485 Royal Bank of Scotland 7.375%, Resettable Perpetual Preferred.................. 80,000 83,056 Skandinaviska Enskilda Banken 144A 6.625%, Resettable Perpetual Preferred.................. 305,000 306,220 ----------- 2,343,937 ----------- U.S. GOVERNMENT AGENCIES -- 23.90% Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13.................................... 492,125 502,589 7.500%, due 01/15/23.................................... 139,328 146,306 7.000%, due 01/15/25.................................... 235,000 233,989 7.238%, due 05/01/26.................................... 38,252 39,615 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03............................... 98,672 97,531 8.000%, due 11/01/22.................................... 190,982 197,607 9.000%, due 03/01/24.................................... 148,338 160,200 9.500%, due 04/01/25.................................... 43,073 46,007
- -------------------------------------------------------------------------------- 34 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Federal Home Loan Mortgage Corp. Strip 0.000%, due 04/15/27 principal only..................... $ 300,000 $ 195,734 Federal National Mortgage Association 6.959%, due 08/01/07.................................... 488,562 509,325 6.500%, due 05/25/08.................................... 115,558 115,337 8.000%, due 12/18/11.................................... 100,000 107,497 8.000%, due 05/25/21.................................... 260,000 271,993 9.000%, due 08/01/21.................................... 28,894 31,040 8.500%, due 07/01/22.................................... 22,285 23,606 9.500%, due 08/01/22.................................... 134,383 143,874 8.500%, due 12/01/25.................................... 298,255 311,397 6.500%, due 02/01/26.................................... 118,416 116,862 6.500%, due 04/01/26.................................... 402,445 397,163 6.500%, due 12/01/26 TBA................................ 200,000 197,375 6.175%, due 10/01/27.................................... 511,877 511,212 6.500%, due 12/01/27.................................... 792,000 781,605 Federal National Mortgage Association Strips 7.500%, due 05/01/23 interest only...................... 175,961 44,798 0.000%, due 04/01/27 principal only..................... 608,062 461,763 Government National Mortgage Association 10.000%, due 09/15/00................................... 2,663 2,835 10.000%, due 05/15/01................................... 5,200 5,537 9.000%, due 11/15/04.................................... 15,025 15,790 9.000%, due 12/15/17.................................... 56,428 61,654 8.000%, due 08/15/22.................................... 78,467 81,361 7.500%, due 12/15/22.................................... 362,696 373,008 7.500%, due 06/15/25.................................... 118,808 121,791 7.000%, due 07/15/25.................................... 118,543 119,542 ----------- 6,425,943 ----------- U.S. GOVERNMENT OBLIGATIONS -- 20.22% U.S. Treasury Notes and Bonds 6.625%, due 07/31/01.................................... 270,000 277,678 7.000%, due 07/15/06.................................... 250,000 269,922 8.125%, due 05/15/21.................................... 325,000 409,500 6.000%, due 02/15/26.................................... 380,000 379,525 5.500%, due 11/15/98.................................... 153,000 152,761 6.000%, due 06/30/99.................................... 3,830,000 3,849,150 5.875%, due 08/31/99.................................... 100,000 100,313 ----------- 5,438,849 ----------- Total U.S. Bonds (Cost $24,121,505)...................... 24,647,225 -----------
FACE AMOUNT VALUE ---------- ----------- Short-Term Investments -- 6.07% COMMERCIAL PAPER -- 6.07% Case Credit Corp. 6.110%, due 01/20/98.................. $ 300,000 $ 299,033 GTE Corp. 6.020%, due 03/02/98.......................... 500,000 494,983 Safeway, Inc. 5.920%, due 01/22/98...................... 183,000 182,368 Vastar Resources, Inc. 7.100%, due 01/02/98................................... 657,000 656,871 ----------- Total Short-Term Investments (Cost $1,633,255)...................................... 1,633,255 ----------- Total Investments (Cost $25,754,760) -- 97.72% (a)....................... 26,280,480 ----------- Cash and other assets, less liabilities -- 2.28%........ 613,309 ----------- Net Assets -- 100%...................................... $26,893,789 ===========
(a) Aggregate cost for federal income tax purposes was $25,754,760; and net unrealized appreciation consisted of: Gross unrealized ap- preciation........... $563,738 Gross unrealized de- preciation........... (38,018) -------- Net unrealized ap- preciation........... $525,720 ========
FRN: Floating rate note -- The rate disclosed is that in effect at December 31, 1997. 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, 1997, the value of these securities amounted to $1,124,381, or 4.18% 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. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $25,754,760) (Note 1)................ $26,280,480 Cash............................................................. 65,136 Receivables: Investment securities sold...................................... 908,528 Interest........................................................ 250,274 Other assets..................................................... 29,443 ----------- TOTAL ASSETS.................................................. 27,533,861 ----------- LIABILITIES: Payables: Investment securities purchased................................. 590,827 Investment advisory fees (Note 2)............................... 5,020 Accrued expenses................................................ 44,225 ----------- TOTAL LIABILITIES............................................. 640,072 ----------- NET ASSETS........................................................ $26,893,789 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $26,262,620 Accumulated undistributed net investment income.................. (13,078) Accumulated net realized gain.................................... 118,527 Net unrealized appreciation...................................... 525,720 ----------- NET ASSETS.................................................... $26,893,789 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $24,948,207 and 2,409,486 shares issued and outstanding) (Note 6)...................................... $ 10.35 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,067 and 103 shares issued and outstanding) (Note 6)......... $ 10.36 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,944,515 and 188,228 shares issued and outstanding) (Note 6). $ 10.33 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Interest........................................................... $ 844,224 ---------- TOTAL INCOME.................................................... 844,224 ---------- EXPENSES: Advisory (Note 2).................................................. 65,526 Professional....................................................... 18,768 Registration....................................................... 10,791 Distribution (Note 5).............................................. 4,144 Other.............................................................. 19,950 ---------- TOTAL EXPENSES.................................................. 119,179 Expenses deferred by Advisor (Note 2)........................... (36,523) ---------- NET EXPENSES.................................................... 82,656 ---------- NET INVESTMENT INCOME .......................................... 761,568 ---------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments................................... 548,792 Change in net unrealized appreciation or depreciation.............. 328,468 ---------- Net realized and unrealized gain................................... 877,260 ---------- Net increase in net assets resulting from operations............... $1,638,828 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 37 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR SIX MONTHS ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 OPERATIONS: ----------------- ----------- Net investment income.......................... $ 761,568 $ 836,232 Net realized gain (loss)....................... 548,792 (36,166) Change in net unrealized appreciation or depre- ciation....................................... 328,468 343,515 ----------- ----------- Net increase in net assets resulting from oper- ations........................................ 1,638,828 1,143,581 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................... (976,512) (598,393) Brinson Class N............................... (39) -- SwissKey Class................................ (69,936) (31,712) Distributions from and in excess of net real- ized gain: Brinson Class I............................... (335,742) (675) Brinson Class N............................... (14) -- SwissKey Class................................ (25,812) (39) ----------- ----------- Total distributions to shareholders............ (1,408,055) (630,819) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................... 4,679,580 16,583,813 Shares issued on reinvestment of distributions. 641,561 461,917 Shares redeemed................................ (2,478,830) (3,420,321) ----------- ----------- Net increase in net assets resulting from capi- tal share transactions (Note 6)............... 2,842,311 13,625,409 ----------- ----------- TOTAL INCREASE IN NET ASSETS................ 3,073,084 14,138,171 ----------- ----------- NET ASSETS: Beginning of period............................ 23,820,705 9,682,534 ----------- ----------- End of period (including accumulated undistrib- uted net investment income of $(13,078) and $271,841, respective- ly)........................................... $26,893,789 $23,820,705 =========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 38 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, 1997 YEAR ENDED THROUGH BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $ 10.24 $ 9.93 $10.00 ------- ------- ------ Income from investment opera- tions: Net investment income....... 0.30 0.51** 0.50 Net realized and unrealized gain (loss)................ 0.37 0.32 (0.14) ------- ------- ------ Total income from invest- ment operations.......... 0.67 0.83 0.36 ------- ------- ------ Less distributions: Distributions from net in- vestment income............ (0.42) (0.52) (0.40) Distributions from and in excess of net realized gain....................... (0.14) -- (0.03) ------- ------- ------ Total distributions....... (0.56) (0.52) (0.43) ------- ------- ------ Net asset value, end of peri- od........................... $ 10.35 $ 10.24 $ 9.93 ======= ======= ====== Total return (non-annualized). 6.58% 8.45% 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $24,948 $22,421 $9,047 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 0.88%*** 1.65% 3.63%*** After expense reimbursement. 0.60%*** 0.60% 0.60%*** Ratio of net investment in- come to average net assets: Before expense reimburse- ment....................... 5.56%*** 5.14% 3.00%*** After expense reimbursement. 5.84%*** 6.19% 6.03%*** Portfolio turnover rate...... 132% 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. - -------------------------------------------------------------------------------- 39 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, 1997 BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period.......................... $10.24 ------ Income from investment operations: Net investment income....................................... 0.30 Net realized and unrealized gain............................ 0.36 ------ Total income from investment operations................... 0.66 ------ Less distributions: Distributions from net investment income.................... (0.40) Distributions from net realized gain........................ (0.14) ------ Total distributions....................................... (0.54) ------ Net asset value, end of period................................ $10.36 ====== Total return (non-annualized)................................. 6.52% Ratios/Supplemental data Net assets, end of period (in 000s).......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement................................ 1.15%** After expense reimbursement................................. 0.85%** Ratio of net investment income to average net assets: Before expense reimbursement................................ 5.35%** After expense reimbursement................................. 5.65%** Portfolio turnover rate...................................... 132%
*Commencement of Brinson Class N was June 30, 1997. **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 40 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, 1997 YEAR ENDED THROUGH JUNE 30, SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period....................... $10.22 $ 9.92 $10.00 ------ ------ ------ Income from investment opera- tions: Net investment income....... 0.24 0.46** 0.46 Net realized and unrealized gain (loss)................ 0.40 0.32 (0.13) ------ ------ ------ Total income from invest- ment operations.......... 0.64 0.78 0.33 ------ ------ ------ Less distributions: Distributions from net in- vestment income............ (0.39) (0.48) (0.38) Distributions from and in excess of net realized gain....................... (0.14) -- (0.03) ------ ------ ------ Total distributions....... (0.53) (0.48) (0.41) ------ ------ ------ Net asset value, end of peri- od........................... $10.33 $10.22 $ 9.92 ====== ====== ====== Total return (non-annualized). 6.31% 7.91% 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)....................... $1,945 $1,399 $ 636 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 1.35%*** 2.12% 4.10%*** After expense reimbursement. 1.07%*** 1.07% 1.07%*** Ratio of net investment in- come to average net assets: Before expense reimburse- ment....................... 5.09%*** 4.67% 2.53%*** After expense reimbursement. 5.37%*** 5.72% 5.56%*** Portfolio turnover rate...... 132% 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. - -------------------------------------------------------------------------------- 41 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, and Non-U.S. Equity Fund. Effective June 30, 1997, each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which the most recent bid price or market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Equity securities, traded over-the-counter, are valued at the most recent bid price. Debt securities are valued at the most recent bid price by using market quotations or independent services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. C.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1997, therefore, no federal income tax provision was required. E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by the Funds will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. G.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. - -------------------------------------------------------------------------------- 42 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on the Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1997, were as follows:
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED -------- --------------- --------------- -------------- ---------- ------ U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,005,745 $ -- U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,577,328 -- U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 65,526 36,523
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $3,864, $3,128 and $2,024 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $253,281,640 $257,927,118 U.S. Equity Fund...................................... 225,510,580 82,326,482 U.S. Bond Fund........................................ 33,839,825 32,178,604
4.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5.DISTRIBUTION PLANS The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares, and effective June 30, 1997, the Brinson Class N shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. - -------------------------------------------------------------------------------- 43 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.CAPITAL TRANSACTIONS
U.S. BALANCED FUND ----------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I.............. 2,281,024 $ 28,309,870 6,578,157 $ 78,728,712 Brinson Class N.............. -- -- 80 1,000 SwissKey Class............... 25,739 330,584 148,317 1,798,818 ---------- ------------ ---------- ------------ Total Sales................ 2,306,763 $ 28,640,454 6,726,554 $ 80,528,530 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.............. 2,452,121 $ 28,812,427 1,541,262 $ 18,266,191 Brinson Class N.............. 9 105 -- -- SwissKey Class............... 11,570 135,252 3,904 46,232 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 2,463,700 $ 28,947,784 1,545,166 $ 18,312,423 ========== ============ ========== ============ Redemptions: Brinson Class I.............. 2,397,723 $ 30,943,131 4,988,208 $ 59,912,281 Brinson Class N.............. -- -- -- -- SwissKey Class............... 29,023 371,072 86,625 1,050,388 ---------- ------------ ---------- ------------ Total Redemptions.......... 2,426,746 $ 31,314,203 5,074,833 $ 60,962,669 ========== ============ ========== ============ U.S. EQUITY FUND ----------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I.............. 10,354,918 $189,157,887 11,551,336 $183,660,431 Brinson Class N.............. -- -- 57 1,000 SwissKey Class............... 800,195 14,676,583 1,834,556 28,733,451 ---------- ------------ ---------- ------------ Total Sales................ 11,155,113 $203,834,470 13,385,949 $212,394,882 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.............. 1,675,362 $ 28,698,745 907,559 $ 13,745,444 Brinson Class N.............. 4 69 -- -- SwissKey Class............... 107,016 1,827,828 25,905 393,121 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 1,782,382 $ 30,526,642 933,464 $ 14,138,565 ========== ============ ========== ============ Redemptions: Brinson Class I.............. 2,309,278 $ 42,289,711 1,959,184 $ 31,250,336 Brinson Class N.............. -- -- -- -- SwissKey Class............... 382,268 7,005,523 237,473 3,720,862 ---------- ------------ ---------- ------------ Total Redemptions.......... 2,691,546 $ 49,295,234 2,196,657 $ 34,971,198 ========== ============ ========== ============ U.S. BOND FUND ----------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I.............. 386,736 $ 4,064,958 1,521,821 $ 15,371,166 Brinson Class N.............. -- -- 98 1,000 SwissKey Class............... 58,318 614,622 119,951 1,211,647 ---------- ------------ ---------- ------------ Total Sales................ 445,054 $ 4,679,580 1,641,870 $ 16,583,813 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.............. 58,336 $ 599,697 44,351 $ 449,362 Brinson Class N.............. 5 53 -- -- SwissKey Class............... 4,075 41,811 1,239 12,555 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 62,416 $ 641,561 45,590 $ 461,917 ========== ============ ========== ============ Redemptions: Brinson Class I.............. 224,864 $ 2,363,677 288,064 $ 2,929,252 Brinson Class N.............. -- -- -- -- SwissKey Class............... 11,114 115,153 48,365 491,069 ---------- ------------ ---------- ------------ Total Redemptions.......... 235,978 $ 2,478,830 336,429 $ 3,420,321 ========== ============ ========== ============
Capital stock transactions were as follows: - -------------------------------------------------------------------------------- 44 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- [LOGO OF SWISSKEY FUNDS] 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY . http://www.swisskeyfunds.com [LOGO OF SWISS KEY FUNDS APPEARS HERE] SWISSKEY NON-U.S. EQUITY FUND SEMI-ANNUAL REPORT DECEMBER 31, 1997 YOUR KEY TO PERFORMANCE ----------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Debra L. Nichols Chairman of the Board Vice President E. Thomas McFarlan Carolyn M. Burke, CPA President Secretary and Treasurer Thomas J. Digenan, CFA, CPA Catherine E. Macrae Vice President Assistant Secretary - -------------------------------------------------------------------------------- 1 THE FUND'S ADVISOR--BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS] Brinson Partners is the global institutional asset management division of Swiss Bank Corporation (SBC) and manages assets of over $140 billion. We have $90 billion of discretionary institutional assets with active management mandates and we are the investment manager for SBC Private Banking mutual fund assets which total over $50 billion. In addition, we act as an investment advisor to SBC Private Banking. Our organization manages investment portfolios for corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. We employ over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich. Brinson Partners, an established U.S.-based leader in the investment field located in Chicago, acts as the headquarters of our worldwide investment management process. Brinson Partners pioneered the movement to the active management of global portfolios in the early 1980s for U.S. clients. Private market and venture capital investing was established in the 1970s and today we represent a major worldwide presence in this asset class. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] Shareholder Letter................................ 4 Global Economic and Market Highlights............. 5 Non-U.S. Equity Fund.............................. 6 Schedule of Investments........................... 9 Financial Statements.............................. 14 Financial Highlights.............................. 17 Notes to Financial Statements..................... 20 - -------------------------------------------------------------------------------- 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] February 20, 1998 Dear Shareholder: We are very pleased to present the December 31, 1997 Semi-Annual Report for the SwissKey Non-U.S. Equity Fund. Within this Report, we will focus on the current international economic outlook as well as our current strategy and performance update for the Non-U.S. Equity Fund. Swiss Bank Corporation and Union Bank of Switzerland announced on December 8, 1997 their intention to merge into a single global financial institution. As part of this merger, Brinson Partners and UBS Asset Management will be combined into Brinson. Brinson will be the Institutional Asset Management Division of the new organization with assets under management in excess of $340 billion and will provide investment advisory services for the Private Banking Division with assets over $400 billion. The Consumer & Corporate Banking Division and Brinson combined will manage assets in excess of $940 billion. We are excited about the formation of Brinson and the additional resources we will bring together to further the tradition of delivering value-added investment performance and the highest level of professional client service. Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has produced an annualized total return of 10.55% versus 4.70% for the Morgan Stanley Capital International Non-U.S. Equity (Free) Index benchmark. This return was achieved at an annualized volatility of 10.55%, below the benchmark volatility of 11.94%. Our international Fund employs the same value-oriented investment philosophy within and across the international spectrum, as do our other Funds. Each Fund uses the resources of our entire worldwide organization. Investment performance for our clients is maximized within and across major asset classes through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific objectives and focused upon both risk and return considerations in the context of full investment cycles. Our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent. The Report that follows highlights the investment characteristics of the SwissKey Non-U.S. Equity Fund. We very much appreciate your continued trust and the confidence you have placed in the SwissKey Funds. Sincerely, /s/ Hanspeter A. Walder /s/ Raymond Simon ------------------- ---------------------- Hanspeter A. Walder Raymond Simon Executive Director Executive Director Private Banking Private Banking - -------------------------------------------------------------------------------- 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] While financial markets seem to be signaling that the worst of the crisis in Asia has passed, those economies still have substantial problems to overcome before they are recovered. Substantial amounts of foreign currency borrowing will require rescheduling or forgiveness, and excess capacity will need to be worked off. The Japanese, as particularly important lenders to these Asian borrowers, will remain vulnerable. The adverse impact on the U.S. from the Asian crisis is likely to remain relatively limited. Because non-Japan Asia represents a small portion of U.S. trade, direct effects, such as a drop in real growth due to a collapse in exports, are not expected to be sizable. The economy remains strong, as evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and 3.8%, respectively. Continental European economies continue to benefit from weaker currencies although the expansions have not been terribly strong. While output growth is moderate, there has been no discernible improvement in the high unemployment rates. Sterling remains strong on concerns of a weak euro and hikes in short- term rates by the Bank of England.
Non-U.S. Equity Environment 6 months 1 year 7/31/95* Major Markets ended ended to Total Return in U.S. Dollar Hedged Terms 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------------------- MSCI Non-US Equity (Free) Index -1.40% 16.12% 17.57% Japan -18.31 -9.86 4.03 U.K. 12.62 26.17 19.89 Germany 11.51 49.01 30.51 France 6.44 32.75 25.05 Canada 6.26 20.84 21.85 Netherlands 8.11 48.94 41.16 Australia -2.48 9.85 7.96 - ------------------------------------------------------------------------------------------- 6 months 1 year 7/31/95* Major Currencies ended ended to Percent Change Relative to U.S. Dollars 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------------------- Yen -11.99% -10.73% -14.90% Pound -1.14 -3.85 1.16 Deutschemark -3.08 -14.29 -10.35 Canadian Dollar -3.60 -4.22 -1.72 - ------------------------------------------------------------------------------------------- *Inception date of the SwissKey Non-U.S. Equity Fund
All total returns in excess of 1 year are average annualized total returns ================================================================================ 5 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] The Non-U.S. Equity Fund invests in the common stocks of companies headquartered outside the U.S. We believe that in a non-U.S. investment program the country allocation decision is the most important. Country assessments are jointly developed by the non-U.S. strategy team in our offices worldwide. Currency strategies are separately developed and coordinated with market allocations. Our industry strategies and individual security selections are determined by fundamental research conducted by our analysts worldwide. Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has earned an annualized return of 10.55% versus 4.70% for its benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. This return was achieved at an annualized volatility of 10.55%, measurably below the benchmark volatility of 11.94%. For the year ended December 31, 1997, the Fund returned 5.02%, while the index returned 2.07%. Since inception, market allocation and currency management have added solidly to returns, while Japan stock selection has detracted. In 1997, market allocation reduced performance, largely due to underweights of Switzerland and Sweden, strategic cash and overweights of New Zealand and Australia. Although value was added from underweights of Hong Kong, Japan and Malaysia, and from overweights of the Netherlands, Belgium, the U.K. and Finland, these did not completely offset the negatives. During 1997, there was a clear split between the aggregate performance of the European markets and that of the Pacific region. All European countries earned double-digit returns, several in excess of 50%, building on the prior two years' strong performance. In sharp contrast, Japan and Southeast Asia ended with double-digit losses, New Zealand rose only 3.5% and Australia "merely" rose 9.9%. The best performing markets in dollar-hedged terms were Switzerland (63.5%) and Denmark (59.5%). In contrast, the worst performer was Malaysia (-52.1%). The Southeast Asian markets reacted to a period of turmoil stemming from a currency, banking and property crisis that placed considerable downward pressure on the region's economy. In addition, Japan's fragile economic recovery has been further imperiled by an unprecedented series of bankruptcies in its financial and industrial sectors. The entry of Korea in the category of "at-risk" countries has dealt yet another blow to Japan's economic revival. Currency management was the second greatest positive contributor to 1997 performance, primarily due to the strength of the U.S. dollar, where the Fund holds an overweight. With a few exceptions, the current strategy is close to neutral, but the Fund benefited tremendously from its positions earlier in the year, focusing on a sizable U.S. dollar overweight and underweights of the Japanese yen and the core European currencies. Stock selection over the past year added significantly to value, principally due to excellent Japan stock selection, combined with good results in France and Canada. Positive stock selection in Japan derived from the Fund's exposure to high-quality defensive issues and multinational exporters, and its underweight of banks and financials. A negative contribution came from Germany, due to underweighting specific technology stocks. ================================================================================ 6 Non-U.S. Equity Fund [LOGO OF SWISS KEY FUNDS APPEARS HERE]
Total Return 6 months 1 year 7/31/95* ended ended to 12/31/97 12/31/97 12/31/97 - ------------------------------------------------------------------------------------------------- SwissKey Non-U.S. Equity Fund -7.71% 5.02% 10.55% MSCI Non-U.S. Equity (Free) Index** -8.22 2.07 4.70 =================================================================================================
* Inception date of the SwissKey Non-U.S. Equity Fund **Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the SwissKey Non- U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through December 31, 1997. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SwissKey Non-U.S. Equity Fund vs. MSCI Non-U.S. Equity (Free) Index Wealth Value with Dividends Reinvested [GRAPH CHART APPEARS HERE]
Swisskey Non-U.S. Equity Equity Fund (Free) Index 1 7/31/95 10000 10000 2 8/31/95 10146 9632 3 9/30/95 10302 9817 4 10/31/95 10205 9563 5 11/30/95 10448 9835 6 12/31/95 10858 10220 7 1/31/96 11065 10291 8 2/29/96 11024 10320 9 3/31/96 11158 10538 10 4/30/96 11563 10848 11 5/31/96 11500 10662 12 6/30/96 11578 10713 13 7/31/96 11256 10398 14 8/31/96 11287 10443 15 9/30/96 11630 10727 16 10/31/96 11578 10654 17 11/30/96 12161 11099 18 12/31/96 12140 10947 19 1/31/97 12074 10612 20 2/28/97 12262 10770 21 3/31/97 12328 10775 22 4/30/97 12405 10844 23 5/31/97 13220 11561 24 6/30/97 13815 12174 25 7/31/97 14059 12400 26 8/31/97 13063 11468 27 9/30/97 13782 12111 28 10/31/97 12920 11200 29 11/30/97 12687 11068 30 12/31/97 12750 11174
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. ================================================================================ Non-U.S. Equity Fund [LOGO OF SWISS KEY FUNDS APPEARS HERE] Industry Diversification As a Percent of Net Assets As of December 31, 1997 (Unaudited) - --------------------------------------------------------
- -------------------------------------------------------- NON-U.S. EQUITIES Airlines...................................... 0.35% Appliances & Household........................ 2.19 Autos/Durables................................ 3.25 Banking....................................... 11.65 Beverages & Tobacco........................... 2.43 Broadcasting & Publishing..................... 1.90 Building Materials............................ 1.41 Business & Public Service..................... 3.66 Chemicals..................................... 2.95 Construction.................................. 1.15 Data Processing............................... 0.97 Electric Components........................... 1.32 Electronics................................... 3.72 Energy........................................ 7.13 Financial Services............................ 1.99 Food & House Products......................... 3.41 Forest Products............................... 1.25 Gold Mining................................... 0.07 Health & Personal Care........................ 6.87 Industrial Components......................... 1.75 Insurance..................................... 5.24 Leisure & Tourism............................. 0.76 - -------------------------------------------------------- Machinery & Engineering....................... 0.39% Merchandising................................. 4.68 Metals-Steel.................................. 1.35 Miscellaneous Materials....................... 0.75 Miscellaneous Services........................ 0.09 Multi-Industry................................ 4.73 Non-Ferrous Metals............................ 1.69 Real Estate................................... 0.76 Recreation.................................... 0.61 Shipping...................................... 0.05 Telecommunications............................ 7.41 Textiles & Apparel............................ 0.16 Transportation................................ 1.05 Utilities..................................... 4.55 Wholesale & International Trade............... 0.48 ----- Total Non-U.S. Equities.................. 94.17 ----- SHORT-TERM INVESTMENTS........................ 5.49 ----- TOTAL INVESTMENTS........................ 99.66 CASH AND OTHER ASSETS, LESS LIABILITIES............................. 0.34 ----- NET ASSETS................................ 00.00% ===== - --------------------------------------------------------
Market and Currency Strategy As of December 31, 1997 (Unaudited)
Portfolio ---------------------- Market Currency Strategy Strategy Index - ----------------------------------------------------- U.S. Dollar 0.0% 7.3% 0.0% Japan 18.0 20.0 24.0 Australia 5.1 2.6 2.6 Belgium 3.6 1.2 1.2 Canada 3.2 4.9 4.9 Finland 0.8 0.7 0.7 France 7.1 7.6 7.6 Germany 8.6 9.4 9.4 Hong Kong 1.0 0.0 2.7 Italy 4.4 3.8 3.8 Malaysia 1.5 0.8 0.8 Netherlands 4.5 5.4 5.4 New Zealand 3.6 3.6 0.3 Spain 2.5 2.5 2.5 Sweden 1.8 2.5 2.5 Switzerland 5.1 7.4 7.4 U.K. 22.6 16.5 20.5 Cash Reserves 5.0 0.0 0.0 Other Markets 1.6 3.8 3.7 - ----------------------------------------------------- 100.0% 100.0% 100.0%
Top Ten Non-U.S. Equity Holdings As of December 31, 1997 (Unaudited)
Percent of Net Assets - ------------------------------------------------------- 1. Glaxo Wellcome PLC 1.47% 2. Royal Dutch Petroleum Co. 1.35 3. Novartis AG (Reg.) 1.34 4. Telecom Corp. of New Zealand Ltd 1.26 5. B.A.T. Industries PLC 1.09 6. Lloyds TSB Group PLC 1.09 7. Allianz AG Holding 1.03 8. British Petroleum Co. PLC 0.95 9. Matsushita Electric Industrial Co. 0.92 10. Roche Holding AG (Gen.) 0.91 ========================================================
8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ----------- Non-U.S. Equities -- 94.17% AUSTRALIA -- 4.68% Amcor Ltd.................................................. 89,300 $ 392,769 Boral Ltd.................................................. 226,000 571,377 Brambles Industries Ltd.................................... 47,700 946,429 Broken Hill Proprietary Co., Ltd........................... 295,670 2,745,392 Coca-Cola Amatil Ltd....................................... 51,100 381,782 CSR Ltd.................................................... 162,000 548,909 David Jones Ltd............................................ 565,600 637,584 Lend Lease Corp., Ltd...................................... 38,778 758,034 Mayne Nickless Ltd......................................... 74,800 395,280 M.I.M. Holdings Ltd........................................ 322,943 197,804 National Australia Bank Ltd................................ 205,848 2,874,425 News Corp. Ltd............................................. 427,659 2,360,278 News Corp. Ltd., Preferred................................. 108,182 535,313 Pacific Dunlop Ltd......................................... 271,600 575,169 Qantas Airways Ltd......................................... 265,310 469,532 Rio Tinto Ltd.............................................. 103,810 1,211,008 Santos Ltd................................................. 60,300 248,323 Telstra Corp., Ltd. (b).................................... 102,000 215,341 Westpac Banking Corp., Ltd................................. 355,351 2,272,868 WMC Ltd.................................................... 179,500 625,749 Woolworth's Ltd............................................ 114,300 382,073 ----------- 19,345,439 ----------- BELGIUM -- 3.32%........................................... Delhaize-Le Lion S.A....................................... 21,770 1,104,629 Electrabel S.A............................................. 10,905 2,522,357 Fortis AG.................................................. 723 98 Fortis AG Strip (b)........................................ 9,603 2,003,487 Generale de Banque S.A..................................... 2,430 1,057,563 Groupe Bruxelles Lambert S.A............................... 5,690 823,146 Kredietbank NV............................................. 2,780 1,166,743 Kredietbank VVPR........................................... 76 31,896 Petrofina S.A.............................................. 4,550 1,679,341 Societe Generale de Belgique............................... 7,238 662,244 Solvay S.A., Class A....................................... 16,210 1,019,387 Tractebel.................................................. 12,650 1,102,791 Tractebel Warrants "99" (b)................................ 1,350 3,461 Union Miniere Group S.A. (b)............................... 7,750 537,570 ----------- 13,714,713 ----------- CANADA -- 3.18% Agrium, Inc................................................ 32,300 392,719 Alcan Aluminum Ltd......................................... 24,500 674,516 Bank of Montreal........................................... 18,700 827,786 Barrick Gold Corp.......................................... 15,000 279,331 Canadian National Railway Co............................... 17,000 799,455 Canadian Pacific Ltd....................................... 56,194 1,511,752 Hudson's Bay Co............................................ 20,100 447,338 Imasco, Ltd................................................ 8,900 314,059 Imperial Oil Ltd........................................... 20,200 1,298,582 Magna International Inc., Class A.......................... 6,200 388,177 Moore Corp., Ltd........................................... 20,900 313,989 Newbridge Networks Corp. (b)............................... 7,700 269,293 Noranda, Inc............................................... 25,300 434,896 Northern Telecom Ltd....................................... 4,600 408,700 NOVA Corp.................................................. 68,800 653,819 Potash Corporation of Saskatchewan, Inc.................... 7,500 623,908
SHARES VALUE ------- ----------- Royal Bank of Canada....................................... 21,900 $ 1,156,900 Seagram Co., Ltd........................................... 14,400 465,376 TELUS Corporation.......................................... 33,800 748,697 TransCanada Pipelines Ltd.................................. 33,400 744,504 Westcoast Energy, Inc...................................... 16,800 387,394 ----------- 13,141,191 ----------- FINLAND -- 0.66% Cultor Oyj................................................. 3,500 190,242 Merita Ltd., Class A....................................... 54,410 297,743 Metsa Serla Oyj, Class B................................... 17,090 133,376 Nokia Oyj, Class A, Preferred.............................. 17,680 1,256,433 Outokumpu Oyj, Class A..................................... 14,920 182,195 Pohjola Insurance Group, Class B........................... 790 29,304 Sampo Insurance Co., Ltd., Class A......................... 5,160 170,557 The Rauma Group............................................ 693 10,817 UPM-Kymmene Corp........................................... 22,930 458,962 ----------- 2,729,629 ----------- FRANCE -- 5.57% Accor S.A.................................................. 4,165 774,707 Alcatel Alsthom............................................ 7,305 928,910 AXA-UAP.................................................... 15,502 1,200,014 AXA-UAP Rights (b)......................................... 9,902 9,711 Banque Nationale de Paris.................................. 15,110 803,472 Cie Bancaire S.A........................................... 1,162 188,323 Cie de Saint Gobain........................................ 9,043 1,285,200 Cie Financiere de Paribas.................................. 7,800 678,092 Cie Generale des Eaux...................................... 9,734 1,359,136 Cie Generale des Eaux Warrants "01" (b).................... 13,864 9,425 Dexia France............................................... 6,640 769,295 Elf Aquitaine S.A.......................................... 12,714 1,479,355 France Telecom S.A. (b).................................... 32,500 1,179,313 Groupe Danone.............................................. 3,220 575,382 Lafarge S.A................................................ 7,690 504,784 Lagardere S.C.A............................................ 21,860 723,095 Lyonnaise des Eaux S.A..................................... 10,843 1,200,338 Michelin, Class B.......................................... 17,293 870,974 Pechiney S.A., Class A..................................... 19,385 765,604 Peugeot S.A................................................ 9,260 1,168,275 Pinault-Printemps-Redoute S.A.............................. 1,750 934,051 Rhone-Poulenc, Class A..................................... 27,230 1,220,281 SEITA...................................................... 24,930 895,093 Societe Generale........................................... 8,713 1,187,610 Thomson CSF................................................ 24,290 765,926 Total S.A., Class B........................................ 11,725 1,276,575 Usinor Sacilor............................................. 18,180 262,607 ----------- 23,015,548 ----------- GERMANY -- 9.77% Allianz AG Holding......................................... 16,480 4,252,667 BASF AG.................................................... 23,140 826,199 Bayer AG................................................... 59,750 2,218,071 Bayerische Motoren Werke AG................................ 1,990 1,488,544 Commerzbank AG............................................. 49,330 1,920,416 Continental AG............................................. 42,200 950,503 Daimler-Benz AG............................................ 22,870 1,615,311 Deutsche Bank AG........................................... 47,967 3,355,903 Deutsche Telekom AG........................................ 152,360 2,821,638 Henkel KGaA-Vorzug AG, Preferred........................... 17,780 1,112,424 Hochtief AG................................................ 13,990 575,752
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- GERMANY (CONTINUED) Hoechst AG............................................... 18,960 $ 656,920 M.A.N. AG................................................ 3,000 866,748 Mannesmann AG............................................ 3,447 1,731,072 Metro AG................................................. 33,303 1,181,661 Muenchener Rueckver AG................................... 8,370 3,183,961 Muenchener Rueckver AG Warrants "98" (b)................. 12 7,274 Preussag AG.............................................. 4,619 1,420,559 RWE AG................................................... 33,800 1,813,970 Schering AG.............................................. 19,022 1,835,447 Siemens AG............................................... 36,770 2,218,756 Veba AG.................................................. 39,558 2,694,986 Volkswagen AG............................................ 2,920 1,632,056 ----------- 40,380,838 ----------- HONG KONG -- 0.93% Cheung Kong Holdings Ltd................................. 104,000 681,164 China Light & Power Co., Ltd............................. 58,500 324,643 Citic Pacific Ltd........................................ 54,000 214,648 Hang Seng Bank Ltd....................................... 42,000 405,175 Hong Kong and China Gas Co., Ltd......................... 257,000 497,516 Hong Kong Telecommunications Ltd......................... 237,000 487,856 Hutchison Whampoa Ltd.................................... 113,000 708,756 Sun Hung Kai Properties Ltd.............................. 54,000 376,331 Swire Pacific Ltd., Class A.............................. 31,000 170,033 ----------- 3,866,122 ----------- ITALY -- 4.33% Aeroporti Di Roma Spa (b)................................ 13,000 134,923 Assicurazioni Generali................................... 69,350 1,704,283 Banca Commerciale Italiana............................... 194,000 674,811 Credito Italiano Spa..................................... 343,500 1,059,807 Danieli & Co. Savings (Risp)............................. 141,100 507,563 Edison Spa............................................... 79,600 481,728 ENI ADR (c).............................................. 20,300 1,158,369 ENI Spa.................................................. 292,000 1,656,492 Fiat Spa-Priv Preferred.................................. 607,220 927,289 INA-Istituto Nazionale delle Assicurazioni............... 311,100 630,804 Instituto Mobiliare Italiano Spa......................... 92,000 1,092,729 Italgas Spa.............................................. 122,000 503,719 La Rinascente Spa........................................ 91,300 340,816 La Rinascente Spa RNC.................................... 101,740 759,576 La Rinascente Spa Warrants "99" (b)...................... 2,800 3,389 Mediobanca Spa........................................... 31,600 248,253 Montedison Spa........................................... 1,120,280 1,006,830 SAI-Savings (Risp)....................................... 86,000 379,401 Telecom Italia Mobile Spa................................ 210,000 969,797 Telecom Italia Mobile Spa RNC............................ 510,000 1,450,921 Telecom Italia Spa....................................... 90,666 579,467 Telecom Italia Spa RNC................................... 368,034 1,623,633 ----------- 17,894,600 ----------- JAPAN -- 19.44% Amada Co., Ltd........................................... 186,000 693,790 Asahi Glass Co., Ltd..................................... 83,000 395,770 Bank of Tokyo-Mitsubishi, Ltd............................ 152,000 2,104,211 Canon, Inc............................................... 126,000 2,945,895 Canon Sales Co., Inc..................................... 61,000 699,019 Citizen Watch Co., Ltd................................... 149,000 1,002,692 Dai Nippon Printing Co., Ltd............................. 155,000 2,920,592
SHARES VALUE ------- ----------- Daiichi Pharmaceutical Co., Ltd............................ 152,000 $ 1,718,439 Daikin Industries Ltd...................................... 180,000 681,100 Daiwa House Industry Co., Ltd.............................. 93,000 493,521 Fanuc...................................................... 63,700 2,420,135 Fujitsu.................................................... 98,000 1,055,182 Hitachi Ltd................................................ 313,000 2,238,723 Honda Motor Co............................................. 54,000 1,989,310 Hoya Corp.................................................. 22,000 693,713 Inax....................................................... 132,000 384,757 Ito Yokado Co., Ltd........................................ 61,000 3,119,785 Kaneka Corp................................................ 177,000 801,792 Keio Teito Electric Railway................................ 195,000 748,356 Kinki Nippon Railway....................................... 195,000 1,045,299 Kirin Brewery Co., Ltd..................................... 184,000 1,344,357 Kokuyo..................................................... 56,000 969,044 Kuraray Co., Ltd........................................... 198,000 1,644,607 Kyocera Corp............................................... 20,300 924,253 Marui Co., Ltd............................................. 90,000 1,405,114 Matsushita Electric Industrial Co.......................... 258,000 3,789,887 Mitsubishi Paper Mills..................................... 168,000 236,447 NGK Insulators............................................. 284,000 2,533,667 Nintendo Corp., Ltd........................................ 15,500 1,525,860 Nippon Denso Co., Ltd...................................... 87,000 1,572,390 Nippon Meat Packers, Inc................................... 108,000 1,478,485 Nippon Steel Co............................................ 156,000 231,555 Okumura.................................................... 203,000 483,984 Osaka Gas Co............................................... 312,000 715,062 Sankyo Co., Ltd............................................ 162,000 3,675,447 Secom Co., Ltd............................................. 40,000 2,565,660 Seino Transportation....................................... 135,000 675,908 Sekisui House Ltd.......................................... 272,000 1,755,109 Shinmaywa Industries Ltd................................... 27,000 66,449 Sony Corp.................................................. 33,500 2,988,656 Sumitomo Bank.............................................. 183,000 2,097,058 Sumitomo Chemical Co....................................... 222,000 512,209 Sumitomo Electric Industries............................... 137,000 1,875,485 Takeda Chemical Industries................................. 103,000 2,946,818 TDK Corp................................................... 28,000 2,118,977 Tokio Marine & Fire Insurance Co........................... 162,000 1,843,953 Tokyo Electric Power....................................... 41,000 750,471 Tokyo Steel Mfg............................................ 67,000 227,241 Tonen Corp................................................. 120,000 649,721 Toray Industries, Inc...................................... 581,000 2,613,997 Toshiba Corp............................................... 424,000 1,770,675 Toyo Suisan Kaisha......................................... 86,000 597,916 Toyota Motor Corp.......................................... 100,000 2,876,370 Yamazaki Baking Co., Ltd................................... 80,000 781,388 ----------- 80,396,301 ----------- MALAYSIA -- 1.54% Hume Industries (Malaysia) Bhd............................. 151,000 158,274 Kuala Lumpur Kepong Bhd.................................... 337,000 722,916 Land & General Holdings Bhd................................ 324,500 60,023 Malayan Banking Bhd........................................ 136,000 394,811 Malaysia International Shipping Bhd (Frgn.)................ 147,000 215,260 Nestle (Malaysia) Bhd...................................... 83,000 383,815 New Straits Times Press Bhd................................ 169,000 209,269 Perusahaan Otomobil Nasional Bhd........................... 102,000 99,576 Petronas Gas Bhd........................................... 139,000 316,031 Public Bank Bhd............................................ 128,400 39,914
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ----------- MALAYSIA (CONTINUED) Public Bank Bhd (Frgn.).................................. 204,000 $ 70,227 Public Bank Bhd Rights (b)............................... 21,400 1,155 Public Bank Bhd Rights (Frgn.) (b)....................... 34,000 1,747 Resorts World Bhd........................................ 152,000 255,774 Rothmans of Pall Mall Bhd................................ 91,000 707,193 Sime Darby Bhd........................................... 475,000 456,390 Telekom Malaysia Bhd..................................... 347,000 1,025,177 Tenaga Nasional Bhd...................................... 410,000 874,245 UMW Holdings Bhd......................................... 63,000 47,746 United Engineers Bhd..................................... 122,000 101,549 YTL Corp. Bhd............................................ 177,000 238,728 YTL Power International Bhd (b).......................... 4,900 3,764 ----------- 6,383,584 ----------- NETHERLANDS -- 4.31% ABN AMRO Holdings NV..................................... 75,352 1,468,162 Akzo Nobel NV............................................ 2,430 419,044 Elsevier NV.............................................. 88,210 1,427,163 Heineken NV.............................................. 6,310 1,098,717 Hoogovens NV............................................. 7,737 317,143 ING Groep NV............................................. 43,369 1,826,919 KLM Royal Dutch Air Lines NV............................. 11,150 412,494 KPN NV................................................... 43,716 1,824,285 Philips Electronics NV................................... 23,070 1,383,768 Royal Dutch Petroleum Co................................. 101,460 5,570,216 Unilever NV.............................................. 33,560 2,069,255 ----------- 17,817,166 ----------- NEW ZEALAND -- 3.12% Brierley Investments Ltd................................. 2,601,500 1,858,150 Carter Holt Harvey Ltd................................... 897,100 1,385,716 Fletcher Challenge Building.............................. 297,850 608,824 Fletcher Challenge Energy................................ 328,550 1,150,457 Fletcher Challenge Forests Ltd........................... 639,793 531,285 Fletcher Challenge Paper................................. 591,800 773,231 Lion Nathan Ltd.......................................... 298,000 667,967 Telecom Corp. of New Zealand Ltd......................... 1,071,500 5,195,536 Telecom Corp. of New Zealand Ltd. ADS (c)................ 19,300 747,875 ----------- 12,919,041 ----------- SINGAPORE -- 1.88% City Developments Ltd.................................... 97,000 449,021 DBS Land Ltd............................................. 184,000 281,733 Development Bank of Singapore Ltd........................ 92,000 786,231 Elec & Eltek International Co., Ltd...................... 28,600 130,988 Fraser & Neave Ltd....................................... 38,000 164,629 Hotel Properties Ltd..................................... 323,000 210,861 Keppel Corp., Ltd........................................ 106,750 306,629 Keppel Land Ltd.......................................... 115,000 158,338 NatSteel Ltd............................................. 82,000 110,956 Oversea-Chinese Banking Corp., Ltd....................... 159,400 927,074 Singapore Airlines Ltd. (Frgn.).......................... 165,000 1,077,151 Singapore Press Holdings Ltd. (Frgn.).................... 47,000 588,546 Singapore Telecommunications, Ltd........................ 767,000 1,429,306 United Overseas Bank Ltd. (Frgn.)........................ 174,000 965,519 Venture Manufacturing (Singapore) Ltd.................... 14,000 39,050 Wing Tai Holdings Ltd.................................... 126,000 147,312 ----------- 7,773,344 -----------
SHARES VALUE ------- ----------- SPAIN -- 2.44% Acerinox S.A............................................... 1,050 $ 155,482 Banco Bilbao-Vizcaya, S.A.................................. 37,590 1,215,843 Banco Central Hispanoamericano............................. 27,320 664,986 Banco Popular Espanol S.A.................................. 9,880 690,342 Banco Santander S.A........................................ 29,880 997,830 Empresa National de Electridad S.A......................... 72,480 1,286,304 Fomento Construcctiones y Contratas S.A.................... 12,880 490,119 Gas Natural SDG S.A........................................ 12,220 633,368 Iberdrola S.A.............................................. 67,710 890,687 Mapfre Corp................................................ 11,420 302,695 Repsol S.A................................................. 12,710 542,022 Repsol S.A. ADR (c)........................................ 7,130 303,471 Tabacalera S.A............................................. 1,600 129,642 Telefonica de Espana....................................... 43,960 1,254,599 Vallehermoso S.A........................................... 9,210 282,185 Viscofan Envolturas Celulosicas S.A........................ 10,060 252,457 ----------- 10,092,032 ----------- SWEDEN -- 1.69% ABB AB, A Shares........................................... 30,700 363,698 AssiDoman AB............................................... 2,000 50,664 Astra AB, A Shares......................................... 71,000 1,230,371 Electrolux AB, B Shares.................................... 4,800 333,325 Hennes & Mauritz AB, B Shares.............................. 16,800 741,058 Nordbanken Holding AB...................................... 163,700 926,339 Securitas AB, B Shares..................................... 12,400 375,066 Skanska AB, B Shares....................................... 9,200 377,410 Svenska Handelsbanken, A Shares............................ 14,600 505,092 Swedish Match AB........................................... 136,000 454,213 Telefonaktiebolaget LM Ericsson, B Shares.................. 24,700 929,215 Volvo AB, B Shares......................................... 26,200 703,325 ----------- 6,989,776 ----------- SWITZERLAND -- 5.03% ABB AG (Bearer)............................................ 373 469,255 CS Holdings AG (Reg.)...................................... 12,902 1,999,076 Holderbank Financiere Glarus, B Shares..................... 722 590,034 Nestle S.A. (Reg.)......................................... 1,635 2,453,733 Novartis AG (Reg.)......................................... 3,407 5,535,849 Roche Holding AG (Gen.).................................... 379 3,768,953 Sairgroup (b).............................................. 408 559,441 Schweizerische Lebensversicherungs-und Rentenastalt.............................................. 886 696,724 Sulzer AG.................................................. 697 442,494 Swiss Reinsurance Co. (Reg.)............................... 917 1,717,568 UBS (Bearer)............................................... 944 1,366,878 Zurich Versicherungs (Reg.)................................ 2,527 1,205,808 ----------- 20,805,813 ----------- UNITED KINGDOM -- 22.28% Abbey National PLC......................................... 100,100 1,796,941 Barclays PLC............................................... 47,000 1,251,271 Bass PLC................................................... 60,600 941,780 B.A.T. Industries PLC...................................... 495,200 4,514,040 BG PLC..................................................... 532,675 2,401,530 Billiton PLC (b)........................................... 384,000 985,668 Booker PLC................................................. 222,100 1,169,428 British Energy PLC......................................... 251,000 1,746,985 British Petroleum Co. PLC.................................. 297,069 3,910,410 British Sky Broadcating Group PLC.......................... 136,000 1,020,420
- -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ UNITED KINGDOM (CONTINUED) British Steel PLC......................................... 307,600 $ 660,499 British Telecommunications PLC............................ 454,800 3,580,778 BTR PLC................................................... 238,900 723,284 Cable & Wireless PLC...................................... 101,000 889,099 Cadbury Schweppes PLC..................................... 180,000 1,817,030 Centrica PLC (b).......................................... 414,500 610,411 Charter PLC............................................... 100,518 1,238,799 Coats Viyella PLC......................................... 441,700 661,369 Diageo PLC................................................ 209,300 1,926,834 FKI PLC................................................... 500,425 1,572,705 General Electric Co. PLC.................................. 439,800 2,854,810 Glaxo Wellcome PLC........................................ 256,200 6,070,391 Greenalls Group PLC....................................... 134,000 965,726 Hanson PLC................................................ 184,312 823,756 Hillsdown Holdings PLC.................................... 538,200 1,310,631 House of Fraser PLC....................................... 566,400 1,873,244 HSBC Holdings PLC......................................... 110,300 2,831,230 Inchcape PLC.............................................. 301,300 808,094 Legal & General Group PLC................................. 256,700 2,247,049 Lloyds TSB Group PLC...................................... 348,585 4,513,968 Marks & Spencer PLC....................................... 309,700 3,052,411 Mirror Group PLC.......................................... 535,500 1,718,182 National Westminster Bank PLC............................. 102,400 1,705,122 Northern Foods PLC........................................ 301,900 1,311,421 Peninsular & Oriental Steam Navigation Co................. 191,700 2,184,323 Reckitt & Colman PLC...................................... 54,346 853,977 Reuters Holdings PLC...................................... 115,100 1,259,424 Rio Tinto PLC............................................. 112,100 1,381,537 RJB Mining PLC............................................ 303,800 634,843 Royal & Sun Alliance Insurance Group PLC.................. 218,814 2,207,042 Scottish Hydro-Electric PLC............................... 124,400 1,027,541 Sears PLC................................................. 769,400 670,970 Sedgwick Group PLC........................................ 451,500 1,054,924 SmithKline Beecham PLC.................................... 266,600 2,732,897 Smurfit (Jefferson) Group PLC............................. 432,929 1,203,867 Tate & Lyle PLC........................................... 132,000 1,088,145 Tesco PLC................................................. 196,300 1,598,824 Thames Water PLC.......................................... 133,100 1,985,276 The Great Universal Stores PLC............................ 160,000 2,019,251 Unilever PLC.............................................. 116,600 999,566 Vodafone Group PLC........................................ 272,000 1,964,755 Williams PLC.............................................. 316,400 1,759,658 ------------ 92,132,136 ------------ Total Non-U.S. Equities (Cost $377,962,629)...................................... 389,397,273 ------------
FACE AMOUNT VALUE ---------- ------------ Short-Term Investments-- 5.49% COMMERCIAL PAPER -- 5.49% Case Credit Corp. 6.110%, due 01/20/98 $1,500,000 $ 1,495,163 6.030%, due 03/10/98 1,500,000 1,482,915 6.020%, due 03/13/98 1,500,000 1,482,191 GTE Corp. 6.120%, due 02/20/98 2,000,000 1,983,000 6.020%, due 03/02/98 1,500,000 1,484,950 Marriott Corp. 6.300%, due 01/16/98 3,000,000 2,992,125 Nabisco, Inc. 6.700%, due 01/05/98 5,000,000 4,996,278 Safeway, Inc. 6.700%, due 01/02/98 3,000,000 2,999,441 5.920%, due 01/22/98 1,500,000 1,494,820 Vastar Resources, Inc. 7.100%, due 01/02/98 2,298,000 2,297,547 ------------ Total Short-Term Investments (Cost $22,708,430) 22,708,430 ------------ Total Investments (Cost $400,671,059)--99.66% (a) 412,105,703 ------------ Cash and other assets, less liabilities -- 0.34% 1,397,658 ------------ Net Assets--100% $413,503,361 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS December 31, 1997 (Unaudited) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $400,671,059; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $54,880,226 Gross unrealized depreciation................................ (43,445,582) ----------- Net unrealized appreciation................................ $11,434,644 ===========
(b) Non-income producing security (c) Denominated in U.S. dollars. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Non-U.S. Equity Fund had the following open forward currency contracts as of December 31, 1997:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar......... 2/19/98 9,200,000 $ 6,438,744 $ (245,359) Danish Kroner........... 2/19/98 25,200,000 3,689,615 63,716 Dutch Guilder........... 2/19/98 12,700,000 6,283,614 (75,607) French Franc............ 2/19/98 47,500,000 7,918,475 179,167 Hong Kong Dollar........ 2/19/98 15,500,000 1,993,151 13,197 Japanese Yen............ 2/19/98 2,952,000,000 22,868,948 (1,659,011) Norwegian Krona......... 2/19/98 15,700,000 2,135,842 (7,605) Swedish Krona........... 2/19/98 77,500,000 9,780,957 55,406 Swiss Franc............. 2/19/98 23,000,000 15,859,553 392,169 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 2/19/98 12,550,000 8,186,509 1,019,749 Belgian Franc........... 2/19/98 320,000,000 8,661,289 (173,226) British Pound........... 2/19/98 14,900,000 24,457,905 (841,405) Dutch Guilder........... 2/19/98 5,900,000 2,919,159 (42,794) German Mark............. 2/19/98 4,900,000 2,732,941 (42,851) Hong Kong Dollar........ 2/19/98 44,500,000 5,722,273 (63,215) Italian Lira............ 2/19/98 3,550,000,000 2,007,247 30,863 Japanese Yen............ 2/19/98 15,757,627 122,073 10,291 Malaysian Ringgit....... 2/19/98 9,900,000 2,541,994 978,632 Singapore Dollar........ 2/19/98 6,300,000 3,715,346 439,231 Swedish Krona........... 2/19/98 54,800,000 6,916,083 159,175 Swiss Franc............. 2/19/98 6,525,059 4,499,327 30,108 ---------- Total................. $ 220,631 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997 (UNAUDITED) ASSETS: Investments, at value (Cost $400,671,059) (Note 1)............... $412,105,703 Cash............................................................. 919,098 Foreign currency, at value (Cost $466,106)....................... 462,654 Receivables: Investment securities sold...................................... 193,234 Dividends....................................................... 1,078,507 Fund shares sold................................................ 265,165 Variation margin (Note 5)....................................... 3,702 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 220,631 Other assets..................................................... 80,990 ------------ TOTAL ASSETS.................................................. 415,329,684 ------------ LIABILITIES: Payables: Investment securities purchased................................. 959,539 Investment advisory fees (Note 2)............................... 273,612 Variation margin (Note 5)....................................... 436,337 Accrued expenses................................................ 156,835 ------------ TOTAL LIABILITIES............................................. 1,826,323 ------------ NET ASSETS........................................................ $413,503,361 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $400,607,722 Accumulated undistributed net investment income.................. 55,030 Accumulated net realized gain.................................... 1,189,903 Net unrealized appreciation...................................... 11,650,706 ------------ NET ASSETS.................................................... $413,503,361 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $405,396,793 and 37,537,642 shares is- sued and outstanding) (Note 7)................................. $ 10.80 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $929 and 86 shares issued and outstanding) (Note 7)............ $ 10.80 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $8,105,639 and 756,307 shares issued and outstanding) (Note 7)...................................... $ 10.72 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) INVESTMENT INCOME: Dividends (net of $516,253 for foreign taxes withheld).......... $ 3,571,336 Interest........................................................ 788,825 ------------ TOTAL INCOME................................................. 4,360,161 ------------ EXPENSES: Advisory (Note 2)............................................... 1,633,467 Administrative.................................................. 142,058 Custodian....................................................... 127,605 Distribution (Note 6)........................................... 34,648 Other........................................................... 130,129 ------------ TOTAL EXPENSES............................................... 2,067,907 ------------ NET INVESTMENT INCOME ....................................... 2,292,254 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................... 7,396,068 Futures contracts.............................................. (1,031,399) Foreign currency transactions.................................. 821,079 ------------ Net realized gain............................................ 7,185,748 ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency .............................. (38,295,004) Futures contracts ............................................. (107,626) Forward contracts.............................................. (637,141) Translation of other assets and liabilities denominated in for- eign currency................................................. (37,238) ------------ Change in net unrealized appreciation or depreciation........ (39,077,009) ------------ Net realized and unrealized loss................................. (31,891,261) ------------ Net decrease in net assets resulting from operations............. $(29,599,007) ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 ----------------- ------------ OPERATIONS: Net investment income......................... $ 2,292,254 $ 5,529,755 Net realized gain............................. 7,185,748 24,421,499 Change in net unrealized appreciation or de- preciation .................................. (39,077,009) 35,391,730 ------------ ------------ Net increase (decrease) in net assets result- ing from operations.......................... (29,599,007) 65,342,984 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I ............................. (3,973,110) (4,371,883) Brinson Class N.............................. (8) -- SwissKey Class............................... (42,036) (40,369) Distributions from net realized gain: Brinson Class I.............................. (25,288,399) (12,209,010) Brinson Class N.............................. (59) -- SwissKey Class............................... (521,640) (94,152) ------------ ------------ Total distributions to shareholders........... (29,825,252) (16,715,414) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold................................... 132,897,867 232,045,893 Shares issued on reinvestment of distribu- tions........................................ 29,067,629 16,204,754 Shares redeemed............................... (117,690,199) (81,854,223) ------------ ------------ Net increase in net assets resulting from cap- ital share transactions (Note 7)............. 44,275,297 166,396,424 ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS..... (15,148,962) 215,023,994 ------------ ------------ NET ASSETS: Beginning of year............................. 428,652,323 213,628,329 ------------ ------------ End of year (including accumulated undistrib- uted net investment income of $55,030 and $1,777,930, respectively).................... $413,503,361 $428,652,323 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR ENDED JUNE 30, AUGUST 31, 1993* DECEMBER 31, 1997 ----------------------------- THROUGH BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------------------- Net asset value, begin- ning of period......... $ 12.59 $ 11.17 $ 9.68 $ 9.69 $ 10.00 -------- -------- -------- -------- ------- Income from investment operations: Net investment income. 0.07 0.18 0.18 0.15 0.10 Net realized and unrealized gain (loss)............... (1.00) 1.97 2.05 (0.16) (0.34) -------- -------- -------- -------- ------- Total income (loss) from investment operations......... (0.93) 2.15 2.23 (0.01) (0.24) -------- -------- -------- -------- ------- Less distributions: Distributions from net investment income.... (0.12) (0.17) (0.18) -- (0.07) Distributions from net realized gain........ (0.74) (0.56) (0.56) -- -- -------- -------- -------- -------- ------- Total distributions. (0.86) (0.73) (0.74) -- (0.07) -------- -------- -------- -------- ------- Net asset value, end of period................. $ 10.80 $ 12.59 $ 11.17 $ 9.68 $ 9.69 ======== ======== ======== ======== ======= Total return (non- annualized)............ (7.36)% 20.27% 23.64% (0.10)% (2.45)% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $405,397 $420,855 $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.00%** 1.00% 1.20% 1.23% 1.60%** After expense reim- bursement............ N/A N/A 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 1.14%** 1.83% 1.67% 1.93% 1.28%** After expense reim- bursement............ N/A N/A 1.87% 2.16% 1.88%** Portfolio turnover rate.................. 22% 25% 20% 14% 12% Average commission rate paid per share........ $ 0.0269 $ 0.0245 $ 0.0219 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
SIX MONTHS ENDED DECEMBER 31, 1997 BRINSON CLASS N (UNAUDITED) - -------------------------------------------------------------------------------- Net asset value, beginning of period.......................... $ 12.59 ------- Income from investment operations: Net investment income....................................... 0.06 Net realized and unrealized loss............................ (1.02) ------- Total loss from investment operations..................... (0.96) ------- Less distributions: Distributions from net investment income.................... (0.10) Distributions from net realized gain........................ (0.73) ------- Total distributions....................................... (0.83) ------- Net asset value, end of period................................ $ 10.80 ======= Total return (non-annualized)................................. (7.49)% Ratios/Supplemental data: Net assets, end of period (in 000s).......................... $ 1 Ratio of expenses to average net assets: Before expense reimbursement................................ 1.25%* After expense reimbursement................................. N/A Ratio of net investment income to average net assets: Before expense reimbursement................................ 0.89%* After expense reimbursement................................. N/A Portfolio turnover rate...................................... 22% Average commission rate paid per share....................... $0.0269
Commencement of Brinson Class N was June 30, 1997. * Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
SIX MONTHS ENDED YEAR JULY 31, 1995* DECEMBER 31, 1997 ENDED THROUGH SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 12.49 $ 11.12 $ 10.26 ------- ------- ------- Income from investment opera- tions: Net investment income......... 0.00 0.11 0.12 Net realized and unrealized gain......................... (0.98) 1.93 1.45 ------- ------- ------- Total income (loss) from in- vestment operations........ (0.98) 2.04 1.57 ------- ------- ------- Less distributions: Distributions from net invest- ment income.................. (0.05) (0.11) (0.15) Distributions from net real- ized gain.................... (0.74) (0.56) (0.56) ------- ------- ------- Total distributions......... (0.79) (0.67) (0.71) ------- ------- ------- Net asset value, end of period.. $ 10.72 $ 12.49 $ 11.12 ======= ======= ======= Total return (non-annualized)... (7.71)% 19.32% 15.78% Ratios/Supplemental data Net assets, end of period (in 000s)......................... $ 8,106 $ 7,797 $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement.. 1.84%** 1.81% 2.04%** After expense reimbursement... N/A N/A 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement.. 0.29%** 1.02% 0.83%** After expense reimbursement... N/A N/A 1.03%** Portfolio turnover rate........ 22% 25% 20% Average commission rate paid per share..................... $0.0269 $0.0245 $0.0219
* Commencement of SwissKey Class ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. The Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N, and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share of the Fund represents an identical interest in the investments of the Fund and has the same rights. The following is a summary of significant accounting policies consistently followed by the Non-U.S. Equity Fund (the "Fund") in the preparation of its financial statements. A.INVESTMENT VALUATION:Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION:Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C.INVESTMENT TRANSACTIONS:Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME:Interest income, which includes amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES:It is the policy of the Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1997, therefore, no federal income tax provision was required. F.DISTRIBUTIONS TO SHAREHOLDERS:It is the policy of the Fund to distribute its net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing tax treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. G.INCOME AND EXPENSE ALLOCATION:All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the SwissKey Class. - -------------------------------------------------------------------------------- 20 NON-U.S. EQUITY FUND -- 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. 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 SwissKey Class, respectively. Investment advisory fees and other transactions with affiliates for the six months ended December 31, 1997, were as follows:
ADVISORY ADVISORY FEE FEES -------- ---------- Non-U.S. Equity Fund........................................ 0.80% $1,633,467
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees fees paid to unaffiliated trustees were $2,944. 3.INVESTMENT TRANSACTIONS Investment transactions for the six months ended December 31, 1997, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ----------- Non-U.S. Equity Fund................................... $107,166,089 $82,459,445
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, 1997, was the Fund's custodian. 5.FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such contracts to hedge a portion of its portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. - -------------------------------------------------------------------------------- 21 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Brinson Class N and the SwissKey Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class, and effective June 30, 1997, the Brinson Class N shares. Annual fees under the SwissKey Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of daily net assets of the Brinson Class N. 7.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
SIX MONTHS ENDED DECEMBER 31, 1997 YEAR ENDED (UNAUDITED) JUNE 30, 1997 ----------------------- ----------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Sales: Brinson Class I............... 10,958,617 $130,290,326 19,910,853 $225,344,857 Brinson Class N............... -- -- 79 1,000 SwissKey Class................ 217,732 2,607,541 590,377 6,700,036 ---------- ------------ ---------- ------------ Total Sales................ 11,176,349 $132,897,867 20,501,309 $232,045,893 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I............... 2,668,222 $ 28,549,975 1,461,013 $ 16,110,105 Brinson Class N............... 7 67 -- -- SwissKey Class................ 48,737 517,587 8,477 94,649 ---------- ------------ ---------- ------------ Total Dividend Reinvest- ment...................... 2,716,966 $ 29,067,629 1,469,490 $ 16,204,754 ========== ============ ========== ============ Redemptions: Brinson Class I............... 9,525,571 $116,078,085 6,945,571 $ 80,838,515 Brinson Class N............... -- -- -- -- SwissKey Class................ 134,550 1,612,114 87,985 1,015,708 ---------- ------------ ---------- ------------ Total Redemptions.......... 9,660,121 $117,690,199 7,033,556 $ 81,854,223 ========== ============ ========== ============
- -------------------------------------------------------------------------------- 22 DISTRIBUTED BY: FUNDS DISTRIBUTOR, INC. 60 STATE STREET BOSTON, MA 02109 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- [LOGO OF SWISS KEY FUNDS APPEARS HERE] 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY . http://www.swisskey funds -----END PRIVACY-ENHANCED MESSAGE-----