-----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, Hk8z/wVlQwD/nnKWNsyc0s+HP8TFvV2eZyOcUvevCs/BizyYBNSygKLscVvL74rj wAXshrZcZRmupq6508+Uog== 0000950131-99-005179.txt : 19990906 0000950131-99-005179.hdr.sgml : 19990906 ACCESSION NUMBER: 0000950131-99-005179 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990903 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: 99705594 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 N-30D 1 BRINSON PARTNERS ANNUAL REPORTS ________________________ The Brinson Funds Brinson U.S. Balanced Fund Brinson U.S. Equity Fund Brinson U.S. Large Capitalization Equity Fund Brinson U.S. Large Capitalization Growth Fund Brinson U.S. Small Capitalization Growth Fund Brinson U.S. Bond Fund Brinson High Yield Fund Annual Report June 30, 1999 Institutional Asset Management [LOGO OF BRINSON APPEARS HERE] _____________________________________ Trustees and Officers [LOGO OF BRINSON 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 David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary ================================================================================ The Funds' Advisor -- Brinson Partners, Inc. [LOGO OF BRINSON APPEARS HERE] - ------------------------------------------------------------------------------- Since the entrepreneurial founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value- added investment performance; and providing our clients with unrivaled, custom- tailored service of the highest quality. Now, in 1999, more than 1,100 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, with approximately USD 280 billion in assets under management, and industry recognition as a global thought leader. In North America, we make our services available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are diversified, no-load, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and services. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios--balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Brinson Division, the institutional asset management division of UBSAG. ================================================================================ 2 Table of Contents [LOGO OF BRINSON APPEARS HERE] - ------------------------------------------------------------------------------ Shareholder Letter.......................................... 4 U.S. Economic and Market Highlights......................... 5 U.S. Balanced Fund.......................................... 6 Schedule of Investments................................ 10 Financial Statements................................... 13 Financial Highlights................................... 16 U.S. Equity Fund............................................ 18 Schedule of Investments................................ 22 Financial Statements................................... 23 Financial Highlights................................... 26 U.S. Large Capitalization Equity Fund....................... 28 Schedule of Investments................................ 32 Financial Statements................................... 33 Financial Highlights................................... 36 U.S. Large Capitalization Growth Fund....................... 38 Schedule of Investments................................ 42 Financial Statements................................... 43 Financial Highlights................................... 46 U.S. Small Capitalization Growth Fund....................... 48 Schedule of Investments................................ 52 Financial Statements................................... 54 Financial Highlights................................... 57 U.S. Bond Fund.............................................. 59 Schedule of Investments................................ 63 Financial Statements................................... 66 Financial Highlights................................... 69 High Yield Fund............................................. 71 Schedule of Investments................................ 75 Financial Statements................................... 78 Financial Highlights................................... 81 The Brinson Funds--Notes to Financial Statements............ 83 Report of Independent Auditors.............................. 90 ================================================================================ 3 Shareholder Letter [LOGO OF BRINSON APPEARS HERE] - ------------------------------------------------------------------------------- July 26, 1999 Dear Shareholder: We are pleased to present the Annual Report for The Brinson Funds covering the year ended June 30, 1999. This report focuses on the current economic outlook as well as our current strategies and performance updates for our seven Domestic Funds: U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund. During the second quarter of 1999, momentum shifted away from growth stocks. Growth-oriented stocks had outperformed value for much of the last two years, leading to what we believe to be significant overvaluation among many of the largest capitalization issues. Several factors contributed to this shift, including improving expectations for global growth (bottoming in Asia and Latin America), firming in key industrial commodity prices (notably oil) and expectations for stronger corporate profits. Steeper yield curves and higher interest rates also contributed to this rotation. An improving economic picture, coupled with increased profitability for value stocks, suggests that there is scope for continued outperformance relative to growth stocks in the coming months. Our work continues to indicate that many large-capitalization growth stocks remain overvalued and are likely to underperform. Our current strategies for U.S. fixed income portfolios indicate that current U.S. market interest rates provide positive excess returns. Market expectations of higher inflation and Fed tightening (the Fed did raise rates by 25 basis points on June 30) have driven bond yields in the U.S. to levels above our estimates of fair value. The prevailing credit spreads provide more than adequate compensation for risk, given our assumptions about the economy and the probabilities we assign to different scenarios for default rates. The U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund are all actively managed funds that provide integrated asset management across and within the U.S. security markets. Each of our Funds employ the same value-oriented investment philosophy of applied growth 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. The reports that follow highlight the investment characteristics and the performance of the respective Funds. We appreciate your continued trust and the confidence you have placed in The Brinson Funds, and look forward to a long lasting, quality relationship. Sincerely, /s/Gary P. Brinson Gary P. Brinson Chairman and Chief Investment Officer Brinson Partners, Inc. ================================================================================ 4 U.S. Economic and Market Highlights [LOGO OF BRINSON APPEARS HERE] ________________________________________________________________________________ The U.S. economy continued to expand at a rapid pace in the second quarter of 1999, with weakness in the housing sector being largely compensated by rebounding activity in manufacturing. With no signs of a recession in sight, the current business cycle will break the record for longevity established by the business expansion of the 1960s. Despite the strong momentum in economic growth, price pressures, as measured by consumer prices excluding food and energy, have remained moderate. Largely as a result of higher energy prices, headline inflation has moved back above 2%. Strong momentum in domestic demand, sluggish demand for U.S. products in Asia, Europe and Latin America and higher oil prices all contributed to a massive widening in the nation's trade deficit in May. Large net capital imports --which reflects global investors' confidence in the U.S. economy -- and a strong U.S. dollar are the flip side of the current account deficit. By increasing the federal funds rate on June 30, the Federal Reserve has partly reversed some of the rate cuts adopted during the Asia/Russia/LTCM crisis last year. The move reflects growing doubts about a permanent surge in productivity growth. Despite this tightening, the FOMC's policy stance continues to be expansionary with money supply expanding at rates inconsistent with long-run price stability. U.S. Environment [BAR CHARTS APPEAR HERE] Major Markets Year to date June 30, 1999 Total Return U.S. Cash Equivalents 2.17 U.S. Bonds -1.39 U.S. Equities 11.87 Salomon U.S. Treasury Benchmark Returns Year to date June 30, 1999 Maturity (Years) Total Return 1 2.25 2 0.52 5 -2.35 10 -6.5 30 -10.54 Top Ten Industry Returns Relative to S&P 500 Year to date June 30, 1999 Aerospace 24.93 For. Petroleum Res. 22.84 Dom. Petroleum Res. 21.83 Electronics 21.4 Oil Service 19.41 Forest Products 14.54 Aluminum 12.91 Producer Goods 11.72 Media 11.08 Telephone, Telegraph 10.66 Source: BARRA Bottom Ten Industry Returns Relative to S&P 500 Year to date June 30, 1999 Miscellaneous -9.61 Containers -9.69 Health (Non-Drug) -9.78 Drugs, Medicine -11.03 Electric Utilities -16.05 Beverages -17.05 Trucking, Freight -22.07 Precious Metals -24.55 Water Transport -26.82 Tobacco -30.91 Source: BARRA ================================================================================ 5 U.S. Balanced Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- We actively manage the U.S. Balanced Fund in all of its aspects. We seek out price/value discrepancies across capital markets (at the asset class level), and within capital markets (through sector, sub-sector and individual security selection). The Fund is monitored on an ongoing basis, and rebalanced with both risk and return considerations in mind. Our value estimates and investment decisions are based on comprehensive analysis of forward-looking investment fundamentals, drawing on the collective judgement of our seasoned investment teams. Since its performance inception on December 31, 1994, the Brinson U.S. Balanced Fund Class I has produced an annualized rate of return of 13.32% compared to the 20.78% return of its benchmark, the U.S. Balanced Mutual Fund Index. This performance record was obtained with significantly less risk or volatility than the benchmark, 5.45% versus 9.66%, respectively. The lower risk level implies that the Fund has generated a much more constant return stream over time, protecting its investors from abrupt fluctuations in the overall Fund's value. For the first six months of 1999, the Fund returned 0.96% versus 7.13% for the benchmark. The key reason for the Fund's underperformance is its relative underweight to the U.S. equity market, which we believe has reached historic levels of overvaluation. Today a record 76% of U.S. fund managers believe that Wall Street is overvalued. Based on our analysis, the U.S. equity market is now approximately 50% overvalued, a level higher than that seen prior to the market's "crash" in 1987. The Fund currently holds only 20% of its assets in equities versus 65% for the benchmark, which is the maximum underweight position. In 1998 and the first half of this year, the U.S. equity market was fueled by the desire to not miss out on market momentum. These feelings appear to have overshadowed concerns about the fundamentals of stock valuation, and the market has been driven to extremes. Infatuations with technology (especially internet- related) companies and a few other sectors were the key drivers of this phenomenon. The market had experienced an incredible lack of breadth leading into the second quarter of 1999, and was forced higher by an ever-smaller number of "in-vogue" stocks. Momentum shifted away from U.S growth stocks in the second quarter of 1999 after a long period of outperformance relative to value stocks. Factors contributing to this shift include higher global industrial production, the rebound in many commodity prices (notably oil) and expectations for stronger corporate profits. This is a significant change from the momentum in growth stocks over the past two years. While strong value stock performance this quarter helped broaden the market, valuation imbalances still remain. The market on the whole remains overvalued, with growth stocks at the extreme. With risk considerations uppermost in mind, overweight positions relative to the benchmark are held in conventional U.S. bonds at +25%, and in Treasury Inflation Protected Securities (TIPS) at +20%. TIPS are bonds linked to the Consumer Price Index whose future cash flows are regularly adjusted according to prevailing inflation. While it is likely that future average inflation will be moderate, it is also likely that it will be more pronounced than currently expected by market participants. In this type of environment, TIPS provide unusual upside potential. ================================================================================ 6 U.S. Balanced Fund ________________________________________________________________________________ Total Return
6 months 1 year 3 years 12/31/94* ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 - ---------------------------------------------------------------------------------------------------------- Brinson U.S. Balanced Fund Class I 0.96% 4.74% 10.72% 13.32% - ---------------------------------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 7.13 14.27 19.40 20.78 - ---------------------------------------------------------------------------------------------------------- Wilshire 5000 Index 11.87 19.59 25.84 27.64 - ---------------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 7.24 8.51 - ----------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Balanced Fund Class I. ** An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Smith Barney Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Balanced Fund Class I, the U.S. Balanced Mutual Fund Index, the Wilshire 5000 Index and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000 on December 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Balanced Fund Class I vs. U.S. Balanced Mutual Fund Index, Wilshire 5000 Index and Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Balanced U.S. Balanced Mutual Wilshire 5000 Salomon Smith Barney Fund Class I Fund Index Index BIG Bond Index 12/31/94 1,000,000 1,000,000 1,000,000 1,000,000 1/31/95 1,019,000 1,020,459 1,021,610 1,020,700 2/28/95 1,050,000 1,054,246 1,062,301 1,044,584 3/31/95 1,064,000 1,074,390 1,090,303 1,050,643 4/30/95 1,080,000 1,096,416 1,117,397 1,065,037 5/31/95 1,120,000 1,133,880 1,155,243 1,107,319 6/30/95 1,139,086 1,160,041 1,192,095 1,115,070 7/31/95 1,154,301 1,190,257 1,241,150 1,112,840 8/31/95 1,170,530 1,202,592 1,253,251 1,125,637 9/30/95 1,192,845 1,236,362 1,301,050 1,136,219 10/31/95 1,199,945 1,234,092 1,287,988 1,151,444 11/30/95 1,236,461 1,274,817 1,342,560 1,169,406 12/31/95 1,254,813 1,294,523 1,364,511 1,185,544 1/31/96 1,278,797 1,320,146 1,401,066 1,193,606 2/29/96 1,273,346 1,327,345 1,425,571 1,173,434 3/31/96 1,276,616 1,333,439 1,441,166 1,164,985 4/30/96 1,279,887 1,351,402 1,476,778 1,156,364 5/31/96 1,284,248 1,375,182 1,517,153 1,155,786 6/30/96 1,293,124 1,374,034 1,504,667 1,170,696 7/31/96 1,273,247 1,327,149 1,423,490 1,173,857 8/31/96 1,287,603 1,354,048 1,469,027 1,172,096 9/30/96 1,324,045 1,409,152 1,547,238 1,192,490 10/31/96 1,354,965 1,433,054 1,568,869 1,219,321 11/30/96 1,405,762 1,503,041 1,672,806 1,239,440 12/31/96 1,396,859 1,487,401 1,653,954 1,228,533 1/31/97 1,414,616 1,541,133 1,742,490 1,233,201 2/28/97 1,419,351 1,541,265 1,741,688 1,234,558 3/31/97 1,394,492 1,491,506 1,664,653 1,222,089 4/30/97 1,418,167 1,541,250 1,737,249 1,239,565 5/31/97 1,459,599 1,617,300 1,860,333 1,251,217 6/30/97 1,493,510 1,672,330 1,945,797 1,266,106 7/31/97 1,555,541 1,771,762 2,095,390 1,300,418 8/31/97 1,530,490 1,723,138 2,016,624 1,289,234 9/30/97 1,563,891 1,798,097 2,135,625 1,308,186 10/31/97 1,548,383 1,768,165 2,064,487 1,326,893 11/30/97 1,559,120 1,808,702 2,132,078 1,333,129 12/31/97 1,581,464 1,836,885 2,171,479 1,346,727 1/31/98 1,597,411 1,851,662 2,183,270 1,364,100 2/28/98 1,638,609 1,938,829 2,342,213 1,363,145 3/31/98 1,670,504 2,004,551 2,459,440 1,368,461 4/30/98 1,666,517 2,023,665 2,488,634 1,375,577 5/31/98 1,670,504 1,995,462 2,422,411 1,388,783 6/30/98 1,675,623 2,046,664 2,507,341 1,400,171 7/31/98 1,661,933 2,019,021 2,452,405 1,403,111 8/31/98 1,614,019 1,825,458 2,070,492 1,424,579 9/30/98 1,672,885 1,918,042 2,205,737 1,458,199 10/31/98 1,705,740 2,007,777 2,369,843 1,451,637 11/30/98 1,726,275 2,093,822 2,519,072 1,459,621 12/31/98 1,738,302 2,183,183 2,680,268 1,464,146 1/31/99 1,734,600 2,241,002 2,778,795 1,474,981 2/28/99 1,693,873 2,174,472 2,678,063 1,449,168 3/31/99 1,712,385 2,233,354 2,781,410 1,457,429 4/30/99 1,762,368 2,305,512 2,914,723 1,462,238 5/31/99 1,753,112 2,265,285 2,850,919 1,448,786 6/30/99 1,755,023 2,338,817 2,998,512 1,443,860
12/31/94 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 7 U.S. Balanced Fund ________________________________________________________________________________ Total Return
6 months 1 year 6/30/97* ended ended to 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------------ Brinson U.S. Balanced Fund Class N 0.53% 4.17% 8.09% - ------------------------------------------------------------------------------------ U.S. Balanced Mutual Fund Index** 7.13 14.27 18.26 - ------------------------------------------------------------------------------------ Wilshire 5000 Index 11.87 19.59 24.14 - ------------------------------------------------------------------------------------ Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 6.79 - ------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Balanced Fund Class N. ** An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Smith Barney Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Balanced Fund Class N, the U.S. Balanced Mutual Fund Index, the Wilshire 5000 Index and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Balanced Fund Class N vs. U.S. Balanced Mutual Fund Index, Wilshire 5000 Index and Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Balanced U.S. Balanced Mutual Wilshire 5000 Salomon Smith Barney Fund Class N Fund Index Index BIG Bond Index 6/30/97 $1,000,000 $1,000,000 $1,000,000 $1,000,000 7/31/97 $1,041,534 $1,059,457 $1,076,880 $1,027,100 8/31/97 $1,023,962 $1,030,382 $1,036,400 $1,018,267 9/30/97 $1,046,326 $1,075,205 $1,097,558 $1,033,235 10/31/97 $1,035,144 $1,057,307 $1,060,998 $1,048,011 11/30/97 $1,042,332 $1,081,546 $1,095,735 $1,052,936 12/31/97 $1,057,159 $1,098,399 $1,115,985 $1,063,676 1/31/98 $1,067,820 $1,107,235 $1,122,044 $1,077,398 2/28/98 $1,095,359 $1,159,358 $1,203,729 $1,076,644 3/31/98 $1,117,569 $1,198,658 $1,263,976 $1,080,842 4/30/98 $1,114,903 $1,210,087 $1,278,979 $1,086,463 5/31/98 $1,117,569 $1,193,223 $1,244,946 $1,096,893 6/30/98 $1,121,533 $1,223,840 $1,288,593 $1,105,887 7/31/98 $1,112,392 $1,207,310 $1,260,360 $1,108,210 8/31/98 $1,080,401 $1,091,566 $1,064,084 $1,125,165 9/30/98 $1,118,791 $1,146,928 $1,133,590 $1,151,719 10/31/98 $1,140,728 $1,200,587 $1,217,930 $1,146,537 11/30/98 $1,154,438 $1,252,039 $1,294,623 $1,152,843 12/31/98 $1,162,059 $1,305,474 $1,337,466 $1,156,416 1/31/99 $1,159,592 $1,340,048 $1,428,101 $1,164,974 2/28/99 $1,128,752 $1,300,265 $1,376,333 $1,144,587 3/31/99 $1,139,854 $1,335,474 $1,429,445 $1,151,111 4/30/99 $1,173,162 $1,378,623 $1,497,958 $1,154,910 5/31/99 $1,168,227 $1,354,568 $1,465,168 $1,144,284 6/30/99 $1,168,251 $1,398,538 $1,541,020 $1,140,394
6/30/97 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 8 U.S. Balanced Fund [LOGO OF BRINSON APPEARS HERE] ________________________________________________________________________________ Industry Diversification As a Percent of Net Assets As of June 30, 1999 - -------------------------------------------------------------------------------- U.S. EQUITIES Energy.................................... 0.27% Capital Investment Capital Goods............................ 4.71 Technology............................... 6.10 ------ 10.81 Basic Industries Chemicals................................ 1.82 Housing/Paper............................ 3.13 Metals................................... 1.18 ------ 6.13 Consumer Non-Durables............................. 1.39 Retail/Apparel........................... 2.43 Autos/Durables........................... 1.71 Health: Drugs............................ 1.93 Health: Non-Drugs........................ 2.25 ------ 9.71 Financial Banks.................................... 4.71 Non-Banks................................ 3.48 ------ 8.19 Utilities Electric................................. 1.75 Telephone................................ 0.71 ------ 2.46 Transportation............................ 3.78% Services/Misc............................. 2.61 ------ Total U.S. Equities................... 43.96* U.S. BONDS Corporate Bonds Asset-Backed............................. 0.99 CMO...................................... 0.46 Consumer................................. 1.05 Financial Services....................... 1.06 Industrial Components.................... 0.59 Services/Miscellaneous................... 0.91 Utilities................................ 2.43 ------ Total U.S. Corporate Bonds............ 7.49 International Dollar Bonds................ 3.10 Mortgage-Backed Securities................ 5.13 U.S. Government Agencies.................. 12.14 U.S. Government Obligations............... 24.97 ------ Total U.S. Bonds...................... 52.83* SHORT-TERM INVESTMENTS.................... 2.17* ------ TOTAL INVESTMENTS..................... 98.96 CASH AND OTHER ASSETS, LESS LIABILITIES......................... 1.04 ------ NET ASSETS................................ 100.00% ====== - -------------------------------------------------------------------------------- *The Fund held a long position in U.S. Treasury futures on June 30, 1999 which increased U.S. bond exposure from 52.83% to 77.27%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 43.96% to 18.53%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 2.17% to 3.16%. Asset Allocation As of June 30, 1999 Current Benchmark Strategy - -------------------------------------------- U.S. Equity 65% 20% U.S. Bonds 35 80 - -------------------------------------------- 100% 100% Top Ten U.S. Equity Holdings As of June 30, 1999 Percent of Net Assets - -------------------------------------------- 1. Xerox Corp. 2.46% 2. FDX Corp. 1.68% 3. Burlington Northern Santa Fe Corp. 1.57% 4. Raytheon Co., Class B 1.45% 5. Electronic Data Systems Corp. 1.42% 6. Corning, Inc. 1.39% 7. Aetna, Inc. 1.34% 8. Lockheed Martin Corp. 1.19% 9. CIGNA Corp. 1.08% 10. General Instrument Corp. 1.08% - -------------------------------------------- ================================================================================ 9 U.S. Balanced Fund -- Schedule of Investments June 30, 1999 - ------------------------------------------------------------------------
Shares Value ------ ----- U.S. Equities -- 43.96% Advanced Micro Devices, Inc. (b)............. 8,900 $ 160,756 Aetna, Inc................................... 5,900 527,681 Allergan, Inc................................ 1,900 210,900 Alza Corp. (b)............................... 7,700 391,737 American Standard Companies, Inc. (b)........ 4,100 196,800 Aon Corp..................................... 10,050 414,562 Armstrong World Industries, Inc.............. 1,100 63,594 BankBoston Corp.............................. 2,200 112,475 Baxter International, Inc.................... 4,400 266,750 Burlington Northern Santa Fe Corp............ 19,900 616,900 Champion Enterprises, Inc. (b)............... 3,500 65,188 Champion International Corp.................. 1,200 57,450 Chase Manhattan Corp......................... 3,400 294,525 CIGNA Corp................................... 4,800 427,200 Circuit City Stores-Circuit City Group....... 3,700 344,100 CMS Energy Corp.............................. 3,700 154,937 CommScope, Inc. (b).......................... 3,166 97,355 Compaq Computer Corp......................... 1,100 26,056 Computer Sciences Corp. (b).................. 1,900 131,456 Compuware Corp. (b).......................... 3,200 101,800 Comverse Technology, Inc. (b)................ 1,230 92,865 Consolidated Stores Corp. (b)................ 5,100 137,700 Corning, Inc................................. 7,800 546,975 Covance, Inc. (b)............................ 3,075 73,608 Delphi Automotive Systems Corp............... 7,200 133,650 Dial Corp.................................... 2,100 78,094 Dominion Resources, Inc...................... 600 25,988 Eastman Chemical Co.......................... 2,200 113,850 Electronic Data Systems Corp................. 9,900 559,969 Eli Lilly and Company........................ 2,200 157,575 Entergy Corp................................. 10,400 325,000 FDX Corp. (b)................................ 12,200 661,850 Federal-Mogul Corp........................... 2,000 104,000 First American Corp. of Tennessee............ 1,000 41,563 First Data Corp.............................. 7,958 389,445 First Security Corp.......................... 1,925 52,456 First Union Corp............................. 3,300 155,100 Fleet Financial Group, Inc................... 5,000 221,875 Fleetwood Enterprises, Inc................... 2,200 58,163 Food Lion Inc., Class A...................... 11,600 137,750 Fort James Corp.............................. 7,000 265,125 General Instrument Corp. (b)................. 10,000 425,000 Genzyme Corp. (b)............................ 1,600 77,600 Genzyme Surgical Products Division (b)....... 286 1,262 Geon Co...................................... 1,000 32,250 GreenPoint Financial Corp.................... 6,400 210,000 Hibernia Corp., Class A...................... 4,700 73,731 Household International, Inc................. 6,400 303,200 Illinois Tool Works, Inc..................... 1,300 106,600 IMC Global, Inc.............................. 7,200 126,900 Johnson Controls, Inc........................ 1,900 131,694 Kimberly-Clark Corp.......................... 3,600 205,200 Lafarge Corp................................. 2,200 77,963 Lear Corp. (b)............................... 4,800 238,800 Lockheed Martin Corp......................... 12,542 467,189 Lyondell Chemical Company.................... 5,700 117,563 Martin Marietta Materials, Inc............... 1,136 67,024 Masco Corp................................... 12,400 $ 358,050 Mattel, Inc.................................. 5,600 148,050 MCN Energy Group, Inc........................ 800 16,600 Nabisco Holdings Corp., Class A.............. 1,100 47,575 National Service Industries, Inc............. 2,000 72,000 New York Times Co............................ 2,100 77,306 Newell Rubbermaid, Inc....................... 4,100 190,650 Nextel Communications, Inc. (b).............. 5,600 281,050 Norfolk Southern Corp........................ 7,000 210,875 Peco Energy Co............................... 4,400 184,250 Pentair, Inc................................. 2,100 96,075 Philip Morris Companies, Inc................. 6,400 257,200 PNC Bank Corp................................ 3,200 184,400 Praxair, Inc................................. 3,400 166,387 Raytheon Co., Class B........................ 8,100 570,037 Regions Financial Corp....................... 1,000 38,438 Southdown, Inc............................... 2,316 148,803 St. Jude Medical, Inc. (b)................... 5,600 199,500 Tyson Foods, Inc., Class A................... 7,400 166,500 U.S. Bancorp................................. 5,059 172,006 Ultramar Diamond Shamrock Corp............... 4,090 89,213 United Healthcare Corp....................... 4,000 250,500 USG Corp..................................... 2,100 117,600 Vencor, Inc. (b)............................. 4,200 630 Ventas, Inc.................................. 2,800 15,050 Viad Corp.................................... 3,900 120,656 W.W. Grainger, Inc........................... 1,200 64,575 Wells Fargo and Co........................... 7,000 299,250 Westvaco Corp................................ 1,400 40,600 Xerox Corp................................... 16,400 968,625 York International Corp...................... 2,500 107,031 ----------- Total U.S. Equities (Cost $14,121,165)....... 17,316,281 ----------- Face Amount ------ Bonds -- 52.83% U.S. Corporate Bonds -- 7.49% Archer Daniels 6.950%, due 12/15/69.......... $ 250,000 232,287 Donaldson Lufkin & Jenrette, FRN 6.700%, due 06/30/00......................... 415,000 417,222 Heller Financial Commercial Mortgage Assets, 99-PH1, Class A1 6.500%, due 05/15/61................................. 184,130 182,451 MBNA Global Capital Securities, FRN 5.795%, due 02/01/27..................... 215,000 186,425 Noram Energy Corp. 6.375%, due 11/01/03...... 200,000 195,519 PanAmSat Corp. 6.000%, due 01/15/03.......... 335,000 327,904 Peco Energy Transition Trust 6.130%, due 03/01/09................................. 215,000 203,857 Rite Aid Corp., 144A 6.125%, due 12/15/08.... 140,000 126,805 Sprint Capital Corp. 6.875%, due 11/15/28.... 200,000 182,106 TCI Communications, Inc. 8.750%, due 08/01/15................................. 220,000 249,899 Time Warner, Inc. 7.570%, due 02/01/24....... 290,000 288,806 U.S.A. Waste Services 6.500%, due 12/15/02... 360,000 356,994 ----------- 2,950,275 -----------
=============================================================================== 10 U.S. Balanced Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------
Face Amount Value ------ ----- International Dollar Bonds -- 3.10% Abbey National PLC, Resettable Perpetual Preferred 6.700%, due 06/29/49............................ 250,000 $ 231,861 British Sky Broadcasting Group plc 6.875%, due 02/23/09...................................... 125,000 113,989 Credit Suisse-London, 144A, Resettable Perpetual Preferred 7.900%, due 05/01/07.................. 270,000 262,863 Empresa Nacional de Electricidad S.A. 8.125%, due 02/01/97...................................... 200,000 155,920 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14................................ 235,000 216,865 Tyco International Group, S.A. 5.875%, due 11/01/04...................................... 250,000 241,254 ----------- 1,222,752 ----------- Mortgage-Backed Securities -- 5.13% LB Commercial Conduit Mortgage Trust, 99-C1, Class A1, 6.410%, due 10/15/30..................... 90,000 88,809 Prudential Home Mortgage Securities, 93-43, Class A9 6.750%, due 10/25/23............................. 711,829 695,607 Residential Asset Securitization Trust 97-A10, Class A1, 7.250%, due 12/25/27............................ 432,331 434,501 97-A11, Class A2, 7.000%, due 01/25/28.................... 93,689 93,927 UCFC Home Equity Loan 97-C, Class A8, FRN 5.069%, due 09/15/27.................................. 710,969 709,256 ----------- 2,022,100 ----------- U.S. Government Agencies -- 12.14% Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23...................................... 386,445 398,293 9.000%, due 03/01/24...................................... 178,064 189,558 Federal Home Loan Mortgage Corp. 9.000%, due 01/01/29...................................... 164,979 174,620 Federal National Mortgage Assoc. 5.250%, due 01/15/09...................................... 440,000 401,812 7.500%, due 07/01/10...................................... 277,137 281,711 7.500%, due 12/01/27...................................... 228,125 230,712 Federal National Mortgage Assoc. Series 97-72 Class EG 0.000%, due 09/25/22....................... 263,539 234,686 FNCI 8.000%, due 02/01/13................................. 327,222 337,170 Government National Mortgage Association 7.000%, due 12/15/23...................................... 651,117 645,402 7.500%, due 06/15/24...................................... 478,831 485,108 8.000%, due 08/15/22...................................... 506,068 521,774 Jordan Aid 8.750%, due 09/01/19........................... 775,765 881,285 ----------- 4,782,131 ----------- U.S. Government Obligations -- 24.97% U.S. Treasury Bond 8.000%, due 11/15/21................... $ 1,535,000 $ 1,846,797 U.S. Treasury Inflation Indexed Note 3.625%, due 01/15/08...................................... 5,140,000 5,137,858 3.625%, due 04/15/28...................................... 2,940,000 2,852,343 ----------- 9,836,998 ----------- Total U.S. Bonds (Cost $21,149,598)....................... 20,814,256 ----------- Short-Term Investments -- 2.17% U.S. Treasury Bills -- 1.57% U.S. Treasury Bill 4.46%, due 08/05/99.................... 620,000 617,348 ----------- Investment Companies -- 0.60%............................. Shares ------ Brinson Supplementary Trust U.S. Cash Management Prime Fund..................................... 236,079 236,079 ----------- Total Short-Term Investments (Cost $853,397)........................................... 853,427 ----------- Total Investments (Cost $36,124,160) -- 98.96% (a).......................... 38,983,964 Cash and other assets, less liabilities -- 1.04%................................. 409,130 ----------- Net Assets -- 100%........................................ $39,393,094 ===========
See accompanying notes to Schedule of Investments. ================================================================================ 11 U.S. Balanced Fund -- Schedule of Investments June 30, 1999 - ----------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $36,124,160; and net unrealized appreciation consisted of: Gross unrealized appreciation..................... $ 3,895,161 Gross unrealized depreciation..................... (1,035,357) ----------- Net unrealized appreciation................... $ 2,859,804 =========== (b) Non-income producing security FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1999. 144A:Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $606,533, or 1.54% 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 The U.S. Balanced Fund had the following open futures contracts as of June 30, 1999:
Settlement Cost/ Current Unrealized Date Proceeds Value Loss -------------- ---------- ----------- ------------ Interest Rate Futures Buy Contracts 5 Year U.S. Treasury Note, 57 contracts.......... September 1999 $6,256,594 $ 6,213,000 $ (43,594) 10 Year U.S. Treasury Note, 14 contracts......... September 1999 1,574,551 1,556,625 (17,926) 30 Year U.S. Treasury Bond, 16 contracts......... September 1999 1,881,096 1,854,500 (26,596) Index Futures Sale Contracts Standard & Poor's 500, 29 contracts.............. September 1999 9,569,072 10,017,325 (448,254) --------- Total........................................ $(536,370) =========
The segregated cash and aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1999 were $83,300 and $617,348, respectively. See accompanying notes to financial statements. ================================================================================ 12 U.S. Balanced Fund -- Financial Statements
- ----------------------------------------------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $35,888,081)........................................................... $38,747,885 Affiliated issuers (Cost $236,079)................................................................ 236,079 Cash................................................................................................ 69,398 Receivables: Investment securities sold........................................................................ 334,340 Dividends......................................................................................... 21,037 Interest.......................................................................................... 273,042 Fund shares sold.................................................................................. 87,121 Other assets........................................................................................ 1,621 ----------- TOTAL ASSETS.................................................................................... 39,770,523 ----------- LIABILITIES: Payables: Investment securities purchased................................................................... 67,513 Fund shares redeemed.............................................................................. 120,328 Investment advisory fees.......................................................................... 15,906 Variation margin.................................................................................. 111,813 Accrued expenses.................................................................................. 61,869 ----------- TOTAL LIABILITIES............................................................................... 377,429 ----------- NET ASSETS........................................................................................... $39,393,094 =========== NET ASSETS CONSIST OF: Paid in capital..................................................................................... $36,848,035 Accumulated undistributed net investment income..................................................... 200,223 Accumulated net realized gain....................................................................... 21,402 Net unrealized appreciation......................................................................... 2,323,434 ----------- NET ASSETS...................................................................................... $39,393,094 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $37,603,028 and 4,010,404 shares issued and outstanding)......................................... $ 9.38 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,266 and 135 shares issued and outstanding).................................................... $ 9.38 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,788,800 and 191,943 shares issued and outstanding)............................................ $ 9.32 ===========
See accompanying notes to financial statements. ================================================================================ 13 U.S. Balanced Fund -- Financial Statements
- ------------------------------------------------------------------------------------------------------------ STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Interest.................................................................................. $ 1,648,958 Dividends................................................................................. 315,958 ----------- TOTAL INCOME.......................................................................... 1,964,916 ----------- EXPENSES: Advisory.................................................................................. 347,297 Professional.............................................................................. 43,123 Registration.............................................................................. 36,449 Printing.................................................................................. 27,654 Distribution.............................................................................. 9,774 Other..................................................................................... 21,483 ----------- TOTAL EXPENSES........................................................................ 485,780 Expenses waived by Advisor............................................................ (79,286) ----------- NET EXPENSES.......................................................................... 406,494 ----------- NET INVESTMENT INCOME................................................................. 1,558,422 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.............................................................................. 4,805,976 Futures contracts........................................................................ (548,763) ----------- Net realized gain..................................................................... 4,257,213 ----------- Change in net unrealized appreciation or depreciation on: Investments.............................................................................. (4,679,394) Futures contracts........................................................................ (482,951) ----------- Change in net unrealized appreciation or depreciation................................. (5,162,345) ----------- Net realized and unrealized loss.......................................................... (905,132) ----------- Net increase in net assets resulting from operations...................................... $ 653,290 ===========
See accompanying notes to financial statements. ============================================================================== 14 U.S. Balanced Fund -- Financial Statements
- ------------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF CHANGES IN NET ASSETS Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income....................................................... $ 1,558,422 $ 9,285,597 Net realized gain........................................................... 4,257,213 43,393,817 Change in net unrealized appreciation or depreciation....................... (5,162,345) (19,387,830) ------------ ------------- Net increase in net assets resulting from operations........................ 653,290 33,291,584 ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................................................ (2,554,055) (11,202,072) Brinson Class N............................................................ (68) (62) UBS Investment Funds Class................................................. (123,921) (96,209) Distributions from net realized gain: Brinson Class I............................................................ (9,074,452) (20,202,719) Brinson Class N............................................................ (243) (75) UBS Investment Funds Class................................................. (483,100) (121,168) ------------ ------------- Total distributions to shareholders.......................................... (12,235,839) (31,622,305) ------------ ------------- CAPITAL SHARE TRANSACTIONS: Shares sold................................................................. 14,184,340 58,797,856 Shares issued on reinvestment of distributions.............................. 12,036,064 31,535,417 Shares redeemed............................................................. (57,681,932) (294,075,195) ------------ ------------- Net decrease in net assets resulting from capital share transactions........ (31,461,528) (203,741,922) ------------ ------------- TOTAL DECREASE IN NET ASSETS............................................ (43,044,077) (202,072,643) ------------ ------------- NET ASSETS: Beginning of period......................................................... 82,437,171 284,509,814 ------------ ------------- End of period (including accumulated undistributed net investment income of $200,223 and $1,337,239, respectively)........................... $ 39,393,094 $ 82,437,171 ============ =============
See accompanying notes to financial statements. =============================================================================== 15 U.S. Balanced Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
December 30, 1994* Year Ended June 30, Through ----------------------------------------------- Brinson Class I 1999 1998 1997 1996 June 30, 1995 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period.......... $ 12.24 $ 12.53 $ 11.71 $ 11.23 $ 10.00 Income from investment operations:.......... --------- --------- --------- --------- --------- Net investment income...................... 0.34** 0.49** 0.47 0.44 0.23 Net realized and unrealized gain........... 0.18 0.93 1.29 1.04 1.16 --------- --------- --------- --------- --------- Total income from investment operations. 0.52 1.42 1.76 1.48 1.39 --------- --------- --------- --------- --------- Less distributions: Distributions from net investment income... (0.73) (0.77) (0.40) (0.43) (0.16) Distributions from net realized gain....... (2.65) (0.94) (0.54) (0.57) -- --------- --------- --------- --------- --------- Total distributions..................... (3.38) (1.71) (0.94) (1.00) (0.16) --------- --------- --------- --------- --------- Net asset value, end of period................ $ 9.38 $ 12.24 $ 12.53 $ 11.71 $ 11.23 ========= ========= ========= ========= ========= Total return (non-annualized)................. 4.74% 12.19% 15.50% 13.52% 13.91% Ratios/Supplemental data: Net assets, end of period (in 000s)......... $ 37,603 $ 80,556 $ 282,860 $ 227,829 $ 157,724 Ratio of expenses to average net assets: Before expense reimbursement............... 0.96% 0.81% 0.88% 1.01% 1.06%*** After expense reimbursement................ 0.80% 0.80% 0.80% 0.80% 0.80%*** Ratio of net investment income to average net assets: Before expense reimbursement............... 3.00% 3.88% 3.78% 3.76% 4.36%*** After expense reimbursement................ 3.16% 3.89% 3.86% 3.97% 4.63%*** Portfolio turnover rate..................... 113% 194% 329% 240% 196%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. ================================================================================ 16 U.S. Balanced Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Year Ended Ended Brinson Class N June 30, 1999 June 30, 1998 - ----------------------------------------------------------------------------------------- Net asset value, beginning of period................... $ 12.27 $ 12.53 ---------- ---------- Income from investment operations: Net investment income................................ 0.29* 0.47* Net realized and unrealized gain..................... 0.18 0.94 ---------- ---------- Total income from investment operations........... 0.47 1.41 ---------- ---------- Less distributions: Distributions from net investment income............. (0.71) (0.73) Distributions from net realized gain................. (2.65) (0.94) ---------- ---------- Total distributions............................... (3.36) (1.67) ---------- ---------- Net asset value, end of period......................... $ 9.38 $ 12.27 ========== ========== Total return........................................... 4.17% 12.15% Ratios/Supplemental data: Net assets, end of period (in 000s)................... $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement......................... 1.21% 1.06% After expense reimbursement.......................... 1.05% 1.05% Ratio of net investment income to average net assets: Before expense reimbursement......................... 2.75% 3.63% After expense reimbursement.......................... 2.91% 3.64% Portfolio turnover rate............................... 113% 194%
*The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. ================================================================================ 17 U.S. Equity Fund [LOGO OF BRINSON APPEARS HERE] - ------------------------------------------------------------------------------- The investment strategies implemented in the U.S. Equity Fund are designed to enhance returns, while controlling risk. Our investment strategies emphasize stock selection with attention to avoiding unintended concentrations in particular industry and other common characteristic exposures. The Fund is typically 70% invested in large capitalization stocks with the remaining 30% in intermediate and small capitalization stocks. Industry exposures are normally maintained within 10% of the benchmark weightings. Since its performance inception on February 28, 1994, the Brinson U.S. Equity Fund Class I has produced an annualized return of 21.60%, compared to the 22.66% return of its benchmark, the Wilshire 5000 Equity Index. These results have been achieved with a risk level or volatility very similar to that of the benchmark: 14.02% versus 14.10%, respectively. For the last six months, the Fund has underperformed the benchmark, returning 10.45% compared to the benchmark return of 11.87%. Stock selection has provided the largest positive contribution to the Fund's returns over the last six months. Positions in Circuit City, First Data Corp. and FDX Corp. were some of the best performers. The Fund's underperformance on a year-to-date basis results mainly from our protective industry and common characteristic exposures which we feel are appropriate given the current environment of increasing volatility and stratification of equity returns across market segments. The equity market continued to favor a small group of fashionable large capitalization growth and technology (especially internet-related) stocks in the first quarter of 1999. These types of stocks represent, in our opinion, the most overvalued segments of the U.S. equity market. They have been driven to extremes by investors' unwillingness to miss out on the market's momentum. Demand for this niche group of stocks alone drove the entire market higher in the first quarter. Momentum, however, shifted away from U.S. growth stocks in the second quarter of 1999 after a long period of outperformance relative to "value" stocks. Factors contributing to this shift include higher global industrial production, the rebound in many commodity prices (notably oil) and expectations for stronger corporate profits. That shift helped the Fund regain nearly 400 basis points relative to the benchmark during the second quarter, with the Fund holding a pronounced overweight in stocks with "value" style affiliations. This is a significant change from the momentum in growth stocks over the past two years. While strong value stock performance this quarter helped broaden the market, valuation imbalances still remain, and growth stocks are likely to underperform. In addition to the value overweight, common characteristic exposures include underweights to size, momentum and earnings variability--chief characteristics of the "growth" segment of the market. While these underweights have hampered performance on a year-to-date basis, they were beneficial in the second quarter, and we believe the Fund is well positioned for the coming months. ================================================================================ 18 U.S. Equity Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return
6 months 1 year 3 years 5 years 2/28/94* ended ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------------------------- Brinson U.S. Equity Fund Class I 10.45% 15.22% 22.67% 23.95% 21.60% - ------------------------------------------------------------------------------------------------- Wilshire 5000 Equity Index 11.87 19.59 25.84 25.69 22.66 - -------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Equity Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Equity Fund Class I and the Wilshire 5000 Equity Index if you had invested $1,000,000 on February 28, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Equity Fund Class I vs. Wilshire 5000 Equity Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Equity Fund Wilshire 5000 Equity Class I Index 2/28/94 1,000,000 1,000,000 3/31/94 942,943 954,720 4/30/94 964,965 963,876 5/31/94 984,985 973,322 6/30/94 970,003 947,285 992,118 975,401 1,055,444 1,018,484 9/30/94 1,019,258 998,766 1,014,232 1,015,076 979,050 977,904 12/31/94 983,676 991,086 1,004,021 1,012,504 1,049,797 1,052,832 3/31/95 1,076,245 1,080,584 4/30/95 1,099,642 1,107,437 5/31/95 1,140,332 1,144,946 6/30/95 1,178,023 1,181,470 1,219,913 1,230,087 1,242,391 1,242,080 9/30/95 1,289,389 1,289,453 1,285,302 1,276,507 1,358,865 1,330,593 12/31/95 1,382,877 1,352,348 1,439,578 1,388,577 1,462,678 1,412,864 3/31/96 1,489,979 1,428,320 1,518,329 1,463,614 1,542,480 1,503,629 6/30/96 1,538,200 1,491,254 1,464,400 1,410,801 1,520,277 1,455,933 9/30/96 1,588,806 1,533,447 1,622,543 1,554,884 1,735,351 1,657,895 12/31/96 1,737,594 1,639,211 1,800,717 1,726,958 1,811,046 1,726,163 3/31/97 1,751,366 1,649,815 1,805,308 1,721,764 1,937,291 1,843,751 6/30/97 2,028,487 1,928,453 2,183,729 2,076,712 2,098,633 1,998,648 9/30/97 2,192,928 2,116,589 2,076,785 2,046,085 2,118,182 2,113,074 12/31/97 2,167,878 2,152,123 2,182,676 2,163,809 2,372,581 2,321,335 3/31/98 2,509,461 2,437,518 2,484,798 2,466,451 2,449,037 2,400,819 6/30/98 2,464,186 2,484,991 2,402,303 2,430,545 2,059,471 2,052,036 9/30/98 2,209,228 2,186,075 2,377,550 2,348,719 2,476,563 2,496,618 12/31/98 2,570,544 2,656,377 1/31/99 2,553,433 2,754,025 2/28/99 2,459,983 2,654,192 3/31/99 2,540,271 2,756,617 4/30/99 2,769,291 2,888,742 5/31/99 2,735,069 2,825,507 6/30/99 2,839,240 2,971,784
2/28/94 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 19 U.S.Equity Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return
6 months 1 year 6/30/97* ended ended to 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------- Brinson U.S. Equity Fund Class N 10.34% 14.75% 17.88% - ------------------------------------------------------------------------- Wilshire 5000 Equity Index 11.87 19.59 24.14 - -------------------------------------------------------------------------
*Inception date of the Brinson U.S. Equity Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Equity Fund Class N and the Wilshire 5000 Equity Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Equity Fund Class N vs. Wilshire 5000 Equity Index Wealth Value with Dividends Reinvested
Brinson U.S. Equity Fund Wilshire 5000 Equity Class N Index 6/30/97 1,000,000 1,000,000 7/31/97 1,076,531 1,076,880 8/31/97 1,034,580 1,036,400 9/30/97 1,080,499 1,097,558 10/31/97 1,023,243 1,060,998 11/30/97 1,043,084 1,095,735 12/31/97 1,067,291 1,115,985 1/31/98 1,074,577 1,122,044 2/28/98 1,168,071 1,203,729 3/31/98 1,234,245 1,263,976 4/30/98 1,222,103 1,278,979 5/31/98 1,203,890 1,244,946 6/30/98 1,210,968 1,288,593 7/31/98 1,179,902 1,260,360 8/31/98 1,011,779 1,064,084 9/30/98 1,083,049 1,133,590 10/31/98 1,165,282 1,217,930 11/30/98 1,214,013 1,294,623 12/31/98 1,259,349 1,377,466 1/31/99 1,250,932 1,428,101 2/28/99 1,204,961 1,376,333 3/31/99 1,243,810 1,429,445 4/30/99 1,355,824 1,497,958 5/31/99 1,338,342 1,465,168 6/30/99 1,389,546 1,541,020
6/30/97 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 20 U.S. Equity Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Industry Diversification As a Percent of Net Assets As of June 30, 1999 - ------------------------------------------------------------------ U.S. EQUITIES Energy............................................... 0.69% Capital Investment Capital Goods..................................... 10.54 Technology........................................ 13.90 ------ 24.44 Basic Industries Chemicals......................................... 4.00 Housing/Paper..................................... 7.07 Metals............................................ 2.61 ------ 13.68 Consumer Non-Durables...................................... 2.93 Retail/Apparel.................................... 5.42 Autos/Durables.................................... 3.81 Health: Drugs..................................... 4.32 Health: Non-Drugs................................. 5.02 ------ 21.50 Financial Banks............................................. 10.62% Non-Banks......................................... 7.81 ------ 18.43 Utilities Electric.......................................... 3.91 Telephone......................................... 1.58 ------ 5.49 Transportation....................................... 8.60 Services/Misc........................................ 5.89 ------ Total U.S. Equities...................... 98.72 SHORT-TERM INVESTMENTS............................... 4.77 ------ TOTAL INVESTMENTS........................ 103.49 LIABILITIES, LESS CASH AND OTHER ASSETS...................................... (3.49) ------ NET ASSETS........................................... 100.00% ====== - -------------------------------------------------------------------------------- Top Ten U.S. Equity Holdings As of June 30, 1999 Percent of Net Assets - ----------------------------------------------------------- 1. Xerox Corp. 5.51% 2. FDX Corp. 3.75 3. Burlington Northern Santa Fe Corp. 3.51 4. Raytheon Co., Class B 3.22 5. Electronic Data Systems Corp. 3.18 6. Corning, Inc. 3.11 7. Aetna, Inc. 3.01 8. Lockheed Martin Corp. 2.66 9. CIGNA Corp. 2.44 10. General Instrument Corp. 2.44 - ----------------------------------------------------------- ================================================================================ 21 U.S. Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value --------- ------------ U.S. Equities -- 98.72% Advanced Micro Devices, Inc. (b)..................... 400,500 $ 7,234,031 Aetna, Inc........................................... 265,800 23,772,487 Allergan, Inc........................................ 84,600 9,390,600 Alza Corp. (b)....................................... 349,150 17,763,006 American Standard Companies, Inc. (b)................ 183,900 8,827,200 Aon Corp............................................. 451,950 18,642,937 Armstrong World Industries, Inc...................... 48,200 2,786,563 BankBoston Corp...................................... 97,200 4,969,350 Baxter International, Inc............................ 195,400 11,846,125 Burlington Northern Santa Fe Corp.................... 894,000 27,714,000 Champion Enterprises, Inc. (b)....................... 157,000 2,924,125 Champion International Corp.......................... 55,500 2,657,063 Chase Manhattan Corp................................. 154,700 13,400,887 CIGNA Corp........................................... 216,950 19,308,550 Circuit City Stores-Circuit City Group............... 164,000 15,252,000 CMS Energy Corp...................................... 164,850 6,903,094 CommScope, Inc. (b).................................. 140,999 4,335,719 Compaq Computer Corp................................. 50,100 1,186,744 Computer Sciences Corp. (b).......................... 94,100 6,510,544 Compuware Corp. (b).................................. 184,600 5,872,588 Comverse Technology, Inc. (b)........................ 51,847 3,914,449 Consolidated Stores Corp. (b)........................ 221,100 5,969,700 Corning, Inc......................................... 350,200 24,557,775 Covance, Inc. (b).................................... 140,050 3,352,447 Delphi Automotive Systems Corp....................... 323,700 6,008,681 Dial Corp............................................ 92,400 3,436,125 Dominion Resources, Inc.............................. 43,300 1,875,431 Eastman Chemical Co.................................. 98,450 5,094,788 Electronic Data Systems Corp......................... 443,600 25,091,125 Eli Lilly and Co..................................... 97,000 6,947,625 Entergy Corp......................................... 467,800 14,618,750 FDX Corp. (b)........................................ 545,800 29,609,650 Federal-Mogul Corp................................... 89,900 4,674,800 First American Corp. of Tennessee.................... 46,700 1,940,969 First Data Corp...................................... 358,430 17,540,668 First Security Corp.................................. 88,300 2,406,175 First Union Corp..................................... 148,400 6,974,800 Fleet Financial Group, Inc........................... 223,900 9,935,562 Fleetwood Enterprises, Inc........................... 107,900 2,852,606 Food Lion Inc., Class A.............................. 528,600 6,277,125 Fort James Corp...................................... 320,100 12,123,787 GATX Corp............................................ 30,200 1,149,488 General Instrument Corp. (b)......................... 454,250 19,305,625 Genzyme Corp. (b).................................... 72,150 3,499,275 Genzyme Surgical Products Division (b)............... 12,916 56,909 Geon Co.............................................. 24,550 791,738 GreenPoint Financial Corp............................ 288,000 9,450,000 Hibernia Corp........................................ 226,750 3,557,141 Household International, Inc......................... 289,200 13,700,850 Illinois Tool Works, Inc............................. 54,600 4,477,200 IMC Global, Inc...................................... 323,700 5,705,213 Johnson Controls, Inc................................ 84,500 5,856,906 Kimberly-Clark Corp.................................. 180,650 10,297,050 Lafarge Corp......................................... 96,700 3,426,806 Lear Corp. (b)....................................... 214,050 10,648,987 Lockheed Martin Corp................................. 565,052 21,048,187 Lyondell Chemical Company............................ 257,250 5,305,781 Martin Marietta Materials, Inc....................... 52,307 3,086,113 Masco Corp........................................... 557,500 16,097,812 Mattel, Inc.......................................... 258,700 6,839,381 MCN Energy Group, Inc................................ 66,900 1,388,175 Nabisco Holdings Corp................................ 20,300 $ 877,975 National Service Industries, Inc..................... 88,000 3,168,000 New York Times Co.................................... 105,100 3,868,994 Newell Rubbermaid, Inc............................... 183,200 8,518,800 Nextel Communications, Inc., Class A (b)............. 249,450 12,519,272 Norfolk Southern Corp................................ 314,600 9,477,325 Peco Energy Co....................................... 179,600 7,520,750 Pentair, Inc......................................... 94,500 4,323,375 Philip Morris Companies, Inc......................... 283,450 11,391,147 PNC Bank Corp........................................ 145,500 8,384,438 Praxair, Inc......................................... 153,400 7,507,013 Raytheon Co., Class B................................ 361,950 25,472,232 Regions Financial Corp............................... 45,900 1,764,281 Southdown, Inc....................................... 102,840 6,607,470 St. Jude Medical, Inc. (b)........................... 253,100 9,016,687 Tyson Foods, Inc..................................... 332,350 7,477,875 U.S. Bancorp......................................... 229,141 7,790,794 Ultramar Diamond Shamrock Corp....................... 184,218 4,018,255 United Healthcare Corp............................... 178,700 11,191,087 USG Corp............................................. 71,600 4,009,600 Vencor, Inc. (b)..................................... 169,000 25,350 Ventas, Inc.......................................... 119,700 643,388 Viad Corp............................................ 175,650 5,434,172 W.W. Grainger, Inc................................... 54,400 2,927,400 Wells Fargo and Co................................... 311,900 13,333,725 Westvaco Corp........................................ 72,800 2,111,200 Xerox Corp........................................... 737,900 43,582,219 York International Corp.............................. 111,300 4,765,031 ------------ Total U.S. Equities (Cost $611,467,321).............. 779,917,143 ------------ Short-Term Investments -- 4.77% Investment Companies -- 4.77% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $37,684,984).................... 37,684,984 37,684,984 ------------ Total Investments (Cost $649,152,305) -- 103.49% (a)............... 817,602,127 Liabilities, less cash and other assets -- (3.49%) (27,551,605) ------------ Net Assets -- 100%................................... $790,050,522 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $649,152,305; and net unrealized appreciation consisted of: Gross unrealized appreciation $191,506,645 Gross unrealized depreciation (23,056,823) ------------ Net unrealized appreciation $168,449,822 ============ (b) Non-income producing security See accompanying notes to financial statements. ================================================================================ 22 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $611,467,321)........................ $779,917,143 Affiliated issuers (Cost $37,684,984)........................... 37,684,984 Cash............................................................. 939 Receivables: Investment securities sold...................................... 4,034,378 Dividends....................................................... 935,568 Interest........................................................ 163,922 Fund shares sold................................................ 1,589,198 Other assets..................................................... 914 ------------ TOTAL ASSETS................................................. 824,327,046 ------------ LIABILITIES: Payables: Investment securities purchased................................. 4,197,075 Fund shares redeemed............................................ 29,582,170 Investment advisory fees........................................ 462,359 Accrued expenses................................................ 34,920 ------------ TOTAL LIABILITIES............................................ 34,276,524 ------------ NET ASSETS........................................................ $790,050,522 ============ NET ASSETS CONSIST OF: Paid in capital.................................................. $577,012,442 Accumulated undistributed net investment income.................. 1,363,158 Accumulated net realized gain.................................... 43,225,100 Net unrealized appreciation...................................... 168,449,822 ------------ NET ASSETS................................................... $790,050,522 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $713,320,572 and 33,205,246 shares issued and outstanding)....................................... $ 21.48 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $7,563,160 and 353,550 shares issued and outstanding)....................................... $ 21.39 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $69,166,790 and 3,233,960 shares issued and outstanding)....................................... $ 21.39 ============
See accompanying notes to financial statements. ================================================================================ 23 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends.................................................. $ 10,840,069 Interest................................................... 860,262 ------------ TOTAL INCOME............................................. 11,700,331 ------------ EXPENSES: Advisory................................................... 5,047,492 Distribution............................................... 363,195 Administration............................................. 267,455 Other...................................................... 459,718 ------------ TOTAL EXPENSES........................................... 6,137,860 ------------ NET INVESTMENT INCOME.................................... 5,562,471 ------------ NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments............................................... 52,263,712 Futures contracts......................................... 1,685,319 ------------ Net realized gain........................................ 53,949,031 ------------ Change in net unrealized appreciation or depreciation on: Investments............................................... 51,764,886 Futures contracts......................................... (96,948) ------------ Change in net unrealized appreciation or depreciation.... 51,667,938 ------------ Net realized and unrealized gain........................... 105,616,969 ------------ Net increase in net assets resulting from operations....... $111,179,440 ============
See accompanying notes to financial statements. =============================================================================== 24 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income.......................................................... $ 5,562,471 $ 5,791,742 Net realized gain.............................................................. 53,949,031 44,131,079 Change in net unrealized appreciation or depreciation.......................... 51,667,938 58,277,883 ------------- ------------- Net increase in net assets resulting from operations........................... 111,179,440 108,200,704 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................................................... (5,223,351) (4,978,081) Brinson Class N............................................................... (28,171) (832) UBS Investment Funds Class.................................................... (190,578) (249,586) Distributions from net realized gain: Brinson Class I............................................................... (36,404,562) (28,383,478) Brinson Class N............................................................... (234,496) (64) UBS Investment Funds Class.................................................... (3,937,537) (2,678,143) ------------- ------------- Total distributions to shareholders............................................ (46,018,695) (36,290,184) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................................................... 283,730,686 346,081,960 Shares issued in connection with the acquisition of the UBS Value Equity Fund.. 23,269,419 -- Shares issued on reinvestment of distributions................................. 42,645,369 33,981,329 Shares redeemed................................................................ (285,854,547) (163,864,419) ------------- ------------- Net increase in net assets resulting from capital share transactions........... 63,790,927 216,198,870 ------------- ------------- TOTAL INCREASE IN NET ASSETS............................................... 128,951,672 288,109,390 ------------- ------------- NET ASSETS: Beginning of period............................................................ 661,098,850 372,989,460 ------------- ------------- End of period (including accumulated undistributed net investment income of $1,363,158 and $1,242,787, respectively)....................................... $ 790,050,522 $ 661,098,850 ============= =============
See accompanying notes to financial statements. ================================================================================ 25 U.S. Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, ------------------------------------------------ Brinson Class I 1999 1998 1997 1996 1995 - -------------------------------------------------------------------------------------------------- Net asset value, beginning of period........ $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65 -------- -------- -------- -------- ------- Income from investment operations: Net investment income.................... 0.17* 0.19 0.15 0.17 0.16 Net realized and unrealized gain......... 2.67 3.39 4.27 3.31 1.89 -------- -------- -------- -------- ------- Total income from investment operations................................ 2.84 3.58 4.42 3.48 2.05 -------- -------- -------- -------- ------- Less distributions: Distributions from net investment income. (0.15) (0.18) (0.14) (0.17) (0.14) Distributions from net realized gain..... (1.12) (1.13) (1.23) (0.25) (0.03) -------- -------- -------- -------- ------- Total distributions................... (1.27) (1.31) (1.37) (0.42) (0.17) -------- -------- -------- -------- ------- Net asset value, end of period.............. $ 21.48 $ 19.91 $ 17.64 $ 14.59 $ 11.53 ======== ======== ======== ======== ======= Total return................................ 15.22% 21.48% 31.87% 30.57% 21.45% Ratios/Supplemental data: Net assets, end of period (in 000s)....... $713,321 $605,768 $337,949 $126,342 $42,573 Ratio of expenses to average net assets: Before expense reimbursement............. 0.80% 0.80% 0.89% 1.14% 1.70% After expense reimbursement.............. N/A N/A 0.80% 0.80% 0.80% Ratio of net investment income to average net assets: Before expense reimbursement............. 0.82% 1.12% 1.06% 1.13% 1.09% After expense reimbursement.............. N/A N/A 1.15% 1.47% 1.99% Portfolio turnover rate................... 48% 42% 43% 36% 33%
* The net investment income per share data was determined by using average shares outstanding throughout the period. N/A = Not applicable See accompanying notes to financial statements. ================================================================================ 26 U.S. Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended Year Ended Brinson Class N June 30, 1999 June 30, 1998 - -------------------------------------------------------------------------------------- Net asset value, beginning of period....................... $19.88 $17.64 ------ ------ Income from investment operations: Net investment income................................... 0.08* 0.15 Net realized and unrealized gain........................ 2.67 3.37 ------ ------ Total income from investment operations............... 2.75 3.52 ------ ------ Less distributions: Distributions from net investment income................ (0.12) (0.15) Distributions from net realized gain.................... (1.12) (1.13) ------ ------ Total distributions................................... (1.24) (1.28) ------ ------ Net asset value, end of period............................. $21.39 $19.88 ====== ====== Total return............................................... 14.75% 21.10% Ratios/Supplemental data: Net assets, end of period (in 000s)....................... $7,563 $ 268 Ratio of expenses to average net assets................... 1.05% 1.05% Ratio of net investment income to average net assets...... 0.57% 0.87% Portfolio turnover rate................................... 48% 42%
* The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. ================================================================================ 27 U.S. Large Capitalization Equity Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- The investment strategies implemented in the U.S. Large Capitalization Equity Fund are designed to enhance returns, while controlling risk. Our investment strategies emphasize stock selection with attention directed to avoiding unintended concentrations in particular industry and other common characteristic exposures. Issues are selected from a universe of less than 300 of the largest capitalization domestic stocks, collectively comprising approximately 65% of the value of the U.S. equity market. Since its performance inception on April 30, 1998, the Brinson U.S. Large Capitalization Equity Fund Class I has produced an annualized return of 12.21%, compared to the 21.53% return of its benchmark, the S&P 500 Equity Index. These results have been achieved with a risk level or volatility somewhat lower than that of the benchmark: 19.90% versus 21.14% respectively. For the last six months, the Fund has underperformed the benchmark, returning 8.04% compared to the benchmark return of 12.38%. In 1998 and the first quarter of this year, the U.S. equity market has been fueled by the desire to not miss out on market momentum. The very largest stocks and stocks characterized as growth stocks have outperformed the broader market by historic margins, driving the market to extremes. Based on current prices, the market is extrapolating super-normal earnings growth for a small group of "in vogue" stocks far into the future, making the realization of such projections increasingly unattainable. For the year-to-date period, this momentum has created a difficult environment for the U.S. Large Capitalization Equity Fund. We believe that many of the largest, most successful companies (in terms of recent price appreciation) are currently among the most overvalued. However, market momentum has continued to carry them higher. The largest 25 stocks by market capitalization in the S&P 500 were up 6.59% in the first quarter of the year compared to an increase of 3.79% for the bottom 475 stocks. The largest four stocks alone accounted for 33% of the S&P 500 return for the quarter. Some of the best performing stocks for the quarter were again found in the computer, electronics, and telecommunications industries. While many of the companies driving the market are characterized as "good companies," their future prospects simply cannot support current prices. Momentum did, in fact, shift away from growth stocks in the second quarter of 1999 to the benefit of value stocks, and our Fund. The Fund outperformed the benchmark in the second quarter by more than 100 basis points due to this value shift. Contributing factors included higher global industrial production, the rebound in many commodity prices (notably oil) and expectations for stronger corporate profits. This is a significant change from the momentum driving growth stocks over the past two years. While strong value stock performance this quarter helped broaden the market, valuation imbalances still remain. Based on our analysis, growth stocks are likely to underperform the broader market by a wide margin in the coming months. Such conditions should benefit the Fund which maintains underweight positions in common characteristics such as size, momentum and earnings variability and overweights to more traditional value measures. ================================================================================ 28 U.S. Large Capitalization Equity Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return
6 months 1 year 4/30/98* ended ended to 6/30/99 6/30/99 6/30/99 - --------------------------------------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Equity Fund Class I 8.04% 14.54% 12.21% - --------------------------------------------------------------------------------------------------------------------------------- S&P 500 Equity Index 12.38 22.76 21.53 - ---------------------------------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Equity Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Capitalization Equity Fund Class I and the S&P 500 Equity Index if you had invested $1,000,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Equity Fund Class I vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Large Capitalization Equity Fund Class I S&P 500 Equity Index 4/30/98 1,000,000 1,000,000 5/31/98 983,723 982,810 6/30/98 998,652 1,022,732 7/31/98 980,310 1,011,840 8/31/98 850,893 865,548 9/30/98 917,130 920,995 10/31/98 984,386 995,909 11/30/98 1,026,166 1,056,263 12/31/98 1,058,703 1,117,132 1/31/99 1,065,884 1,163,846 2/28/99 1,032,030 1,127,676 3/31/99 1,057,677 1,172,792 4/30/99 1,147,954 1,218,210 5/31/99 1,114,100 1,189,470 6/30/99 1,143,860 1,255,482
4/30/98 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 29 U.S. Large Capitalization Equity Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return
6 months 1 year 4/30/98* ended ended to 6/30/99 6/30/99 6/30/99 - -------------------------------------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Equity Fund Class N 7.95% 14.40% 11.86% - -------------------------------------------------------------------------------------------------------------------------------- S&P 500 Equity Index 12.38 22.76 21.53 - --------------------------------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Equity Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Capitalization Equity Fund Class N and the S&P 500 Equity Index if you had invested $1,000,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Equity Fund Class N vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Large Capitalization S&P 500 Equity Equity Fund Class N Index 4/30/98 1,000,000 1,000,000 5/31/98 983,723 982,810 6/30/98 996,297 1,022,732 7/31/98 977,960 1,011,840 8/31/98 848,584 865,548 9/30/98 914,800 920,995 10/31/98 981,016 995,909 11/30/98 1,023,802 1,056,263 12/31/98 1,055,758 1,117,132 1/31/99 1,062,927 1,163,846 2/28/99 1,029,134 1,127,676 3/31/99 1,054,734 1,172,792 4/30/99 1,143,824 1,218,210 5/31/99 1,110,031 1,189,470 6/30/99 1,139,728 1,255,482
4/30/98 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 30 U.S. Large Capitalization Equity Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Industry Diversification
As a Percent of Net Assets As of June 30, 1999 - -------------------------------------------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods..................................................... 13.52% Technology........................................................ 15.47 ------ 28.99 Basic Industries Chemicals......................................................... 1.41 Housing/Paper..................................................... 1.79 Metals............................................................ 3.90 ------ 7.10 Consumer Non-Durables...................................................... 2.17 Retail/Apparel.................................................... 2.88 Autos/Durables.................................................... 0.88 Health: Drugs..................................................... 1.30 Health: Non-Drugs................................................. 4.96 ------ 12.19 Financial Banks............................................................. 12.24% Non-Banks......................................................... 11.76 ------ 24.00 Utilities Electric.......................................................... 3.11 Transportation....................................................... 12.68 Services/Miscellaneous............................................... 5.95 ------ Total U.S. Equities...................................... 94.02 SHORT-TERM INVESTMENTS............................................... 5.80 ------ TOTAL INVESTMENTS........................................ 99.82 CASH AND OTHER ASSETS, LESS LIABILITIES.................................................. 0.18 ------ NET ASSETS........................................................... 100.00% ======
- -------------------------------------------------------------------------------- Top 10 U.S. Equity Holdings
As of June 30, 1999 Percent of Net Assets - -------------------------------------------------------------------------------- 1. Xerox Corp. 8.29% 2. FDX Corp. 5.64 3. Burlington Northern Santa Fe Corp. 5.28 4. Raytheon Co., Class B 4.85 5. Electronic Data Systems Corp. 4.77 6. Corning, Inc. 4.67 7. Aetna, Inc. 4.53 8. Lockheed Martin Corp. 4.02 9. CIGNA Corp. 3.67 10. Aon Corp. 3.55 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- U.S. Large Capitalization Equity Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------
Shares Value ------ ----------- U.S. Equities -- 94.02% Aetna, Inc.......................................... 13,400 $ 1,198,462 Aon Corp............................................ 22,750 938,437 BankBoston Corp..................................... 4,800 245,400 Baxter International, Inc........................... 9,800 594,125 Burlington Northern Santa Fe Corp................... 45,000 1,395,000 Chase Manhattan Corp................................ 7,800 675,675 CIGNA Corp.......................................... 10,900 970,100 Compaq Computer Corp................................ 2,500 59,219 Computer Sciences Corp. (b)......................... 4,400 304,425 Compuware Corp. (b)................................. 8,600 273,588 Corning, Inc........................................ 17,600 1,234,200 Covance, Inc. (b)................................... 6,900 165,169 Delphi Automotive Systems Corp...................... 12,500 232,031 Dominion Resources, Inc............................. 2,000 86,625 Electronic Data Systems Corp........................ 22,300 1,261,344 Eli Lilly and Company............................... 4,800 343,800 Entergy Corp........................................ 23,500 734,375 FDX Corp. (b)....................................... 27,500 1,491,875 First Data Corp..................................... 18,000 880,875 First Union Corp.................................... 7,300 343,100 Fleet Financial Group, Inc.......................... 11,100 492,562 Household International, Inc........................ 14,600 691,675 Illinois Tool Works, Inc............................ 2,700 221,400 Kimberly-Clark Corp................................. 8,300 473,100 Lockheed Martin Corp................................ 28,500 1,061,625 Masco Corp.......................................... 28,000 808,500 Mattel, Inc......................................... 12,800 338,400 Shares Value ------ ----------- Newell Rubbermaid, Inc.............................. 9,100 $ 423,150 Norfolk Southern Corp............................... 15,400 463,925 Philip Morris Companies, Inc........................ 14,300 574,681 PNC Bank Corp....................................... 7,200 414,900 Praxair, Inc........................................ 7,600 371,925 Raytheon Co., Class B............................... 18,200 1,280,825 U.S. Bancorp........................................ 11,500 391,000 United Healthcare Corp.............................. 8,800 551,100 Wells Fargo and Co.................................. 15,700 671,175 Xerox Corp.......................................... 37,100 2,191,219 ---------- Total U.S. Equities (Cost $22,653,111).............. 24,848,987 ---------- Investment Companies -- 5.80% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,533,005)................................... 1,533,005 1,533,005 ---------- Total Investments (Cost $24,186,116) -- 99.82% (a).................... 26,381,992 Cash and other assets, less liabilities -- 0.18%........................... 47,712 ----------- Net Assets -- 100%.................................. $26,429,704 ===========
See accompanying notes to schedule of investments. NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $24,186,116; and net unrealized appreciation consisted of: Gross unrealized appreciation............. $2,715,404 Gross unrealized depreciation (519,528) Net unrealized appreciation $2,195,876 (b) Non-income producing security See accompanying notes to financial statements. ================================================================================ 32 U.S. Large Capitalization Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $22,653,111)........................................................ $24,848,987 Affiliated issuers (Cost $1,533,005)........................................................... 1,533,005 Receivables: Investment securities sold..................................................................... 68,635 Dividends...................................................................................... 40,400 Interest....................................................................................... 5,840 Fund shares sold............................................................................... 75,369 ---------- TOTAL ASSETS................................................................................ 26,572,236 LIABILITIES:..................................................................................... ---------- Payables: Investment securities purchased................................................................ 83,692 Fund shares redeemed........................................................................... 22,374 Investment advisory fees....................................................................... 7,436 Accrued expenses............................................................................... 29,030 TOTAL LIABILITIES........................................................................... 142,532 ----------- NET ASSETS....................................................................................... $26,429,704 =========== NET ASSETS CONSIST OF: Paid in capital................................................................................. $23,882,590 Accumulated undistributed net investment income................................................. 81,256 Accumulated net realized gain................................................................... 269,982 Net unrealized appreciation..................................................................... 2,195,876 ----------- NET ASSETS.................................................................................. $26,429,704 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $22,668,003 and 2,036,524 shares issued and outstanding)....................................... $ 11.13 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $3,755,814 and 337,580 shares issued and outstanding).......................................... $ 11.13 =========== UBSInvestment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,887 and 532 shares issued and outstanding).................................................. $ 11.07 ===========
See accompanying notes to financial statements. ================================================================================ 33 U.S. Large Capitalization Equity Fund -- Financial Statements
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends........................................................ $ 315,848 Interest......................................................... 52,331 ---------- TOTAL INCOME................................................. 368,179 ---------- EXPENSES: Advisory......................................................... 137,200 Professional..................................................... 35,054 Distribution..................................................... 24,699 Other............................................................ 82,697 ---------- TOTAL EXPENSES............................................... 279,650 Expenses waived by Advisor................................... (97,158) ---------- NET EXPENSES................................................. 182,492 ---------- NET INVESTMENT INCOME........................................ 185,687 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments..................................................... 233,080 Futures contracts............................................... 106,203 Net realized gain............................................ 339,283 Change in net unrealized appreciation or depreciation on: Investments..................................................... 2,383,598 Futures contracts............................................... (9,036) ---------- Change in net unrealized appreciation or depreciation............ 2,374,562 ---------- Net realized and unrealized gain................................. 2,713,845 ---------- Net increase in net assets resulting from operations............. $2,899,532 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 U.S. Large Capitalization Equity Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS Year April 6, 1998* Ended Through June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income................................................. $ 185,687 $ 32,434 Net realized gain (loss).............................................. 339,283 (69,301) Change in net unrealized appreciation or depreciation................. 2,374,562 (178,686) ------------ ----------- Net increase (decrease) in net assets resulting from operations....... 2,899,532 (215,553) ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I...................................................... (87,626) (191) Brinson Class N...................................................... (69,880) (20,605) UBS Investment Funds Class........................................... (12) (1) ------------ ----------- Total distributions to shareholders................................... (157,518) (20,797) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold........................................................... 24,853,429 16,922,491 Shares issued on reinvestment of distributions........................ 147,324 20,775 Shares redeemed....................................................... (17,500,436) (519,553) ------------ ----------- Net increase in net assets resulting from capital share transactions.. 7,500,317 16,423,713 ------------ ----------- TOTAL INCREASE IN NET ASSETS...................................... 10,242,331 16,187,363 ------------ ----------- NET ASSETS: Beginning of period................................................... 16,187,373 10 ------------ ----------- End of period (including accumulated undistributed net investment income of $81,256 and $11,637, respectively)......................... $ 26,429,704 $16,187,373 ============ ===========
*Commencement of investment operations See accompanying notes to financial statements. ================================================================================ 35 U.S. Large Capitalization Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year April 6, 1998* Ended Through Brinson Class I June 30, 1999 June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period..................................................... $ 9.80 $ 10.00 ------- --------- Income from investment operations: Net investment income.................................................................. 0.11** 0.02 Net realized and unrealized gain (loss)................................................ 1.31 (0.20) ------- --------- Total income (loss) from investment operations...................................... 1.42 (0.18) ------- --------- Less distributions: Distributions from net investment income............................................... (0.09) (0.02) ------- --------- Total distributions................................................................. (0.09) (0.02) ------- --------- Net asset value, end of period........................................................... $ 11.13 $ 9.80 ======= ========= Total return (non-annualized)............................................................ 14.54% (1.83)% Ratios/Supplemental data: Net assets, end of period (in 000s)..................................................... $22,668 $ 154 Ratio of expenses to average net assets: Before expense reimbursement........................................................... 1.29% 1.59%*** After expense reimbursement............................................................ 0.80% 0.80%*** Ratio of net investment income to average net assets: Before expense reimbursement........................................................... 0.57% 0.52%*** After expense reimbursement............................................................ 1.06% 1.31%*** Portfolio turnover rate................................................................. 88% 12%
*Commencement of investment operations **The net investment income per share data was determined by using average shares outstanding throughout the period. ***Annualized See accompanying notes to financial statements. ================================================================================ 36 U.S. Large Capitalization Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year April 6, 1998* Ended Through Brinson Class N June 30, 1999 June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period...................................................... $ 9.78 $ 10.00 ------- --------- Income from investment operations: Net investment income................................................................... 0.09** 0.02 Net realized and unrealized gain (loss)................................................. 1.31 (0.23) ------- --------- Total income (loss) from investment operations....................................... 1.40 (0.21) ------- --------- Less distributions: Distributions from net investment income................................................ (0.05) (0.01) ------- --------- Total distributions.................................................................. (0.05) (0.01) ------- --------- Net asset value, end of period............................................................ $ 11.13 $ 9.78 ======= ========= Total return (non-annualized)............................................................. 14.40% (2.02)% Ratios/Supplemental data: Net assets, end of period (in 000s)...................................................... $ 3,756 $ 16,033 Ratio of expenses to average net assets: Before expense reimbursement............................................................ 1.54% 1.84%*** After expense reimbursement............................................................. 1.05% 1.05%*** Ratio of net investment income to average net assets: Before expense reimbursement............................................................ 0.32% 0.27%*** After expense reimbursement............................................................. 0.81% 1.06%*** Portfolio turnover rate.................................................................. 88% 12%
*Commencement of investment operations **The net investment income per share data was determined by using average shares outstanding throughout the period. ***Annualized See accompanying notes to financial statements. ================================================================================ 37 U.S. Large Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - ----------------------------------------------------------------------------- The investment strategies implemented in the U.S. Large Capitalization Growth Fund are designed to enhance returns while controlling risk. We invest in large companies with market capitalizations of $3 billion and larger that we believe possess a unique competitive advantage that will allow them to achieve high returns through above average sales and profit growth. We employ quantitative and qualitative analysis to identify companies that are undervalued relative to current market prices, and construct portfolios with attention to both risk and return. Since its performance inception on October 31, 1997, the Brinson U.S. Large Capitalization Growth Fund Class I has returned 28.87% compared to 29.46% for its benchmark, the S&P 500 Equity Index. Over the most recent six-month period, the Fund has returned 17.48% versus the index return of 12.38%. While large growth stocks have outperformed the broader market over this period, the Fund's success on a year-to-date basis is not a result of its large growth style affiliation. The Fund also outperformed the Russell 1000 Growth Index (an index of the market's largest 1000 growth companies) by a wide margin. The Russell 1000 Growth Index posted a return of 10.45% for the six months ending June 30, more than 700 basis points lower than the Fund. In our December 31, 1998 report, we discussed our expectations of improving earnings for cyclical companies in 1999, and the consequences of those expectations for the growth segment of the market. At that time, our solution was to look for growth companies that were hurt by global economic woes, and which we expected to perform well in this emerging environment. We consciously underweighted the major companies in most sectors unless we were extremely confident of the underlying fundamentals. In the second quarter of 1999 we did in fact experience a shift in favor of cyclicals. The Fund was well-positioned for that occurrence. The strongest positive contribution to performance came from issue selection, while the remainder came from our industry allocation decisions. The strongest performing stocks for the Fund were Qualcomm (up more than 450%), Texas Instruments (up nearly 70%), and Sun Microsytems (up approximately 60%). Other positives for the Fund were holdings in Immunex and Liberty Media, while positions in Compaq computer and Becton Dickinson caused a slight on performance. With respect to industry weightings, the largest positive contributors to performance were overweights in electronics, media and oil services. On the opposing side, negative contributions came from our underweight of producer goods and our overweight of the business machines industry. As we enter the remainder of the year, the Fund is positioned to take advantage of a continuation in the trends that helped performance in the first half of 1999. The largest overweights relative to the S&P 500 Equity Index are held in the consumer staples, healthcare and technology sectors. The largest relative industry underweight is maintained to financials. ================================================================================ 38 U.S. Large Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return
6 months 1 year 10/31/97* ended ended to 6/30/99 6/30/99 6/30/99 - --------------------------------------------------------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Growth Fund Class I 17.48% 29.70% 28.87% - --------------------------------------------------------------------------------------------------------------------------------- S&P 500 Equity Index 12.38 22.76 29.46 - ---------------------------------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Growth Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Capitalization Growth Fund Class I and the S&P 500 Equity Index if you had invested $1,000,000 on October 31, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Growth Fund Class I vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Large Capitalization Growth Fund Class I S&P 500 Equity Index 10/31/97 1,000,000 1,000,000 11/30/97 1,018,495 1,046,290 12/31/97 1,039,140 1,064,255 1/31/98 1,031,495 1,076,025 2/28/98 1,091,715 1,153,628 3/31/98 1,134,655 1,212,706 4/30/98 1,156,858 1,224,906 5/31/98 1,131,408 1,203,849 6/30/98 1,175,605 1,252,750 7/31/98 1,171,311 1,239,408 8/31/98 973,788 1,060,214 9/30/98 1,026,697 1,128,132 10/31/98 1,129,126 1,219,894 11/30/98 1,210,713 1,293,822 12/31/98 1,297,885 1,368,381 1/31/99 1,380,099 1,425,601 2/28/99 1,319,808 1,381,297 3/31/99 1,384,483 1,436,559 4/30/99 1,436,004 1,492,192 5/31/99 1,418,465 1,456,988 6/30/99 1,524,795 1,537,847
10/31/97 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 39 U.S. Large Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return
12/31/98* to 6/30/99 - -------------------------------------------------------------------------------- Brinson U.S. Large Capitalization Growth Fund Class N 17.23% - -------------------------------------------------------------------------------- S&P 500 Equity Index 12.38 - --------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Large Capitalization Growth Fund Class N. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Capitalization Growth Fund Class N and the S&P 500 Equity Index if you had invested $1,000,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Large Capitalization Growth Fund Class N vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Large Capitalization Growth Fund Class N S&P 500 Equity Index 12/31/98 $1,000,000 $1,000,000 1/31/99 $1,062,500 $1,041,816 2/28/99 $1,016,047 $1,009,439 3/31/99 $1,065,034 $1,049,824 4/30/99 $1,104,730 $1,090,480 5/31/99 $1,091,216 $1,064,753 6/30/99 $1,172,297 $1,123,844
12/31/98 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 40 U.S. Large Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------
Industry Diversification As a Percent of Net Assets As of June 30, 1999 - -------------------------------------------------------------------------------- U.S. EQUITIES Energy..................................................... 3.52% Basic Industries Chemicals............................................... 1.35 Housing/Paper........................................... 1.68 ------ 3.03 Capital Investment Capital Goods........................................... 2.04 Technology.............................................. 19.26 ------ 21.30 Consumer Non-Durables............................................ 4.40 Retail/Apparel.......................................... 7.21 Autos/Durables.......................................... 1.23 Health: Drugs........................................... 9.49 Health: Non-Drugs....................................... 8.05 ------ 30.38 Financial Banks................................................... 1.72% Non-Banks............................................... 6.45 ------ 8.17 Utilities Telephone............................................... 13.46 Transportation............................................. 1.58 Services/Miscellaneous..................................... 13.74 ------ Total U.S. Equities............................ 95.18 ------ TOTAL INVESTMENTS.............................. 95.18 CASH AND OTHER ASSETS, LESS LIABILITIES........................................ 4.82 ------ NET ASSETS................................................. 100.00% ====== - -------------------------------------------------------------------------------- Top 10 U.S. Equity Holdings As of June 30, 1999 Percent of Net Assets - -------------------------------------------------------------- 1. International Business Machines Corp. 3.36% 2. General Electric Co. 3.35 3. Texas Instruments, Inc. 3.23 4. Oracle Corp. 2.50 5. Dayton-Hudson Corp. 2.41 6. Waste Management, Inc. 2.39 7. Qualcomm, Inc. 2.31 8. SBC Communications, Inc. 2.22 9. Wal-Mart Stores, Inc. 2.21 10. Sun Microsystems, Inc. 2.13 - --------------------------------------------------------------
================================================================================ 41 U.S. Large Capitalization Growth Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------
Shares Value ------ -------- U.S. Equities -- 95.18% Abbott Laboratories....................... 2,000 $ 91,000 AFLAC, Inc................................ 3,300 157,987 Albertson's, Inc.......................... 2,000 103,125 American Express, Co...................... 1,100 143,137 American International Group, Inc......... 700 81,944 AT&T Corp................................. 2,950 164,647 AT&T Corp. - Liberty Media Goup, Inc. (b). 4,156 152,733 Autozone, Inc............................. 3,300 99,413 Avon Products, Inc........................ 2,000 111,000 Bank of America Corp...................... 1,900 139,294 Becton Dickinson & Co..................... 2,300 69,000 Bell Atlantic Corp........................ 1,200 78,450 BMC Software, Inc. (b).................... 2,100 113,400 Boeing Co................................. 2,900 128,144 Boston Scientific Corp. (b)............... 1,800 79,088 Bristol-Myers Squibb Co................... 2,200 154,962 CBS Corp. (b)............................. 2,600 112,937 Citigroup, Inc............................ 1,900 90,250 Dayton Hudson Corp........................ 3,000 195,000 E.I. du Pont de Nemours & Co.............. 1,600 109,300 Electronic Data Systems Corp.............. 2,100 118,781 Exxon Corp................................ 900 69,413 Federal Home Loan Association Co.......... 1,900 110,200 General Electric Co....................... 2,400 271,200 Gillette Co............................... 1,500 61,500 Halliburton Co............................ 1,800 81,450 Hewlett-Packard Co........................ 1,200 120,600 Immunex Corp. (b)......................... 800 101,950 Intel Corp................................ 1,700 101,150 International Business Machines Corp...... 2,100 271,425 Johnson & Johnson Co...................... 1,300 127,400 Lilly (Eli) & Co.......................... 1,500 107,438 Loral Space & Communications Ltd. (b)..... 5,900 106,200 Lowe's Companies, Inc..................... 2,400 136,050 Lucent Technologies, Inc.................. 1,700 114,644 Medtronic, Inc............................ 2,000 155,750 Merck & Co., Inc.......................... 1,800 133,200 Merrill Lynch & Co........................ 1,200 95,925 Microsoft, Inc. (b)....................... 1,400 126,262 Motorola, Inc............................. 1,000 94,750 Nortel Networks, Inc...................... 1,200 104,175 Oracle Corp. (b).......................... 5,450 202,331 Pepsi Bottling Group, Inc................. 5,200 119,925 Philip Morris Companies, Inc.............. 3,300 132,619 Proctor & Gamble Co....................... 1,100 98,175 QUALCOMM, Inc. (b)........................ 1,300 186,550 Raytheon Co., Class A..................... 2,400 165,300 Shares Value ------ --------- SBC Communications, Inc................... 3,100 $179,800 Schering Plough Corp...................... 3,100 164,300 Schlumberger Ltd.......................... 2,100 133,744 Sun Microsystems, Inc. (b)................ 2,500 172,187 Texas Instruments, Inc.................... 1,800 261,000 Time Warner, Inc.......................... 2,300 169,050 Tyco International Co..................... 900 85,275 Wal-Mart Stores, Inc...................... 3,700 178,525 Walt Disney Co............................ 2,700 83,194 Waste Management, Inc..................... 3,600 193,500 Watson Pharmaceutical Co.................. 400 14,025 Xerox Corp................................ 2,900 171,281 ---------- Total Equities (Cost $6,642,892).......... 7,695,055 ---------- Total Investments (Cost $6,642,892) -- 95.18% (a)........... 7,695,055 ---------- Cash and other assets, less liabilities -- 4.82%................. 389,844 ---------- Net Assets -- 100%........................ $8,084,899 ==========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $6,642,892; and net unrealized appreciation consisted of: Gross unrealized appreciation.. $1,141,787 Gross unrealized depreciation.. (89,624) ---------- Net unrealized appreciation $1,052,163 ========== (b) Non-income producing security See accompanying notes to financial statements. ================================================================================ 42 U.S. Large Capitalization Growth Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $6,642,892)......................................... $7,695,055 Cash............................................................................ 409,188 Receivables: Due from Advisor............................................................... 23,548 Dividends...................................................................... 5,334 Investment securities sold..................................................... 73,230 Fund shares sold............................................................... 30,752 Other assets................................................................... 18,639 ---------- TOTAL ASSETS................................................................ 8,255,746 ---------- LIABILITIES: Payables: Investment securities purchased................................................ 126,965 Accrued expenses............................................................... 43,882 ---------- TOTAL LIABILITIES........................................................... 170,847 ---------- NET ASSETS....................................................................... $8,084,899 ---------- NET ASSETS CONSIST OF: Paid in capital................................................................ $6,447,525 Accumulated net realized gain.................................................. 585,211 Net unrealized appreciation.................................................... 1,052,163 ---------- NET ASSETS.................................................................. $8,084,899 ========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $2,947,293 and 211,874 shares issued and outstanding)............... $ 13.91 ========= Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,166 and 84 shares issued and outstanding)........................ $ 13.88 ========= UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,136,440 and 370,958 shares issued and outstanding)............... $ 13.85 =========
See accompanying notes to financial statements. ================================================================================ 43 U.S. Large Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends....................................................................... $ 20,814 Interest........................................................................ 9,130 -------- TOTAL INCOME................................................................. 29,944 -------- EXPENSES: Registration.................................................................... 23,053 Advisory........................................................................ 18,582 Professional.................................................................... 17,394 Distribution.................................................................... 8,837 Other........................................................................... 4,337 -------- TOTAL EXPENSES............................................................... 72,203 Expenses waived and reimbursed by Advisor.................................... (42,136) -------- NET EXPENSES................................................................. 30,067 -------- NET INVESTMENT LOSS.......................................................... (123) -------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments................................................ 408,525 Change in net unrealized appreciation or depreciation on investments............ 463,877 -------- Net realized and unrealized gain................................................ 872,402 -------- Net increase in net assets resulting from operations............................ $872,279 ========
See accompanying notes to financial statements. ================================================================================ 44 U.S. Large Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS Period Ended Year Ended June 30, 1999 December 31, 1998 ------------- ----------------- OPERATIONS: Net investment income (loss)..................................................... $ (123) $ 20,269 Net realized gain................................................................ 408,525 438,421 Change in net unrealized appreciation or depreciation............................ 463,877 554,465 ----------- ----------- Net increase in net assets resulting from operations............................. 872,279 1,013,155 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................. -- (19,205) Distributions from net realized gain: Brinson Class I................................................................. -- (151,936) ----------- ----------- Total distributions to shareholders.............................................. -- (171,141) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................................................... 5,233,678 4,973,380 Shares issued on reinvestment of distributions................................... -- 170,881 Shares redeemed.................................................................. (2,169,846) (5,974,601) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions.. 3,063,832 (830,340) ----------- ----------- TOTAL INCREASE IN NET ASSETS................................................. 3,936,111 11,674 ----------- ----------- NET ASSETS: Beginning of period.............................................................. 4,148,788 4,137,114 ----------- ----------- End of period.................................................................... $ 8,084,899 $ 4,148,788 =========== ===========
See accompanying notes to financial statements. ================================================================================ 45 U.S. Large Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
October 14, 1997* Period Ended Year Ended Through Brinson Class I June 30, 1999 December 31, 1998** December 31, 1998** - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 11.84 $ 9.92 $ 10.00 ------- ------- -------- Income from investment operations: Net investment income......................................... 0.02 0.06 0.02 Net realized and unrealized gain (loss)....................... 2.05 2.38 (0.08) ------- ------- -------- Total income from investment operations..................... 2.07 2.44 (0.06) ------- ------- -------- Less distributions: Distributions from net investment income...................... -- (0.06) (0.02) Distributions from net realized gain.......................... -- (0.46) -- ------- ------- -------- Total distributions......................................... -- (0.52) (0.02) ------- ------- -------- Net asset value, end of period................................... $ 13.91 $ 11.84 $ 9.92 ======= ======= ======== Total return (non-annualized).................................... 17.48% 24.90% (0.55)% Ratios/Supplemental Data: Net assets, end of period (in 000s)............................. $ 2,947 $ 4,147 $ 4,137 Ratio of expenses to average net assets: Before expense reimbursement.................................. 2.38%*** 2.76% 8.54%*** After expense reimbursement................................... 0.80%*** 0.99% 1.00%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement.................................. (1.26)%*** (1.40)% (6.19)%*** After expense reimbursement................................... 0.32%*** 0.37% 1.35%*** Portfolio turnover rate......................................... 51% N/A N/A
* Commencement of investment operations ** Reflects 10 for 1 share split effective December 9, 1998. *** Annualized N/A = Information is not available for periods prior to reorganization, as described in notes to financial statements. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 46 U.S. Large Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Period Ended Brinson Class N June 30, 1999* - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period........................................................................ $ 11.84 ------------- Income from investment operations: Net investment loss...................................................................................... (0.01) Net realized and unrealized gain......................................................................... 2.05 ------------- Total income from investment operations................................................................ 2.04 ------------- Net asset value, end of period.............................................................................. $ 13.88 ============= Total return (non-annualized)............................................................................... 17.23% Ratios/Supplemental Data: Net assets, end of period (in 000s)........................................................................ $ 1 Ratio of expenses to average net assets: Before expense reimbursement............................................................................. 2.63%** After expense reimbursement.............................................................................. 1.05%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement............................................................................. (1.51)%** After expense reimbursement.............................................................................. 0.07%** Portfolio turnover rate.................................................................................... 51%
* Commencement of Brinson Class N was December 31, 1998. ** Annualized See accompanying notes to financial statements. ================================================================================ 47 U.S. Small Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- The investment strategies implemented in the U.S. Small Capitalization Growth Fund are designed to enhance returns while controlling risk. We invest in smaller companies with market capitalizations less than $1 billion that we believe possess a unique competitive advantage that will allow them to achieve high returns through above average sales and profit growth. We employ quantitative and qualitative analysis to identify companies that are undervalued relative to current market prices, and construct portfolios with attention to both risk and return. Since its inception on September 30, 1997, the Brinson U.S. Small Capitalization Growth Fund Class I has returned - 4.74% compared to 1.67% for its benchmark, the Russell 2000 Index. Over the most recent six-month period, the Fund has returned 4.32% versus the index return of 9.28%. Small stocks have dramatically underperformed large stocks over the period since the Fund's inception making the environment difficult for small capitalization equity managers. The market has been driven to extremes. Valuation imbalances between large and small stocks reached a historical peak during this period. Additionally, the market has experienced an incredible lack of breadth, with a small number of fashionable stocks driving index returns. Our positions relative to the benchmark in some broad common characteristics were the biggest detractors from relative performance for the year-to-date period. Our underweight of the "variability in market" characteristic had the worst effect, costing us more than 100 basis points of relative performance. This was largely due to our underweight of the high-flying internet sector, which has notoriously high variability in returns. Our overweight to the "labor intensity" factor was also a negative for the year-to-date period, resulting from poor performance of some of the stocks we owned in the services sector. Stock selection was negative for the first half of the year, while our active industry positions relative to the index added value. These two factors combined for a negligible effect on overall performance. The Fund was helped by its overweight to electronics and oil services, but hurt by underweights to producer goods and telephones. While the Fund's underperformance over the period is uncomfortable, it has come during a unique period in the market's history, and should not be indicative of our future performance. As a result of both a recent broadening of the market, and steps that we have taken to reposition the Fund, we have experienced a strong uptick in recent performance. For the month of June, the Fund returned 6.87%, beating the benchmark's return of 4.52% by 235 basis points. We remain committed to uncovering price/value discrepancies in the small capitalization segment of the market. We are confident that our sound investment philosophy and consistent, long-term approach can create value for our clients. ================================================================================ 48 U.S. Small Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - ------------------------------------------------------------------------------- Total Return
6 months 1 year ended ended 9/30/97* 6/30/99 6/30/99 to 6/30/99 - ---------------------------------------------------------------------------------------------------------------------------- Brinson U.S. Small Capitalization Growth Fund Class I 4.32% -5.41% -4.74% - ---------------------------------------------------------------------------------------------------------------------------- Russell 2000 Index 9.28 1.50 1.67 - ----------------------------------------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Small Capitalization Growth Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year represent average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Small Capitalization Growth Fund Class I and the Russell 2000 Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Small Capitalization Growth Fund Class I vs. Russell 2000 Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Small Capitalization Growth Growth Fund Class I Russell 2000 Index 1,000,000 1,000,000 10/31/97 953,600 956071 936,600 949,887 12/31/97 943,800 996,513 932,700 951,260 2/28/98 1,007,600 1,021,599 1,049,900 1,063,732 4/30/98 1,047,200 1,069,618 990,700 1,012,012 6/30/98 971,100 1,014,141 887,800 932,042 8/31/98 700,200 751,059 739,372 809,835 10/31/98 788,803 842,863 807,515 887,022 12/31/98 880,562 941,913 881,563 954,430 2/28/99 807,515 877,126 825,527 890,820 4/30/99 823,526 970,644 859,549 984,822 6/30/99 918,586 1,029,355
9/30/97 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. =============================================================================== 49 U.S. Small Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return 12/31/98* to 6/30/99 - -------------------------------------------------------------------------------- Brinson U.S. Small Capitalization Growth Fund Class N 4.09 - -------------------------------------------------------------------------------- Russell 2000 Index 9.28 - -------------------------------------------------------------------------------- * Inception date of the Brinson U.S. Small Capitalization Growth Fund Class N. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Small Capitalization Growth Fund Class N and the Russell 2000 Index if you had invested $1,000,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Small Capitalization Growth Fund Class N vs. Russell 2000 Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson U.S. Small Capitalization Growth Fund Class N Russell 2000 Index 12/31/98 1,000,000 1,000,000 1/31/99 1,000,000 1,013,289 2/28/99 915,909 931,218 3/31/99 935,227 945,756 4/30/99 932,955 1,030,503 5/31/99 973,864 1,045,555 6/30/99 1,040,909 1,092,835
12/31/98 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. =============================================================================== 50 U.S. Small Capitalization Growth Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Industry Diversification
As a Percent of Net Assets As of June 30, 1999 - -------------------------------------------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods..................................................... 2.76% Technology........................................................ 17.19 ------ 19.95 Basic Industries Chemicals......................................................... 1.23 Housing/Paper..................................................... 0.70 ------ 1.93 Consumer Non-Durables...................................................... 6.29 Retail/Apparel.................................................... 7.99 Autos/Durables.................................................... 10.97 Health: Drugs..................................................... 1.37 Health: Non-Drugs................................................. 6.65 ------ 33.27 Financial Banks............................................................. 7.79% Non-Banks......................................................... 8.38 ------ 16.17 Utilities Telephone......................................................... 1.29 Transportation....................................................... 5.05 Services/Miscellaneous............................................... 13.31 ----- Total U.S. Equities...................................... 90.97 SHORT-TERM INVESTMENTS............................................... 5.95 ------ TOTAL INVESTMENTS........................................ 96.92 CASH AND OTHER ASSETS, LESS LIABILITIES.................................................. 3.08 ------ NET ASSETS........................................................... 100.00% ======
- -------------------------------------------------------------------------------- Top 10 U.S. Equity Holdings
As of June 30, 1999 Percent of Net Assets - -------------------------------------------------------------------------------- 1. Waters Corp. 2.86% 2. Foodmaker, Inc. 2.81 3. U.S. Trust Corp. 2.79 4. U.S. Foodservice, Inc. 2.37 5. Protective Life Corp. 2.24 6. Swift Transportation Co., Inc. 2.06 7. North Fork Bancorporation, Inc. 1.99 8. Expeditors International of Washington, Inc. 1.97 9. Smith International, Inc. 1.87 10. Investors Financial Services Corp. 1.82 - --------------------------------------------------------------------------------
================================================================================ 51 U.S. Small Capitalization Growth Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------ ----- U.S. Equities -- 90.97% Aeroflex, Inc. (b)............................................... 29,800 $ 588,550 AFC Cable Systems, Inc. (b)...................................... 8,400 296,625 Airborne Freight Corp. .......................................... 5,700 157,819 American Italian Pasta Co., Class A (b).......................... 13,100 397,912 Ariba, Inc. (b).................................................. 2,000 194,500 Ask Jeeves, Inc. (b)............................................. 2,500 35,000 Astec Industries, Inc. (b)....................................... 12,100 493,075 AVT Corp. (b).................................................... 14,900 564,337 Bally Total Fitness Holdings, Inc. (b)........................... 14,100 400,087 Bindley Western Industries, Inc. ................................ 21,066 485,849 Casey's General Stores, Inc. .................................... 30,000 450,000 Comfort Systems USA, Inc. (b).................................... 14,000 252,000 Commercial Federal Corp. ........................................ 11,000 255,063 Consolidated Graphics, Inc. (b).................................. 7,100 355,000 Copper Mountain Networks, Inc. (b)............................... 2,300 177,675 Cost Plus, Inc. (b).............................................. 11,400 518,700 Critical Path, Inc. (b).......................................... 600 33,188 CTS Corp. ....................................................... 2,000 140,000 Dendrite International, Inc. (b)................................. 15,800 570,775 DII Group, Inc. (b).............................................. 14,300 533,569 DLJdirect (b).................................................... 2,700 79,650 Eclipsys Corp. (b)............................................... 6,100 146,019 Elcor Corp. ..................................................... 12,600 550,462 Emmis Communications Corp. (b)................................... 6,800 335,750 Ethan Allen Interiors, Inc. ..................................... 10,450 394,487 eToys Inc. (b)................................................... 2,100 85,575 Expeditors International of Washington, Inc. .................... 25,900 705,775 Finova Group, Inc. .............................................. 10,700 563,087 Foodmaker, Inc. (b).............................................. 35,500 1,007,312 FPIC Insurance Group, Inc. (b)................................... 9,300 451,050 H.B. Fuller Co. ................................................. 6,400 437,600 Haverty Furniture Cos., Inc. .................................... 5,000 175,938 Hooper Holmes, Inc. ............................................. 21,200 431,950 Horace Mann Educators Corp. ..................................... 6,100 165,844 Insight Enterprises, Inc. (b).................................... 15,500 383,625 Investors Financial Services Corp. .............................. 16,300 652,000 Juniper Networks, Inc. (b)....................................... 1,400 208,600 Kellstrom Industries, Inc. (b)................................... 18,200 332,150 Kenneth Cole Productions, Inc. (b)............................... 13,800 384,675 Kronos, Inc. (b)................................................. 3,400 154,700 Labor Ready, Inc. (b)............................................ 11,000 357,500 Level One Communications, Inc. (b)............................... 7,300 357,244 Manitowoc Co., Inc. ............................................. 5,500 228,938 MapQuest.com, Inc. (b)........................................... 900 14,681 Marimba, Inc. (b)................................................ 1,800 94,838 Media Metrix, Inc. (b)........................................... 900 47,925 MedQuist, Inc. (b)............................................... 11,900 520,625 Mercury Computer Systems, Inc. (b)............................... 14,500 467,625 Mercury Interactive Corp. (b).................................... 12,700 449,262 Mesaba Holdings, Inc. (b)........................................ 16,400 209,100 Metro Information Services, Inc. (b)............................. 14,000 232,750 Monaco Coach Corp. (b)........................................... 13,400 566,987 MotivePower Industries, Inc. (b)................................. 17,850 321,300 North Fork Bancorporation, Inc. ................................. 33,500 713,969 Ocular Sciences, Inc. (b)........................................ 10,700 185,913 Orthodontic Centers of America, Inc. (b)......................... 17,900 252,838 Pacific Sunwear of California, Inc. (b).......................... 16,650 405,844 Pantry, Inc. (b)................................................. 19,900 320,887 Patterson Dental Co. ............................................ 17,900 622,025 Peoples Heritage Financial Group, Inc. .......................... 30,400 571,900 Peregrine Systems, Inc. (b)...................................... 20,400 524,025 Personnel Group of America, Inc. (b)............................. 11,700 117,000 Phone.com, Inc. (b).............................................. 1,200 67,200 Prime Group Realty Trust......................................... 18,100 311,094 Protective Life Corp. ........................................... 24,300 801,900 QRS Corp. (b).................................................... 5,500 429,000 ResMed, Inc. (b)................................................. 7,700 255,544 Sanmina Corp. (b)................................................ 7,800 591,825 Scient Corp. (b)................................................. 4,600 218,788 Smith Int'l, Inc. (b)............................................ 15,400 668,937 Sonic Automotive, Inc. (b)....................................... 18,400 253,000 StarMedia Network, Inc. (b)...................................... 1,900 121,838 Sunrise Assisted Living, Inc. (b)................................ 13,500 470,812 Swift Transportation Co., Inc. (b)............................... 33,600 739,200 Sykes Enterprises, Inc. (b)...................................... 15,100 503,962 Tetra Tech, Inc. (b)............................................. 15,750 259,875 TheStreet.com, Inc. (b).......................................... 1,800 64,800 TMP Worldwide, Inc. (b).......................................... 7,800 495,300 Tower Automotive, Inc. (b)....................................... 10,900 277,269 U.S. Foodservice (b)............................................. 19,900 848,237 U.S. Trust Corp. ................................................ 10,800 999,000 United Stationers, Inc. (b)...................................... 8,400 184,800 Vignette Corp. (b)............................................... 800 60,000 Waters Corp. (b)................................................. 19,300 1,025,312 Zebra Technologies Corp., Class A (b)............................ 15,200 584,250 Zions Bancorporation............................................. 4,000 254,000 ----------- Total U.S. Equities (Cost $28,475,224)........................... 32,615,092 ----------- Investment Companies -- 5.95% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,134,217).............................................. 2,134,217 2,134,217 ----------- Total Investments (Cost $30,609,441) -- 96.92% (a)............................... 34,749,309 Cash and other assets, less liabilities -- 3.08%...................................... 1,102,657 ----------- Net Assets -- 100%............................................... $35,851,966 ===========
See accompanying notes to schedule of investments. ================================================================================ 52 U.S. Small Capitalization Growth Fund -- Schedule of Investments June 30, 1999 - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $30,609,441; and net unrealized appreciation consisted of: Gross unrealized appreciation........ $ 5,312,470 Gross unrealized depreciation........ (1,172,602) ------------ Net unrealized appreciation....... $ 4,139,868 ============ (b) Non-income producing security See accompanying notes to financial statements. ================================================================================ 53 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $28,475,224)............................................................ $32,615,092 Affiliated issuers (Cost $2,134,217)............................................................... 2,134,217 Cash................................................................................................ 142,822 Receivables: Investment securities sold......................................................................... 719,015 Dividends.......................................................................................... 9,768 Interest........................................................................................... 9,943 Fund shares sold................................................................................... 553,305 Other assets........................................................................................ 18,639 ----------- TOTAL ASSETS.................................................................................... 36,202,801 ----------- LIABILITIES: Payables: Investment securities purchased.................................................................... 257,629 Investment advisory fees........................................................................... 17,969 Fund shares purchased.............................................................................. 31,580 Accrued expenses................................................................................... 43,657 ----------- TOTAL LIABILITIES............................................................................... 350,835 ----------- NET ASSETS........................................................................................... $35,851,966 =========== NET ASSETS CONSIST OF: Paid in capital..................................................................................... $35,967,096 Accumulated net realized loss....................................................................... (4,254,998) Net unrealized appreciation......................................................................... 4,139,868 ----------- NET ASSETS...................................................................................... $35,851,966 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $35,211,394 and 3,836,230 shares issued and outstanding)........................................... $ 9.18 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,044 and 114 shares issued and outstanding)...................................................... $ 9.16 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $639,528 and 69,990 shares issued and outstanding)................................................. $ 9.14 ===========
See accompanying notes to financial statements. ================================================================================ 54 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends..................................................................................... $ 57,456 Interest...................................................................................... 47,194 ---------- TOTAL INCOME.............................................................................. 104,650 ---------- EXPENSES: Advisory...................................................................................... 148,873 Registration.................................................................................. 22,283 Professional.................................................................................. 15,150 Other......................................................................................... 12,307 ---------- TOTAL EXPENSES............................................................................ 198,613 Expenses waived by Advisor................................................................ (25,786) ---------- NET EXPENSES.............................................................................. 172,827 ---------- NET INVESTMENT LOSS....................................................................... (68,177) ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss on investments.............................................................. (633,451) Change in net unrealized appreciation or depreciation on investments.......................... 1,970,811 ---------- Net realized and unrealized gain.............................................................. 1,337,360 ---------- Net increase in net assets resulting from operations.......................................... $1,269,183 ==========
See accompanying notes to financial statements. ================================================================================ 55 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Period Ended Year Ended June 30, 1999 December 31, 1998 ------------- ----------------- OPERATIONS: Net investment loss................................................................... $ (68,177) $ (49,900) Net realized loss..................................................................... (633,451) (3,615,782) Change in net unrealized appreciation or depreciation................................. 1,970,811 2,695,815 ------------- --------------- Net increase (decrease) in net assets resulting from operations....................... 1,269,183 (969,867) ------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net realized gain: Brinson Class I...................................................................... -- (10,014) ------------- --------------- Total distributions to shareholders................................................... -- (10,014) ------------- --------------- CAPITAL SHARE TRANSACTIONS: Shares sold........................................................................... 23,560,273 18,352,730 Shares issued on reinvestment of distributions........................................ -- 9,859 Shares redeemed....................................................................... (11,586,801) (6,727,395) ------------- --------------- Net increase in net assets resulting from capital share transactions.................. 11,973,472 11,635,194 ------------- --------------- TOTAL INCREASE IN NET ASSETS....................................................... 13,242,655 10,655,313 ------------- --------------- NET ASSETS: Beginning of period................................................................... 22,609,311 11,953,998 ------------- --------------- End of period......................................................................... $ 35,851,966 $22,609,311 ============= ===============
See accompanying notes to financial statements. ================================================================================ 56 U.S. Small Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Period Year September 30, 1997* Ended Ended Through Brinson Class I June 30, 1999 December 31, 1998** December 31, 1997** - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period.............................. $ 8.80 $ 9.44 $ 10.00 -------- -------- -------- Income from investment operations: Net investment loss............................................ (0.02) (0.02) -- Net realized and unrealized gain (loss)........................ 0.40 (0.57) (0.56) -------- -------- -------- Total income (loss) from investment operations............... 0.38 (0.59) (0.56) -------- -------- -------- Less distributions: Distributions from net realized gain........................... -- (0.05) -- -------- -------- -------- Total distributions.......................................... -- (0.05) -- -------- -------- -------- Net asset value, end of period.................................... $ 9.18 $ 8.80 $ 9.44 ======== ======== ======== Total return (non-annualized)..................................... 4.32% (6.70)% (5.62)% Ratios/Supplemental data: Net assets, end of period (in 000s).............................. $ 35,211 $ 22,607 $ 11,954 Ratio of expenses to average net assets: Before expense reimbursement................................... 1.32%*** 1.69% 3.63%*** After expense reimbursement.................................... 1.15%*** 1.20% 1.20%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement................................... (0.62)%*** (0.76)% (2.53)%*** After expense reimbursement.................................... (0.45)%*** (0.27)% (0.10)%*** Portfolio turnover rate.......................................... 71% N/A N/A
* Commencement of investment operations ** Reflects 10 for 1 share split effective December 9, 1998. *** Annualized N/A = Information is not available for periods prior to reorganization, as described in notes to financial statements. See accompanying notes to financial statements. ================================================================================ 57 U.S. Small Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Period Ended Brinson Class N June 30, 1999* - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period........................................................ $ 8.80 ------ Income from investment operations: Net investment loss...................................................................... (0.04) Net realized and unrealized gain......................................................... 0.40 ------ Total income from investment operations................................................ 0.36 ------ Net asset value, end of period.............................................................. $ 9.16 ====== Total return (non-annualized)............................................................... 4.09% Ratios/Supplemental data: Net assets, end of period (in 000s)........................................................ $ 1 Ratio of expenses to average net assets: Before expense reimbursement............................................................. 1.57%** After expense reimbursement.............................................................. 1.40%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement............................................................. (0.87)%** After expense reimbursement.............................................................. 0.70%** Portfolio turnover rate.................................................................... 71%
* Commencement of Brinson Class N was December 31, 1998. ** Annualized See accompanying notes to financial statements. ================================================================================ 58 U.S. Bond Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- In selecting issues for the U.S. Bond Fund, we incorporate our analysis of interest rate sensitivity, maturity mix and sector valuation, as well as security specific research compiled by our fixed income and equity research teams. We invest the Fund's assets in investment grade (high quality) securities. Since its inception on August 31, 1995, the Brinson U.S. Bond Fund Class I has produced an annualized return of 6.64%, compared to the 6.71% return of its benchmark, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. The annualized volatility of the Fund was similar to that of the benchmark at 4.01% and 3.54% respectively. During the first half of 1999, the Fund was down 1.40% while the benchmark was down similarly by 1.39%. U.S. bond markets were characterized by a high level of volatility in the first quarter of 1999. After a fairly stable January, February turned in the worst one-month performance record for U.S. Treasury securities in 18 years. The largest changes took place among securities with longer terms to maturity, while shorter-term treasury bills were relatively stable. This volatility was spurred somewhat by Federal Reserve (Fed) chairman Alan Greenspan's testimony to Congress in February. He stated that the Fed expects stronger growth and higher inflation in the U.S. than was originally called for in the fall of 1998. Even though these adjustments were modest, they were sufficient enough to disappoint investors. During this period of volatility, corporate bonds and other spread sectors (bonds that have credit risk because they are not backed by the U.S. Government) performed well, retracing some of the weakness caused by a general flight-to- quality that rounded out 1998. We trimmed our corporate bond weighting on the heels of this strong showing, but maintained a meaningful overweight to corporate bonds and, to a lesser extent, mortgages throughout the first half of the year. U.S. bond yields in the second quarter were driven well above our estimates of fair value by market expectations of higher inflation and anticipation of the 25 basis point rate hike by the Federal Reserve which occurred on June 30. As a result we have set representative duration strategies longer than the benchmark- - -at 1.05 times the benchmark. From a sector standpoint, we believe that prevailing credit spreads provide more than adequate compensation for risk--given our assumptions about the economy and the probabilities we assign to different scenarios for default rates. While credit fundamentals have modestly deteriorated in recent months, this has already been accounted for in our sector modeling. As a consequence, exposure to corporate bonds remains one of the largest active portfolio positions relative to the index. Overweights are also maintained in the mortgage and asset-backed sectors. ================================================================================ 59 U.S. Bond Fund [LOGO OF BRINSON APPEARS HERE] - ------------------------------------------------------------------------------- Total Return
6 months 1 year 3 years Annualized ended ended ended 8/31/95* to 6/30/99 6/30/99 6/30/99 6/30/99 - ---------------------------------------------------------------------------------------------------------- Brinson U.S. Bond Fund Class I -1.40% 2.97% 7.29% 6.64% - ---------------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 7.24 6.71 - ----------------------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Bond Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Bond Fund Class I and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Bond Fund Class I vs. Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested [CHART APPEARS HERE]
Brinson U.S. Bond Salomon Smith Barney Fund Class I BIG Bond Index 8/31/95 1,000,000 1,000,000 1,009,000 1,009,400 1,024,000 1,022,926 1,040,000 1,038,884 12/31/95 1,054,932 1,053,220 1,061,071 1,060,382 1,038,561 1,042,462 1,031,398 1,034,956 1,023,213 1,027,297 1,020,143 1,026,784 6/30/96 1,035,997 1,040,029 1,039,127 1,042,837 1,032,867 1,041,273 1,054,776 1,059,391 1,081,902 1,083,227 1,109,028 1,101,101 12/31/96 1,092,169 1,091,411 1,094,338 1,095,558 1,096,507 1,096,763 1,081,323 1,085,686 1,098,676 1,101,211 1,109,522 1,111,563 6/30/97 1,123,558 1,124,790 1,158,669 1,155,272 1,148,794 1,145,337 1,164,156 1,162,173 1,180,614 1,178,792 1,183,906 1,184,333 12/31/97 1,197,458 1,196,413 1,211,341 1,211,847 1,211,341 1,210,998 1,214,812 1,215,721 1,220,597 1,222,043 1,232,167 1,233,775 6/30/98 1,242,614 1,243,892 1,243,789 1,246,504 1,264,930 1,265,575 1,287,245 1,295,443 1,282,547 1,289,613 1,291,943 1,296,706 12/31/98 1,297,674 1,300,726 1,308,672 1,310,351 1,286,677 1,287,420 1,295,231 1,294,759 1,298,896 1,299,031 1,285,455 1,287,080 6/30/99 1,279,528 1,282,704
8/31/95 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 60 U.S. Bond Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return
6 months 1 year 6/30/97* ended ended to 6/30/99 6/30/99 6/30/99 - ---------------------------------------------------------------------------------------------- Brinson U.S. Bond Fund Class N -1.58% 2.88% 6.53% - ---------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 6.79 - ----------------------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Bond Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Bond Fund Class N and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson U.S. Bond Fund Class N vs. Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested [CHART APPEARS HERE]
Brinson U.S. Bond Salomon Smith Barney Fund Class N BIG Bond Index 6/30/97 1,000,000 1,000,000 1,031,250 1,027,100 1,021,484 1,018,267 9/30/97 1,035,156 1,033,235 1,049,805 1,048,011 1,052,734 1,052,936 12/31/97 1,065,178 1,063,676 1,077,516 1,077,398 1,076,488 1,076,644 3/31/98 1,079,573 1,080,842 1,084,714 1,086,463 1,094,995 1,096,893 6/30/98 1,103,029 1,105,887 1,104,072 1,108,210 1,121,795 1,125,165 9/30/98 1,141,604 1,151,719 1,140,561 1,146,537 1,148,902 1,152,843 12/31/98 1,153,031 1,156,416 1,162,774 1,164,974 1,142,204 1,144,587 1,149,783 1,151,111 1,153,031 1,154,910 1,140,039 1,144,284 6/30/99 1,134,778 1,140,394
6/30/97 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 61 US Bond Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Industry Diversification
As a Percent of Net Assets As of June 30, 1999 - ------------------------------------------------------------------------------------ U.S. BONDS Corporate Bonds Airlines............................................................... 0.07% Asset-Backed........................................................... 7.08 Banks.................................................................. 0.98 CMO.................................................................... 4.98 Consumer............................................................... 2.40 Energy................................................................. 0.27 Financial Services..................................................... 4.78 Industrial Components.................................................. 0.45 Services/Miscellaneous................................................. 2.43 Utilities.............................................................. 3.50 ------ Total U.S. Corporate Bonds.......................................... 26.94 International Dollar Bonds.............................................. 9.14 Mortgage-Backed Securities.............................................. 8.72 U.S. Government Agencies................................................ 32.62 U.S. Government Obligations............................................. 16.46 ------ Total U.S. Bonds.................................................... 93.88 SHORT-TERM INVESTMENTS.................................................. 5.61 ------ TOTAL INVESTMENTS................................................... 99.49 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.51 ------ NET ASSETS.............................................................. 100.00% ======
================================================================================ 62 U.S. Bond Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- ----------- Bonds -- 93.88% U.S. Corporate Bonds -- 26.94% ABN Amro Mortgage Corp., 99-2 IA2, 6.300%, due 04/25/29................................... $2,100,000 $ 2,040,612 ABN Amro Mortgage Corp., 99-3, Class A2, 6.300%, due 05/25/29................................... 1,000,000 972,050 Cendant Corp., 7.750%, due 12/01/03...................... 1,060,000 1,070,622 Centaur Funding Corp., 144A, (b) 0.000%, due 04/21/20................................... 1,355 209,348 9.080%, due 04/21/20................................... 715 767,284 Chase Mortgage Finance Corp., 93-J1, Class 1A5, 6.625%, due 08/25/09........................ 60,423 58,912 Ches Pot Tel MD, 8.000%, due 10/15/29.................... 87,000 95,466 Chrysler Financial Corp., 7.400%, due 08/01/97................................... 100,000 97,942 Continental Airlines, Inc., 98-1B, 6.748%, due 09/15/18................................... 71,387 67,966 Countrywide Funding Corp. FRN, 5.420%, due 12/01/03................................... 250,000 237,500 Farmers Exchange Capital, 144A, 7.050%, due 07/15/28................................... 1,090,000 985,126 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03.......................... 980,000 982,852 General Motors Acceptance Corp., 9.625%, due 12/15/01................................... 294,000 315,322 Heller Financial Commercial Mortgage Assets, 99-PH1 A1, 6.500%, due 05/15/61........................ 1,244,122 1,232,775 Illinois Power Special Purpose Trust, 98-1, 5.650%, due 12/25/10................................... 1,565,000 1,445,590 LB Commercial Conduit Mortgage Trust, 99-C1 A1, 6.410%, due 10/15/30......................... 705,000 695,673 Lehman Brothers, Inc., Senior Note 7.250%, due 04/15/03................................... 225,000 225,783 MBNA Global Capital Securities FRN, 5.795%, due 02/01/27................................... 90,000 78,038 Merrill Lynch & Co., Inc., 6.000%, due 02/17/09................................... 1,000,000 921,990 Mid-America Energy, 6.375%, due 06/15/06................................... 275,000 261,566 Monsanto Co., 144A, 6.600%, due 12/01/28................................... 1,250,000 1,110,850 Morgan Stanley Dean Witter, MTN, 5.625%, due 01/20/04................................... 1,000,000 960,268 News America Holdings, 7.750%, due 12/01/45................................... 358,000 339,350 Norwest Asset Securities Corp., 98-25, Class A5, 6.000%, due 12/25/28......................... 2,400,000 2,306,280 PanAmSat Corp., 6.000%, due 01/15/03................................... 375,000 367,057 6.375%, due 01/15/08................................... 500,000 472,114 Peco Energy Transition Trust, 6.130%, due 03/01/09................................... 1,135,000 1,076,173 Premier Auto Trust 96-4A, Class A4, 6.400%, due 10/06/01................................... 350,000 351,421 Rite Aid Corp., 144A, 6.125%, due 12/15/08................................... $ 890,000 $ 806,115 Salomon, Inc., 6.750%, due 02/15/03...................... 300,000 300,693 Service Corp., International, 6.000%, due 12/15/05................................... 750,000 689,197 Sprint Capital Corp., 6.875%, due 11/15/28................................... 1,000,000 910,531 Tele-Communications, Inc, 9.800%, due 02/01/12................................... 950,000 1,160,336 Texas Utilities, 5.940%, due 10/15/11.................... 420,000 416,947 Thrift Financial Corp., 11.250%, due 01/01/16.................................. 34,157 35,681 Time Warner Entertainment, Inc., Debenture 8.375%, due 03/15/23 Pool #298198........................................... 94,000 101,723 Time Warner, Inc., 7.570%, due 02/01/24.................. 340,000 338,600 U.S.A. Waste Services, 6.500%, due 12/15/02................................... 400,000 396,660 Vendee Mortgage Trust, 92-1, Class 2Z, 7.750%, due 05/15/22................................... 532,364 548,565 Westdeutsche Landesbank NY, 6.050%, due 01/15/09................................... 1,035,000 957,835 ----------- 26,408,813 ----------- Mortgage-Backed Securities -- 8.72% Chemical Mortgage Securities Inc. 93-1 Class A5, 7.450%, due 02/25/23......................... 327,646 329,661 Citicorp Mortgage Securities, Inc. 94-9 Class A8, 5.750%, due 06/25/09......................... 1,069,783 1,000,065 GE Capital Mortgage Services, Inc., 97-HE4, Class A7, 6.735%, due 12/25/28......................... 410,000 408,930 GreenTree Financial Corp., 94-5, Class A5, 8.300%, due 11/15/19................................... 320,000 335,797 PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%, due 07/25/24......................... 215,000 212,766 Prudential Home Mortgage Securities, 93-43, Class A9, 6.750%, due 10/25/23......................... 275,025 268,757 Prudential Home Mortgage Securities, 94-3, Class A10, 97-HE4 A76.500%, due 02/25/24........................................... 170,000 164,492 Residential Accredit Loans, Inc., 96-QS4, Class Al10, 7.900%, due 08/25/26....................... 275,000 279,570 Residential Accredit Loans, Inc., 98-QS4, Class AI5, 7.000%, due 03/25/28........................ 2,850,000 2,842,296 Residential Asset Securitization Trust, 97-A10, Class A1, 7.250%, due 12/25/27......................... 490,952 493,417 Residential Funding Mortgage, Series 95-S6, Class A7, 7.500%, due 11/25/25......................... 955,358 961,730 SASCO LLC., 98-RF1, Class A, 7.900%, 144A, due 10/15/28..................................... 517,811 530,109 Structured Asset Securities Corp., 98-RF1, Class A, 8.712%, due 03/15/27.......................... 434,456 455,093 Structured Asset Securities Corp., 98-RF2, 8.582%, due 07/15/27................................... 152,810 159,687
================================================================================ 63 U.S. Bond Fund -- Schedule of Investments - -------------------------------------------------------------------------------- June 30, 1999
Face Amount Value ---------- ---------- Mortgage-Backed Securities -- (Continued) UCFC Home Equity Loan 97-C, Class A8, FRN, 5.069%, due 09/15/27................................. $ 106,786 $ 106,529 ----------- 8,548,899 ----------- International Dollar Bonds -- 9.14% Banco Santiago S.A., 7.000%, due 07/18/07.............................................. 380,000 333,217 Banque Paribas, Sub. Notes, 6.875%, due 03/01/09...................................... 700,000 675,146 British Sky Broadcasting Group plc, 6.875%, due 02/23/09...................................... 820,000 747,771 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.90%, due 05/01/07....................................... 500,000 486,783 Empresa Nacional de Electricidad S.A., 7.875%, due 02/01/27...................................... 594,000 502,946 Interamer Development Bank, 6.80%, due 10/15/25.............................................. 100,000 100,188 Korea Development Bank, 7.125%, due 09/17/01.............................................. 500,000 498,573 Pemex Finance Ltd., 2A-B1, 8.450%, due 02/15/07, 144A........................................ 940,000 942,406 Petroliam Nasional Berhad, 144A, 7.625%, due 10/15/26...................................... 430,000 344,523 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14................................ 450,000 415,274 Repsol International Finance, 7.000%, due 08/01/05...................................... 200,000 198,779 Republic of South Africa, 9.625%, due 12/15/99...................................... 71,000 71,710 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49.............................................. 80,000 77,767 Skandinaviska Enskilda Banken, 144A, 6.625%, due 03/29/49...................................... 960,000 949,317 Skandinaviska Enskilda Banken, 144A, Resettable Perpetual Preferred, 6.500%, due 12/29/49...................................... 305,000 290,079 Southern Investments UK, 6.800%, due 12/01/06.............................................. 1,345,000 1,296,974 Tyco International Group, S.A., 5.875%, due 11/01/04...................................... 595,000 574,186 7.000%, due 06/15/28...................................... 500,000 463,137 ----------- 8,968,776 ----------- U.S. Government Agencies -- 32.62% Aid-Israel, Series 10-Z, 0.000%, due 02/15/03 (b).......................................... 805,000 650,286 Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25............................. 138,477 144,700 Federal Home Loan Mortgage Corp., 7.000%, due 10/15/13...................................... $ 492,125 $ 486,244 7.238%, due 05/01/26...................................... 15,110 15,224 Federal Home Loan Mortgage Corp. Gold, 8.000%, due 11/01/22...................................... 99,552 102,604 9.000%, due 03/01/24...................................... 76,257 81,179 Federal National Mortgage Association 5.625%, due 03/15/01...................................... 5,080,000 5,068,458 6.500%, due 03/01/19...................................... 488,377 475,426 6.000%, due 03/01/28...................................... 689,567 649,320 6.000%, due 01/01/29...................................... 1,624,551 1,528,964 6.000%, due 02/01/29...................................... 3,480,663 3,277,511 6.500%, due 06/01/28...................................... 750,168 726,093 6.500%, due 09/01/28...................................... 241,593 233,840 6.500%, due 11/01/28...................................... 1,965,912 1,901,493 6.500%, due 11/01/28...................................... 3,407,597 3,298,235 6.500%, due 02/01/29...................................... 512,629 495,832 7.000%, due 12/01/24...................................... 2,790,375 2,762,223 7.000%, due 03/01/29...................................... 47,731 47,275 7.500%, due 12/01/23...................................... 523,038 528,969 7.500%, due 01/01/28...................................... 285,300 288,975 8.000%, due 08/01/08...................................... 637,337 656,714 8.000%, due 12/18/11...................................... 100,000 104,443 8.000%, due 05/25/21...................................... 2,260,000 2,301,753 8.500%, due 07/01/22...................................... 11,754 12,362 8.500%, due 07/15/21...................................... 61,292 63,438 9.500%, due 08/01/22...................................... 72,528 77,376 Federal National Mortgage Assoc., Series 97-72, Class EG, 0.000%, due 09/25/22.............................................. 344,151 306,473 Federal National Mortgage Assoc. Strips, 8.000%, due 08/01/23...................................... 333,287 85,297 0.000%, due 02/01/28 (b).................................. 239,536 168,071 Federal National Mortgage Assoc. TBA N12L8, 0.000%............................................. 1,090,000 1,025,281 Federal National Mortgage Association, FNCI, 8.000%, due 02/01/13................................ 200,460 206,555 Freddie Mac, 5.750%, due 06/15/01........................... 1,000,000 998,241 Government National Mortgage Association Class L SEQ, 7.000%, due 02/16/24......................... 150,000 149,410 Government National Mortgage Association, 7.000%, due 07/15/25...................................... 91,342 90,490 7.500%, due 12/15/22...................................... 226,748 229,914 7.500%, due 12/15/23...................................... 949,000 962,014 7.500%, due 01/15/24...................................... 64,928 65,779 7.500%, due 06/15/25...................................... 79,422 80,486 8.000%, due 08/15/22...................................... 45,546 46,960 9.000%, due 11/15/04...................................... 7,671 8,079 9.000%, due 11/15/04...................................... 3,126 3,292 9.000%, due 12/15/17...................................... 32,630 34,783 10.000%, due 09/15/00..................................... 1,306 1,392 10.000%, due 05/15/01..................................... 1,527 1,628 Jordan Aid, 8.750%, due 09/01/19............................ 1,357,589 1,542,248 ----------- 31,985,330 -----------
================================================================================ 64 U.S. Bond Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- ------------ U.S. Government Obligations -- 16.46% U.S. Treasury Bond, 8.000%, due 11/15/21.......................... $7,985,000 $ 9,606,953 U.S. Treasury Inflation Indexed Note, 3.625%, due 04/15/28.......................... 1,770,000 1,717,227 U.S. Treasury Note, 5.000%, due 04/30/01.......................... 3,400,000 3,370,250 5.625%, due 05/15/08.......................... 1,470,000 1,439,681 ------------ 16,134,111 ------------ Total Bonds (Cost $94,549,344).................. 92,045,929 ------------ Shares ---------- Short-Term Investments -- 5.61% Investment Companies -- 5.61% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $5,504,377)............................. 5,504,377 5,504,377 ------------ Total Investments (Cost $100,053,721) -- 99.49% (a)............. 97,550,306 Cash and other assets, less liabilities -- 0.51%.......................... 495,277 ------------ Net Assets -- 100%.............................. $ 98,045,583 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $100,053,721; and net unrealized depreciation consisted of: Gross unrealized appreciation.............. $ 342,432 Gross unrealized depreciation.............. (2,845,847) ----------- Net unrealized depreciation............. $(2,503,415) ===========
FRN: Floating rate note --The rate disclosed is that in effect at June 30, 1999. TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $7,837,214, or 7.99% 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. ================================================================================ 65 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $94,549,344)................................................. $ 92,045,929 Affiliated issuers (Cost $5,504,377).................................................... 5,504,377 Receivables: Investment securities sold.............................................................. 299 Fund shares sold........................................................................ 757,363 Interest................................................................................ 930,662 Other assets............................................................................. 3,248 ------------ TOTAL ASSETS......................................................................... 99,241,878 ------------ LIABILITIES: Payables: Investment securities purchased......................................................... 1,022,193 Fund shares redeemed.................................................................... 102,892 Investment advisory fees................................................................ 39,926 Accrued expenses........................................................................ 31,284 ------------ TOTAL LIABILITIES.................................................................... 1,196,295 ------------ NET ASSETS................................................................................ $ 98,045,583 ============ NET ASSETS CONSIST OF: Paid in capital.......................................................................... $100,639,632 Accumulated undistributed net investment income.......................................... 961,121 Distributions in excess of net realized gain............................................. (1,051,755) Net unrealized depreciation.............................................................. (2,503,415) ------------ NET ASSETS........................................................................... $ 98,045,583 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $92,029,678 and 8,955,888 shares issued and outstanding)................................. $ $10.28 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,133 and 110 shares issued and outstanding)............................................ $ $10.30 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $6,014,772 and 587,717 shares issued and outstanding).................................... $ 10.23 ============
See accompanying notes to financial statements. ================================================================================ 66 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends................................................................................ $ 29,756 Interest................................................................................. 5,014,331 ----------- TOTAL INCOME......................................................................... 5,044,087 ----------- EXPENSES: Advisory................................................................................. 418,445 Registration............................................................................. 36,405 Professional............................................................................. 27,870 Distribution............................................................................. 25,254 Other.................................................................................... 30,338 ----------- TOTAL EXPENSES....................................................................... 538,312 Expenses waived by Advisor........................................................... (11,372) ----------- NET EXPENSES......................................................................... 526,940 ----------- NET INVESTMENT INCOME................................................................ 4,517,147 ----------- NET REALIZED AND UNREALIZED LOSS:......................................................... Net realized loss........................................................................ (338,906) Change in net unrealized appreciation or depreciation.................................... (3,036,340) ----------- Net realized and unrealized loss......................................................... (3,375,246) ----------- Net increase in net assets resulting from operations..................................... $ 1,141,901 ===========
See accompanying notes to financial statements. ================================================================================ 67 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income........................................................ $ 4,517,147 $ 1,638,048 Net realized gain (loss)..................................................... (338,906) 801,133 Change in net unrealized appreciation or depreciation........................ (3,036,340) 335,673 ------------- ------------- Net increase in net assets resulting from operations......................... 1,141,901 2,774,854 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income..................................... (3,812,376) (1,629,719) Distributions from net realized gain......................................... (55,782) (361,568) Distributions in excess of net realized gain................................. (1,051,755) -- ------------- ------------- Total distributions to shareholders*......................................... (4,919,913) (1,991,287) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................................................. 156,386,946 21,794,978 Shares issued in connection with the acquisition of UBS Bond Fund............ 15,177,263 -- Shares issued on reinvestment of distributions............................... 4,271,987 1,174,894 Shares redeemed.............................................................. (115,331,025) (6,255,720) ------------- ------------- Net increase in net assets resulting from capital share transactions......... 60,505,171 16,714,152 ------------- ------------- TOTAL INCREASE IN NET ASSETS............................................... 56,727,159 17,497,719 ------------- ------------- NET ASSETS: Beginning of period.......................................................... 41,318,424 23,820,705 ------------- ------------- End of period (including accumulated undistributed net investment income of $961,121 and $300,973, respectively)......................................... $ 98,045,583 $41,318,424 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from net investment income: Brinson Class I............................................................. (3,583,162) (1,526,152) Brinson Class N............................................................. (46) (54) UBS Investment Funds Class.................................................. (229,168) (103,513) Distributions from and in excess of net realized gain: Brinson Class I............................................................. (1,038,553) (335,742) Brinson Class N............................................................. (16) (14) UBS Investment Funds Class.................................................. (68,968) (25,812) ------------- ------------- Total distributions to shareholders.......................................... (4,919,913) (1,991,287) ------------- -------------
See accompanying notes to financial statements. ================================================================================ 68 U.S. Bond Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
August 31, 1995* Year Ended June 30, Through ---------------------------------------- Brinson Class I 1999 1998 1997 June 30, 1996 - -------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............ $ 10.58 $ 10.24 $ 9.93 $ 10.00 ------- ------- ------- --------- Income from investment operations: Net investment income......................... 0.58** 0.53 0.51** 0.50 Net realized and unrealized gain (loss)....... (0.26) 0.53 0.32 (0.14) ------- ------- ------- --------- Total income from investment operations.... 0.32 1.06 0.83 0.36 ------- ------- ------- --------- Less distributions: Distributions from net investment income...... (0.47) (0.58) (0.52) (0.40) Distributions in excess of net realized gain.. (0.15) (0.14) -- (0.03) ------- ------- ------- --------- Total distributions........................ (0.62) (0.72) (0.52) (0.43) ------- ------- ------- --------- Net asset value, end of period.................. $ 10.28 $ 10.58 $ 10.24 $ 9.93 ======= ======= ======= ========= Total return (non-annualized)................... 2.97% 10.60% 8.45% 3.60% Ratios/Supplemental data: Net assets, end of period (in 000s)............ $92,030 $38,874 $22,421 $ 9,047 Ratio of expenses to average net assets: Before expense reimbursement.................. 0.61% 0.84% 1.65% 3.63%*** After expense reimbursement................... 0.60% 0.60% 0.60% 0.60%*** Ratio of net investment income to average net assets: Before expense reimbursement.................. 5.42% 5.61% 5.14% 3.00%*** After expense reimbursement................... 5.43% 5.85% 6.19% 6.03%*** Portfolio turnover rate........................ 260% 198% 410% 363%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. ================================================================================ 69 U.S. Bond Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
Year Ended Year Ended Brinson Class N June 30, 1999 June 30, 1998 - ---------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............................................. $10.58 $10.24 ------ ------ Income from investment operations: Net investment income......................................................... 0.57* 0.61 Net realized and unrealized gain (loss)....................................... (0.26) 0.42 ------ ------ Total income from investment operations..................................... 0.31 1.03 ------ ------ Less distributions: Distributions from net investment income...................................... (0.44) (0.55) Distributions from net realized gain.......................................... (0.15) (0.14) ------ ------ Total distributions......................................................... (0.59) (0.69) ------ ------ Net asset value, end of period................................................... $10.30 $10.58 ====== ====== Total return..................................................................... 2.88% 10.30% Ratios/Supplemental data: Net assets, end of period (in 000s)............................................. $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement.................................................. 0.86% 1.09% After expense reimbursement................................................... 0.85% 0.85% Ratio of net investment income to average net assets: Before expense reimbursement.................................................. 5.17% 5.36% After expense reimbursement................................................... 5.18% 5.60% Portfolio turnover rate......................................................... 260% 198%
* The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 70 High Yield Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- In selecting issues for the High Yield Fund, we incorporate our analysis of interest rate sensitivity, maturity mix, sector valuation, as well as security specific research compiled by our fixed income and equity research teams. Successful high yield fixed income investing involves capturing the market's high total return potential while minimizing losses due to credit deterioration or default. We believe that many high yield managers sacrifice safety while reaching for high current income. In contrast, at the forefront of our philosophy is a focus on asset coverage and preservation of principal. Our disciplined process avoids taking large risks solely for the sake of a high indicated yield. Our investment process consists of four stages: . Identify high quality issuers with substantial asset coverage. . Identify issuers generating free cash flow with a focus on deleveraging their balance sheet. . Consider relative value: does expected return from the investment adequately compensate for risk? . Diversify holdings by issuer and industry. Since its inception on September 30, 1997, the Brinson High Yield Fund Class I has returned 7.50% compared to 4.61% for its benchmark, the Merrill Lynch High Yield Master Index. Over the most recent six-month period, the Fund has returned 2.91% versus the index return of 1.76%. Volatility of the Fund since its inception has been slightly higher than that of the benchmark at 7.00% versus 5.53%. Rising U.S. Treasury yields, above-trend GDP growth and a more benign global economic outlook resulted in tighter high yield bond spreads in the first half of 1999. Prices of high yield bonds increased relative to U.S. treasuries, bringing forward-looking "risky" bond yields closer to those of "riskless" government-backed treasury bonds. Spreads over treasuries tightened significantly from 5.55% at December 31, 1998 to 4.51% at June 30, 1999. Lower rated high yield bonds have generally outperformed their higher quality counterparts thus far in 1999, as investors have, to some degree, reversed the flight-to-quality which occurred during the second half of 1998. We continue to believe that additional spread tightening is warranted at current levels. Our valuation model indicates that the high yield bond market is expected to generate an annualized total return of approximately 10.5% over the course of the next 3 years. We continue to believe that issue selection remains paramount in generating solid returns from a high yield portfolio, and our focus remains on single-B rated companies that we expect will demonstrate improving credit quality over a 12 to 18 month horizon. Specifically, we have reduced our underweight in cyclical industries which performed well during the first half of the year, including paper and energy, and modestly reduced our overweight in cable television and broadcasting. ================================================================================ 71 High Yield Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Total Return 6 months 1 year 9/30/97* ended ended to 6/30/99 6/30/99 6/30/99 - ---------------------------------------------------------------------------------------------- Brinson High Yield Fund Class I 2.91% 4.90% 7.50% - ---------------------------------------------------------------------------------------------- Merrill Lynch High Yield Master Index 1.76 0.94 4.61 - ----------------------------------------------------------------------------------------------
* Inception date of the Brinson High Yield Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson High Yield Fund Class I and the Merrill Lynch High Yield Master Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson High Yield Fund Class I vs. Merrill Lynch High Yield Master Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE] Brinson High Yield Merrill Lynch High Date Fund Class I Yield Master Index 9/30/97 1,000,000 1,000,000 10/31/97 995,405 1,006,640 11/30/97 1,005,534 1,016,173 12/31/97 1,023,434 1,025,816 1/31/98 1,047,259 1,041,091 2/28/98 1,054,152 1,045,391 3/31/98 1,066,777 1,054,402 4/30/98 1,068,387 1,059,410 5/31/98 1,070,928 1,066,784 6/30/98 1,081,780 1,072,064 7/31/98 1,098,343 1,078,175 8/31/98 1,042,275 1,031,652 9/30/98 1,057,065 1,033,715 10/31/98 1,049,791 1,016,742 11/30/98 1,109,624 1,063,035 12/31/98 1,102,713 1,063,388 1/31/99 1,129,231 1,073,905 2/28/99 1,134,755 1,065,711 3/31/99 1,146,909 1,074,897 4/30/99 1,163,483 1,091,709 5/31/99 1,140,280 1,084,132 6/30/99 1,134,755 1,082,094 9/30/97 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ============================================================================== 72 High Yield Fund [LOGO OF BRINSON APPEARS HERE] - ------------------------------------------------------------------------------- Total Return 12/31/98* to 6/30/99 - ------------------------------------------------------------------------------- Brinson High Yield Fund Class N 2.71% - ------------------------------------------------------------------------------- Merrill Lynch High Yield Master Index 1.76 - ------------------------------------------------------------------------------- * Inception date of the Brinson High Yield Fund Class N. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson High Yield Fund Class N and the Merrill Lynch High Yield Master Index if you had invested $1,000,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson High Yield Fund Class N vs. Merrill Lynch High Yield Master Index Wealth Value with Dividends Reinvested [BAR CHART APPEARS HERE]
Brinson High Yield Merrill Lynch High Date Fund Class N Yield Master Index 12/31/98 1,000,000 1,000,000 1/31/99 1,024,048 1,009,890 2/28/99 1,028,056 1,002,184 3/31/99 1,039,078 1,010,823 4/30/99 1,054,108 1,026,633 5/31/99 1,032,064 1,019,508 6/30/99 1,027,054 1,017,591
12/31/98 = $1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. =============================================================================== 73 High Yield Fund [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- Industry Diversification
As a Percent of Net Assets As of June 30, 1999 U.S. BONDS Corporate Bonds Auto..................................... 2.51% Business & Public Service................ 3.29 Chemicals................................ 3.23 Construction............................. 2.19 Consumer................................. 3.59 Electronics and Electric Components...... 1.10 Energy................................... 0.68 Financial Services....................... 1.13 Food & House Products.................... 5.83 Health................................... 6.39 Industrial............................... 0.41 Multi-Industry........................... 0.59 Radio Broadcasting....................... 3.75 Real Estate.............................. 0.76 Recreation............................... 8.53 Retail................................... 4.81 Services/Miscellaneous................... 19.24 Telecommunications....................... 12.22% Television Broadcasting.................. 13.21 ------ Total U.S. Corporate Bonds............ 93.46 International Dollar Bonds................ 1.69 ------ Total U.S. Bonds...................... 95.15 SHORT-TERM INVESTMENTS.................... 3.39 TOTAL INVESTMENTS..................... 98.54 CASH AND OTHER ASSETS, LESS LIABILITIES......................... 1.46 ------ NET ASSETS................................ 100.00% ======
- ------------------------------------------------------------------------------- Top Ten U.S. Bond Holdings As of June 30, 1999
Percent of Net Assets - --------------------------------------------------- 1. Phoenix Color Corp. 1.48% 2. Mediacomm LLC. 1.42 3. Mail Well Corp. 1.32 4. Waterford Gaming LLC. 1.27 5. Outdoor Communications, Inc. 1.27 6. Scotts Co. 1.26 7. Group Maintenance America 1.26 8. Dobson/Sygnet Communications 1.25 9. Eagle Family Foods, Inc. 1.20 10. Cumulus Media, Inc. 1.20 - ---------------------------------------------------
================================================================================ 74 High Yield Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- -------- U.S. Bonds -- 95.15% U.S. Corporate Bonds -- 93.46% Ackerley Group, Inc. Series B, 9.000%, due 01/15/09........................................ $ 675,000 $666,562 Adams Outdoor Advertising, 10.750%, due 03/15/06....................................... 550,000 585,750 Allbritton Communications Co.,Series B, 8.875%, due 02/01/08........................................ 550,000 529,375 Alliance Laundry Systems,144A, 9.625%, due 05/01/08........................................ 425,000 389,938 American Plumbing & Mechanic, Inc., 144A, 11.625%, due 11/15/08....................................... 650,000 627,250 Aurora Foods, Inc., Series B, 9.875%, due 02/15/07........................................ 700,000 724,500 Avalon Cable Holdings, 144A, 9.375%, due 12/01/08........................................ 600,000 609,750 Bally Total Fitness Corp., Series B, 9.875%, due 10/15/07........................................ 750,000 727,500 BGF Industries, Inc. 144A, 10.250%, due 01/15/09....................................... 300,000 273,000 Big City Radio, Inc., (c) 0.000%, due 03/15/05........................................ 1,100,000 781,000 Big Flower Holdings, Inc., 8.625%, due 12/01/08........................................ 800,000 736,000 Bresnan Communications Group, 144A, (d) 0.000%, due 02/01/09........................................ 500,000 325,000 Budget Group, Inc., 9.125%, due 04/01/06........................................ 500,000 465,000 Capstar Broadcasting Partners, Inc., (e) 0.000%, due 02/01/09........................................ 500,000 422,500 CB Richard Ellis Services, Inc., 8.875%, due 06/01/06........................................ 525,000 506,625 Centennial Cellular, 144A, 10.750%, due 12/15/08........................................ 750,000 774,375 Century Communications Corp., 0.000%, due 01/15/08........................................ 425,000 189,125 Century Communications Corp., 8.375%, due 11/15/17........................................ 300,000 276,375 Collins & Alkman Corp., 11.500%, due 04/15/06....................................... 700,000 703,500 CSC Holdings, Inc., 7.625%, due 07/15/18........................................ 600,000 555,750 Cumulus Media, Inc., 10.375%, due 07/01/08........................................ 750,000 795,000 Dan River, Inc., Snr-Sub-Nts, 10.125%, due 12/15/03....................................... 500,000 510,000 Diamond Triumph Autoglass, Inc., 144A, 9.250%, due 04/01/08,....................................... 700,000 679,000 Digital Television Services, Series B, 12.500%, due 08/01/07....................................... 550,000 604,312 Dobson Sygnet Communications, Inc., 12.250%, due 12/15/08....................................... 800,000 832,000 Eagle Family Foods, Series B, 8.750%, due 01/15/08........................................ 890,000 796,550 Echostar DBS Corp. 144A, 9.375%, due 02/01/09........................................ $ 250,000 $254,375 Exodus Communications, Inc., 144A, 11.250%, due 07/01/08....................................... 500,000 525,000 Exodus Communications, Inc., 11.250%, due 07/01/08....................................... 250,000 262,500 Falcon Holding Group, Series B, (f) 0.000%, due 04/15/10........................................ 750,000 525,000 Fedders North America, 9.375%, due 08/15/07........................................ 500,000 505,000 Federal-Mogul Corp. 144A, 7.500%, due 01/15/09........................................ 500,000 460,813 Florida Panthers Corp., 9.875%, due 04/15/09........................................ 750,000 701,250 Fox/Liberty Networks, Step, 0.000%, due 08/15/07........................................ 500,000 390,000 Global Imaging Systems, Inc. 144A, 10.750%, due 02/15/07....................................... 500,000 490,000 Golden Sky DBS, Inc., 144A, (g) 0.000%, due 03/01/07........................................ 375,000 223,125 Golden Sky Systems, Inc., Series B, (h) 12.375%, due 08/01/06....................................... 700,000 784,000 Granite Broadcasting, Corp., 10.375%, due 05/15/05....................................... 400,000 404,000 Group Maintenance America Corp., 144A, 9.750%, due 01/15/09........................................ 850,000 834,062 Harvey Casinos Resorts, 10.625%, due 06/01/06....................................... 450,000 468,000 Hollinger International Publishing Corp., 9.250%, due 02/01/06........................................ 750,000 765,937 ICG Holdings, Inc., (i) 0.000%, due 05/01/06........................................ 750,000 585,000 Integrated Electrical Services, Inc., 144A, 9.375%, due 02/01/09........................................ 750,000 738,750 Interep National Radio Sales, Series B, 10.000%, due 07/01/08....................................... 650,000 664,625 Intermedia Communications, Series B, (j) 8.600%, due 06/01/08........................................ 250,000 230,000 Intermedia Communications, Inc., Series B, 0.000%, due 07/15/07.............................. 550,000 391,875 Iron Mountain, Inc., 10.125%, due 10/01/06....................................... 200,000 207,000 Iron Mountain, Inc., 8.750%, due 09/30/09........................................ 500,000 485,000 Isle of Capri Casinos, Inc., 144A, 8.750%, due 04/15/09........................................ 500,000 468,750 ISP Holdings Inc., Series B, 9.000%, due 10/15/03........................................ 415,000 412,925 J.H. Heafner Co., 144A, 10.000%, due 05/15/08....................................... 425,000 422,875 J.H. Heafner Co., Inc., 10.000%, due 05/15/08....................................... 100,000 99,500 JCAC, Inc., 10.125%, due 06/15/06....................................... 450,000 487,688
================================================================================ 75 High Yield Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- -------- Level 3 Communications, Inc., (k) 0.000%, due 12/01/08.......................................... $1,250,000 $768,750 Liberty Group Operating, 9.375%, due 02/01/08.......................................... 800,000 752,000 Lifepoint Hospitals Holdings, 144A, 10.750%, due 05/15/09......................................... 650,000 661,375 LIN Holdings Corp., Step, (l) 0.000%, due 03/01/08.......................................... 1,000,000 660,000 Lyondell Chemical Co.,144A, 9.875%, due 05/01/07.......................................... 750,000 766,875 Mail Well Corp., 8.750%, due 12/15/08.......................................... 900,000 873,000 Mediacom LLC., Series B, 8.500%, due 04/15/08.......................................... 1,000,000 940,000 Mohegan Tribal Gaming Authority, 8.750%, due 01/01/09.......................................... 600,000 594,000 MTS, Inc., 9.375%, due 05/01/05.......................................... 750,000 570,000 NationsRent, Inc., 10.375%, due 12/15/08......................................... 675,000 668,250 NBTY, Inc., Series B, 8.625%, due 09/15/07.......................................... 550,000 473,000 New World Pasta Co., 144A, 9.250%, due 02/15/09.......................................... 795,000 773,137 Newpark Resources, Inc., Series B, 8.625%, due 12/15/07.......................................... 500,000 482,500 Nextel Communications, Inc., (n) 0.000%, due 02/15/08.......................................... 250,000 171,250 Nextel Communications, Inc., Step, 144A, (o) 0.000%, due 09/15/07.......................... 800,000 582,000 Nortek, Inc, 144A, 8.875%, due 08/01/08.......................................... 375,000 367,500 Nortex, Inc., 9.875%, due 03/01/04......................................... 450,000 454,500 NTL Communications Corp., Series B, Step, (p) 0.000%, due 10/01/08................................ 900,000 614,250 Outdoor Communications, Inc., Snr-Sub-Nts, 9.250%, due 08/15/07............................. 800,000 842,000 Packaging Corp. of America, 144A, 9.625%, due 04/01/09.......................................... 500,000 507,500 Paxson Communications Corp., (b) 0.000%, due 10/31/06.......................................... 750 684,375 Pegasus Communications Corp., Series B, 9.625%, due 10/15/05.......................................... 750,000 735,000 Pegasus Communications Corp., Series B, 9.750%, due 12/01/06.......................................... 150,000 150,000 Supreme International Corp., 144A, 12.250%, due 04/01/06......................................... 650,000 656,500 Phoenix Color, Inc., 10.375%, due 02/01/09......................................... 1,000,000 980,000 Pilgrim's Pride Corp., Snr-Sub-Nts, 10.875%, due 08/01/03......................................... $ 200,000 $204,000 Premier Parks, Inc., Step, (q) 0.000%, due 04/01/08.......................................... 1,100,000 731,500 Protection One Alarm, Inc., (r) 13.625%, due 06/30/05......................................... 250,000 279,688 PSINet Inc., 11.500%, due 11/01/08......................................... 700,000 738,500 Quest Diagnostic, 144A, 9.875%, due 07/01/09.......................................... 500,000 506,250 Qwest Communications International, Inc., (s) 0.000%, due 10/15/07...................................... 500,000 390,000 R. H. Donnelly, Inc., 9.125%, due 06/01/08.......................................... 750,000 751,875 Range Resources Corp., 8.750%, due 01/15/07.......................................... 500,000 450,000 Rayovac Corp., Series B, 10.250%, due 11/01/06......................................... 500,000 535,000 RCN Corp., Step, (t) 0.000%, due 10/15/07.......................................... 450,000 302,625 Revlon Consumer Products, 8.625%, due 02/01/08.......................................... 650,000 607,750 Scotts Co., 144A, 8.625%, due 01/15/09.......................................... 850,000 837,250 SFX Entertainment, Inc., Series B, 9.125%, due 02/01/08.......................................... 800,000 784,000 Simmons Co., 144A, 10.250%, due 03/15/09......................................... 700,000 710,500 Sinclair Broadcast Group, 10.000%, due 09/30/05......................................... 250,000 255,625 Sinclair Broadcast Group, 8.750%, due 12/15/07.......................................... 425,000 412,250 Sleepmaster Corp., 144A, 11.000%, due 05/15/09......................................... 650,000 661,375 Speedway Motorsports, Inc., 8.500%, due 08/15/07.......................................... 600,000 606,000 Speedway Motorsports, Inc., 144A, 8.500%, due 08/15/07.......................................... 250,000 252,500 T/SF Communications Corp., Series B, 10.375%, due 11/01/07......................................... 550,000 550,000 Telecorp PCS Inc., 144A, (u) 0.000%, due 04/15/09.......................................... 500,000 276,250 TeleWest Communications PLC,144A, 0.000%, due 04/15/09.......................................... 500,000 333,125 Tenet Healthcare Corp., 8.625%, due 01/15/07.......................................... 750,000 738,750 Trans-Resources, Inc., Series B, (v) 0.000%, due 03/15/08.......................................... 650,000 328,250 TransWestern Publishing Co., 9.625%, due 11/15/07.......................................... 625,000 614,844
================================================================================ 76 High Yield Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- ----------- Triton PCS, Inc., (w) 0.000%, due 05/01/08................................. $1,000,000 $ 642,500 Twin Labs, Inc., 10.250%, due 05/15/06................................ 500,000 525,000 Unisys Corp., 11.750%, due 10/15/04................................ 450,000 499,500 United Artists Theatre Circuit, Inc., Series B, 9.750%, due 04/15/08....................... 150,000 106,500 United Artists Theatre Circuit, Inc., Series B, Snr-Sub-Nts, 9.375%, due 10/15/07......................................... 125,000 98,750 United Industries Corp., 144A, 9.875%, due 04/01/09................................. 700,000 637,000 United Rentals, Inc., Series B, 9.500%, due 06/01/08................................. 625,000 628,125 United Rentals, Inc., Series B, 9.250%, due 01/15/09................................. 250,000 246,250 Verio Inc., 13.500%, due 06/15/04................................ 550,000 616,000 Waterford Gaming, 144A, 9.500%, due 03/15/10................................. 850,000 843,625 Wesco Distribution, Inc., Series B, 9.125%, due 06/01/08................................. 250,000 241,875 Young Broadcasting, Inc., Series B, 8.750%, due 06/15/07................................. 475,000 460,750 ----------- 62,004,331 ----------- International Dollar Bonds -- 1.69% Energis plc, Series 144A, 9.750%, due 06/15/09................................. 250,000 253,125 Imax, Corp., 7.875%, due 12/01/05................................. 500,000 470,625 Microcell Telecommunications, Inc., Series B, (m) 0.000%, due 06/01/06................... 490,000 395,675 ----------- 1,119,425 ----------- Total U.S. Bonds (Cost $65,268,225).................... 63,123,756 ----------- Shares ---------- Short-Term Investments -- 3.39% Brinson Supplementary Trust U.S. Cash Management Prime Fund, (Cost $2,246,149).................................... 2,246,149 2,246,149 ----------- Total Investments (Cost $67,514,374) -- 98.54% (a)..................... 65,369,905 ----------- Cash and other assets, less liabilities -- 1.46%............................ 967,242 ----------- Net Assets -- 100%..................................... $66,337,147 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $67,514,374; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 239,974 Gross unrealized depreciation (2,384,443) ----------- Net unrealized depreciation $(2,144,469) ===========
(b) Non-income producing security (c) Interest rate 0.000% until 03/15/01, then 11.125% to maturity (d) Interest rate 0.000% until 02/01/04, then 9.25% to maturity (e) Interest rate 0.000% until 02/01/02, then 12.750% to maturity (f) Interest rate 0.000% until 04/15/03, then 9.285% to maturity (g) Interest rate 0.000% until 03/01/04, then 13.50% to maturity (h) Interest rate 12.875% until 03/22/99, then 12.375% to maturity (i) Interest rate 0.000% until 05/01/01, then 12.50% to maturity (j) Interest rate 0.000% until 07/15/02, then 11.250% to maturity (k) Interest rate 0.000% until 12/01/03, then 10.50% to maturity (l) Interest rate 0.000% until 03/01/03, then 10.00% to maturity (m) Interest rate 0.000% until 12/01/01, then 14.00% to maturity (n) Interest rate 0.000% until 10/01/03, then 12.375% to maturity (o) Interest rate 0.000% until 10/15/02, then 11.125% to maturity (p) Interest rate 0.000% until 10/01/03, then 12.375% to maturity (q) Interest rate 0.000% until 04/01/03, then 10.000% to maturity (r) Interest rate 0.000% until 06/30/98, then 13.625% to maturity (s) Interest rate 0.000% until 10/15/02, then 9.47% to maturity (t) Interest rate 0.000% until 10/15/02, then 11.125% to maturity (u) Interest rate 0.000% until 04/15/01, then 11.625% to maturity (v) Interest rate 0.000% until 03/15/08, then 12.00% to maturity (w) Interest rate 0.000% until 05/01/03, then 11.00% to maturity 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $17,139,950 or 25.84% of net assets. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 77 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999
ASSETS: Investments, at value: Unaffiliated issuers (Cost $65,268,225)................................................. $63,123,756 Affiliated issuers (Cost $2,246,149).................................................... 2,246,149 Cash..................................................................................... 170 Receivables: Investment securities sold.............................................................. 77,562 Interest................................................................................ 1,328,077 Fund shares sold........................................................................ 496,649 Other assets............................................................................. 18,638 ----------- TOTAL ASSETS......................................................................... 67,291,001 ----------- LIABILITIES: Payables: Fund shares redeemed.................................................................... 5,281 Investment securities purchased......................................................... 893,623 Investment advisory fees................................................................ 8,858 Accrued expenses........................................................................ 46,092 ----------- TOTAL LIABILITIES.................................................................... 953,854 ----------- NET ASSETS................................................................................ $66,337,147 =========== NET ASSETS CONSIST OF: Paid in capital.......................................................................... $67,513,756 Accumulated undistributed net investment income.......................................... 611,744 Accumulated net realized gain............................................................ 356,116 Net unrealized depreciation.............................................................. (2,144,469) ----------- NET ASSETS................................................................................ $66,337,147 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $60,043,677 and 6,029,168 shares issued and outstanding)................................ $9.96 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,025 and 103 shares issued and outstanding)........................................... $9.95 =========== UBSInvestment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $6,292,445 and 632,435 shares issued and outstanding)................................... $9.95 ===========
See accompanying notes to financial statements. ================================================================================ 78 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1999
INVESTMENT INCOME: Interest............................................................ $ 2,705,081 ----------- TOTAL INCOME.................................................... 2,705,081 ----------- EXPENSES: Advisory............................................................ 173,302 Professional........................................................ 27,506 Registration........................................................ 22,303 Distribution........................................................ 15,676 Other............................................................... 15,372 ----------- TOTAL EXPENSES.................................................. 254,159 Expenses waived by Advisor...................................... (36,263) ----------- NET EXPENSES.................................................... 217,896 ----------- NET INVESTMENT INCOME........................................... 2,487,185 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on investments.................................... 420,129 Change in net unrealized appreciation or depreciation............... (1,916,114) ----------- Net realized and unrealized loss.................................... (1,495,985) ----------- Net increase in net assets resulting from operations................ $ 991,200 ===========
See accompanying notes to financial statements. ================================================================================ 79 High Yield Fund -- Financial Statements [LOGO OF BRINSON APPEARS HERE] - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Period Ended Year Ended June 30, 1999 December 31, 1998 ------------- ----------------- OPERATIONS: Net investment income................................................... $ 2,487,185 $ 1,385,364 Net realized gain....................................................... 420,129 261,744 Change in net unrealized appreciation or depreciation................... (1,916,114) (260,233) ------------ ----------- Net increase in net assets resulting from operations.................... 991,200 1,386,875 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I......................................................... (1,845,754) (1,395,944) Brinson Class N........................................................ (30) -- UBS Investment Funds Class............................................. (167,575) -- Distributions from net realized gain: Brinson Class I......................................................... -- (196,916) ------------ ----------- Total distributions to shareholders..................................... (2,013,359) (1,592,860) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold............................................................. 52,695,849 29,258,184 Shares issued on reinvestment of distributions.......................... 1,797,826 1,381,731 Shares redeemed......................................................... (22,036,291) (3,393,269) ------------ ----------- Net increase in net assets resulting from capital share transactions.... 32,457,384 27,246,646 ------------ ----------- TOTAL INCREASE IN NET ASSETS......................................... 31,435,225 27,040,661 ------------ ----------- NET ASSETS: Beginning of period..................................................... 34,901,922 7,861,261 ------------ ----------- End of period (including accumulated undistributed net investment income of $611,744 and $0, respectively)................................ $ 66,337,147 $34,901,922 ============ ===========
See accompanying notes to financial statements. ================================================================================ 80 80 High Yield Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
September 30, 1997* Period Ended Year Ended through Brinson Class I June 30, 1999 December 31, 1998** December 31, 1997** - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period..................... $ 9.98 $ 10.05 $ 10.00 ------------- ----------------- ---------------- Income from investment operations: Net investment income.................................. 0.44*** 7.30 0.18 Net realized and unrealized gain (loss)................ (0.15) 0.02 0.05 ------------- ----------------- ---------------- Total income from investment operations............... 0.29 7.32 0.23 ------------- ----------------- ---------------- Less distributions: Distributions from net investment income............... (0.31) (7.33) (0.18) Distributions from net realized gain................... -- (0.06) -- ------------- ----------------- ---------------- Total distributions................................... (0.31) (7.39) (0.18) ------------- ----------------- ---------------- Net asset value, end of period........................... 9.96 $ 9.98 $ 10.05 ============= ================= ================ Total return (non-annualized)............................ 2.91% 7.75% 2.34% Ratios/Supplemental Data: Net assets, end of period (in 000s)..................... $ 60,044 $ 34,900 $ 7,861 Ratio of expenses to average net assets: Before expense reimbursement........................... 0.83%**** 1.59% 4.98%**** After expense reimbursement............................ 0.70%**** 0.89% 0.90%**** Ratio of net investment income to average net assets: Before expense reimbursement........................... 8.54%**** 7.38% 3.15%**** After expense reimbursement............................ 8.67%**** 8.08% 7.23%**** Portfolio turnover rate................................. 77% N/A N/A
* Commencement of investment operations ** Reflects 10 for 1 share split effective December 9, 1998 *** The net investment income per share data was determined by using average shares outstanding throughout the period. **** Annualized N/A = Information is not available for periods prior to reorganization, as described in notes to financial statements. See accompanying notes to financial statements. ================================================================================ High Yield Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Period Ended Brinson Class N June 30, 1999* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period.................................................. $ 9.98 ------------- Income from investment operations: Net investment income.............................................................. 0.42** Net realized and unrealized loss................................................... (0.15) ------------- Total income from investment operations.......................................... 0.27 ------------- Less distributions: Distributions from net investment income........................................... (0.30) Distributions from net realized gain............................................... -- ------------- Total distributions.............................................................. (0.30) ------------- Net asset value, end of period........................................................ $ 9.95 ============= Total return (non-annualized)......................................................... 2.71% Ratios/Supplemental Data: Net assets, end of period (in 000s).................................................. $ 1 Ratio of expenses to average net assets: Before expense reimbursement....................................................... 1.08%*** After expense reimbursement........................................................ 0.95%*** Ratio of net investment income to average net assets: Before expense reimbursement....................................................... 8.29%*** After expense reimbursement........................................................ 8.42%*** Portfolio turnover rate.............................................................. 77%
* Commencement of Brinson Class N was December 31, 1998 ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. ================================================================================ 82 The Brinson Funds -- Notes To Financial Statements - ------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBSInvestment Funds Class (formerly, 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 financial highlights of the UBS Investment Funds Class are presented separately. Prior to December 19, 1998, the U.S. Large Capitalization Growth Fund (formerly, UBS Large CapGrowth Fund), U.S. Small Capitalization Growth Fund (formerly, UBS Small CapFund), High Yield Fund (formerly, UBS High YieldBond Fund), UBS Value Equity Fund and UBSBond Fund sought to achieve their investment objectives by investing substantially all of their investable assets in a corresponding portfolio of UBS Investor Portfolios Trust (each a "Portfolio" and collectively, the "Portfolios"), an open-end management investment company that had the same investment objective. On October 20, 1998, the Board of Directors approved a tax-free plan of reorganization (the "Reorganization"). Pursuant to the Reorganization, the net assets of the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were withdrawn from their corresponding Portfolio and thereafter each began to operate, under its new name, as a separate Fund in the Trust. In addition, pursuant to the Reorganization, the net assets of the UBSValue Equity Fund and UBSBond Fund were withdrawn from their corresponding Portfolio and acquired by the U.S. Equity Fund and U.S. Bond Fund, respectively, in a tax- free exchange solely for Brinson Class I shares of each Fund. The UBS Value Equity Fund and UBSBond Fund were then dissolved. Shares issued in exchange, net asset value and corresponding net unrealized appreciation at December 18, 1998, were as follows: Net Net Unrealized Fund Shares Asset Value Appreciation - ---- ------ ----------- ------------ UBS Value Equity Fund......... 1,233,797 $23,269,419 $774,047 UBS Bond Fund................. 1,429,121 15,177,263 27,192 The aggregate net assets of the U.S. Equity Fund and U.S. Bond Fund immediately before the mergers were $729,679,727 and $80,523,890, respectively. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund in the preparation of their financial statements. The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund have each changed its fiscal year-end from December 31 to June 30. A. Investment Valuation: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Equity securities traded over-the-counter are valued at the most recent bid price. Securities for which the most recent bid price or market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. Investment Transactions: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. ================================================================================ 83 The Brinson Funds -- Notes To Financial Statements - ----------------------------------------------------------------------------- C. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the period ended June 30, 1999, therefore, no federal income tax provision was required. E. Distributions to Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 10.26%, 44.82%, 34.64%, and 0.49% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund , and U.S. Bond Fund, respectively. At June 30, 1999, the U.S. Small Capitalization Growth Fund had a capital loss carry forward for Federal income tax purposes of approximately $4,242,000 available to offset future net capital gains, of which $1,768,000 expires on December 31, 2006 and $2,474,000 expires on June 30, 2007. F. Income and Expense Allocations: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. G. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions for the year ended June 30, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fees Fee Expense Cap Expense Cap Expense Cap Fees Waived -------- --------------- --------------- -------------- -------- -------- U.S. Balanced Fund...................... 0.70% 0.80% 1.05% 1.30% $ 347,297 $79,286 U.S. Equity Fund........................ 0.70 0.80 1.05 1.32 5,047,492 -- U.S. Large Capitalization Equity Fund... 0.70 0.80 1.05 1.32 137,200 97,158 U.S. Bond Fund.......................... 0.50 0.60 0.85 1.07 418,445 11,372 Investment advisory fees and other transactions for the period ended June 30, 1999, were as follows: UBS Investment Fees Waived Advisory Brinson Class I Brinson Class N Funds Class Advisory and/or Fee Expense Cap Expense Cap Expense Cap Fees Reimbursed -------- --------------- --------------- ------------ --------- ----------- U.S. Large Capitalization Growth Fund... 0.70% 0.80% 1.05% 1.57% $ 18,582 $42,136 U.S. Small Capitalization Growth Fund... 1.00 1.15 1.40 1.92 148,873 25,786 High Yield Fund......................... 0.60 0.70 0.95 1.55 173,302 36,263
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1999 were $7,665, $6,205, $3,665 and $4,015 for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S. Bond Fund, respectively. For the six months ended June 30, 1999, Trustees' fees paid to unaffiliated trustees were $1,955, $1,877 and $1,949 for the U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund, respectively. ================================================================================ 84 The Brinson Funds -- Notes To Financial Statements - ------------------------------------------------------------------------------- The following Funds invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments at June 30, 1999 and for the period then ended, were as follows:
% of Sales Interest Net Fund Purchases Proceeds Income Value Assets - ---- --------- -------- --------- ----- ------- U.S. Balanced Fund......................... 12,954,575 $ 12,718,496 $ 24,984 $ 236,079 0.60% U.S. Equity Fund........................... 49,752,656 112,067,672 496,321 37,684,984 4.77 U.S. Large Capitalization Equity Fund...... 17,583,562 16,050,557 33,979 1,533,005 5.80 U.S. Large Capitalization Growth Fund...... 3,645,460 3,777,151 7,359 -- -- U.S. Small Capitalization Growth Fund...... 26,063,602 24,888,256 47,338 2,134,217 5.95 U.S. Bond Fund............................. 110,752,960 105,248,583 190,546 5,504,377 5.61 High Yield Fund 49,314,348 48,413,642 84,390 2,246,149 3.39
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales ------------ ------------ U.S. Balanced Fund................................. $ 52,357,150 $ 87,129,265 U.S. Equity Fund................................... 344,235,845 337,180,719 U.S. Large Capitalization Equity Fund.............. 23,604,030 16,716,289 U.S. Bond Fund..................................... 252,784,699 204,053,072 Investment transactions for the period ended June 30, 1999, excluding short-term investments, were as follows: Proceeds Purchases From Sales ------------ ------------ U.S. Large Capitalization Growth Fund.............. $ 5,470,029 $ 2,638,632 U.S. Small Capitalization Growth Fund.............. 29,120,655 19,843,223 High Yield Fund.................................... 72,095,801 41,178,328
4. FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBSInvestment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBSInvestment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBSInvestment Funds Plan, which include a 0.25% service fee, total 0.50%, 0.52%, 0.52%, 0.77%, 0.77%, 0.47%, and 0.85% of the average daily net assets of the UBSInvestment Funds Class of the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund, respectively. ================================================================================ 85 The Brinson Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 6. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds rate plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the period ended June 30, 1999, the Funds had no borrowings under the agreement. 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. Balanced Fund ----------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 --------------------------- ----------------------- Shares Value Shares Value ---------- ----------- --------- ------------ Sales: Brinson Class I.............................. 1,174,303 $12,704,822 4,720,912 $ 58,173,143 Brinson Class N.............................. 1,652 15,306 -- -- UBS Investment Funds Class................... 135,474 1,464,212 49,659 624,713 --------- ----------- --------- ------------ Total Sales................................. 1,311,429 $14,184,340 4,770,571 $ 58,797,856 ========= =========== ========= ============ Dividend Reinvestment: Brinson Class I.............................. 1,235,079 $11,512,192 2,662,862 $ 31,359,575 Brinson Class N.............................. 33 311 11 136 UBS Investment Funds Class................... 56,474 523,561 14,933 175,706 --------- ----------- --------- ------------ Total Dividend Reinvestment................. 1,291,586 $12,036,064 2,677,806 $ 31,535,417 ========= =========== ========= ============ Redemptions: Brinson Class I.............................. 4,977,791 $56,107,946 23,388,425 $293,534,522 Brinson Class N.............................. 1,641 15,210 -- -- UBS Investment Funds Class................... 154,266 1,558,776 42,682 540,673 --------- ----------- --------- ------------ Total Redemptions........................... 5,133,698 $57,681,932 23,431,107 $294,075,195 ========= =========== ========= ============
================================================================================ 86 The Brinson Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Equity Fund -------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------- ------------------------ Shares Value Shares Value ----------- ------------ ---------- ------------ Sales: Brinson Class I*.............. 14,157,093 $272,587,287 16,875,765 $314,205,812 Brinson Class N............... 417,980 8,022,220 13,398 269,368 UBS Investment Funds Class.... 1,317,474 26,390,598 1,697,355 31,606,780 ---------- ------------ ---------- ------------ Total Sales................ 15,892,547 $307,000,105 18,586,518 $346,081,960 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I............... 2,164,601 $ 40,726,871 1,861,660 $ 32,092,717 Brinson Class N............... 12,904 239,980 47 896 UBS Investment Funds Class.... 89,839 1,678,518 110,158 1,887,716 ---------- ------------ ---------- ------------ Total Dividend Reinvestment 2,267,344 $ 42,645,369 1,971,865 $ 33,981,329 ========== ============ ========== ============ Redemptions: Brinson Class I............... 13,543,224 $265,910,621 7,470,182 $144,565,891 Brinson Class N............... 90,831 1,768,705 5 100 UBS Investment Funds Class.... 950,265 18,175,221 1,023,014 19,298,428 ---------- ------------ ---------- ------------ Total Redemptions.......... 14,584,320 $285,854,547 8,493,201 $163,864,419 ========== ============ ========== ============
*Includes shares issued in connection with the acquisition of the UBS Value Equity Fund.
U.S. Large Capitalization Equity Fund ---------------------------------------------------- Year Ended Period Ended June 30, 1999 June 30, 1998** ----------------------- -------------------------- Shares Value Shares Value -------- ----------- ----------- ----------- Sales: Brinson Class I............... 2,384,176 $24,164,112 16,662 $ 163,328 Brinson Class N............... 61,091 684,700 1,688,092 16,758,163 UBS Investment Funds Class.... 427 4,617 104 1,000 --------- ----------- --------- ----------- Total Sales................ 2,445,694 $24,853,429 1,704,858 $16,922,491 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I............... 7,506 $ 77,433 18 $ 168 Brinson Class N............... 7,094 69,880 2,204 20,606 UBS Investment Funds Class.... 1 11 -- 1 --------- ----------- --------- ----------- Total Dividend Reinvestment 14,601 $ 147,324 2,222 $ 20,775 ========= =========== ========= =========== Redemptions: Brinson Class I............... 370,824 $ 3,862,037 1,015 $ 9,875 Brinson Class N............... 1,369,240 13,638,399 51,661 509,678 UBS Investment Funds Class.... -- -- -- -- --------- ----------- --------- ----------- Total Redemptions.......... 1,740,064 $17,500,436 52,676 $ 519,553 ========= =========== ========= ===========
**The Fund commenced operations on April 6, 1998. ================================================================================ 87 The Brinson Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Large Capitalization Growth Fund --------------------------------------------- Year Ended Year Ended June 30, 1999 December 31, 1998 -------------------- ----------------------- Shares Value Shares Value -------- ---------- -------- ------------ Sales: Brinson Class I*............... 35,111 $ 451,776 349,475 $4,971,380 Brinson Class N................ -- -- 84 1,000 UBS Investment Funds Class..... 372,727 4,781,902 84 1,000 ------- ---------- ------- ---------- Total Sales................ 407,838 $5,233,678 349,643 $4,973,380 ======= ========== ======= ========== Dividend Reinvestment: Brinson Class I................ -- -- 15,430 $ 170,881 Brinson Class N................ -- -- -- -- UBS Investment Funds Class..... -- -- -- -- ------- ---------- ------- ---------- Total Dividend Reinvestment. -- $ -- 15,430 $ 170,881 ======= ========== ======= ========== Redemptions: Brinson Class I................ 173,449 $2,143,629 56,390 $5,974,601 Brinson Class N................ -- -- -- -- UBS Investment Funds Class..... 1,853 26,217 -- -- ------- ---------- ------- ---------- Total Redemptions........... 175,302 $2,169,846 56,390 $5,974,601 ======= ========== ======= ==========
*Includes 298,108 shares issued in 10 for 1 share split.
U.S. Small Capitalization Growth Fund ----------------------------------------------- Year Ended Year Ended June 30, 1999 December 31, 1998 ----------------------- ---------------------- Shares Value Shares Value ---------- ----------- --------- ----------- Sales: Brinson Class I**............... 2,641,837 $22,702,120 2,571,818 $18,350,730 Brinson Class N................. -- -- 114 1,000 UBS Investment Funds Class...... 99,579 858,153 114 1,000 --------- ----------- --------- ----------- Total Sales.................. 2,741,416 $23,560,273 2,572,046 $18,352,730 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I................. -- -- 132 $ 9,859 Brinson Class N................. -- -- -- -- UBS Investment Funds Class...... -- -- -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment.. -- $ -- 132 $ 9,859 ========= =========== ========= =========== Redemptions: Brinson Class I................. 1,375,470 $11,346,801 128,744 $ 6,727,395 Brinson Class N................. -- -- -- -- UBS Investment Funds Class...... 29,703 240,000 -- -- --------- ----------- --------- ----------- Total Redemptions............ 1,405,173 $11,586,801 128,744 $ 6,727,395 ========= =========== ========== ===========
**Includes 2,227,053 shares issued in 10 for 1 share split. =============================================================================== 88 The Brinson Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Bond Fund ------------------------------------------------ Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------ ---------------------- Shares Value Shares Value ---------- ------------ --------- ----------- Sales: Brinson Class I*................. 15,463,879 $165,316,122 1,926,960 $20,378,131 Brinson Class N.................. 2,379 25,964 -- -- UBS Investment Funds Class....... 582,475 6,222,123 134,362 1,416,847 ---------- ------------ --------- ----------- Total Sales................... 16,048,733 $171,564,209 2,061,322 $21,794,978 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I.................. 386,462 $ 4,042,561 107,565 $ 1,114,591 Brinson Class N.................. 6 62 6 68 UBS Investment Funds Class....... 22,041 229,364 5,825 60,235 ---------- ------------ --------- ----------- Total Dividend Reinvestment... 408,509 $ 4,271,987 113,396 $ 1,174,894 ========== ============ ========= =========== Redemptions: Brinson Class I.................. 10,568,875 $112,692,202 549,381 $ 5,780,080 Brinson Class N.................. 2,379 25,905 -- -- UBS Investment Funds Class....... 248,522 2,612,918 45,413 475,640 ---------- ------------ --------- ----------- Total Redemptions............. 10,819,776 $115,331,025 594,794 $ 6,255,720 ========== ============ ========= ===========
*Includes shares issued in connection with the acquisition of the UBS Bond Fund.
High Yield Fund ------------------------------------------------ Year Ended Year Ended June 30, 1999 December 31, 1998 ------------------------ ---------------------- Shares Value Shares Value ---------- ------------ --------- ----------- Sales: Brinson Class I**................ 4,509,034 $ 46,327,741 3,412,082 $29,256,184 Brinson Class N.................. -- -- 100 1,000 UBS Investment Funds Class....... 620,093 6,368,108 100 1,000 ---------- ------------ --------- ----------- Total Sales................... 5,129,127 $ 52,695,849 3,412,282 $29,258,184 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I.................. 166,520 $ 1,658,538 47,240 $ 1,381,731 Brinson Class N.................. 3 30 -- -- UBS Investment Funds Class....... 13,996 139,258 -- -- ---------- ------------ --------- ----------- Total Dividend Reinvestment... 180,519 $ 1,797,826 47,240 $ 1,381,731 ========== ============ ========= =========== Redemptions: Brinson Class I.................. 2,144,630 $ 22,018,291 39,259 $ 3,393,269 Brinson Class N.................. -- -- -- -- UBS Investment Funds Class....... 1,754 18,000 -- -- ---------- ------------ --------- ----------- Total Redemptions............. 2,146,384 $ 22,036,291 39,259 $ 3,393,269 ========== ============ ========= ===========
**Includes 2,898,051 shares issued in 10 for 1 share split. ================================================================================ 89 Report of Independent Auditors - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- U.S. Balanced Fund U.S. Equity Fund U.S. Large Capitalization Equity Fund U.S. Large Capitalization Growth Fund U.S. Small Capitalization Growth Fund U.S. Bond Fund High Yield Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund as of June 30, 1999, and the related statements of operations and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund for the period ended December 31, 1997, were audited by other auditors whose report dated February 17, 1998, expressed an unqualified opinion on those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund at June 30, 1999, the results of their operations, the changes in their net assets and the financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. Ernst & Young LLP Chicago, Illinois August 11, 1999 ================================================================================ 90 Distributed by: Funds Distributor, Inc. 60 State Street Boston, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. ================================================================================ [LOGO OF BRINSON APPEARS HERE] [LETTERHEAD OF THE BRINSON FUNDS APPEARS HERE] ________________________ The Brinson Funds Brinson Global Fund Brinson Global Equity Fund Brinson Global Bond Fund Annual Report June 30, 1999 [LOGO OF BRINSON] Institutional Asset Management ________________________ TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Chairman of the Board E. Thomas McFarlan President Thomas J. Digenan, CFA, CPA Vice President Debra L. Nichols Vice President Carolyn M. Burke, CPA Secretary and Treasurer David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary ================================================================================ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Since the entrepreneurial founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with unrivaled, custom-tailored service of the highest quality. Now, in 1999, more than 1,100 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, with approximately USD 280 billion in assets under management, and industry recognition as a global thought leader. In North America, we make our services available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are diversified, no-load, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and services. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios--balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Brinson Division, the institutional asset management division of UBS AG. ================================================================================ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Shareholder Letter............................................. 4 Global Economic and Market Highlights.......................... 5 Global Fund.................................................... 6 Schedule of Investments.................................. 11 Financial Statements..................................... 18 Financial Highlights..................................... 22 Global Equity Fund............................................. 24 Schedule of Investments.................................. 29 Financial Statements..................................... 33 Financial Highlights..................................... 36 Global Bond Fund............................................... 38 Schedule of Investments.................................. 42 Financial Statements..................................... 45 Financial Highlights..................................... 48 The Brinson Funds--Notes to Financial Statements............... 50 Report of Independent Auditors................................. 55
================================================================================ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- [LOGO OF BRINSON] July 26, 1999 Dear Shareholder: We are pleased to present the Annual Report for The Brinson Funds covering the year ended June 30, 1999. This report focuses on the current global economic outlook as well as our current strategies and performance updates for our three Global Funds: Global Fund, Global Equity Fund and Global Bond Fund. We would also like to take this opportunity to discuss a new theme that we will call, "The Industrial Evolution." Accelerating globalization of business enterprise and integration of capital markets is altering the equity investment environment. In prior decades, equity investing typically focused on a collection of separate country-defined markets with foreign countries considered as diversifying alternatives to an investor's domestic equity market. Within this framework, individuals and advisors typically structured their equity portfolios into separate domestic and foreign allocations. Today, investors confront a global equity market in which the country-level distinction is but one of several important determinants of equity returns. The home country of a company is declining in relative importance, and the industry classification is becoming increasingly important. Consequently, relative comparisons of stock prices within global industries should become a more prominent feature of active portfolio management. As such, individuals will likely reconsider the separation of their equity portfolios into domestic and foreign components. Today, an allocation to Global Equity is likely to lead to a more efficient portfolio, maximizing the return/risk relationship, than separate allocations to domestic and foreign equities. We believe The Brinson Funds provide you with optimal access to the global capital markets and desirable configurations of global assets. The Global Fund, the Global Equity Fund and the Global Bond Fund are all actively managed funds that provide integrated asset management across and within security markets. Each of our Funds employ 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 independent team investment approach allows for rapid responses to market changes, while providing each investor with the benefit of our talent and the flexibility to deliver portfolios that produce returns appropriate to a client's risk tolerance. The reports that follow highlight the investment characteristics and the performance of the respective Funds. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds, and look forward to a long lasting, quality relationship. Sincerely, /s/ Garry P. Brinson Gary P. Brinson Chairman and Chief Investment Officer Brinson Partners, Inc. ================================================================================ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Thanks to a weaker euro and better prospects for the world economy, growth in Euroland is picking up steam after having experienced a slowdown in the first half of 1999. Business confidence is supported by ever stronger commitments of the European governments to implement structural reforms. This should eventually create a better environment for the labor market, boost employment and lift consumers' confidence. Due to divergence of inflation and GDP growth rates, the ECB is still facing a very heterogeneous situation, ranging from above average growth and below average inflation (as in France) to below average growth and above average inflation (as in Italy). No signs of strain have emerged from this situation so far. In Japan, first quarter growth (at 7.9% QI/99 over QIV/98 annualized rate) caught market attention. The positive expectations shared by many market participants depend heavily on the government's massive injection of public funds rather than on increased productivity resulting from structural reforms undertaken in the private sector. Only the latter would allow the Japanese economy to move toward a sustainable long-term growth path. The Bank of Japan continues its policy of zero overnight call rates, which it sees as an alternative for full-fledged money supply targeting. Growing current account imbalances are emerging. A healthy American economy is attracting capital from all over the world, but at the same time private savings are falling in the U.S. (and this is only partly compensated by higher public savings). The result is a widening current account deficit. With growth picking up in the rest of the world, capital flows are likely to be rerouted. This should alleviate the current account problem and weaken the USD.
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 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------ U.S. Equity 11.87% 19.59% 25.84% 25.69% 20.72% Global (Ex-U.S.) Equities (currency unhedged) 4.34 7.18 8.90 8.50 10.89 Global (Ex-U.S.) Equities (currency hedged) 14.26 9.72 16.34 14.07 14.44 U.S. Bonds -1.39 3.12 7.24 7.82 6.77 Global (Ex-U.S.) Bonds (currency unhedged) -9.12 4.86 2.62 5.45 5.77 Global (Ex-U.S.) Bonds (currency hedged) 1.20 7.06 10.62 10.96 9.67 U.S. Cash Equivalents 2.46 5.32 5.57 5.63 5.02 ------------------------------------------------------------------------------------------------------ 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 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------ Yen -6.81% 14.66% -3.23% -4.01% 0.27% Pound -5.26 -5.53 0.48 0.42 -3.30 Euro** -12.18 -4.83 -7.07 -3.45 -4.28 Canadian Dollar 3.78 -0.64 -2.65 1.37 -3.07 ------------------------------------------------------------------------------------------------------
* Inception date of the Brinson Global Fund Class I ** Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized returns. ================================================================================ 5 GLOBAL FUND - -------------------------------------------------------------------------------- [LOGO OF BRINSON] The Global Fund provides investors with a single investment vehicle for comprehensive diversification across global markets and asset classes. It is a long-term, value-driven investment option designed to maximize total U.S. dollar return without assuming unnecessary risk. Its benchmark is the Global Securities Markets Mutual Fund Index. In selecting securities for the Global Fund, we seek out price/value discrepancies across capital markets at the asset class, country and currency levels and within capital markets through sector, sub-sector and individual security selection. The Fund is monitored on an ongoing basis, and rebalanced with both risk and return considerations in mind. Our value estimates and investment decisions are based on comprehensive analysis of forward-looking investment fundamentals, drawing on the collective judgment of our global investment teams. Since its inception on August 31, 1992, the Brinson Global Fund Class I has produced an annualized return of 10.43%, compared to the 13.52% return of its benchmark. This performance record was achieved with significantly less risk or volatility than the benchmark; 6.63% versus 8.56%, respectively. The lower risk level implies that the Fund has generated a much more constant return stream over time, protecting its investors from unwanted fluctuations in the Fund's value. For the year-to-date period, the Fund has returned 2.71% versus the benchmark return of 5.83%. The greatest reason for the Fund's underperformance relative to the benchmark is its underweight of what we consider to be overvalued global equity markets. Our analysis indicates that the current overvaluation of the U.S. market exceeds that seen prior to the "crash" in 1987. Other major equity markets throughout the world are significantly overvalued but not to the same extent as the U.S. However, these markets would be expected to suffer in the wake of a setback in the U.S., and as a consequence, equity allocation for the Fund is at its minimum limit. Offsetting the Fund's equity underweight is a general overweight to global bond markets. The largest of these overweights is to the U.S. market (+20%), of which 15.5% is in Treasury Inflation Protected Securities (TIPS). The next largest overweight in the Fund is to Australian bonds (+9.7%), which we believe are undervalued at current levels. Emerging market debt offers the best valuation among all asset classes. The returns from the still very high spreads to Treasuries outweigh the probabilities of loss due to default risk and the required risk premium that is related to the high volatility of these securities. As a result, the Fund holds a 3% overweight position in emerging market debt. The Fund's largest currency overweight positions are in the euro, Swedish krona and Australian dollars. The Australian dollar has benefited from slightly firmer commodities prices and robust domestic growth, but we estimate that it is still undervalued against the U.S. dollar. The krona has strengthened this year against the euro, and has appreciated to a level closer to fundamental value. Due to pessimism regarding economies and policy-setting within the EMU currency area, the euro was one of the weakest currencies over the last quarter. However, a cyclical strengthening seems to be underway, and we maintain our overweight position. ================================================================================ 6 GLOBAL FUND - -------------------------------------------------------------------------------- [LOGO OF BRINSON]
Total Return 6 months 1 year 3 years 5 years 8/31/92* ended ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 ----------------------------------------------------------------------------------------------------- Brinson Global Fund Class I 2.71% 4.76% 10.45% 12.03% 10.43% ----------------------------------------------------------------------------------------------------- GSMI Mutual Fund Index** 5.83 11.87 14.52 15.35 13.52 ----------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 8.57 15.87 18.53 17.09 16.15 ----------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't. Bond Index -7.17 4.13 4.11 6.11 6.03 -----------------------------------------------------------------------------------------------------
* Inception date of the Brinson Global Fund Class I. ** An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI World ex USA (Free) Index; 21% Salomon Smith Barney BIGBond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JPMorgan EMBI+; 3% MSCI Emerging Markets Free Index; and 3% Merrill Lynch High Yield Master Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Fund Class I, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and the Salomon Smith Barney World Gov't. Bond Index if you had invested $1,000,000 on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Fund Class I vs. GSMI Mutual Fund Index, MSCI World Equity (Free) Index and Salomon Smith Barney World Gov't. Bond Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Date Brinson Global Fund Class I GSMI Mutual Fund Index MSCI World Equity (Free) Index Solomon ------------------------------------------------------------------------------------------------------------------------- 8/31/92 $ 1,000,000 $ 1,000,000 $ 1,000,000 $1,000,000 9/30/92 $ 1,013,000 $ 1,005,314 $ 991,423 $1,010,000 10/31/92 $ 1,007,000 $ 997,514 $ 964,679 $ 982,528 11/30/92 $ 1,022,000 $ 1,017,428 $ 981,884 $ 966,906 12/31/92 $ 1,032,925 $ 1,030,790 $ 990,218 $ 972,746 1/31/93 $ 1,048,115 $ 1,042,387 $ 993,554 $ 989,769 2/28/93 $ 1,068,369 $ 1,055,458 $ 1,017,111 $1,009,267 3/31/93 $ 1,081,142 $ 1,087,329 $ 1,075,990 $1,024,810 4/30/93 $ 1,086,223 $ 1,093,919 $ 1,125,787 $1,046,434 5/31/93 $ 1,097,400 $ 1,116,872 $ 1,151,607 $1,056,898 6/30/93 $ 1,107,567 $ 1,119,316 $ 1,141,994 $1,054,636 7/31/93 $ 1,110,624 $ 1,127,126 $ 1,165,369 $1,057,589 8/31/93 $ 1,134,059 $ 1,166,328 $ 1,219,770 $1,089,423 9/30/93 $ 1,134,084 $ 1,165,278 $ 1,197,452 $1,102,387 10/31/93 $ 1,143,329 $ 1,182,155 $ 1,230,667 $1,100,513 11/30/93 $ 1,131,002 $ 1,153,045 $ 1,160,612 $1,092,699 12/31/93 $ 1,148,054 $ 1,179,801 $ 1,216,971 $1,101,932 1/31/94 $ 1,173,590 $ 1,218,762 $ 1,297,252 $1,110,748 2/28/94 $ 1,152,310 $ 1,200,386 $ 1,280,212 $1,103,528 3/31/94 $ 1,118,262 $ 1,159,904 $ 1,225,058 $1,101,983 4/30/94 $ 1,122,518 $ 1,172,614 $ 1,263,624 $1,103,195 5/31/94 $ 1,124,646 $ 1,176,336 $ 1,267,367 $1,093,487 6/30/94 $ 1,116,140 $ 1,164,819 $ 1,263,654 $1,109,233 7/31/94 $ 1,132,192 $ 1,189,041 $ 1,287,845 $1,118,107 8/31/94 $ 1,156,805 $ 1,220,386 $ 1,326,765 $1,114,194 9/30/94 $ 1,139,683 $ 1,201,154 $ 1,291,736 $1,122,216 10/31/94 $ 1,137,543 $ 1,219,946 $ 1,328,899 $1,140,171 11/30/94 $ 1,122,561 $ 1,185,232 $ 1,271,624 $1,124,437 12/31/94 $ 1,126,372 $ 1,196,582 $ 1,283,697 $1,127,585 1/31/95 $ 1,139,482 $ 1,208,708 $ 1,264,853 $1,151,265 2/28/95 $ 1,167,887 $ 1,241,252 $ 1,283,629 $1,180,737 3/31/95 $ 1,183,182 $ 1,281,224 $ 1,345,557 $1,250,873 4/30/95 $ 1,206,125 $ 1,311,158 $ 1,392,627 $1,274,014 5/31/95 $ 1,244,362 $ 1,344,050 $ 1,405,194 $1,309,941 6/30/95 $ 1,256,423 $ 1,364,548 $ 1,404,730 $1,317,670 7/31/95 $ 1,284,098 $ 1,407,051 $ 1,475,061 $1,320,832 8/31/95 $ 1,300,703 $ 1,402,131 $ 1,442,139 $1,275,396 9/30/95 $ 1,322,842 $ 1,439,648 $ 1,484,738 $1,303,837 10/31/95 $ 1,332,805 $ 1,430,595 $ 1,461,673 $1,313,485 11/30/95 $ 1,371,549 $ 1,473,410 $ 1,512,618 $1,328,328 12/31/95 $ 1,398,239 $ 1,500,615 $ 1,557,008 $1,342,275 1/31/96 $ 1,424,264 $ 1,525,115 $ 1,586,118 $1,325,765 2/29/96 $ 1,418,349 $ 1,529,469 $ 1,595,765 $1,319,004 3/31/96 $ 1,428,996 $ 1,542,531 $ 1,622,258 $1,317,157 4/30/96 $ 1,447,923 $ 1,569,098 $ 1,660,371 $1,311,889 5/31/96 $ 1,452,655 $ 1,580,746 $ 1,661,700 $1,312,151 6/30/96 $ 1,462,269 $ 1,583,964 $ 1,670,556 $1,322,517 7/31/96 $ 1,440,730 $ 1,542,337 $ 1,611,517 $1,347,909 8/31/96 $ 1,463,465 $ 1,567,235 $ 1,630,575 $1,353,166 9/30/96 $ 1,511,330 $ 1,618,828 $ 1,694,511 $1,358,714 10/31/96 $ 1,536,459 $ 1,634,998 $ 1,706,176 $1,384,122 11/30/96 $ 1,596,290 $ 1,703,760 $ 1,802,360 $1,402,393 12/31/96 $ 1,595,424 $ 1,688,579 $ 1,773,715 $1,391,033 1/31/97 $ 1,615,268 $ 1,713,300 $ 1,795,458 $1,353,893 2/28/97 $ 1,629,820 $ 1,721,365 $ 1,815,922 $1,343,738 3/31/97 $ 1,604,685 $ 1,683,518 $ 1,779,579 $1,333,526 4/30/97 $ 1,621,882 $ 1,717,598 $ 1,837,956 $1,321,791 5/31/97 $ 1,689,351 $ 1,804,433 $ 1,951,687 $1,357,744 6/30/97 $ 1,736,975 $ 1,869,036 $ 2,048,777 $1,373,901 7/31/97 $ 1,792,537 $ 1,943,405 $ 2,143,340 $1,363,184 8/31/97 $ 1,746,236 $ 1,872,161 $ 1,998,281 $1,362,366 9/30/97 $ 1,800,475 $ 1,953,277 $ 2,106,924 $1,391,385 10/31/97 $ 1,747,558 $ 1,890,285 $ 1,996,326 $1,420,326 11/30/97 $ 1,751,527 $ 1,907,153 $ 2,031,241 $1,398,595 12/31/97 $ 1,770,868 $ 1,930,073 $ 2,056,062 $1,394,399 1/31/98 $ 1,791,307 $ 1,956,072 $ 2,113,744 $1,407,925 2/28/98 $ 1,857,002 $ 2,050,747 $ 2,256,714 $1,419,329 3/31/98 $ 1,899,340 $ 2,108,872 $ 2,351,694 $1,405,277 4/30/98 $ 1,902,260 $ 2,129,617 $ 2,374,688 $1,427,762 5/31/98 $ 1,892,040 $ 2,099,572 $ 2,345,875 $1,431,046 6/30/98 $ 1,880,791 $ 2,126,234 $ 2,400,742 $1,433,192 7/31/98 $ 1,876,373 $ 2,115,137 $ 2,397,120 $1,435,055 8/31/98 $ 1,726,145 $ 1,901,138 $ 2,077,601 $1,474,089 9/30/98 $ 1,780,639 $ 1,966,845 $ 2,114,573 $1,552,510 10/31/98 $ 1,845,443 $ 2,084,211 $ 2,306,041 $1,598,465 11/30/98 $ 1,896,992 $ 2,169,407 $ 2,443,383 $1,575,926 12/31/98 $ 1,918,264 $ 2,247,617 $ 2,562,162 $1,607,603 1/31/99 $ 1,921,515 $ 2,278,825 $ 2,618,459 $1,592,813 2/28/99 $ 1,874,371 $ 2,218,396 $ 2,548,880 $1,541,683 3/31/99 $ 1,905,259 $ 2,288,480 $ 2,654,612 $1,545,538 4/30/99 $ 1,983,290 $ 2,368,078 $ 2,759,702 $1,544,919 5/31/99 $ 1,947,525 $ 2,308,167 $ 2,658,037 $1,518,965 6/30/99 $ 1,970,339 $ 2,378,762 $ 2,781,681 $1,492,383
8/31/92=$1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. =============================================================================== 7 GLOBAL FUND - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Total Return
6 months 1 year 6/30/97* ended ended to 6/30/99 6/30/99 6/30/99 ----------------------------------------------------------------------------------------------------- Brinson Global Fund Class N 2.55% 4.47% 6.17% ----------------------------------------------------------------------------------------------------- GSMI Mutual Fund Index** 5.83 11.87 12.81 ----------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 8.57 15.87 16.52 ----------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't. Bond Index -7.17 4.13 4.22 -----------------------------------------------------------------------------------------------------
* Inception date of the Brinson Global Fund Class N. ** An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI World ex USA (Free) Index; 21% Salomon Smith Barney BIGBond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JPMorgan EMBI+; 3% MSCI Emerging Markets Free Index; and 3% Merrill Lynch High Yield Master Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Fund Class N, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and the Salomon Smith Barney World Gov't. Bond Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Fund Class N vs. GSMI Mutual Fund Index, MSCIWorld Equity (Free) Index and Salomon Smith Barney World Gov't. Bond Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE] - --------------------------------------------------------------------------------
Label A B C D Brinson Global Fund Class N GSMI Mutual Fund Index MSCI World Equity (Free) Index Salomon Smith Barney World 6/30/97 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,031,226 $ 1,039,790 $ 1,046,155 $ 992,200 $ 1,003,808 $ 1,001,672 $ 975,353 $ 991,605 9/30/97 $ 1,035,796 $ 1,045,072 $ 1,028,381 $ 1,012,726 $ 1,004,570 $ 1,011,369 $ 974,399 $ 1,033,791 $ 1,006,093 $ 1,020,394 $ 991,441 $ 1,017,974 12/31/97 $ 1,017,857 $ 1,032,657 $ 1,003,556 $ 1,014,920 $ 1,028,766 $ 1,046,567 $ 1,031,710 $ 1,024,764 $ 1,066,526 $ 1,097,222 $ 1,101,493 $ 1,033,065 3/31/98 $ 1,090,861 $ 1,128,321 $ 1,147,852 $ 1,022,838 $ 1,091,700 $ 1,139,420 $ 1,159,076 $ 1,039,203 $ 1,085,826 $ 1,123,345 $ 1,145,012 $ 1,041,593 6/30/98 $ 1,079,019 $ 1,137,610 $ 1,171,793 $ 1,043,156 $ 1,076,480 $ 1,131,673 $ 1,170,024 $ 1,044,512 $ 990,159 $ 1,017,176 $ 1,014,069 $ 1,072,922 9/30/98 $ 1,021,471 $ 1,052,331 $ 1,032,115 $ 1,130,002 $ 1,057,862 $ 1,115,127 $ 1,125,569 $ 1,163,450 $ 1,086,636 $ 1,160,709 $ 1,192,605 $ 1,147,045 12/31/98 $ 1,099,252 $ 1,202,555 $ 1,250,581 $ 1,170,101 $ 1,101,119 $ 1,219,252 $ 1,278,059 $ 1,159,336 $ 1,073,124 $ 1,186,920 $ 1,244,098 $ 1,122,121 3/31/99 $ 1,089,921 $ 1,224,418 $ 1,295,705 $ 1,124,927 $ 1,134,712 $ 1,267,005 $ 1,346,999 $ 1,124,477 $ 1,114,183 $ 1,234,951 $ 1,297,377 $ 1,105,585 6/30/99 $ 1,127,275 $ 1,272,722 $ 1,357,727 $ 1,086,238
6/30/97=$1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 8 GLOBAL FUND - -------------------------------------------------------------------------------- [LOGO OF BRINSON]
Asset Allocation As of June 30, 1999 Current Benchmark Strategy -------------------------------------------------------- U.S. Equities 40.0% 17.0% Global (Ex-U.S.) Equities 22.0 15.0 Emerging Markets Equities 3.0 3.0 Dollar Bonds 21.0 41.0 High Yield Bonds 3.0 3.0 Global (Ex-U.S.) Bonds 9.0 16.0 Emerging Markets Debt 2.0 5.0 Cash Equivalents 0.0 0.0 -------------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holding As of June 30, 1999 Percent of Net Assets -------------------------------------------------------- 1. Xerox Corp. 1.39% 2. FDX Corp. 0.94 3. Burlington Northern Santa Fe Corp. 0.88 4. Raytheon Co., Class B 0.81 5. Electronic Data Systems Corp. 0.80 6. Corning, Inc. 0.78 7. Aetna, Inc. 0.76 8. Lockheed Martin Corp. 0.67 9. CIGNA Corp. 0.62 10. General Instrument Corp. 0.61 -------------------------------------------------------
Currency Allocation As of June 30, 1999 Current Benchmark Strategy -------------------------------------------------------- U.S. 66.0% 62.5% Japan 7.8 0.0 U.K. 5.5 0.0 Euro 12.4 19.7 Other Europe 2.6 6.6 Canada 1.3 1.3 Emerging Markets 3.0 3.0 Other 1.4 6.9 -------------------------------------------------------- 100.0% 100.0%
Top Ten Global (Ex-U.S.) Equity Holdings As of June 30, 1999 Percent of Net Assets -------------------------------------------------------- 1. BP Amoco PLC 0.25% 2. Veba AG 0.24 3. ING Groep NV 0.22 4. Lloyds TSB Group PLC 0.20 5. Nippon Telegraph & Telephone Corp. 0.19 6. Nestle S.A. (Reg.) 0.19 7. General Electric Co. PLC 0.18 8. Glaxo Wellcome PLC 0.18 9. Marks & Spencer PLC 0.18 10. Siemens AG 0.17 --------------------------------------------------------
================================================================================ 9 ---------------------------------------------------------------------- GLOBAL FUND ---------------------------------------------------------------------- ---------------------------------------------------------------------- Industry Diversification ---------------------------------------------------------------------- As a Percent of Net Assets As of June 30, 1999 ---------------------------------------------------------------------- U.S. EQUITIES Energy................................ 0.17% Capital Investment Capital Goods....................... 2.41 Technology.......................... 3.50 ----- 5.91 Basic Industries Chemicals.......................... 1.01 Housing/Paper...................... 1.93 Metals............................. 0.75 ----- 3.69 Consumer Non-Durables....................... 0.74 Retail/Apparel..................... 1.37 Autos/Durables..................... 0.95 Health: Drugs...................... 1.09 Health: Non-Drugs.................. 1.26 ----- 5.41 Financial Banks.............................. 2.37 Non-Banks.......................... 2.27 ----- 4.64 Utilities Electric........................... 0.99 Telephone.......................... 0.40 ----- 1.39 Transportation........................ 2.15 Services/Misc......................... 1.48 Post Venture.......................... 1.55 ----- Total U.S. Equities............ 26.39* GLOBAL (EX-U.S.) EQUITIES Aerospace & Military.................. 0.16 Airlines.............................. 0.12 Appliances & Household................ 0.20 Autos/Durables........................ 0.37 Banking............................... 1.57 Beverages & Tobacco................... 0.44 Broadcasting & Publishing............. 0.67 Building Materials.................... 0.14 Business & Public Service............. 0.63 Chemicals............................. 0.61 Construction.......................... 0.10 Data Processing....................... 0.21 Electric Components................... 0.18 Electronics........................... 0.84 Energy................................ 0.81 Financial Services.................... 0.36 Food & House Products................. 0.57 Forest Products....................... 0.17 Health: Drugs......................... 0.93 Industrial Components................. 0.35 Insurance............................. 0.76% Leisure & Tourism..................... 0.05 Machinery & Engineering............... 0.12 Merchandising......................... 0.69 Metals--Steel......................... 0.06 Multi-Industry........................ 0.23 Non-Ferrous Metals.................... 0.40 Real Estate........................... 0.12 Recreation............................ 0.14 Telecommunications.................... 1.30 Textiles & Apparel.................... 0.03 Transportation........................ 0.23 Utilities............................. 0.75 Wholesale & International Trade....... 0.08 ----- Total global (Ex-U.S.) Equities. 14.39 EMERGING MARKETS EQUITIES............. 3.56 ----- TOTAL EQUITIES........................ 44.34 U.S. BONDS Corporate Bonds Aerospace & Military............... 0.61 Airlines........................... 0.03 Asset-Backed....................... 0.72 Banks.............................. 0.03 CMO................................ 0.10 Consumer........................... 0.44 Energy............................. 0.32 Financial Services................. 0.44 Food and Housing Products.......... 0.41 Services and Miscellaneous......... 0.96 Telecommunications................. 0.48 Transportation..................... 0.31 ----- 4.85 International Dollar Bonds............ 1.96 Mortgage-Backed Securities............ 1.86 U.S. Government Agencies.............. 5.08 U.S. Government Obligations........... 15.43 ----- Total U.S. Bonds................ 29.18* HIGH YIELD BONDS...................... 2.89 GLOBAL (EX-U.S.) BONDS Foreign Financial Bonds............... 1.62 Foreign Government Bonds.............. 13.57 ----- Total Global (Ex-U.S.) Bonds.... 15.19 EMERGING MARKETS DEBT................. 5.02 SHORT-TERM INVESTMENTS................ 25.10* ----- TOTAL INVESTMENTS............... 121.72 LIABILITIES, LESS CASH AND OTHER ASSETS......................... (21.72) ------ NET ASSETS...................... 100.00% ====== ================================================================================ * The Fund held a long position in U.S. Treasury futures on June 30, 1999 which increased U.S. Bond exposure from 29.18% to 39.37%. * The Fund held a short position in stock index futures on June 30, 1999 which reduced U.S. Equity exposure from 26.39% to 16.44%. * These adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 25.10% to 24.86%. ================================================================================ 10 Global Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value -------- ---------- Equities -- 44.34% U.S. Equities -- 26.39% Advanced Micro Devices, Inc. (b)..................... 62,700 $1,132,519 Aetna, Inc........................................... 41,700 3,729,544 Allergan, Inc........................................ 13,300 1,476,300 Alza Corp. (b)....................................... 55,100 2,803,212 American Standard Companies, Inc. (b)................ 28,900 1,387,200 Aon Corp............................................. 70,947 2,926,564 Armstrong World Industries, Inc...................... 7,700 445,156 BankBoston Corp...................................... 15,300 782,213 Baxter International, Inc............................ 30,700 1,861,187 Brinson Post-Venture Fund (b)........................ 397,192 7,660,445 Burlington Northern Santa Fe Corp.................... 140,400 4,352,400 Champion Enterprises, Inc. (b)....................... 24,700 460,038 Champion International Corp.......................... 8,700 416,513 Chase Manhattan Corp................................. 24,300 2,104,987 CIGNA Corp........................................... 34,100 3,034,900 Circuit City Stores-Circuit City Group............... 25,800 2,399,400 CMS Energy Corp...................................... 25,900 1,084,562 CommScope, Inc. (b).................................. 22,133 680,590 Compaq Computer Corp................................. 7,800 184,763 Computer Sciences Corp. (b).......................... 14,600 1,010,137 Compuware Corp. (b).................................. 29,000 922,563 Comverse Technology, Inc. (b)........................ 8,540 644,770 Consolidated Stores Corp. (b)........................ 34,900 942,300 Corning, Inc......................................... 55,000 3,856,875 Covance, Inc. (b).................................... 22,072 528,349 Delphi Automotive Systems Corp....................... 50,600 939,262 Dial Corp............................................ 14,500 539,219 Dominion Resources Inc............................... 7,000 303,188 Eastman Chemical Co.................................. 15,500 802,125 Electronic Data Systems Corp......................... 69,700 3,942,406 Eli Lilly and Co..................................... 15,200 1,088,700 Entergy Corp......................................... 73,500 2,296,875 FDX Corp. (b)........................................ 85,700 4,649,225 Federal-Mogul Corp................................... 14,100 733,200 First American Corp. of Tennessee.................... 7,300 303,406 First Data Corp...................................... 56,230 2,751,756 First Security Corp.................................. 13,875 378,094 First Union Corp..................................... 23,300 1,095,100 Fleet Financial Group, Inc........................... 35,200 1,562,000 Fleetwood Enterprises, Inc........................... 16,300 430,931 Food Lion Inc., Class A.............................. 82,700 982,062 Fort James Corp...................................... 48,600 1,840,725 GATX Corp............................................ 4,000 152,250 General Instrument Corp. (b)......................... 71,200 3,026,000 Genzyme Corp. (b).................................... 11,300 548,050 Genzyme Surgical Products Division (b)............... 2,023 8,913 Geon Co.............................................. 4,500 145,125 GreenPoint Financial Corp............................ 45,400 1,489,687 Hibernia Corp........................................ 34,800 545,925 Household International, Inc......................... 45,400 2,150,825 Illinois Tool Works, Inc............................. 8,300 680,600 IMC Global Inc....................................... 50,800 895,350 Johnson Controls, Inc................................ 13,300 921,856 Kimberly-Clark Corp.................................. 28,200 1,607,400 Lafarge Corp......................................... 15,200 538,650 Lear Corp. (b)....................................... 33,600 1,671,600 Lockheed Martin Corp................................. 89,046 3,316,963 Lyondell Chemical Company............................ 40,400 833,250 Martin Marietta Materials, Inc....................... 8,184 $ 482,856 Masco Corp........................................... 87,600 2,529,450 Mattel, Inc.......................................... 40,700 1,076,006 MCN Energy Group, Inc................................ 10,700 222,025 Nabisco Holdings Corp................................ 3,100 134,075 National Service Industries, Inc..................... 13,800 496,800 New York Times Co.................................... 16,200 596,363 Newell Rubbermaid, Inc............................... 28,800 1,339,200 Nextel Communications, Inc........................... 39,200 1,967,350 Norfolk Southern Corp................................ 48,100 1,449,012 Peco Energy Co....................................... 28,100 1,176,687 Pentair, Inc......................................... 14,896 681,492 Philip Morris Companies, Inc......................... 44,500 1,788,344 PNC Bank Corp........................................ 22,800 1,313,850 Praxair, Inc......................................... 24,100 1,179,394 Raytheon Co., Class B................................ 56,800 3,997,300 Regions Financial Corp............................... 7,200 276,750 Southdown, Inc....................................... 16,136 1,036,738 St. Jude Medical, Inc. (b)........................... 39,600 1,410,750 Tyson Foods, Inc..................................... 52,198 1,174,455 U.S. Bancorp......................................... 35,980 1,223,320 Ultramar Diamond Shamrock Corp....................... 28,902 630,425 United Healthcare Corp............................... 28,100 1,759,762 USG Corp............................................. 12,600 705,600 Vencor, Inc. (b)..................................... 28,100 4,215 Ventas, Inc.......................................... 19,200 103,200 Viad Corp............................................ 27,600 853,875 W.W. Grainger, Inc................................... 7,500 403,594 Wells Fargo and Co................................... 49,000 2,094,750 Westvaco Corp........................................ 11,400 330,600 Xerox Corp........................................... 115,900 6,845,344 York International Corp.............................. 17,500 749,219 ----------- Total U.S. Equities.................................. 130,031,006 ----------- Global (Ex-U.S.) Equities -- 14.39% Australia -- 1.17% Amcor Ltd............................................ 16,420 91,273 Amp Limited.......................................... 23,100 252,528 Brambles Industries Ltd.............................. 9,570 252,109 Broken Hill Proprietary Co., Ltd..................... 49,610 574,646 CSR Ltd.............................................. 62,270 178,056 David Jones Ltd...................................... 73,830 72,325 Lend Lease Corp., Ltd................................ 16,432 225,608 National Australia Bank Ltd.......................... 49,427 817,894 News Corp. Ltd....................................... 74,389 634,680 News Corp. Ltd., Preferred........................... 20,436 155,691 Orica Ltd............................................ 10,350 56,525 Pacific Dunlop Ltd................................... 10,610 15,310 Qantas Airways Ltd................................... 95,837 316,539 QBE Insurance Group Ltd.............................. 37,683 143,419 Rio Tinto Ltd........................................ 16,945 277,840 Santos Ltd........................................... 39,790 130,368 Telstra Corp., Ltd................................... 131,300 752,359 Westpac Banking Corp., Ltd........................... 82,028 532,085 WMC Ltd.............................................. 39,840 171,142 Woolworth's Ltd...................................... 40,060 133,242 ----------- 5,783,639 ----------- Austria -- 0.02% Austria Tabakwerke AG................................ 1,800 104,883 -----------
================================================================================ 11 Global Fund -- Schedule Of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------ --------- Belgium -- 0.17% Fortis (B).............................................. 20,367 $ 639,587 KBC Bancassurance Holding............................... 3,490 206,956 --------- 846,543 --------- Canada -- 0.35% Agrium, Inc............................................. 9,940 86,633 Alcan Aluminum Ltd...................................... 3,720 117,499 Bank of Montreal........................................ 2,320 83,859 Canadian National Railway Co............................ 2,260 151,013 Canadian Pacific Ltd.................................... 6,873 162,526 Hudson's Bay Co......................................... 7,210 80,376 Imasco, Ltd............................................. 3,690 98,975 Imperial Oil Ltd........................................ 5,710 108,020 Magna International, Inc., Class A...................... 1,360 76,587 Newbridge Networks Corp. (b)............................ 4,060 115,208 Nova Chemicals Corp. NPV................................ 4,204 97,992 Potash Corporation of Saskatchewan, Inc................. 960 49,391 Royal Bank of Canada.................................... 3,170 139,214 Seagram Co., Ltd........................................ 1,250 61,947 Shaw Communications, Inc., Class B...................... 4,580 180,403 TransCanada Pipelines Ltd............................... 5,490 76,966 Westcoast Energy, Inc................................... 2,050 40,028 --------- 1,726,637 --------- Denmark -- 0.05% Tele Danmark A/S........................................ 4,920 242,169 --------- Finland -- 0.26% Merita PLC, Class A..................................... 47,730 271,224 Nokia Oyj............................................... 7,160 627,649 UPM-Kymmene Corp........................................ 13,670 391,921 --------- 1,290,794 --------- France -- 1.24% Aerospatiale Matra...................................... 9,160 211,134 Air Liquide............................................. 2,205 346,787 Banque Nationale de Paris............................... 3,899 324,900 Carrefour S.A........................................... 1,920 282,164 Cie de Saint Gobain..................................... 1,597 254,459 Elf Aquitaine S.A....................................... 3,734 547,979 France Telecom S.A...................................... 6,070 458,544 Groupe Air France (b)................................... 13,060 233,010 Groupe Danone........................................... 1,620 417,676 Michelin, Class B....................................... 4,239 173,425 Rhone-Poulenc, Class A.................................. 6,094 278,477 SEITA................................................... 11,830 683,216 Societe Generale........................................ 1,705 300,505 Suez Lyonnaise des Eaux S.A............................. 2,261 407,826 Thomson CSF............................................. 14,210 493,866 Total Fina S.A., Class B................................ 3,016 389,111 Vivendi................................................. 4,040 327,275 --------- 6,130,354 --------- Germany -- 1.43% Allianz AG.............................................. 2,030 567,349 Bayer AG................................................ 19,880 827,266 Continental AG.......................................... 12,200 291,899 DaimlerChrysler AG...................................... 6,456 563,939 Deutsche Bank AG........................................ 11,740 $ 715,551 Deutsche Telekom AG..................................... 13,260 557,258 Deutsche Telekom AG, Rights (b)......................... 13,260 2,598 Dresdner Bank AG........................................ 11,670 453,730 Mannesmann AG........................................... 4,530 677,409 SAP AG.................................................. 570 195,457 Siemens AG.............................................. 10,750 829,268 Veba AG................................................. 20,089 1,185,057 Volkswagen AG........................................... 2,970 191,650 --------- 7,058,431 --------- Italy -- 0.37% Assicurazioni Generali.................................. 12,800 443,542 ENI Spa................................................. 83,000 495,612 ENI Spa ADR............................................. 3,070 184,200 La Rinascente Spa....................................... 29,740 225,124 Montedison Spa.......................................... 119,964 195,476 San Paolo-imi Spa....................................... 19,511 265,606 --------- 1,809,560 --------- Japan -- 3.31% Acom Co., Ltd........................................... 3,800 328,073 Amada Co., Ltd.......................................... 19,000 134,212 Bank of Tokyo-Mitsubushi, Ltd........................... 31,000 441,284 Bridgestone Corp........................................ 10,000 302,379 Canon, Inc.............................................. 15,000 431,262 Citizen Watch Co., Ltd.................................. 18,000 156,147 Dai Nippon Printing Co., Ltd............................ 17,000 271,770 Daiichi Pharmaceutical Co., Ltd......................... 15,000 232,733 Daikin Industries Ltd................................... 38,000 441,094 Daiwa House Industry Co., Ltd........................... 9,000 94,655 East Japan Railway Co................................... 53 284,617 Fanuc................................................... 7,400 397,389 Fuji Photo Film......................................... 5,000 189,194 Fujitsu................................................. 31,000 623,637 Honda Motor Co.......................................... 13,000 550,975 Hoya Corp............................................... 4,000 225,710 Ito Yokado Co., Ltd..................................... 9,000 602,280 Kaneka Corp............................................. 19,000 178,949 Kao Corp................................................ 12,000 337,079 Kirin Brewery Co., Ltd.................................. 20,000 239,590 Kokuyo.................................................. 6,000 96,662 Kuraray Co., Ltd........................................ 22,000 264,640 Marui Co., Ltd.......................................... 10,000 165,235 Matsushita Electric Industrial Co....................... 22,000 427,132 Mitsubishi Estate Co., Ltd.............................. 35,000 341,499 Mitsubishi Corp......................................... 60,000 406,477 NGK Insulators.......................................... 30,000 313,285 Nintendo Corp., Ltd..................................... 2,200 309,171 Nippon Denso Co., Ltd................................... 16,000 325,182 Nippon Meat Packers, Inc................................ 14,000 182,749 Nippon Steel Co......................................... 127,000 294,836 Nippon Telegraph & Telephone Corp....................... 80 931,923 Nomura Securities Co., Ltd.............................. 32,000 374,620 Obayashi Corp........................................... 32,000 161,005 Osaka Gas Co............................................ 90,000 305,601 Sankyo Co., Ltd......................................... 13,000 327,578 Sanwa Bank Ltd.......................................... 21,000 206,634 Secom Co., Ltd.......................................... 4,000 416,391 Sega Enterprises Ltd.................................... 2,400 31,745
================================================================================ 12 Global Fund -- Schedule Of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value -------- --------- Sekisui House Ltd.................................. 20,000 $ 215,796 Shin-Etsu Chemical Co., Ltd........................ 4,000 133,840 Sony Corp.......................................... 4,200 452,826 Sumitomo Bank...................................... 23,000 285,220 Sumitomo Chemical Co............................... 51,000 233,848 Sumitomo Electric Industries....................... 20,000 227,363 Takeda Chemical Industries......................... 11,000 509,831 TDK Corp........................................... 3,000 274,372 Tokio Marine & Fire ............................... 18,000 195,555 Tokyo Electric Power............................... 19,000 401,066 Toshiba Corp....................................... 45,000 320,844 Toyota Motor Corp.................................. 17,000 537,921 Yamato Transport Co., Ltd......................... 11,000 191,755 ---------- 16,325,631 ---------- Netherlands -- 0.67% Elsevier NV........................................ 41,570 482,300 Heineken NV........................................ 3,152 161,395 ING Groep NV....................................... 19,727 1,068,084 Koninklijke KPN NV................................. 11,276 529,117 Royal Dutch Petroleum Co........................... 11,090 649,628 Unilever NV........................................ 5,723 385,704 ---------- 3,276,228 ---------- New Zealand -- 0.25% Auckland International Airport Ltd................. 62,150 95,507 Carter Holt Harvey Ltd............................. 70,640 84,597 Fletcher Challenge Paper........................... 138,030 103,130 Lion Nathan Ltd.................................... 53,920 129,146 Telecom Corp. of New Zealand Ltd................... 189,010 811,266 ---------- 1,223,646 ---------- Norway -- 0.06% Norsk Hydro ASA.................................... 3,190 120,347 Norske Skogindustrier ASA.......................... 4,550 167,608 ---------- 287,955 ---------- Portugal -- 0.06% EDP Electricidade de Portugal S.A.................. 15,300 275,499 ---------- Singapore -- 0.20% Singapore Press Holdings Ltd....................... 39,820 678,285 United Overseas Bank Ltd. (Frgn.).................. 44,360 310,064 ---------- 988,349 ---------- Spain -- 0.31% Banco Popular ..................................... 4,329 311,399 Banco Santander Central Hispano SA................. 42,398 441,623 Endesa S.A......................................... 14,323 305,470 Telefonica S.A. (b)................................ 9,278 446,940 ---------- 1,505,432 ---------- Sweden -- 0.35% Electrolux AB, B Shares........................... 25,740 538,899 Investor AB - B Shares............................. 24,400 272,642 Nordbanken Holding AB.............................. 32,110 187,705 Swedish Match AB................................... 92,620 330,085 Telefonaktiebolaget LM Ericsson, B Shares.......... 12,940 414,744 ---------- 1,744,075 ---------- Switzerland -- 0.71% Adecco S.A......................................... 289 154,855 Holderbank Financiere Glarus AG, B Shares.......... 234 $ 276,206 Nestle S.A. (Reg.)................................. 515 927,901 Novartis AG (Reg.)................................. 543 792,879 Roche Holding AG (Gen.)............................ 69 709,263 Swiss Reinsurance Co. (Reg.)....................... 46 87,585 Swisscom AG (Reg.)................................. 1,416 532,844 ---------- 3,481,533 ---------- United Kingdom -- 3.41% Allied Zurich PLC.................................. 31,052 390,352 AstraZeneca Group PLC.............................. 12,002 464,264 Barclays PLC....................................... 16,050 467,029 BOC Group PLC...................................... 38,350 749,590 Boots Company PLC.................................. 26,230 311,543 British Aerospace PLC.............................. 10,000 64,904 British Airways PLC................................ 40,000 276,009 BP Amoco PLC....................................... 69,473 1,245,126 British Telecommunications PLC..................... 29,000 485,924 Charter PLC........................................ 69,676 408,567 Coats Viyella PLC.................................. 181,970 146,287 Diageo PLC......................................... 44,209 461,672 FKI PLC............................................ 165,040 512,654 General Electric Co. PLC........................... 88,360 901,149 Glaxo Wellcome PLC................................. 32,260 896,507 Greenalls Group PLC................................ 42,358 237,028 House of Fraser PLC................................ 82,780 114,175 Lloyds TSB Group PLC............................... 71,969 975,620 Marks & Spencer PLC................................ 153,060 885,451 Mirror Group PLC................................... 101,390 393,765 National Power PLC................................. 63,500 462,437 Nycomed Amersham PLC............................... 54,844 381,245 Peninsular & Oriental Steam Navigation Co.......... 18,540 278,363 Prudential Corp. PLC............................... 55,540 817,692 Reckitt & Colman PLC............................... 26,000 271,106 Reed International PLC............................. 47,010 313,635 Rio Tinto Ltd...................................... 48,190 807,851 RJB Mining PLC..................................... 66,590 55,107 Royal & Sun Alliance Insurance Group PLC........... 21,884 196,280 Sainsbury (J.) PLC................................. 19,300 121,690 Scottish Hydro-Electric PLC........................ 67,880 694,422 Tesco PLC.......................................... 259,190 666,973 Thames Water PLC................................... 20,997 332,960 Unilever PLC....................................... 34,000 302,538 United News & Media PLC............................ 48,490 466,250 Yorkshire Water PLC................................ 37,080 257,760 ---------- 16,813,925 ---------- Total Global (Ex-U.S.) Equities.................... 70,915,283 ---------- Emerging Markets Equities -- 3.56% Brinson Emerging Markets Equity Fund (b)........... 1,868,295 17,543,286 ----------- Total Equities (Cost $193,689,005)................. 218,489,575 -----------
================================================================================ 13 Global Fund -- Schedule Of Investments June 30, 1999 - -------------------------------------------------------------------------------
Face Amount Value ------ ------ Bonds -- 52.28% U.S. Bonds -- 29.18% U.S. Corporate Bonds -- 4.85% Banque Paribas, Sub. Notes, 6.875%, due 03/01/09.......................................... $175,000 $ 168,787 Bell Atlantic Corp., 8.000%, due 10/15/29............... 78,000 85,590 Cendant Corp., 7.750%, due 12/01/03..................... 640,000 646,414 Centaur Funding Corp., 144A............................. 750 804,844 Centaur Funding Corp., 144A (b)......................... 1,430 220,935 Chase Manhattan Auto Owner Trust, 96-C, Class A4, 6.150%, due 03/15/02........................ 730,000 733,570 Chemical Master Credit Card Trust, 95-Z, Class A, 6.230%, due 06/15/03......................... 1,055,000 1,061,193 Continental Airlines, Inc., 98-1B, 6.748%, due 09/15/18......................................... 166,569 158,588 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03......................... 1,055,000 1,058,070 GATX Capital Corp., 6.500%, due 11/01/00................ 1,500,000 1,510,387 General Motors Acceptance Corp., 9.625%, due 12/15/01.......................................... 241,000 258,478 Hertz Corp., 6.625%, due 07/15/00....................... 2,500,000 2,525,184 International Telecom Satelite, 8.125%, due 02/28/05......................................... 245,000 258,423 Lehman Brothers, Inc., 7.250%, due 04/15/03.......................................... 510,000 511,775 MBNA Global Capital Securities FRN, 5.795%, due 02/01/27.................................. 810,000 702,346 Monsanto Co., 144A, 6.600%, due 12/01/28................ 545,000 484,331 Morgan Stanley Dean Witter, Series MTN, 5.625%, due 01/20/04.................................. 355,000 340,895 Noram Energy Corp., 6.375%, due 11/01/03................ 615,000 601,222 Norwest Asset Securities Corp., 96-2, Class A9, 7.000%, due 09/25/11........................ 435,000 430,167 PanAmSat Corp. 6.000%, due 01/15/03.................................. 225,000 220,234 6.375%, due 01/15/08.................................. 1,000,000 944,227 Raytheon Co., 6.300%, due 08/15/00...................... 3,000,000 3,027,356 Rohm & Haas Co., 144A, 7.400%, due 07/15/09.......................................... 750,000 749,820 Safeway, Inc., 5.750%, due 11/15/00..................... 1,000,000 998,792 Service Corp., International, 6.000%, due 12/15/05.......................................... 1,000,000 918,929 Sprint Capital Corp., 6.875%, due 11/15/28.............. 750,000 682,898 Supervalu Stores, Inc., Series A, MTN 6.500%, due 10/06/00.................................. 1,000,000 1,008,079 Telecommunicaciones de Puerto Rico Inc., 144A, 6.150%, due 05/15/02........................... 200,000 197,923 Thrift Financial Corp., 11.250%, due 01/01/16........... 59,949 62,625 Time Warner Entertainment, Inc., 8.375%, due 03/15/23.......................................... 386,000 417,715 TIme Warner, Inc., 6.625%, due 05/15/29................. 550,000 484,490 Waste Management, Inc., 6.875%, 144A, due 05/15/09.......................................... 640,000 623,763 Western Resources, Inc., 6.875%, due 08/01/04.......................................... 975,000 972,777 ---------- 23,870,827 ---------- Mortgage-Backed Securities -- 1.86% Asset Securitization Corp., 96-D, Class A1B, 7.210%, due 10/13/26......................$1,695,000 $ 1,730,612 Prudential Home Mortgage Securities, 94-3, Class A10, 6.500%, due 02/25/24....................... 730,000 706,348 Residential Asset Securitization Trust, 97-A11, Class A2, 7.000%, due 01/25/28................ 60,229 60,382 97-A7, Class A1, 7.500%, due 09/25/27................. 324,501 327,143 97-A7, Class A1, 7.250%, due 12/25/27................. 1,080,000 1,060,106 Structured Asset Securities Corp., 98-RF1, Class A, 8.712%, due 03/15/27................. 1,125,637 1,179,105 98-RF2, 144A, 8.582%, due 07/15/27.................... 1,433,113 1,497,603 UCFC Home Equity Loan 97-C, Class A8, FRN, 5.069%, due 09/15/27................... 904,870 902,689 Vendee Mortgage Trust, 98-2, Class 1G, 6.750%, due 06/15/28........................ 1,760,000 1,700,459 ----------- 9,164,447 ----------- International Dollar Bonds -- 1.96% Abbey National PLC, Resettable Perpetual Preferred, 6.700%, due 06/29/49............. 1,075,000 997,001 Amvescap PLC, 6.600%, due 05/15/05.......................................... 870,000 822,067 Banco Santiago S.A., 7.000%, due 07/18/07............... 650,000 569,976 Banque Centrale de Tunisie, 8.250%, due 09/19/27.......................................... 785,000 651,550 British Sky Broadcasting Group PLC, 6.875%, due 02/23/09.......................................... 135,000 123,109 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.900%, due 05/01/07............. 600,000 584,139 Empresa Nacional de Electricidad S.A., 7.875%, due 02/01/27.................................. 166,000 140,554 Government of Malaysia, 8.750%, due 06/01/09.......................................... 690,000 695,175 Korea Development Bank, 7.125%, due 09/17/01.......................................... 180,000 179,487 National Australia Bank, FRN, 6.400%, due 12/10/07.......................................... 700,000 690,468 Pan Pacific Industry PLC 144A, 0.000%, due 04/28/07.......................................... 1,565,000 759,025 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14............................ 1,000,000 922,830 Repsol International Finance, 7.000%, due 08/01/05.......................................... 575,000 571,491 Republic of South Africa, 9.625%, due 12/15/99.......................................... 794,000 801,940 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49............. 505,000 490,902 Skandinaviska Enskilda Banken, 144A, 6.625%, due 03/29/49.......................................... 285,000 281,829 144A, Resettable Perpetual Preferred, 6.500%, due 12/29/49......................................... 415,000 394,697 --------- 9,676,240 ---------
================================================================================ 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ----------- ------------ U.S. Government Agencies -- 5.08% Aid-Israel, Series 10-Z, 0.000%, due 02/15/03.............................. $ 4,935,000 $ 3,986,537 Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25............. 22,488 23,498 Federal Home Loan Mortgage Corp............. 6.200%, due 08/15/07...................... 446,183 440,013 7.238%, due 05/01/26...................... 125,917 126,868 Federal Home Loan Mortgage Corp. Gold....... 8.000%, due 11/01/22...................... 75,066 77,367 8.000%, due 05/01/23...................... 806,381 831,105 9.000%, due 03/01/24...................... 543,328 578,400 Federal National Mortgage Association....... 5.625%, due 05/14/04...................... 1,790,000 1,746,852 8.000%, due 02/25/07...................... 1,045,657 1,066,888 6.500%, due 03/01/19...................... 286,120 278,532 8.000%, due 05/25/21...................... 1,300,000 1,324,018 8.500%, due 07/15/21...................... 498,509 515,960 8.000%, due 05/01/22...................... 63,828 65,501 8.500%, due 07/01/22...................... 352,813 371,076 7.500%, due 07/25/22...................... 2,425,413 2,424,210 7.000%, due 10/01/28...................... 979,919 970,033 6.500%, due 02/01/29...................... 1,523,101 1,473,192 7.000%, due 03/01/29...................... 272,067 269,468 Federal National Mortgage Association Strips 8.000%, due 08/01/23...................... 1,417,412 362,753 0.000%, due 02/01/28...................... 1,017,105 713,655 FGGI, 7.500%, due 10/01/11.................. 795,665 809,113 FNCI, 8.000%, due 02/01/13.................. 589,589 607,514 Freddie Mac Series 194 Class PO, 0.000%, due 04/01/28........ 745,014 491,765 2121 Class H, 5.500%, due 02/15/14........ 2,302,392 2,153,174 Government National Mortgage Association 10.000%, due 09/15/00..................... 1,482 1,579 10.000%, due 05/15/01..................... 1,735 1,849 9.000%, due 11/15/04...................... 8,714 9,177 9.000%, due 11/15/04...................... 3,532 3,720 8.000%, due 08/15/22...................... 304,236 313,678 8.000%, due 11/15/22...................... 231,255 238,750 TBA, 7.000%, due 06/15/29................. 2,780,000 2,745,250 ------------ 25,021,495 ------------ U.S. Government Obligations -- 15.43% U.S. Treasury Bond, 8.000%, due 11/15/21.............................. 7,200,000 8,662,500 U.S. Treasury Inflation Indexed Note........ 3.625%, due 01/15/08...................... 6,945,000 6,942,105 3.625%, due 04/15/28...................... 45,590,000 44,230,725 3.875%, due 04/15/29...................... 15,000,000 14,962,259 U.S. Treasury Note.......................... 4.875%, due 03/31/01...................... 970,000 959,997 5.625%, due 05/15/08...................... 290,000 284,019 ------------ 76,041,605 ------------ Total U.S. Bonds............................ 143,774,614 ------------ Shares ----------- High Yield Bonds -- 2.89% Brinson High Yield Fund (b)................. 1,058,868 14,221,334 ------------ Face Amount Value ----------- ------------ Global (Ex-U.S.) Bonds -- 15.19% Australia -- 1.48% Queensland Treasury Corp., Series 05-G, 6.500%, due 06/14/05...................AUD 10,900,000 $ 7,303,822 ------------ Canada -- 1.48% Government of Canada 7.000%, due 12/01/06...................CAD 2,640,000 1,943,141 6.000%, due 06/01/08...................... 1,600,000 1,108,574 4.250%, due 12/01/21...................... 5,440,000 4,227,844 ------------ 7,279,559 ------------ Denmark -- 1.12% Kingdom of Denmark 9.000%, due 11/15/00...................DKK 11,100,000 1,654,505 7.000%, due 12/15/04...................... 7,980,000 1,248,484 8.000%, due 03/15/06...................... 12,100,000 2,008,479 7.000%, due 11/10/24...................... 3,850,000 624,072 ------------ 5,535,540 ------------ France -- 2.31% Government of France (BTAN), 5.750%, due 03/12/01...................EUR 990,000 1,064,481 Government of France (OAT) 9.500%, due 01/25/01...................... 3,200,000 3,607,405 7.500%, due 04/25/05...................... 850,000 1,026,943 8.500%, due 12/26/12...................... 3,499,999 4,950,496 5.500%, due 04/25/29...................... 700,000 728,407 ------------ 11,377,732 ------------ Germany -- 1.95% Bundesrepublik Deutscheland 8.375%, due 05/21/01...................... 3,500,000 3,944,516 6.250%, due 01/04/24...................... 2,000,000 2,309,699 DePfa Deutsche Pfandbriefbank AG, 4.750%, due 03/20/03...................... 1,080,000 1,144,879 Treuhandanstalt, 6.250%, due 03/04/04....... 1,950,000 2,205,502 ------------ 9,604,596 ------------ Italy -- 0.60% Buoni Poliennali Del Tes, 5.000%, due 05/01/08...................... 1,700,000 1,784,066 Republic of Italy (BTP) 12.000%, due 09/01/02..................... 900,000 1,152,416 8.500%, due 04/01/04...................... 1 1 ------------ 2,936,483 ------------ Netherlands -- 1.51% Government of Netherlands 8.250%, due 02/15/02...................... 3,700,000 4,258,444 5.500%, due 01/15/28...................... 1,600,000 1,664,931 Koninklijke KPN NV.......................... 550,000 557,686 LBW Finance NV, 5.125%, due 03/05/04........ 900,000 964,879 ------------ 7,445,940 ------------ Spain -- 0.77% Government of Spain 8.000%, due 05/30/04...................... 1,352,277 1,633,196 6.150%, due 01/31/13...................... 1,900,001 2,161,341 ------------ 3,794,537 ------------
================================================================================ 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ----------- ------------ Sweden -- 1.08% Government of Sweden 10.250%, due 05/05/03................SEK 29,700,000 $ 4,199,664 6.750%, due 05/05/14.................... 8,400,000 1,117,057 ------------ 5,316,721 ------------ United Kingdom -- 2.89% Halifax PLC, Series E, MTN, 8.75% due 07/10/06.........................GBP 2,980,000 5,302,925 UK Treasury............................... 7.250%, due 12/07/07.................... 4,450,000 7,929,894 8.750%, due 08/25/17.................... 440,000 1,012,610 ------------ 14,245,429 ------------ Total Global (Ex-U.S.) Bonds.............. 74,840,359 ------------ Shares ----------- Emerging Markets Debt -- 5.02% Brinson Emerging Markets Debt Fund (b).... 1,240,578 24,713,550 ------------ Total Bonds (Cost $256,399,033)........... 257,549,857 ------------ Short-Term Investments -- 25.10% Investment Companies -- 6.51% Brinson Supplementary Trust U.S. Cash Management Prime Fund................... 32,094,680 32,094,680 ------------ U.S. Corporate Bonds -- 10.08% Burlington Resources, 6.875%, due 08/01/99.................... $ 2,000,000 2,001,755 Centex Corp., Series A, MTN 5.828%, due 06/30/00.................... 5,000,000 5,000,000 Enron Corp., 5.778%, due 03/30/00......... 5,000,000 5,000,000 General Motors Corporate Notes, 9.375%, due 04/01/00.................... 2,000,000 2,058,750 James River Corp., 6.750%, due 10/01/99... 1,000,000 1,002,560 Lehman Brothers, Inc., Series A, MTN 6.920%, due 10/04/99.................... 3,000,000 3,007,690 Lehman Brothers, Inc., Series E, MTN 6.300%, due 08/11/99.................... 2,000,000 2,001,016 MCI Communications Corp., 7.125%, due 01/20/00.................... 1,200,000 1,210,857 MCI Communications Corp., Series A, MTN 6.260%, due 03/03/00.................... 2,000,000 2,011,325 Nabisco Inc., 6.300%, due 08/26/99........ 1,000,000 1,000,786 Occidental Petroleum, Inc., Series B, MTN 6.080%, due 11/26/99.................... 3,000,000 3,005,074 Philadelphia Electric Co., 9.250%, due 10/01/99.................... 1,000,000 1,009,845 Quaker Oats, Inc., Series B, MTN 9.100%, due 08/31/99.................... 1,800,000 1,811,690 Sonat, Inc. 9.500%, due 08/15/99.................... 2,000,000 2,008,509 Supervalu Stores, Inc. 7.250%, due 07/15/99.................... $ 2,000,000 $ 2,001,026 Texas Utilities, Inc. 7.375%, due 11/01/99.................... 3,500,000 3,520,893 Textron Financial Corp., Series C, MTN 5.299%, due 12/20/99.................... 3,000,000 3,000,307 Ultramar Corp., 8.250%, due 07/01/99...... 1,500,000 1,500,000 Union Carbide, Inc., 7.000%, due 08/01/99. 5,000,000 5,004,598 Vastar Resources, Inc. 6.000%, due 04/20/00.................... 2,500,000 2,508,589 ------------ 49,665,270 ------------ U.S. Government Obligations -- 0.65% U.S. Treasury Bill, 0.000%, due 08/05/99.. 3,200,000 3,186,310 ------------ Commercial Paper -- 7.86% FMC Corp., 6.25%, due 07/01/99............ 5,000,000 5,000,000 GPU Australia, 5.15%, due 07/07/99........ 5,000,000 4,995,708 Kroger Corp., 6.40%, due 07/01/99......... 3,560,000 3,560,000 Phillips Petroleum Co., 5.22%, due 07/15/99..................... 5,236,000 5,225,368 Rohm & Haas Co., 6.30%, due 07/01/99...... 5,000,000 5,000,000 Tyco International Corp., 5.12%, due 07/30/99..................... 5,000,000 4,979,378 U.S. Generating LLC, 6.30%, due 07/01/99..................... 5,000,000 5,000,000 Union Pacific Corp., 5.30%, due 07/30/99.. 5,000,000 4,978,653 ------------ 38,739,107 ------------ Total Short-Term Investments (Cost $123,682,048)..................... 123,685,367 ------------ Total Investments (Cost $573,770,086) -- 121.72% (a)...... 599,724,799 Liabilities, less cash and other assets -- (21.72%)............... (107,008,544) ------------ Net Assets -- 100%........................ $492,716,255 ============
See accompanying notes to Schedule of Investments. ================================================================================ 16 Global Fund -- Schedule of Investments June 30, 1999 - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $573,770,086; and net unrealized appreciation consisted of: Gross unrealized appreciation...................... $ 42,244,574 Gross unrealized depreciation...................... (16,289,861) --------------- Net unrealized appreciation................... $ 25,954,713 ===============
(b) Non-income producing security. FRN: Floating Rate Note -- The rate disclosed is that in effect at June 30, 1999. TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 1999, the value of these securities amounted to $7,521,739 or 1.53% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ------------ ------------- ------------ ----------- Forward Foreign Currency Buy Contracts Australian Dollar............................................. 8/6/99 33,200,000 $ 21,984,134 $ 1,052,514 British Pound................................................. 8/6/99 3,200,000 5,045,488 (80,133) Canadian Dollar............................................... 8/6/99 26,100,000 17,643,122 454,542 Danish Kroner................................................. 8/6/99 7,600,000 1,059,269 (65,191) Euro.......................................................... 8/6/99 22,200,000 22,959,263 (1,244,933) Japanese Yen.................................................. 8/6/99 200,000,000 1,661,403 (9,986) Swedish Krona................................................. 8/6/99 114,000,000 13,439,371 (1,470,093) Swiss Franc................................................... 8/6/99 4,400,000 2,842,616 (315,581) Forward Foreign Currency Sale Contracts Australian Dollar............................................. 8/6/99 2,500,000 1,655,432 (102,182) British Pound................................................. 8/6/99 18,700,000 29,484,572 1,319,939 Danish Kroner................................................. 8/6/99 42,800,000 5,965,356 742,414 Euro.......................................................... 8/6/99 6,500,000 6,722,307 878,273 Japanese Yen.................................................. 8/6/99 1,950,000,000 16,198,681 248,437 ----------- Total..................................................... $ 1,408,020 ===========
FUTURES CONTRACTS The Global Fund had the following open futures contracts as of June 30, 1999:
Settlement Cost/ Current Unrealized Date Proceeds Value Loss ------------ ------------- ------------ ----------- U.S. Interest Rate Futures Buy Contracts 5 year U.S. Treasury Notes, 297 contracts..................... September 1999 $ 32,600,149 $ 32,373,000 $ ($227,149) 10 year U.S. Treasury Notes, 72 contracts..................... September 1999 8,097,692 8,005,500 (92,192) 30 year U.S. Treasury Bonds, 85 contracts..................... September 1999 9,977,704 9,852,031 (125,673) Index Futures Sales Contracts Standard & Poor's 500, 142 contracts.......................... September 1999 46,854,992 49,050,350 (2,195,358) ----------- Total.................................................... $(2,640,372) ===========
The segregated cash and aggregate market value of investments pledged to cover margin requirements for the open positions at June 30, 1999 were $291,353 and $3,186,310, respectively. See accompanying notes to financial statements. ================================================================================ 17 Global Fund -- Financial Statements
- ---------------------------------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $480,775,779).............................................. $503,491,504 Affiliated issuers (Cost $92,994,307)................................................. 96,233,295 Cash.................................................................................... 1,791,353 Foreign currency, at value (Cost $2,375,814)............................................ 2,369,487 Receivables: Investment securities sold............................................................ 8,893,781 Dividends............................................................................. 343,049 Interest.............................................................................. 2,891,212 Fund shares sold...................................................................... 5,680,357 Net unrealized appreciation on forward foreign currency contracts....................... 1,408,020 Other assets............................................................................ 1,548 ------------ TOTAL ASSETS...................................................................... 623,103,606 ------------ LIABILITIES: Payables: Securities loaned..................................................................... 97,474,174 Investment securities purchased....................................................... 25,213,162 Investment advisory fees.............................................................. 321,311 Fund shares redeemed.................................................................. 6,648,047 Variation margin...................................................................... 525,125 Accrued expenses...................................................................... 205,532 ------------ TOTAL LIABILITIES................................................................. 130,387,351 ------------ NET ASSETS................................................................................. $492,716,255 ============ NET ASSETS CONSIST OF: Paid in capital......................................................................... $456,511,413 Accumulated undistributed net investment income......................................... 753,116 Accumulated net realized gain........................................................... 10,789,381 Net unrealized appreciation............................................................. 24,662,345 ------------ NET ASSETS.............................................................................. $492,716,255 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $469,080,017 and 39,038,154 shares issued and outstanding).......................... $ 12.02 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,576,267 and 131,510 shares issued and outstanding)............................... $ 11.99 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $22,059,971 and 1,845,252 shares issued and outstanding)............................ $ 11.95 ============
See accompanying notes to financial statements. ================================================================================ 18 Global Fund -- Financial Statements
- -------------------------------------------------------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Interest (net of $15,418 for foreign taxes withheld; including securities lending income of $442,842)...... $ 13,551,311 Dividends (net of $201,714 for foreign taxes withheld)..................................................... 4,051,102 -------------- TOTAL INCOME......................................................................................... 17,602,413 -------------- EXPENSES: Advisory................................................................................................... 4,403,642 Administration............................................................................................. 381,250 Professional............................................................................................... 173,750 Distribution............................................................................................... 173,246 Printing................................................................................................... 116,160 Custodian.................................................................................................. 98,852 Other...................................................................................................... 146,069 -------------- TOTAL EXPENSES....................................................................................... 5,492,969 -------------- NET INVESTMENT INCOME................................................................................ 12,109,444 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.............................................................................................. 54,822,140 Futures contracts........................................................................................ (5,993,590) Foreign currency transactions............................................................................ (4,134,930) -------------- Net realized gain.................................................................................... 44,693,620 -------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency......................................................................... (41,176,138) Futures contracts........................................................................................ (1,693,063) Forward contracts........................................................................................ 4,947,447 Translation of other assets and liabilities denominated in foreign currency.............................. (71,293) -------------- Change in net unrealized appreciation or depreciation.................................................... (37,993,047) -------------- Net realized and unrealized gain......................................................................... 6,700,573 -------------- Net increase in net assets resulting from operations....................................................... $ 18,810,017 ==============
See accompanying notes to financial statements. ================================================================================ 19 Global Fund -- Financial Statements
- ------------------------------------------------------------------------------------------------------------------------------ STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations.................................................... $ 18,810,017 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Net realized and unrealized gain on investments....................................................... (6,700,573) Decrease in receivable for investment securities sold................................................. 8,618,236 Decrease in dividends and interest receivable......................................................... 2,683,034 Decrease in other assets.............................................................................. 55,119 Increase in payable for securities purchased.......................................................... 1,976,692 Decrease in payable for investment advisory fee....................................................... (139,904) Decrease in accrued expenses.......................................................................... (4,070) Increase in variation margin.......................................................................... 967,434 Net amortization of premium........................................................................... 716,822 --------------- Net cash provided by operating activities........................................................... 26,982,807 =============== CASH FLOWS USED FOR FINANCING ACTIVITIES: Purchases of investments................................................................................ (2,072,240,772) Proceeds from sales of investments...................................................................... 2,290,447,040 Net realized loss on futures contracts.................................................................. (5,993,590) Net realized loss on foreign currency transactions...................................................... (4,134,930) Change in net unrealized appreciaton or depreciation on futures contracts............................... (1,693,063) Change in net unrealized appreciation or depreciation on other assets and liabilities................... (71,293) Net decrease in foreign currency........................................................................ 312,488 --------------- Net cash provided by investing activities........................................................... 206,625,880 --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net capital shares transactions......................................................................... (220,959,157) Net decrease from securities lending.................................................................... (7,471,870) Dividends and capital gain distributions paid........................................................... (3,401,660) --------------- Net cash used for financing activities.............................................................. (231,832,687) --------------- Net increase in cash....................................................................................... 1,776,000 Cash at beginning of year.................................................................................. 15,353 --------------- Cash at end of year........................................................................................ $ 1,791,353 ===============
See accompanying notes to financial statements. ================================================================================ 20 GLOBAL FUND -- FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Year Ended Year Ended June 30, 1999 June 30, 1998 --------------- --------------- OPERATIONS: Net investment income..................................................................... $ 12,109,444 $ 17,956,852 Net realized gain......................................................................... 44,693,620 39,774,075 Change in net unrealized appreciation or depreciation..................................... (37,993,047) (6,545,821) ------------- ------------- Net increase in net assets resulting from operations...................................... 18,810,017 51,185,106 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income.................................................. (12,109,444) (28,265,915) Distributions in excess of net investment income.......................................... (6,197,274) (5,070,122) Distributions from net realized gain...................................................... (33,009,121) (35,465,456) ------------- ------------- Total distributions to shareholders*...................................................... (51,315,839) (68,801,493 ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold............................................................................... 410,521,495 256,422,880 Shares issued on reinvestment of distributions............................................ 47,914,179 64,950,197 Shares redeemed........................................................................... (632,556,320) (217,384,769) ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions........... (174,120,646) 103,988,308 ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (206,626,468) 86,371,921 ------------- ------------- NET ASSETS: Beginning of year......................................................................... 699,342,723 612,970,802 ------------- ------------- End of year (including undistributed net investment income of $753,116 and ($845,490), respectively)........................................ $ 492,716,255 $ 699,342,723 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income: Brinson Class I........................................................................... (17,500,696) (32,129,657) Brinson Class N........................................................................... (753,377) (9,572) UBS Investment Funds Class................................................................ (52,645) (1,196,808) Distributions from net realized gain: Brinson Class I........................................................................... (31,201,392) (33,973,096) Brinson Class N........................................................................... (1,710,286) (53) UBS Investment Funds Class................................................................ (97,443) (1,492,307) ------------- ------------- Total distributions to shareholders.......................................................... (51,315,839) (68,801,493) ============= =============
See accompanying notes to financial statements. ================================================================================ 21 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, ------------------------------------------------------------------ Brinson Class I 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of year............................ $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43 --------- --------- --------- --------- -------- Income from investment operations: Net investment income................................... 0.30 0.37 0.38 0.44 0.43 Net realized and unrealized gain........................ 0.25 0.62 1.79 1.37 0.86 --------- --------- --------- --------- -------- Total income from investment operations........... 0.55 0.99 2.17 1.81 1.29 --------- --------- --------- --------- -------- Less distributions: Distributions from and in excess of net investment income.................................... (0.46) (0.65) (0.61) (0.62) (0.27) Distributions from and in excess of net realized gains....................................... (0.84) (0.70) (0.65) (0.32) (0.10) --------- --------- --------- --------- -------- Total distributions................................ (1.30) (1.35) (1.26) (0.94) (0.37) --------- --------- --------- --------- -------- Net asset value, end of year.................................. $ 12.02 $ 12.77 $ 13.13 $ 12.22 $ 11.35 ========= ========= ========= ========= ======== Total return.................................................. 4.76% 8.28% 18.79% 16.38% 12.57% Ratios/Supplemental data: Net assets, end of year (in 000s).......................... $ 469,080 $ 667,745 $ 586,667 $ 457,933 $ 365,678 Ratio of expenses to average net assets.................... 0.96% 0.94% 0.99% 1.04% 1.09% Ratio of net investment income to average net assets.................................................. 2.23% 2.70% 3.03% 3.69% 4.27% Portfolio turnover rate.................................... 105% 88% 150% 142% 238%
See accompanying notes to financial statements. =============================================================================== 22 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
Year Ended Year Ended Brinson Class N June 30, 1999 June 30, 1998 - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year..................................................... $ 12.75 $ 13.13 ------- ------- Income from investment operations: Net investment income............................................................. 0.27 0.63 Net realized and unrealized gain.................................................. 0.25 0.32 ------- ------- Total income from investment operations...................................... 0.52 0.95 ------- ------- Less distributions: Distributions from and in excess of net investment income......................... (0.44) (0.63) Distributions from net realized gain.............................................. (0.84) (0.70) ------- ------- Total distributions.......................................................... (1.28) (1.33) ------- ------- Net asset value, end of year........................................................... $ 11.99 $ 12.75 ======= ======= Total return........................................................................... 4.47% 7.90% Ratios/Supplemental data: Net assets, end of year (in 000s)................................................... $ 1,576 $ 1,163 Ratio of expenses to average net assets............................................. 1.21% 1.19% Ratio of net investment income to average net assets................................ 1.98% 2.45% Portfolio turnover rate............................................................. 105% 88%
See accompanying notes to financial statements. ================================================================================ 23 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- [LOGO OF BRINSON] In managing the Global Equity Fund, our investment research focuses on identifying discrepancies between a security's fundamental value and its observed market price -- both across and within global equity markets. We exploit these discrepancies using a disciplined fundamental approach. Our research teams evaluate companies in their markets around the world and assign relative price/value rankings based on the present value of each company's expected future cash flows. Industry and factor teams, in cooperation with the dedicated country strategy team, use our global network of resources to systematically develop portfolio strategy in the context of integrated global capital markets. Currency strategies are separately developed and coordinated with country allocations. The Brinson Global Equity Fund Class I has provided an annualized return of 12.02% since its performance inception, January 31, 1994. Its benchmark, the MSCI World Equity (Free) Index has returned 15.12% over the same period. The Fund achieved these results while maintaining a risk or volatility level much lower than the benchmark at 10.80% versus 12.72%. The lower risk level implies that the Fund has generated a relatively constant return stream over time, protecting its investors from unwanted fluctuations in the Fund's value. For the year-to-date period, the Fund has returned 7.08% versus the benchmark return of 8.57%. For the year-to-date period, security selection was the largest cause of the Fund's underperformance relative to the index. More specifically, our underweights of large growth-oriented stocks and internet-related technology stocks in the U.S. detracted from performance. While a shift toward value-oriented cyclicals boosted Fund performance in the second quarter, earlier influences dominate year-to-date results. We continue to believe that the U.S. equity market is overvalued by a wide margin, and maintain our underweight. Security selection in Japan also hampered performance as some of the financially risky stocks (which we have steered away from) provided strong returns during the first part of the year, as expectations for some strengthening in the Japanese economy were increased. Currency allocation provided the largest positive contribution, mainly due to the Fund's overweights in the Australian dollar and Swedish krona, two of the strongest performing currencies for the year. Equity prices in Australia/New Zealand are still depressed, having been disproportionately impacted by their geographic proximity to Asia and the related cyclical downturn in basic material prices. In the case of Japan, long-term fundamental valuation of the equity market is critically dependent upon expectations of government reform of the domestic microeconomic environment, and the nature and timing of overdue corporate restructuring. While we believe that restructuring may raise profit margins in Japan to levels of a decade ago, it is unlikely that they will reach levels similar to those found in Continental Europe or the U.K. The implications for employment, bankruptcy and social stress are too severe. As a result, we maintain our neutral exposure to Japan at the present time. The current set of socialist-oriented governments in core Europe seems to have slowed previous reform momentum there. While we continue to expect a policy that is more favorable to capital returns over the long run (driven by a combination of demographic pressure and globalization of capital markets), near term prospects have dimmed. As a result, we favor U.K. equities over those of Continental Europe. ================================================================================ 24 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO OF BRINSON] Total Return
6 months 1 year 3 years 5 years 1/31/94* ended ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 - ---------------------------------------------------------------------------------------------------------- Brinson Global Equity Fund Class I 7.08% 10.14% 13.33% 14.17% 12.02% - ---------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 8.57 15.87 18.53 17.09 15.12 - ----------------------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Equity Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Equity Fund Class I and the MSCI World Equity (Free) Index if you had invested $1,000,000 on January 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Equity Fund Class I VS. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested $1,849,022 ---- Brinson Global Equity Fund Class I $2,144,287 ---- MSCI World Equity (Free) Index [GRAPH APPEARS HERE] 1/31/94 $1,000,000 $1,000,000 2/28/94 $ 978,000 $ 986,865 3/31/94 $ 935,000 $ 944,349 4/30/94 $ 957,000 $ 974,078 5/31/94 $ 964,000 $ 976,963 6/30/94 $ 953,025 $ 974,101 7/31/94 $ 967,085 $ 992,749 8/31/94 $1,008,259 $1,022,751 9/30/94 $ 981,144 $ 995,748 10/31/94 $ 983,153 $1,024,396 11/30/94 $ 957,042 $ 980,245 12/31/94 $ 956,520 $ 989,551 1/31/95 $ 942,320 $ 975,025 2/28/95 $ 957,535 $ 989,499 3/31/95 $ 965,650 $1,037,236 4/30/95 $ 991,008 $1,073,521 5/31/95 $1,004,194 $1,083,208 6/30/95 $1,010,802 $1,082,851 7/31/95 $1,057,638 $1,137,066 8/31/95 $1,075,010 $1,111,688 9/30/95 $1,094,426 $1,144,526 10/31/95 $1,092,382 $1,126,746 11/30/95 $1,131,213 $1,166,018 12/31/95 $1,166,324 $1,200,236 1/31/96 $1,201,270 $1,222,676 2/29/96 $1,206,730 $1,230,112 3/31/96 $1,227,479 $1,250,534 4/30/96 $1,261,333 $1,279,914 5/31/96 $1,264,610 $1,280,939 6/30/96 $1,270,202 $1,287,765 7/31/96 $1,229,582 $1,242,255 8/31/96 $1,251,539 $1,256,945 9/30/96 $1,293,257 $1,306,231 10/31/96 $1,297,648 $1,315,223 11/30/96 $1,363,519 $1,389,368 12/31/96 $1,367,688 $1,367,286 1/31/97 $1,379,696 $1,384,047 2/28/97 $1,398,908 $1,399,822 3/31/97 $1,392,904 $1,371,807 4/30/97 $1,401,310 $1,416,808 5/31/97 $1,484,164 $1,504,478 6/30/97 $1,540,253 $1,579,321 7/31/97 $1,590,951 $1,652,216 8/31/97 $1,517,318 $1,540,396 9/30/97 $1,582,501 $1,624,144 10/31/97 $1,496,797 $1,538,889 11/30/97 $1,495,590 $1,565,803 12/31/97 $1,514,304 $1,584,937 1/31/98 $1,539,631 $1,629,401 2/28/98 $1,634,275 $1,739,612 3/31/98 $1,700,926 $1,812,828 4/30/98 $1,698,260 $1,830,553 5/31/98 $1,692,928 $1,808,342 6/30/98 $1,678,772 $1,850,637 7/31/98 $1,670,739 $1,847,845 8/31/98 $1,487,333 $1,601,540 9/30/98 $1,511,430 $1,630,041 10/31/98 $1,611,835 $1,777,635 11/30/98 $1,673,417 $1,883,507 12/31/98 $1,726,828 $1,975,069 1/31/99 $1,726,828 $2,018,467 2/28/99 $1,676,039 $1,964,831 3/31/99 $1,728,200 $2,046,335 4/31/99 $1,847,623 $2,127,345 5/31/99 $1,780,362 $2,048,976 6/30/99 $1,849,022 $2,144,287 1/31/94=$1,000,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 25 Global Equity Fund - -------------------------------------------------------------------------------- Total Return [LOGO OF BRINSON]
6 months 1 year 6/30/97* ended ended to 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------- Brinson Global Equity Fund Class N 6.93% 9.80% 9.20% ------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 8.57 15.87 16.52 -------------------------------------------------------------------------------------------------------
*Inception date of the Brinson Global Equity Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Equity Fund Class N and the MSCI World Equity (Free) Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Equity Fund Class N vs. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested [CHART APPEARS HERE]
---------------------------------------------------------------- Label A B ---------------------------------------------------------------- MSCI World Equity Label Brinson Global (Free) Index ---------------------------------------------------------------- 1 6/30/97 $1,000,000 $1,000,000 2 7/31/97 $1,032,915 $1,046,155 3 8/31/97 $ 984,326 $ 975,353 4 9/30/97 $1,026,646 $1,028,381 5 10/31/97 $ 970,219 $ 974,399 6 11/30/97 $ 969,436 $ 991,441 7 12/31/97 $ 981,339 $1,003,556 8 1/31/98 $ 996,889 $1,031,710 9 2/28/98 $1,058,222 $1,101,493 10 3/31/98 $1,101,415 $1,147,852 11 4/30/98 $1,098,823 $1,159,076 12 5/31/98 $1,096,232 $1,145,012 13 6/30/98 $1,085,985 $1,171,793 14 7/31/98 $1,080,785 $1,170,024 15 8/31/98 $ 962,046 $1,014,069 16 9/30/98 $ 976,780 $1,032,115 17 10/31/98 $1,040,917 $1,125,569 18 11/30/98 $1,080,785 $1,192,605 19 12/31/98 $1,115,067 $1,250,581 20 1/31/99 $1,115,067 $1,278,059 21 2/28/99 $1,081,304 $1,244,098 22 3/31/99 $1,115,067 $1,295,705 23 4/30/99 $1,191,478 $1,346,999 24 5/31/99 $1,148,830 $1,297,377 25 6/30/99 $1,192,373 $1,357,727 6/30/97 = $1,000,000 Data through 6/30/99
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 26 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Market Allocation As of June 30, 1999 Current Benchmark Strategy -------------------------------------------------------- U.S. 52.0% 43.0% Australia 1.3 5.1 Austria 0.1 0.1 Belgium 0.6 0.7 Canada 2.0 1.7 Denmark 0.4 0.2 Finland 0.9 1.1 France 4.5 5.2 Germany 4.5 6.0 Hong Kong 1.2 0.0 Ireland 0.2 0.0 Italy 2.0 1.5 Japan 11.0 11.0 Netherlands 2.6 2.7 New Zealand 0.1 0.6 Norway 0.2 0.1 Portugual 0.2 0.2 Singapore 0.4 0.8 Spain 1.4 1.3 Sweden 1.1 1.5 Switzerland 3.1 3.0 United Kingdom 10.2 14.2 Cash Reserves 0.0 0.0 -------------------------------------------------------- 100.0% 100.0% Top Ten U.S. Equity Holdings As of June 30, 1999 Percent of Net Assets -------------------------------------------------------- 1. Xerox Corp. 2.33% 2. FDX Corp. 1.58 3. Burlington Northern Santa Fe Corp. 1.48 4. Raytheon Co., Class B 1.36 5. Electronic Data Systems Corp. 1.34 6. Corning, Inc. 1.32 7. Aetna, Inc. 1.27 8. Lockheed Martin Corp. 1.13 9. General Instrument Corp. 1.04 10. CIGNA Corp. 1.03 -------------------------------------------------------- Currency Allocation As of June 30, 1999 Current Benchmark Strategy -------------------------------------------------------- U.S. 52.0% 49.2% Australia 1.3 6.8 Canada 2.0 2.0 Denmark 0.4 0.4 Euro 17.0 27.0 Hong Kong 1.2 0.0 Japan 11.0 3.0 New Zealand 0.1 0.6 Norway 0.2 0.2 Singapore 0.4 0.4 Sweden 1.1 5.1 Switzerland 3.1 3.1 United Kingdom 10.2 2.2 -------------------------------------------------------- 100.0% 100.0% Top Ten Global (Ex-U.S.) Equity Holdings As of June 30, 1999 Percent of Net Assets -------------------------------------------------------- 1. BP Amoco PLC 1.08% 2. Veba AG 1.01 3. ING Groep NV 0.86 4. Nestle S.A. (Reg.) 0.84 5. Lloyds TSB Group PLC 0.80 6. Glaxo Wellcome PLC 0.79 7. Marks & Spencer PLC 0.78 8. General Electric Co. PLC 0.73 9. Bayer AG 0.72 10. Siemens AG 0.72 -------------------------------------------------------- ================================================================================ 27 Global Equity Fund - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Industry Diversification As a Percent of Net Assets As of June 30, 1999 ---------------------------------------------------------------------- U.S. EQUITIES Energy.................................................. 0.28% Capital Investment Capital Goods........................................ 4.46 Technology........................................... 5.88 ------ 10.34 Basic Industries Chemicals............................................ 1.69 Housing/Paper........................................ 3.09 Metals............................................... 1.17 ------ 5.95 Consumer Non-Durables......................................... 1.28 Retail/Apparel....................................... 2.29 Autos/Durables....................................... 1.56 Health: Drugs........................................ 1.83 Health: Non-Drugs.................................... 2.12 ------ 9.08 Financial Banks................................................ 4.41 Non-Banks............................................ 3.30 ------ 7.71 Utilities Electric............................................. 1.66 Telephone............................................ 0.67 ------ 2.33 Transportation.......................................... 3.61 Services/Misc........................................... 2.49 ------ Total U.S. Equities............................. 41.79 GLOBAL (EX-U.S.) EQUITIES Aerospace & Military.................................... 0.65 Airlines................................................ 0.73 Appliances & Household.................................. 1.04 Autos/Durables.......................................... 1.38 Banking................................................. 6.25 Beverages and Tobacco................................... 1.80 Broadcasting & Publishing............................... 2.69 Building Materials...................................... 0.64 Business & Public Service............................... 2.31 Chemicals............................................... 2.38 Construction............................................ 0.31% Data Processing......................................... 0.72 Electric Components..................................... 0.61 Electronics............................................. 3.08 Energy.................................................. 3.88 Financial Services...................................... 1.31 Food & House Products................................... 2.35 Forest Products......................................... 0.70 Health & Personal Care.................................. 3.76 Industrial Components................................... 1.22 Insurance............................................... 3.13 Leisure & Tourism....................................... 0.22 Machinery & Engineering................................. 0.39 Merchandising........................................... 2.99 Metals--Steel........................................... 0.20 Multi-Industry.......................................... 0.92 Non-Ferrous Metals...................................... 1.19 Real Estate............................................. 0.44 Recreation.............................................. 0.43 Telecommunications...................................... 5.21 Textiles & Apparel...................................... 0.12 Transportation.......................................... 0.66 Utilities............................................... 3.07 Wholesale & International Trade......................... 0.27 ------ Total Global (Ex-U.S.) Equities................. 57.05 SHORT-TERM INVESTMENTS.................................. 1.18 ------ TOTAL INVESTMENTS............................... 100.02 LIABILITIES, LESS CASH AND OTHER ASSETS................. (0.02) ------ NET ASSETS...................................... 100.00% ====== ---------------------------------------------------------------------- ================================================================================ 28 Global Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value -------- ------------ Equities -- 98.84% U.S. Equities -- 41.79% Advanced Micro Devices, Inc. (b)........ 17,800 $ 321,513 Aetna, Inc.............................. 12,300 1,100,081 Allergan, Inc........................... 3,900 432,900 Alza Corp. (b).......................... 16,200 824,175 American Standard Companies, Inc. (b)... 8,500 408,000 Aon Corp................................ 20,925 863,156 Armstrong World Industries, Inc......... 2,200 127,188 BankBoston Corp......................... 4,500 230,063 Baxter International, Inc............... 9,000 545,625 Burlington Northern Santa Fe Corp....... 41,300 1,280,300 Champion Enterprises, Inc. (b).......... 6,700 124,788 Champion International Corp............. 2,600 124,475 Chase Manhattan Corp.................... 7,100 615,037 CIGNA Corp.............................. 10,000 890,000 Circuit City Stores-Circuit City Group.. 7,600 706,800 CMS Energy Corp......................... 7,600 318,250 CommScope, Inc. (b)..................... 7,133 219,340 Compaq Computer Corp.................... 2,400 56,850 Computer Sciences Corp. (b)............. 3,700 255,994 Compuware Corp. (b)..................... 8,600 273,588 Comverse Technology, Inc. (b)........... 2,637 199,094 Consolidated Stores Corp. (b)........... 10,500 283,500 Corning, Inc............................ 16,200 1,136,025 Covance, Inc. (b)....................... 6,500 155,594 Crown Cork & Seal Co., Inc.............. 2,100 59,850 Delphi Automotive Systems Corp.......... 14,900 276,581 Dial Corp............................... 4,300 159,906 Dominion Resources, Inc................. 2,000 86,625 Eastman Chemical Co..................... 4,600 238,050 Electronic Data Systems Corp............ 20,500 1,159,531 Eli Lilly and Co........................ 4,500 322,312 Entergy Corp............................ 21,600 675,000 FDX Corp. (b)........................... 25,200 1,367,100 Federal-Mogul Corp...................... 4,100 213,200 First American Corp. of Tennessee....... 2,200 91,438 First Data Corp......................... 17,304 846,814 First Security Corp..................... 4,050 110,363 First Union Corp........................ 6,900 324,300 Fleet Financial Group, Inc.............. 10,300 457,062 Fleetwood Enterprises, Inc.............. 5,300 140,119 Food Lion Inc., Class A................. 24,100 286,188 Fort James Corp......................... 14,300 541,612 GATX Corp............................... 1,100 41,869 General Instrument Corp. (b)............ 21,100 896,750 Genzyme Corp. (b)....................... 3,300 160,050 Genzyme Surgical Products Division (b).. 591 2,603 Geon Co................................. 1,400 45,150 GreenPoint Financial Corp............... 12,400 406,875 Hibernia Corp........................... 8,700 136,481 Household International, Inc............ 13,400 634,825 Illinois Tool Works, Inc................ 2,500 205,000 IMC Global, Inc......................... 15,000 264,375 Johnson Controls, Inc................... 3,900 270,319 Kimberly-Clark Corp..................... 9,600 547,200 Lafarge Corp............................ 4,500 159,469 Lear Corp. (b).......................... 9,900 $ 492,525 Lockheed Martin Corp.................... 26,202 976,024 Lyondell Chemical Company............... 11,900 245,438 Martin Marietta Materials, Inc.......... 2,435 143,665 Masco Corp.............................. 25,800 744,975 Mattel, Inc............................. 11,700 309,319 MCN Energy Group, Inc................... 2,800 58,100 Nabisco Holdings Corp................... 1,600 69,200 National Service Industries, Inc........ 3,600 129,600 New York Times Co....................... 4,400 161,975 Newell Rubbermaid, Inc.................. 8,500 395,250 Nextel Communications, Inc. (b)......... 11,500 577,156 Norfolk Southern Corp................... 14,200 427,775 Peco Energy Co.......................... 8,510 356,356 Pentair, Inc............................ 4,400 201,300 Philip Morris Companies, Inc............ 13,100 526,456 PNC Bank Corp........................... 6,700 386,087 Praxair, Inc............................ 7,000 342,562 Raytheon Co., Class B................... 16,700 1,175,263 Regions Financial Corp.................. 2,100 80,719 Southdown, Inc.......................... 4,776 306,858 St. Jude Medical, Inc. (b).............. 11,700 416,812 Tyson Foods, Inc........................ 15,400 346,500 U.S. Bancorp............................ 10,563 359,142 Ultramar Diamond Shamrock Corp.......... 8,552 186,541 United Healthcare Corp.................. 8,300 519,787 USG Corp................................ 3,800 212,800 Vencor, Inc. (b)........................ 9,100 1,365 Ventas, Inc............................. 5,600 30,100 Viad Corp............................... 8,100 250,594 W.W. Grainger, Inc...................... 1,700 91,481 Wells Fargo and Co...................... 14,400 615,600 Westvaco Corp........................... 3,600 104,400 Xerox Corp.............................. 34,100 2,014,031 York International Corp................. 5,100 218,344 ------------ Total U.S. Equities..................... 36,093,454 ------------ Global (Ex-U.S.) Equities -- 57.05% Australia --5.04% Amcor Ltd............................... 14,200 78,933 Amp Ltd................................. 17,300 189,123 Brambles Industries Ltd................. 6,900 181,771 Broken Hill Proprietary Co., Ltd........ 39,350 455,802 CSR Ltd................................. 54,400 155,552 David Jones Ltd......................... 48,400 47,413 Lend Lease Corp., Ltd................... 13,194 181,151 National Australia Bank Ltd............. 34,875 577,095 News Corp., Ltd......................... 58,540 499,458 News Corp., Ltd., Preferred............. 13,300 101,326 Orica Ltd............................... 4,000 21,845 Qantas Airways Ltd...................... 73,977 244,338 QBE Insurance Group Ltd................. 25,042 95,308 Rio Tinto Ltd........................... 14,363 235,504 Santos Ltd.............................. 26,000 85,187 Telstra Corp., Ltd...................... 98,400 563,839 Westpac Banking Corp., Ltd.............. 57,945 375,868
================================================================================ 29 Global Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value -------- ------------ WMC Ltd................................. 30,800 $ 132,309 Woolworth's Ltd......................... 39,900 132,709 ------------ 4,354,531 ------------ Austria -- 0.06% Austria Tabakwerke AG................... 900 52,442 ------------ Belgium -- 0.75% Fortis (B).............................. 15,562 488,695 KBC Bancassurance Holding............... 2,620 155,365 ------------ 644,060 ------------ Canada -- 1.19% Agrium, Inc............................. 6,200 54,037 Alcan Aluminum Ltd...................... 2,300 72,647 Bank of Montreal........................ 1,400 50,605 Canadian National Railway Co............ 1,400 93,548 Canadian Pacific Ltd.................... 4,116 97,331 Hudson's Bay Co......................... 4,300 47,936 Imasco Ltd.............................. 2,300 61,692 Imperial Oil Ltd........................ 3,600 68,103 Magna International, Inc., Class A...... 600 33,788 Newbridge Networks Corp. (b)............ 1,900 53,915 NOVA Chemicals Corp..................... 2,597 60,534 Potash Corporation of Saskatchewan, Inc. 600 30,870 Royal Bank of Canada.................... 1,600 70,265 Seagram Co., Ltd........................ 700 34,690 Shaw Communications, Inc., Class B...... 3,000 118,168 TransCanada Pipelines Ltd............... 3,988 55,909 Westcoast Energy, Inc................... 1,000 19,526 ------------ 1,023,564 ------------ Denmark -- 0.22% Tele Danmark A/S........................ 3,800 187,041 ------------ Finland -- 1.14% Merita Ltd., Class A.................... 36,700 208,546 Nokia Oyj............................... 5,400 473,367 UPM-Kymmene Corp........................ 10,700 306,770 ------------ 988,683 ------------ France -- 5.30% Aerospatiale Matra...................... 7,180 165,496 Air Liquide............................. 1,638 257,614 Banque Nationale de Paris............... 2,922 243,487 Carrefour S.A........................... 1,500 220,440 Cie de Saint Gobain..................... 1,136 181,005 Elf Aquitaine S.A....................... 2,832 415,607 France Telecom S.A...................... 4,540 342,964 Air France (b).......................... 9,780 174,490 Groupe Danone........................... 1,230 317,125 Michelin, Class B....................... 3,031 124,003 Rhone-Poulenc, Class A.................. 4,550 207,921 SEITA................................... 9,070 523,818 Societe Generale........................ 1,223 215,553 Suez Lyonnaise des Eaux S.A............. 1,687 $ 304,292 Thomson CSF............................. 10,045 349,112 Total Fina S.A., Class B................ 2,249 290,156 Vivendi................................. 3,009 243,755 ------------ 4,576,838 ------------ Germany -- 6.01% Allianz AG.............................. 1,463 408,882 Bayer AG................................ 14,890 619,617 Continental AG.......................... 9,100 217,728 DaimlerChrysler AG...................... 4,625 403,999 Deutsche Bank AG........................ 8,811 537,029 Deutsche Telekom AG..................... 9,960 418,574 Deutsche Telekom AG, Rights (b)......... 9,960 1,951 Dresdner Bank AG........................ 8,400 326,592 Mannesmann AG........................... 3,250 486,000 SAP AG.................................. 400 137,163 Siemens AG.............................. 8,020 618,673 Veba AG................................. 14,810 873,647 Volkswagen AG........................... 2,140 138,091 ------------ 5,187,946 ------------ Italy -- 1.53% Assicurazioni Generali.................. 9,700 336,121 ENI Spa................................. 66,000 394,101 ENI Spa ADR............................. 1,700 102,000 La Rinascente Spa....................... 20,875 158,018 Montedison Spa.......................... 86,091 140,282 San Paolo-imi, Spa...................... 13,911 189,373 ------------ 1,319,895 ------------ Japan -- 10.99% Acom Co., Ltd........................... 2,100 181,304 Amada Co., Ltd.......................... 11,000 77,702 Bank of Tokyo-Mitsubushi Ltd............ 18,000 256,229 Bridgestone Corp........................ 6,000 181,428 Canon, Inc............................. 9,000 258,757 Citizen Watch Co., Ltd.................. 10,000 86,748 Dai Nippon Printing Co., Ltd............ 10,000 159,864 Daiichi Pharmaceutical Co., Ltd......... 9,000 139,640 Daikin Industries Ltd................... 22,000 255,370 Daiwa House Industry Co., Ltd........... 5,000 52,586 Denso Corp., Ltd........................ 9,000 182,915 East Japan Railway Co................... 31 166,474 Fanuc................................... 4,300 230,915 Fuji Photo Film......................... 3,000 113,516 Fujitsu................................. 18,000 362,112 Honda Motor Co.......................... 8,000 339,061 Hoya Corp............................... 2,000 112,855 Ito Yokado Co., Ltd..................... 5,000 334,600 Kaneka Corp............................. 11,000 103,602 Kao Corp................................ 7,000 196,629 Kirin Brewery Co., Ltd.................. 12,000 143,754 Kokuyo.................................. 3,000 48,331 Kuraray Co., Ltd........................ 13,000 156,378 Marui Co., Ltd.......................... 6,000 99,141 Matsushita Electric Industrial Co....... 13,000 252,396
================================================================================ 30 Global Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ---------- ------------ Mitsubishi Estate Co., Ltd.................. 20,000 $ 195,142 Mitsubishi Corp............................. 35,000 237,112 NGK Insulators.............................. 17,000 177,528 Nintendo Corp., Ltd......................... 1,100 154,585 Nippon Meat Packers, Inc.................... 8,000 104,428 Nippon Steel Co............................. 73,000 169,473 Nippon Telegraph & Telephone Corp........... 46 535,856 Nomura Securities Co., Ltd.................. 18,000 210,724 Obayashi Corp............................... 17,000 85,534 Osaka Gas Co................................ 52,000 176,570 Sankyo Co., Ltd............................. 8,000 201,586 Sanwa Bank Ltd.............................. 12,000 118,077 Secom Co., Ltd.............................. 3,000 312,293 Sega Enterprises Ltd........................ 1,000 13,227 Sekisui House Ltd........................... 12,000 129,478 Shin-Etsu Chemical Co., Ltd................. 2,000 66,920 Sony Corp................................... 2,300 247,976 Sumitomo Bank............................... 13,000 161,211 Sumitomo Chemical Co........................ 26,000 119,217 Sumitomo Electric Industries................ 12,000 136,418 Takeda Chemical Industries.................. 7,000 324,438 TDK Corp.................................... 2,000 182,915 Tokio Marine & Fire Insurance Co............ 10,000 108,642 Tokyo Electric Power........................ 11,000 232,196 Toshiba Corp................................ 25,000 178,247 Toyota Motor Corp........................... 10,000 316,424 Yamato Transport Co., Ltd................... 6,000 104,594 ------------ 9,493,118 ------------ Netherlands -- 2.78% Elsevier NV................................. 31,100 360,826 Heineken NV................................. 2,393 122,531 ING Groep NV................................ 13,762 745,120 Koninklijke KPN NV.......................... 8,644 405,612 Royal Dutch Petroleum Co.................... 8,275 484,732 Unilever NV................................. 4,236 285,487 ------------ 2,404,308 ------------ New Zealand -- 0.84% Auckland International Airport Ltd.......... 32,000 49,175 Carter Holt Harvey Ltd...................... 48,000 57,483 Fletcher Challenge Paper.................... 73,100 54,617 Lion Nathan Ltd............................. 36,000 86,225 Telecom Corp. of New Zealand Ltd............ 111,400 478,150 ------------ 725,650 ------------ Norway -- 0.22% Norsk Hydro ASA............................. 2,100 79,225 Norske Skogindustrier ASA................... 3,000 110,511 ------------ 189,736 ------------ Portugal -- 0.24% EDP Electricidade de Portugal S.A........... 11,500 207,075 ------------ Singapore -- 0.69% Singapore Press Holdings Ltd................ 24,046 409,594 United Overseas Bank Ltd. (Frgn.)........... 27,000 188,723 ------------ 598,317 ------------ Spain -- 1.28% Banco Popular S.A........................... 2,883 $ 207,383 Banco Santander Central Hispano, S.A........ 32,134 334,712 Endesa, S.A................................. 10,383 221,441 Telefonica, S.A. (b)........................ 7,090 341,540 ------------ 1,105,076 ------------ Sweden -- 1.52% Electrolux AB, B Shares.................... 19,060 399,045 Ericsson LM, B Shares....................... 10,080 323,077 Investor AB, B Shares....................... 18,240 203,811 Nordbanken Holding AB....................... 23,910 139,770 Swedish Match AB............................ 69,250 246,798 ------------ 1,312,501 ------------ Switzerland -- 3.10% Adecco S.A.................................. 220 117,882 Holderbank Financiere Glarus AG, B Shares... 180 212,466 Holderbank Financiere Glarus AG, Rights..... 24 352 Nestle S.A. (Reg.).......................... 402 724,303 Novartis AG (Reg.).......................... 415 605,976 Roche Holding AG (Gen.)..................... 53 544,796 Swiss Reinsurance Co. (Reg.)................ 35 66,641 Swisscom AG (Reg.).......................... 1,083 407,536 ------------ 2,679,952 ------------ United Kingdom -- 14.15% Allied Zurich PLC........................... 23,375 293,846 AstraZeneca PLC............................. 6,639 256,811 Barclays PLC................................ 12,000 349,180 BOC Group PLC............................... 29,000 566,834 Boots Company PLC........................... 19,500 231,609 British Aerospace PLC....................... 7,000 45,433 British Airways PLC......................... 31,000 213,907 BP Amoco PLC................................ 51,904 930,247 British Telecommunications PLC.............. 20,000 335,120 Charter PLC................................. 49,922 292,733 Coats Viyella PLC........................... 128,250 103,101 Diageo PLC.................................. 32,630 340,753 FKI PLC..................................... 122,405 380,220 General Electric Co. PLC.................... 61,820 630,478 Glaxo Wellcome PLC.......................... 24,620 684,191 Greenalls Group PLC......................... 33,500 187,461 House of Fraser PLC......................... 45,250 62,411 Lloyds TSB Group PLC........................ 51,220 694,344 Marks & Spencer PLC......................... 116,120 671,753 Mirror Group PLC............................ 66,000 256,322 National Power PLC.......................... 49,500 360,482 Nycomed Amersham PLC........................ 41,000 285,009 Peninsular & Oriental Steam Navigation Co... 13,475 202,316 Prudential Corp. PLC........................ 39,000 574,180 Reckitt & Colman PLC........................ 18,000 187,689 Reed International PLC...................... 35,000 233,508 Rio Tinto Ltd............................... 35,020 587,071 RJB Mining PLC.............................. 52,500 43,447 Royal & Sun Alliance Insurance Group PLC.... 16,162 144,959 Sainsbury (J.) PLC.......................... 13,500 85,120
================================================================================ 31 Global Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value -------- ------------ Scottish Southern Energy PLC.......... 49,650 $ 507,926 Tesco PLC............................. 190,250 489,570 Thames Water PLC...................... 15,458 245,125 Unilever PLC.......................... 24,000 213,556 United News & Media PLC............... 36,000 346,154 Yorkshire Water PLC................... 27,500 191,165 ------------ 12,224,031 ------------ Total Global (Ex-U.S.) Equities....... 49,274,764 ------------ Total Equities (Cost $69,139,277)..... 85,368,218 ------------
Shares Value --------- ------------ Short-Term Investments -- 1.18% Investment Companies -- 1.18% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,022,188)................... 1,022,188 $ 1,022,188 ------------ Total Investments (Cost $70,161,465)-- 100.02% (a).. 86,390,406 Liabilities, less cash and other assets-- (0.02%)................... (22,199) ------------ Net Assets-- 100%..................... $ 86,368,207 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $70,161,465; and net unrealized appreciation consisted of: Gross unrealized appreciation.................... $ 18,488,893 Gross unrealized depreciation.................... (2,259,952) ------------ Net unrealized appreciation.................. $ 16,228,941 ============
(b) Non-income producing security FORWARD FOREIGN CURRENCY CONTRACTS The Global Equity Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ------------- ------------ ------------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar........................................... 12/3/99 2,300,000 $ 1,525,877 $ 21,010 Canadian Dollar............................................. 12/3/99 5,500,000 3,723,714 (7,123) Euro........................................................ 12/3/99 3,400,000 3,549,505 (57,895) Swedish Krona............................................... 12/3/99 26,600,000 3,161,221 30,520 Forward Foreign Currency Sale Contracts British Pound............................................... 12/3/99 6,500,000 10,344,610 130,813 Japanese Yen................................................ 12/3/99 818,000,000 6,923,483 13,424 --------- Total.............................................. $130,749 =========
See accompanying notes to financial statements. ================================================================================ 32 Global Equity Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $69,139,277).............................................. $85,368,218 Affiliated issuers (Cost $1,022,188)................................................. 1,022,188 Foreign currency, at value (Cost $517,126).............................................. 518,741 Receivables: Investment securities sold............................................................ 351,137 Dividends............................................................................. 183,865 Interest.............................................................................. 2,812 Fund shares sold...................................................................... 134,588 Net unrealized appreciation on forward foreign currency contracts....................... 130,749 Other assets............................................................................ 2,450 ----------- TOTAL ASSETS...................................................................... 87,714,748 ----------- LIABILITIES: Payables: Investment securities purchased....................................................... 782,515 Fund shares redeemed.................................................................. 423,872 Investment advisory fees.............................................................. 53,551 Accrued expenses...................................................................... 86,603 ----------- TOTAL LIABILITIES................................................................. 1,346,541 ----------- NET ASSETS................................................................................. $86,368,207 =========== NET ASSETS CONSIST OF: Paid in capital......................................................................... $65,256,033 Accumulated undistributed net investment income......................................... 302,311 Accumulated net realized gain........................................................... 4,451,473 Net unrealized appreciation............................................................. 16,358,390 ----------- NET ASSETS........................................................................ $86,368,207 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $42,106,094 and 3,136,505 shares issued and outstanding)............................ $ 13.42 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $220,133 and 16,424 shares issued and outstanding).................................. $ 13.40 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $44,041,980 and 3,285,531 shares issued and outstanding)............................ $ 13.40 ===========
See accompanying notes to financial statements. ================================================================================ 33 Global Equity Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends (net of $122,328 for foreign taxes withheld)................................ $ 1,543,814 Interest.............................................................................. 103,965 -------------- TOTAL INCOME.................................................................... 1,647,779 -------------- EXPENSES: Advisory.............................................................................. 628,067 Distribution.......................................................................... 362,686 Printing.............................................................................. 66,751 Professional.......................................................................... 44,351 Custodian............................................................................. 26,931 Other................................................................................. 58,844 -------------- TOTAL EXPENSES.................................................................. 1,187,630 -------------- Expenses waived by Advisor...................................................... (36,960) -------------- NET EXPENSES.................................................................... 1,150,670 -------------- NET INVESTMENT INCOME........................................................... 497,109 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................................... 5,304,186 Futures contracts................................................................... (511,514) Foreign currency transactions....................................................... 804,005 -------------- Net realized gain............................................................... 5,596,677 -------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency.................................................... 346,586 Futures contracts................................................................... 575,614 Forward contracts................................................................... 214,544 Translation of other assets and liabilities denominated in foreign currency......... (4,441) -------------- Change in net unrealized appreciation or depreciation........................... 1,132,303 -------------- Net realized and unrealized gain...................................................... 6,728,980 -------------- Net increase in net assets resulting from operations.................................. $ 7,226,089 ==============
See accompanying notes to financial statements. ================================================================================ 34 Global Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 -------------- ------------- OPERATIONS: Net investment income............................................................... $ 497,109 $ 677,369 Net realized gain................................................................... 5,596,677 6,903,703 Change in net unrealized appreciation or depreciation............................... 1,132,303 (1,282,988) -------------- ------------- Net increase in net assets resulting from operations................................ 7,226,089 6,298,084 -------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................... (384,423) (242,673) Brinson Class N................................................................... (2,181) (11) UBS Investment Funds Class........................................................ (219,326) (397,017) Distributions from net realized gain: Brinson Class I................................................................... (352,100) (1,266,777) Brinson Class N................................................................... (2,950) (82) UBS Investment Funds Class........................................................ (713,059) (5,307,194) -------------- ------------- Total distributions to shareholders............................................... (1,674,039) (7,213,754) -------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold......................................................................... 34,808,631 40,216,740 Shares issued on reinvestment of distributions...................................... 1,462,446 6,378,677 Shares redeemed..................................................................... (37,326,928) (73,542,587) -------------- ------------- Net decrease in net assets resulting from capital share transactions................ (1,055,851) (26,947,170) -------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS...................................... 4,496,199 (27,862,840) -------------- ------------- NET ASSETs: Beginning of year................................................................... 81,872,008 109,734,848 -------------- ------------- End of year (including accumulated undistributed net investment income of $302,311 and $377,184, respectively).............................................. $ 86,368,207 $ 81,872,008 =============== =============
See accompanying notes to financial statements. ================================================================================ 35 Global Equity Fund -- Financial Highlights ________________________________________________________________________________ The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, ---------------------------------------------------------- Brinson Class I 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year......................... $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49 ------- ------- ------- ------- ------- Income from investment operations: Net investment income................................ 0.14* 0.22 0.16 0.18 0.18 Net realized and unrealized gain..................... 1.09 0.78 2.14 2.29 0.39 ------- ------- ------- ------- ------- Total income from investment operations.......... 1.23 1.00 2.30 2.47 0.57 ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income............. (0.17) (0.17) (0.12) (0.14) (0.04) Distributions from and in excess of net realized gain...................................... (0.18) (1.05) (0.99) (0.69) (0.09) ------- ------- ------- ------- ------- Total distributions.............................. (0.35) (1.22) (1.11) (0.83) (0.13) ------- ------- ------- ------- ------- Net asset value, end of year............................... $ 13.42 $ 12.54 $ 12.76 $ 11.57 $ 9.93 ======= ======= ======= ======= ======= Total return............................................... 10.14% 8.99% 21.26% 25.66% 6.06% Ratios/Supplemental data: Net assets, end of year (in 000s)....................... $42,106 $22,724 $48,054 $27,126 $20,706 Ratio of expenses to average net assets: Before expense reimbursement......................... 1.05% 1.02% 1.25% 1.77% 2.06% 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......................... 1.05% 1.29% 1.35% 0.57% 0.71% After expense reimbursement.......................... 1.10% 1.31% 1.60% 1.34% 1.77% Portfolio turnover rate................................. 86% 46% 32% 74% 36%
*The net investment income per share data was determined by using average shares outstanding throughout the period. See accompany notes to financial statements. ================================================================================ 36 Global Equity Fund -- Financial Highlights ________________________________________________________________________________ The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended Year Ended Brinson Class N June 30, 1999 June 30, 1998 - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of year.............................. $ 12.53 $ 12.76 ------- ------- Income from investment operations: Net investment income..................................... 0.10* 0.13 Net realized and unrealized gain.......................... 1.09 0.82 ------- ------- Total income from investment operations............... 1.19 0.95 ------- ------- Less distributions: Distributions from net investment income.................. (0.14) (0.13) Distributions from net realized gain...................... (0.18) (1.05) ------- ------- Total distributions................................... (0.32) (1.18) ------- ------- Net asset value, end of year.................................... $ 13.40 $ 12.53 ======= ======= Total return.................................................... 9.80% 8.60% Ratios/Supplemental data: Net assets, end of year (in 000s)............................ $ 220 $ 1 Ratio of expenses to average net assets: Before expense reimbursement.............................. 1.30% 1.27% After expense reimbursement............................... 1.25% 1.25% Ratio of net investment income to average net assets: Before expense reimbursement.............................. 0.80% 1.04% After expense reimbursement............................... 0.85% 1.06% Portfolio turnover rate...................................... 86% 46%
* The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. ================================================================================ 37 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO OF BRINSON] Our Global Bond Fund strategy is the result of several key investment decisions. We determine optimal country and currency weightings based on our assessments of global macroeconomic and political landscapes. We choose a maturity mix that provides opportunity for appreciation while also limiting interest rate risks. And importantly, we analyze and select the very best issues within each country or market. All of these decisions are made in a global asset allocation framework. They are interactive and synthesize the ideas of our fixed income professionals around the world. Since its performance inception on July 31, 1993, the Brinson Global Bond Fund Class I has produced an annualized return of 5.91% compared to the 5.99% return of its benchmark, the Salomon Smith Barney World Government Bond Index. The annualized volatility or risk of the Fund was lower than that of the benchmark at 4.74% and 5.76% respectively. During the first half of 1999, the Fund was down 6.37% while the benchmark was down 7.17%. The first half of 1999 was very difficult for global bond markets with two consecutive quarters of negative returns. Yield increases have been spurred by increasing volatility and strong economic activity that is causing market participants to worry increasingly about future inflation rates. Bond markets were characterized by a high level of volatility in the first quarter of 1999. After a fairly stable January, February turned in the worst one-month performance record for U.S. Treasury securities in 18 years. The largest changes took place among securities with longer terms to maturity, while shorter-term treasury bills were relatively stable. This volatility was spurred somewhat by Federal Reserve (Fed) chairman Alan Greenspan's testimony to Congress in February. He stated that the Fed expects stronger growth and higher inflation in the U.S. than was originally called for in the fall of 1998. Even though these adjustments were modest, they were sufficient enough to disappoint investors. U.S. bond yields in the second quarter were driven well above our estimates of fair value by market expectations of higher inflation and anticipation of the 25 basis point rate hike by the Fed which occurred on June 30. As a result, we have set representative duration strategies longer than the benchmark in the U.S. component of the Fund at 1.05 times the benchmark. Interest rates were cut in the U.K. and EMU during the second quarter. While these rate cuts might ordinarily be seen as bullish developments, easier monetary policy in the context of improving economic prospects has led instead to steeper yield curves providing further evidence that market participants are concerned about the longer-term inflation outlook. Downward movement in bond yields in Japan during the quarter took this already overvalued market to extremes not seen since last summer, and prompted us to eliminate our small exposure to Japan. Proceeds were invested in the U.K., taking it to an overweight position. Our strategies elsewhere continue to emphasize the higher yielding market of the U.S. (our largest country overweight), Australia and Canada. ================================================================================ 38 Global Bond Fund - -------------------------------------------------------------------------------- [LOGO OF BRINSON]
Total Return 6 months 1 year 3 years 5 years 7/31/93* ended ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------------------------ Brinson Global Bond Fund Class I -6.37% 3.13% 4.48% 7.20% 5.91% ------------------------------------------------------------------------------------------------------------------------ Salomon Smith Barney World Gov't Bond Index -7.17 4.13 4.11 6.11 5.99 ------------------------------------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Bond Fund Class I. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund Class I and the Salomon Smith Barney World Government Bond Index if you had invested $1,000,000 on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Bond Fund Class I vs. Salomon Smith Barney World Government Bond Index Wealth Value with Dividends Reinvested [CHART APPEARS HERE] - ----------------------------------------------------- Label A B - ----------------------------------------------------- Brinson Global B Salmon Smith E - ----------------------------------------------------- Label 7/31/93 $1,000,000 $1,000,000 - ----------------------------------------------------- 1 8/31/93 $1,019,000 $1,030,100 - ----------------------------------------------------- 2 9/30/93 $1,022,010 $1,042,358 - ----------------------------------------------------- 3 10/31/93 $1,032,059 $1,040,586 - ----------------------------------------------------- 4 11/30/93 $1,023,015 $1,033,198 - ----------------------------------------------------- 5 12/31/93 $1,038,591 $1,041,929 - ----------------------------------------------------- 6 1/31/94 $1,045,818 $1,050,264 - ----------------------------------------------------- 7 2/28/94 $1,021,040 $1,043,437 - ----------------------------------------------------- 8 3/31/94 $1,007,619 $1,041,976 - ----------------------------------------------------- 9 4/30/94 $1,002,457 $1,043,123 - ----------------------------------------------------- 10 5/31/94 $ 994,198 $1,033,943 - ----------------------------------------------------- 11 6/30/94 $ 992,146 $1,048,832 - ----------------------------------------------------- 12 7/31/94 $ 999,419 $1,057,223 - ----------------------------------------------------- 13 8/31/94 $1,000,457 $1,053,522 - ----------------------------------------------------- 14 9/30/94 $1,001,496 $1,061,108 - ----------------------------------------------------- 15 10/31/94 $1,005,652 $1,078,085 - ----------------------------------------------------- 16 11/30/94 $1,003,574 $1,063,208 - ----------------------------------------------------- 17 12/31/94 $1,002,396 $1,066,185 - ----------------------------------------------------- 18 1/31/95 $1,012,827 $1,088,575 - ----------------------------------------------------- 19 2/28/95 $1,030,559 $1,116,442 - ----------------------------------------------------- 20 3/31/95 $1,044,119 $1,182,759 - ----------------------------------------------------- 21 4/30/95 $1,069,153 $1,204,640 - ----------------------------------------------------- 22 5/31/95 $1,106,704 $1,238,611 - ----------------------------------------------------- 23 6/30/95 $1,104,638 $1,245,919 - ----------------------------------------------------- 24 7/31/95 $1,122,712 $1,248,909 - ----------------------------------------------------- 25 8/31/95 $1,134,406 $1,205,946 - ----------------------------------------------------- 26 9/30/95 $1,148,228 $1,232,839 - ----------------------------------------------------- 27 10/31/95 $1,167,365 $1,241,962 - ----------------------------------------------------- 28 11/30/95 $1,190,755 $1,255,996 - ----------------------------------------------------- 29 12/31/95 $1,206,119 $1,269,184 - ----------------------------------------------------- 30 1/31/96 $1,212,149 $1,253,573 - ----------------------------------------------------- 31 2/29/96 $1,200,088 $1,247,180 - ----------------------------------------------------- 32 3/31/96 $1,204,913 $1,245,434 - ----------------------------------------------------- 33 4/30/96 $1,216,974 $1,240,452 - ----------------------------------------------------- 34 5/31/96 $1,220,592 $1,240,700 - ----------------------------------------------------- 35 6/30/96 $1,231,653 $1,250,502 - ----------------------------------------------------- 36 7/31/96 $1,243,921 $1,274,511 - ----------------------------------------------------- 37 8/31/96 $1,253,735 $1,279,482 - ----------------------------------------------------- 38 9/30/96 $1,274,590 $1,284,728 - ----------------------------------------------------- 39 10/31/96 $1,301,578 $1,308,752 - ----------------------------------------------------- 40 11/30/96 $1,326,113 $1,326,028 - ----------------------------------------------------- 41 12/31/96 $1,318,299 $1,315,287 - ----------------------------------------------------- 42 1/31/97 $1,297,658 $1,280,169 - ----------------------------------------------------- 43 2/28/97 $1,299,034 $1,270,567 - ----------------------------------------------------- 44 3/31/97 $1,279,768 $1,260,911 - ----------------------------------------------------- 45 4/30/97 $1,272,888 $1,249,815 - ----------------------------------------------------- 46 5/31/97 $1,310,043 $1,283,810 - ----------------------------------------------------- 47 6/30/97 $1,326,556 $1,299,088 - ----------------------------------------------------- 48 7/31/97 $1,321,051 $1,288,955 - ----------------------------------------------------- 49 8/31/97 $1,316,923 $1,288,181 - ----------------------------------------------------- 50 9/30/97 $1,343,069 $1,315,619 - ----------------------------------------------------- 51 10/31/97 $1,360,958 $1,342,984 - ----------------------------------------------------- 52 11/30/97 $1,343,069 $1,322,437 - ----------------------------------------------------- 53 12/31/97 $1,339,835 $1,318,469 - ----------------------------------------------------- 54 1/31/98 $1,351,311 $1,331,259 - ----------------------------------------------------- 55 2/28/98 $1,359,918 $1,342,042 - ----------------------------------------------------- 56 3/31/98 $1,345,573 $1,328,756 - ----------------------------------------------------- 57 4/30/98 $1,362,787 $1,350,016 - ----------------------------------------------------- 58 5/31/98 $1,362,787 $1,353,121 - ----------------------------------------------------- 59 6/30/98 $1,362,306 $1,355,150 - ----------------------------------------------------- 60 7/31/98 $1,362,306 $1,356,912 - ----------------------------------------------------- 61 8/31/98 $1,378,231 $1,393,820 - ----------------------------------------------------- 62 9/30/98 $1,444,826 $1,467,971 - ----------------------------------------------------- 63 10/31/98 $1,476,676 $1,511,423 - ----------------------------------------------------- 64 11/30/98 $1,466,542 $1,490,112 - ----------------------------------------------------- 65 12/31/98 $1,500,412 $1,520,063 - ----------------------------------------------------- 66 1/31/99 $1,500,412 $1,506,079 - ----------------------------------------------------- 67 2/28/99 $1,451,914 $1,457,734 - ----------------------------------------------------- 68 3/31/99 $1,450,398 $1,461,378 - ----------------------------------------------------- 69 4/30/99 $1,453,429 $1,460,793 - ----------------------------------------------------- 71 5/31/99 $1,427,665 $1,436,252 - ----------------------------------------------------- 72 6/30/99 $1,404,902 $1,411,118 - ----------------------------------------------------- Fund returns are net of all fees and costs, while the index returns are based solely on market returns without deduction for fees or transactions costs for rebalancing. =============================================================================== 39 Global Bond Fund - ------------------------------------------------------------------------------- [LOGO OF BRINSON] Total Return
6 months 1 year 6/30/97* ended ended to 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------- Brinson Global Bond Fund Class N -6.57% 2.89% 2.63% ------------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index -7.17 4.13 4.22 -------------------------------------------------------------------------------------------------------
*Inception date of the Brinson Global Bond Fund Class N. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund Class N and the Salomon Smith Barney World Government Bond Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global Bond Fund Class N vs. Salomon Smith Barney World Government Bond Index Wealth Value with Dividends Reinvested [CHART APPEARS HERE]
Label A B ------------------------------------------------------------------------------------------------------------- Label Brinson Global Bond Fund Class N Salomon Smith Barney World Gov't Bond Index ------------------------------------------------------------------------------------------------------------- 30/06/97 $1,000,000 $1,000,000 31/07/97 $ 995,851 $ 992,200 31/08/97 $ 991,701 $ 991,605 30/09/97 $1,011,411 $1,012,726 31/10/97 $1,023,859 $1,033,791 30/11/97 $1,010,373 $1,017,974 31/12/97 $1,008,216 $1,014,920 31/01/98 $1,015,772 $1,024,764 28/02/98 $1,022,249 $1,033,065 31/03/98 $1,011,454 $1,022,838 30/04/98 $1,024,408 $1,039,203 31/05/98 $1,023,328 $1,041,593 30/06/98 $1,023,719 $1,043,156 31/7/98 $1,022,630 $1,044,512 31/8/98 $1,034,610 $1,072,922 30/9/98 $1,083,618 $1,130,002 31/10/98 $1,106,488 $1,163,450 30/11/98 $1,101,043 $1,147,045 31/12/98 $1,127,443 $1,170,101 31/01/99 $1,126,303 $1,159,336 28/02/99 $1,089,823 $1,122,121 31/03/99 $1,088,683 $1,124,927 30/04/99 $1,090,963 $1,124,477 31/05/99 $1,069,304 $1,105,585 30/06/99 $1,053,324 $1,086,238 6/30/97=$1,000,000 Data through 6/30/99
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ===================================================================== 40 Global Bond Fund - ------------------------------------------------------------------------------- [LOGO OF BRINSON] Asset Allocation As of June 30, 1999 Current Benchmark Strategy ---------------------------------------------------- U.S. 29.5% 39.5% Australia 0.7 5.7 Austria 0.9 0.0 Belgium 2.7 0.0 Canada 3.0 5.8 Denmark 1.5 4.5 Finland 0.7 0.0 France 8.1 9.2 Germany 8.5 6.7 Ireland 0.3 0.0 Italy 8.4 2.4 Japan 21.3 0.0 Netherlands 2.8 4.8 Portugal 0.4 0.0 Spain 3.3 3.1 Sweden 1.2 6.8 Switzerland 0.5 0.0 U.K. 6.2 9.2 Euro 0.0 2.3 ---------------------------------------------------- 100.0% 100.0% Currency Allocation As of June 30, 1999 Current Benchmark Strategy --------------------------------------------------- U.S. 29.5% 25.5% Australia 0.7 6.7 Canada 3.0 3.0 Denmark 1.5 1.5 Euro 36.0 44.3 Japan 21.3 13.3 Sweden 1.3 5.2 Switzerland 0.5 0.5 U.K. 6.2 0.0 --------------------------------------------------- 100.0% 100.0% Industry Diversification As a Percent of Net Assets As of June 30, 1999 --------------------------------------------------- U.S. Bonds Corporate Bonds Airlines............................... 0.72% Asset-Backed........................... 2.05 CMO.................................... 1.38 Consumer............................... 0.57 Financial Services..................... 1.28 Food and Housing Products.............. 0.51 Industrial Components.................. 0.55 Services/Miscellaneous................. 0.82 Utilities.............................. 0.24 ------ 8.12 ------ International Dollar Bonds............. 3.95 Mortgage-Backed Securities............. 6.08 U.S. Government Agencies............... 10.74 U.S. Government Obligations............ 7.91 ------ 28.68 ------ Total U.S. Bonds................. 36.80 ------ Global (Ex-U.S.) Bonds Foreign Financial Bonds................ 8.52 Foreign Government Bonds............... 70.21 ------ Total Global (Ex-U.S.) Bonds.. 78.73 SHORT-TERM INVESTMENTS................. 6.24 ------ TOTAL INVESTMENTS............. 121.77 LIABILITIES, LESS Cash AND OTHER ASSETS.................... (21.77) ------ NET ASSETS.................... 100.00% ====== ================================================================================ 41 Global Bond Fund -- Schedule of Investments June 30, 1998 - --------------------------------------------------------------------------------
Face Amount Value ------------ ------------ Bonds -- 115.53% U.S. Bonds -- 36.80% U.S. Corporate Bonds -- 8.12% ABN Amro Mortgage Corp., Series 99-2 IA2, 6.300%, due 04/25/29.............. $ 345,000 $ 335,243 Bear Stearns Mortgage Securities, Inc., 96-7A4 6.000%, due 01/28/09................. 200,000 193,000 Cendant Corp., 7.750%, due 12/01/03........... 500,000 505,011 Centaur Funding Corp., 144A, 0.000%, due 04/21/20 (b)............................ 750 115,875 Centaur Funding Corp., 144A, 9.080%, due 04/21/20................................ 390 418,519 Chase Manhattan Auto Owner Trust, 96-C, Class A4, 6.150%, due 03/15/02.............. 125,000 125,611 Citigroup Inc., 5.800%, due 03/15/04.......... 500,000 484,932 Comed Transitional Funding Trust, 98-1, Class A7, 5.740%, due 12/25/10.............. 370,000 345,081 Continental Airlines, Inc., 99-2, 7.056%, due 09/15/09............................... 710,000 712,577 Countrywide Capital, Inc., 8.000%, due 12/15/26............................... 250,000 238,167 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03............... 240,000 240,698 First Union Lehman Brothers, 97-C2, Class A2, 6.600%, due 05/18/07.............. 240,000 235,702 Kroger Co., 6.000%, due 07/01/00.............. 500,000 499,475 News America Holdings, 7.750%, due 12/01/45... 575,000 545,045 Noram Energy Corp., 6.375%, due 11/01/03...... 75,000 73,320 Norwest Asset Securities Corp., 98-25, Class A5, 6.000%, due 12/25/28.............. 965,000 927,317 Peco Energy Transition Trust, 6.130%, due 03/01/09................................ 540,000 512,012 Premier Auto Trust, 96-3, Class A4, 96-3A 6.750%, due 11/06/00.................. 400,365 402,183 The Money Store, 98-B, Class AF2, 6.115%, due 05/15/10........................ 56,335 56,272 Time Warner, Inc., 7.570%, due 02/01/24....... 560,000 557,693 USA Waste Services, 7.000%, due 10/01/04...... 300,000 302,797 Western Resources, Inc., 6.875%, due 08/01/04. 160,000 159,635 ------------ 7,986,165 ------------ Mortgage-Backed Securities -- 6.08% GE Capital Mortgage Services, Inc., 93-7F, Class FA3, 6.500%, due 09/25/08............. 194,457 194,429 Heller Financial Commercial Mortgage Assets, Series 99-PH1 A1, 6.500%, due 05/15/31...... 413,048 409,281 LB Commercial Conduit Mortgage Trust, Series 99-C1 A1, 6.410%, due 10/15/30....... 560,000 552,591 PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%, due 07/25/24.............. 190,000 188,026 Prudential Home Mortgage Securities 93-43, Class A9, 6.750%, due 10/25/23....... 206,269 201,568 96-7, Class A4, 6.750%, due 06/25/11........ 150,000 148,257 Residential Accredit Loans, Inc. 96-QS4, Class Al10, 7.900%, due 08/25/26.... 625,000 635,387 98-QS4, Class AI5, 7.000%, due 03/25/28..... 400,000 398,919 Residential Asset Securitization Trust 97-A11, Class A2, 7.000%, due 01/25/28...... 86,997 87,218 97-A11, Class A6, 7.000%, due 01/25/28...... 430,000 418,515 97-A7, Class A1, 7.250%, due 12/25/27....... $ 335,000 $ 328,829 97-A7, Class A1, 7.500%, due 09/25/27....... 99,847 100,659 98-A1, Class A1, 7.000%, due 03/25/28....... 92,018 92,036 Structured Asset Securities Corp. 98-RF1, Class A, 8.712%, due 03/15/27....... 233,027 244,096 98-RF2, 144A, 8.582%, due 07/15/27.......... 351,051 366,848 Structured Mortgage Asset Residential Trust, 96-5C, Class CI, 7.150%, due 03/25/23....... 925,000 917,563 UCFC Home Equity Loan 97-C, Class A8, FRN, 5.069%, due 09/15/27......... 98,356 98,119 Vanderbilt Mortgage Finance, 98-B, Class 1A2, 6.120%, due 05/07/09............. 600,000 599,892 ------------ 5,982,233 ------------ International Dollar Bonds -- 3.95% Banco Santiago S.A., 7.000%, due 07/18/07..... 400,000 350,754 Banque Centrale de Tunisie, 8.250%, due 09/19/27................................ 400,000 332,000 British Sky Broadcasting Group plc, 6.875%, due 02/23/09........................ 130,000 118,549 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.900%, due 05/01/07... 500,000 486,783 Empresa National Electric, 7.875%, due 10/01/97................................ 500,000 398,826 Korea Development Bank, 7.125%, due 09/17/01................................ 300,000 299,144 National Australia Bank, FRN, 6.400%, due 12/10/07................................ 640,000 631,285 Pan Pacific Industry PLC 144A, 0.000%, due 04/28/07................................ 715,000 346,775 PDVSA Fin. LTD 1999-F, 144A, 8.750%, due 02/15/04................................ 500,000 501,370 Republic of South Africa, 9.625%, due 12/15/99................................ 125,000 126,250 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49............. 300,000 291,625 ------------ 3,883,361 ------------ U.S. Government Agencies -- 10.74% Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25............... 10,652 11,131 Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13........................ 68,215 67,400 7.238%, due 05/01/26........................ 21,406 21,567 9.000%, due 01/01/29........................ 824,897 873,102 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23........................ 50,238 51,778 9.000%, due 03/01/24........................ 136,173 144,963 Federal National Mortgage Assoc. 6.000%, due 01/01/29........................ 157,532 148,263 6.500%, due 04/29/09........................ 1,170,000 1,127,039 6.500%, due 03/01/19........................ 123,327 120,057 6.500%, due 09/01/28........................ 1,236,954 1,197,256 6.500%, due 02/01/29........................ 611,212 591,184 7.000%, due 12/01/24........................ 435,297 430,905 7.000%, due 03/01/29........................ 28,639 28,365 7.500%, due 07/01/10........................ 852,730 866,802
================================================================================ 42 Global Bond Fund -- Schedule of Investments June 30, 1998 - --------------------------------------------------------------------------------
Face Amount Value ------------ ------------ U.S. Government Agencies -- Continued 7.500%, due 12/01/23........................ $ 348,692 $ 352,646 7.500%, due 05/18/25........................ 250,000 251,937 7.500%, due 12/01/27........................ 675,821 683,484 7.890%, due 04/01/26........................ 213,724 218,950 8.000%, due 03/01/11........................ 79,069 81,473 8.500%, due 07/01/22........................ 9,961 10,476 Federal National Mortgage Assoc. Strips 0.000%, due 02/01/28........................ 151,092 106,014 8.000%, due 08/01/23........................ 210,034 53,753 FNCI, 8.000%, due 02/01/13.................... 85,491 88,090 Freddie Mac 5.500%, due 02/15/14........................ 32,399 30,299 5.750%, due 06/15/01........................ 1,300,000 1,297,713 6.000%, due 09/15/25........................ 9,180 8,858 Government National Mortgage Assoc. 7.000%, due 08/15/24........................ 382,338 378,923 7.000%, due 07/15/25........................ 53,545 53,046 7.500%, due 08/15/23........................ 67,926 68,830 7.500%, due 12/15/23........................ 103,588 105,009 7.500%, due 01/15/24........................ 74,547 75,524 Jordan Aid, 8.750%, due 09/01/19.............. 452,530 514,083 Tennesse Valley Authority, 6.375%, due 06/15/05................................ 500,000 501,468 ------------ 10,560,388 ------------ U.S. Government Obligations -- 7.91% U.S. Treasury Bond, 8.000%, due 11/15/21...... 4,505,000 5,420,078 U.S. Treasury Inflation Indexed Note, 3.625%, due 04/15/28........................ 570,000 553,005 U.S. Treasury Notes and Bonds, 6.625%, due 07/31/01................................ 1,765,000 1,801,956 ------------ 7,775,039 ------------ Total U.S. Bonds.............................. 36,187,186 ------------ Global (Ex-U.S.) Bonds -- 78.73% Australia -- 7.79% Queensland Treasury Corp.-Global Note 6.500%, due 06/14/05........................AUD 5,230,000 3,504,495 8.000%, due 05/14/03........................ 3,000,000 2,124,206 8.000%, due 09/14/07........................ 2,800,000 2,033,493 ------------ 7,662,194 ------------ Austria -- 2.19% Republic of Austria, 5.500%, due 01/18/04................................EUR 1,951,347 2,152,590 ------------ Canada -- 7.94% Government of Canada 4.250%, due 12/01/21........................CAD 5,550,000 4,313,333 6.000%, due 06/01/08........................ 2,800,000 1,951,558 Province of Ontario, 7.500%, due 01/19/06..... 2,100,000 1,548,858 ------------ 7,813,749 ------------ Denmark -- 5.77% City of Copenhagen, 6.250%, due 03/15/01................................DKK 2,400,000 346,368 Great Belt, 7.000%, due 09/02/03.............. 3,650,000 553,006 Kingdom of Denmark 7.000%, due 12/15/04........................DKK 12,200,000 $ 1,908,710 7.000%, due 11/15/07........................ 1,400,000 224,230 7.000%, due 11/10/24........................ 5,200,000 842,903 8.000%, due 11/15/01........................ 11,800,000 1,797,400 ------------ 5,672,617 ------------ Finland -- 1.37% Republic of Finland, 9.000%, due 08/13/03................................EUR 1,097,633 1,345,029 ------------ France -- 7.33% Government of France (BTAN), 7.750%, due 04/12/00................................ 609,796 652,654 Government of France (OAT) 6.000%, due 10/25/25........................ 950,000 1,056,154 7.500%, due 04/25/05........................ 2,000,000 2,416,337 8.500%, due 04/25/23........................ 1,350,000 1,971,433 9.500%, due 01/25/01........................ 990,000 1,116,041 ------------ 7,212,619 ------------ Germany -- 8.72% Bundesrepublik Deutschland 5.250%, due 01/04/08........................ 900,000 973,465 5.625%, due 01/04/28........................ 1,000,000 1,063,064 6.250%, due 01/04/24........................ 357,904 413,326 European Economic Community, 6.500%, due 03/10/00................................ 567,534 599,286 International Bank of Recon & Dev, 7.125%, due 04/12/05........................ 2,019,603 2,372,536 KFW International Finance, 6.625%, due 04/15/03................................ 2,800,000 3,154,891 ------------ 8,576,568 ------------ Ireland -- 1.73% Republic of Ireland, 7.250%, due 03/18/03................................ 1,482,746 1,700,881 ------------ Italy -- 2.73% Republic of Italy (BTP) 7.750%, due 11/01/06........................ 1,800,000 2,203,537 9.000%, due 10/01/03........................ 387,849 477,026 ------------ 2,680,563 ------------ Netherlands -- 7.32% LKB Baden-Wuerttemberg Finance, 6.500%, due 09/15/08........................ 818,067 942,382 Netherlands Government 5.500%, due 01/15/28........................ 1,700,000 1,768,989 8.250%, due 02/15/02........................ 3,900,000 4,490,283 ------------ 7,201,654 ------------ Portugal -- 1.19% Republic of Portugal, 5.625%, due 04/03/07................................ 1,067,143 1,173,731 ------------ Spain -- 4.00% Kingdom of Spain 7.350%, due 03/31/07........................ 2,150,000 2,597,162 10.000%, due 02/28/05....................... 1,000,000 1,332,773 ------------ 3,929,935 ------------
================================================================================ 43 43 Global Bond Fund -- Schedule of Investments June 30, 1998 - --------------------------------------------------------------------------------
Face Amount Value ------------ ------------ Sweden -- 5.69% Government of Sweden 6.000%, due 02/09/05........................SEK 15,000,000 $ 1,876,937 6.750%, due 05/05/14........................ 6,900,000 917,582 10.250%, due 05/05/03....................... 19,800,000 2,799,777 ------------ 5,594,296 ------------ United Kingdom -- 14.96% Abbey National Treasury Service, 6.500%, due 03/05/04........................GBP 850,000 1,346,816 British Gas PLC, 8.125%, due 03/31/03......... 795,000 1,316,248 European Investment Bank, 7.625%, due 12/07/06................................ 1,400,000 2,414,029 UK Treasury 7.250%, due 12/07/07........................ 4,800,000 8,553,594 8.000%, due 09/27/13........................ 530,000 1,082,724 ------------ 14,713,411 ------------ Total Global (Ex-U.S.) Bonds.................. 77,429,837 ------------ Total Bonds (Cost $118,625,590)............... 113,617,023 ------------
Shares Value ------------ ------------ Short-Term Investments -- 6.24% Investment Companies -- 6.24% Brinson Supplementary Trust U.S. Cash Management Prime Fund, (Cost $6,139,233)........................... 6,139,233 $ 6,139,233 ------------ Total Investments (Cost $124,764,823) -- 121.77% (a) 119,756,256 Liabilities, less cash and other assets-- (21.77%)..................... (21,410,524) ------------ Net Assets-- 100%............................. $ 98,345,732 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $124,764,823; and net unrealized depreciation consisted of: Gross unrealized appreciation....................... $ 503,056 Gross unrealized depreciation ...................... (5,511,623) ------------ Net unrealized depreciation ($5,008,567) ============ (b) Non-income producing security. FRN: Floating Rate Note TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $2,236,170 or 2.27% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Bond Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ------------- ----------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar.......................................... 9/1/99 2,500,000 $ 1,655,936 $ 63,936 British Pound.............................................. 9/1/99 1,700,000 2,681,177 (25,427) Canadian Dollar............................................ 9/1/99 3,100,000 2,096,351 14,976 Danish Kroner.............................................. 9/1/99 3,900,000 544,495 676 Euro....................................................... 9/1/99 22,100,000 22,902,978 (1,856,372) Japanese Yen............................................... 9/1/99 2,510,000,000 20,934,897 (356,029) Swedish Krona.............................................. 9/1/99 18,200,000 2,149,237 (162,901) Forward Foreign Currency Sale Contracts British Pound.............................................. 9/1/99 11,100,000 17,506,506 344,192 Canadian Dollar............................................ 9/1/99 1,000,000 676,242 8,896 Danish Kroner.............................................. 9/1/99 32,400,000 4,523,497 351,852 Euro....................................................... 9/1/99 5,400,000 5,596,203 247,654 Japanese Yen............................................... 9/1/99 310,000,000 2,585,585 28,750 Swedish Krona.............................................. 9/1/99 3,300,000 389,697 14,888 ----------- Total............................................. ($1,324,909) ===========
See accompanying notes to financial statements. ================================================================================ 44 44 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $118,625,590)............................................................ $113,617,023 Affiliated issuers (Cost $6,139,233)................................................................ 6,139,233 Foreign currency, at value (Cost $64,733)............................................................. 65,260 Receivables: Investment securities sold.......................................................................... 15,848,438 Interest............................................................................................ 1,940,121 Fund shares sold.................................................................................... 3,474,923 Other assets.......................................................................................... 17,566 ------------ TOTAL ASSETS................................................................................... 141,102,564 ------------ LIABILITIES: Payables: Investment securities purchased..................................................................... 637,698 Fund shares redeemed................................................................................ 39,306,083 Investment advisory fees............................................................................ 89,477 Accrued expenses.................................................................................... 34,638 Due to custodian bank............................................................................... 1,364,027 Net unrealized depreciation on forward foreign currency contracts..................................... 1,324,909 ------------ TOTAL LIABILITIES.............................................................................. 42,756,832 ------------ NET ASSETS............................................................................................... $ 98,345,732 ============ NET ASSETS CONSIST OF: Paid in capital....................................................................................... $105,466,609 Accumulated undistributed net investment income....................................................... 1,161,994 Distribution in excess of net realized gain........................................................... (1,902,730) Net unrealized depreciation........................................................................... (6,380,141) ------------ NET ASSETS..................................................................................... $ 98,345,732 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $92,832,427 and 10,117,968 shares issued and outstanding).......................................... $ 9.18 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,084,713 and 118,464 shares issued and outstanding).............................................. $ 9.16 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $4,428,592 and 483,424 shares issued and outstanding).............................................. $ 9.16 ============
See accompanying notes to financial statements. ================================================================================ 45 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Interest (net of $13,362 for foreign taxes withheld)................................ $ 6,294,138 Dividends........................................................................... 16,230 ------------- TOTAL INCOME................................................................. 6,310,368 ------------- EXPENSES: Advisory............................................................................ 957,176 Professional........................................................................ 38,814 Distribution........................................................................ 21,834 Administration...................................................................... 15,889 Other............................................................................... 136,719 ------------- TOTAL EXPENSES............................................................... 1,170,432 ------------- NET INVESTMENT INCOME........................................................ 5,139,936 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments....................................................................... 435,436 Foreign currency transactions..................................................... 1,064,191 ------------- Net realized gain.............................................................. 1,499,627 ------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency.................................................. (5,039,115) Forward contracts................................................................. (968,525) Translation of other assets and liabilities denominated in foreign currency....... (44,778) ------------- Change in net unrealized appreciation or depreciation.......................... (6,052,418) ------------- Net realized and unrealized loss.................................................... (4,552,791) ------------- Net increase in net assets resulting from operations................................ $ 587,145 =============
================================================================================ 46 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 --------------- --------------- OPERATIONS: Net investment income............................................................ $ 5,139,936 $ 3,009,836 Net realized gain (loss)......................................................... 1,499,627 (1,114,801) Change in net unrealized appreciation or depreciation............................ (6,052,418) (276,626) --------------- -------------- Net increase in net assets resulting from operations............................. 587,145 1,618,409 --------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................ (5,705,972) (2,070,571) Brinson Class N................................................................ (13,166) (98) UBS Investment Funds Class..................................................... (180,397) (112,673) Distributions from net realized gain: Brinson Class I................................................................ (925,451) (969,902) Brinson Class N................................................................ (811) (18) UBS Investment Funds Class..................................................... (35,005) (71,935) --------------- -------------- Total distributions to shareholders.............................................. (6,860,802) (3,225,197) --------------- -------------- Capital share transactions: Shares sold...................................................................... 115,882,090 46,034,839 Shares issued on reinvestment of distributions................................... 4,872,310 2,230,731 Shares redeemed.................................................................. (111,795,220) (9,266,587) --------------- -------------- Net increase in net assets resulting from capital share transactions............. 8,959,180 38,998,983 --------------- -------------- TOTAL INCREASE IN NET ASSETS............................................... 2,685,523 37,392,195 --------------- -------------- NET assets: Beginning of year................................................................ 95,660,209 58,268,014 --------------- -------------- End of year (including accumulated undistributed net investment income of $1,161,994 and $1,003,399, respectively)......................................... $ 98,345,732 $ 95,660,209 =============== ==============
See accompanying notes to financial statements. ================================================================================ 47 Global Bond Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, --------------------------------------------------------------- Brinson Class I 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year.......................... $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55 -------- ------- ------- ------- -------- Income (loss) from investment operations: Net investment income................................. 0.39* 0.43* 0.67 0.84 0.50 Net realized and unrealized gain (loss)............... (0.07) (0.18) 0.08 0.31 0.58 -------- ------- ------- ------- -------- Total income from investment operations............................................... 0.32 0.25 0.75 1.15 1.08 -------- ------- ------- ------- -------- Less distributions: Distributions from and in excess of net investment income.................................. (0.47) (0.31) (0.96) (1.40) (0.24) Distributions from net realized gain.................. (0.08) (0.17) (0.19) (0.10) -- -------- ------- ------- ------- -------- Total distributions................................ (0.55) (0.48) (1.15) (1.50) (0.24) -------- ------- ------- ------- -------- Net asset value, end of year................................ $ 9.18 $ 9.41 $ 9.64 $ 10.04 $ 10.39 ======== ======= ======= ======= ======== Total return................................................ 3.13% 2.69% 7.71% 11.50% 11.34% Ratios/Supplemental data: Net assets, end of year (in 000s)........................ $ 92,832 $91,274 $54,157 $41,066 $ 51,863 Ratio of expenses to average net assets: Before expense reimbursement.......................... 0.90% 0.96% 1.32% 1.65% 1.43% After expense reimbursement........................... N/A 0.90% 0.90% 0.90% 0.90% Ratio of net investment income to average net assets: Before expense reimbursement.......................... 4.05% 4.47% 4.90% 4.98% 5.53% After expense reimbursement........................... N/A 4.53% 5.32% 5.73% 6.06% Portfolio turnover rate.................................. 138% 151% 235% 184% 199%
* The net investment income per share data was determined by using average shares outstanding throughout the year. N/A = Not Applicable See accompanying notes to financial statements. ================================================================================ 48 Global Bond Fund -- Financial Highlights - -------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended Year Ended Brinson Class N June 30, 1999 June 30, 1998 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year................................................... $ 9.40 $ 9.64 ----------- ----------- Income from investment operations: Net investment income.......................................................... 0.37* 0.42* Net realized and unrealized gain (loss)........................................ (0.07) (0.20) ----------- ----------- Total income from investment operations..................................... 0.30 0.22 ----------- ----------- Less distributions: Distributions from and in excess of net investment income...................... (0.46) (0.29) Distributions from net realized gain........................................... (0.08) (0.17) ----------- ----------- Total distributions......................................................... (0.54) (0.46) ----------- ----------- Net asset value, end of year......................................................... $ 9.16 $ 9.40 =========== =========== Total return......................................................................... 2.89% 2.37% Ratios/Supplemental Data: Net assets, end of year (in 000s)................................................. $ 1, 085 $ 9 Ratio of expenses to average net assets: Before expense reimbursement................................................... 1.15% 1.21% After expense reimbursement.................................................... N/A 1.15% Ratio of net investment income to average net assets: Before expense reimbursement................................................... 3.80% 4.22% After expense reimbursement.................................................... N/A 4.28% Portfolio turnover rate........................................................... 138% 151%
* The net investment income per share data was determined by using average shares outstanding throughout the year. N/A = Not Applicable See accompanying notes to financial statements. ================================================================================ 49 The Brinson Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBSInvestment Funds Class (formerly, 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 financial highlights of the UBS Investment Funds Class are presented separately. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund in the preparation of their financial statements. A. Investment Valuation: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. U.S. equity securities traded over-the-counter are priced at the most recent bid price. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. Foreign Currency Translation: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate of the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C. Investment Transactions: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1999, therefore, no federal income tax provision was required. F. Distributions to Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 14.04% and 58.92% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Global Fund and Global Equity Fund, respectively. G. Income and Expense Allocation: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. 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. ================================================================================ 50 The Brinson Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- Actual results may differ from those estimates. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. 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 for the year ended June 30, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fee Expense Cap Expense Cap Expense Cap Fees Fees Waived -------- --------------- --------------- -------------- ---------- ----------- Global Fund................... 0.80% 1.10% 1.35% 1.75% $4,403,642 $ -- Global Equity Fund............ 0.80 1.00 1.25 1.76 628,067 36,960 Global Bond Fund.............. 0.75 0.90 1.15 1.39 957,176 --
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1999 were $11,680, $4,993 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. The Global Fund invests in shares of certain affiliated investment companies also sponsored by the Advisor. These investments represented 19.53% of the Fund's total net assets at June 30, 1999. Activity for the year ended June 30, 1999 was as follows:
Net Change in Sales Realized Net Unrealized Interest Affiliates Purchases Proceeds Gain/(Loss) Gain/(Loss) Income Value - ---------- ------------ ------------ ------------- -------------- --------- --------- Brinson Post-Venture Fund................ $ 1,500,000 $ 1,949,866 $ 448,329 $ (850,533) $ -- $ 7,660,445 Brinson High Yield Fund.................. 3,900,000 6,400,682 1,016,827 (840,129) -- 14,221,334 Brinson Emerging Markets Equity Fund..... -- 7,602,574 3,701,103 1,483,000 -- 17,543,286 Brinson Emerging Markets Debt Fund....... 6,400,000 15,503,323 4,019,383 (699,055) -- 24,713,550 Brinson Supplementary Trust U.S. Cash Management Prime Fund.................... 319,658,653 287,563,973 -- -- 500,538 32,094,680
The Global Equity Fund and Global Bond Fund also invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income in the statement of operations. Amounts relating to those investments at June 30, 1999 and for the year then ended were as follows:
% of Sales Interest Net Affiliates Purchases Proceeds Income Value Assets - ---------- ------------ ------------ --------- ----------- ------ Global Equity Fund................. $ 26,901,425 $ 25,879,238 $ 43,064 $ 1,022,188 1.18% Global Bond Fund................... 77,341,746 71,202,513 276,943 6,139,233 6.24%
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales ------------- ------------ Global Fund.................................. $555,636,189 $775,205,447 Global Equity Fund........................... 68,882,280 65,637,189 Global Bond Fund............................. 194,378,936 160,439,778
================================================================================ 51 The Brinson Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 4. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the year ended June 30, 1999, was the Funds' custodian or an affiliate of the Funds' custodian. 5. FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as net unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6. SECURITY LENDING The Global Fund loaned securities to certain brokers, with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. Securities loaned are recorded at the amount of cash collateral received. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 102% of the value of domestic securities loaned and 105% of the value of non-U.S. securities loaned. The cash collateral received is invested in short-term investments. The value of loaned securities and related collateral outstanding at June 30, 1999 were as follows:
Value of Loaned Cash Collateral Securities Received --------------- --------------- Global Fund....................... $90,987,855 $97,474,174 =========== ===========
7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the `'Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBSInvestment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBSInvestment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBSInvestment Funds Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the UBSInvestment Funds Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364-day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds Rate plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the year ended June 30, 1999, the Global Equity and Global Bond Funds had no borrowings under the agreement. During the year ended June 30, 1999, the Global Fund had borrowings of $33,900,000, $62,000,000 and $47,400,000 outstanding for 1 day each under the agreement. ================================================================================ 52 The Brinson Funds -- Notes To Financial Statements ________________________________________________________________________________ 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Global Fund ------------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------- ------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I.......................... 33,634,272 $404,497,836 18,850,057 $244,898,004 Brinson Class N.......................... 31,878 401,372 90,370 1,177,290 UBS Investment Funds Class............... 469,115 5,622,287 803,666 10,347,586 ---------- ------------ ---------- ------------ Total Sales......................... 34,135,265 $410,521,495 19,744,093 $256,422,880 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.......................... 3,914,936 $ 45,438,730 5,179,618 $ 62,332,662 Brinson Class N.......................... 12,826 148,599 769 9,625 UBS Investment Funds Class............... 201,293 2,326,850 217,810 2,607,910 ---------- ------------ ---------- ------------ Total Dividend Reinvestment......... 4,129,055 $ 47,914,179 5,398,197 $ 64,950,197 ========== ============ ========== ============ Redemptions: Brinson Class I.......................... 50,809,625 $617,784,220 16,402,396 $209,137,318 Brinson Class N.......................... 4,388 53,226 21 276 UBS Investment Funds Class............... 1,220,493 14,718,874 641,736 8,247,175 ---------- ------------ ---------- ------------ Total Redemptions................... 52,034,506 $632,556,320 17,044,153 $217,384,769 ========== ============ ========== ============
Global Equity Fund ------------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------- ------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I.......................... 2,413,314 $ 30,206,170 1,466,054 $ 17,934,645 Brinson Class N.......................... 15,911 200,000 -- -- UBS Investment Funds Class............... 352,164 4,402,461 1,779,376 22,282,095 ---------- ------------ ---------- ------------ Total Sales......................... 2,781,389 $ 34,808,631 3,245,430 $ 40,216,740 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I.......................... 54,126 $ 661,376 126,859 $ 1,426,171 Brinson Class N.......................... 426 5,130 9 93 UBS Investment Funds Class............... 66,261 795,940 442,472 4,952,413 ---------- ------------ ---------- ------------ Total Dividend Reinvestment......... 120,813 $ 1,462,446 569,340 $ 6,378,677 ========== ============ ========== ============ Redemptions: Brinson Class I.......................... 1,142,595 $ 14,484,716 3,546,702 $ 44,596,092 Brinson Class N.......................... -- -- -- -- UBS Investment Funds Class............... 1,860,700 22,842,212 2,339,080 28,946,495 ---------- ------------ ---------- ------------ Total Redemptions................... 3,003,295 $ 37,326,928 5,885,782 $ 73,542,587 ========== ============ ========== ============
=============================================================================== 53 The Brinson Funds -- Notes To Financial Statements ________________________________________________________________________________
Global Bond Fund ------------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------- ------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I............................ 11,338,295 $110,539,879 4,561,105 $ 43,233,367 Brinson Class N............................ 117,021 1,120,104 860 8,169 UBS Investment Funds Class................. 432,357 4,222,107 293,533 2,793,303 ---------- ------------ ---------- ------------ Total Sales......................... 11,887,673 $115,882,090 4,855,498 $ 46,034,839 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I............................ 484,490 $ 4,679,150 220,347 $ 2,058,040 Brinson Class N............................ 579 5,581 12 115 UBS Investment Funds Class................. 19,366 187,579 18,525 172,576 ---------- ------------ ---------- ------------ Total Dividend Reinvestment......... 504,435 $ 4,872,310 238,884 $ 2,230,731 ========== ============ ========== ============ Redemptions: Brinson Class I............................ 11,403,020 $107,591,860 699,882 $ 6,667,104 Brinson Class N............................ 90 871 22 210 UBS Investment Funds Class................. 434,492 4,202,489 273,680 2,599,273 ---------- ------------ ---------- ------------ Total Redemptions................... 11,837,602 $111,795,220 973,584 $ 9,266,587 ========== ============ ========== ============
================================================================================ 54 Report of Independent Auditors - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds-- Global Fund Global Equity Fund Global Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund as of June 30, 1999, the related statements of operations and cash flows (Global Fund only) for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30, 1999, the results of their operations and cash flows (Global Fund only) for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 11, 1999 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 BRINSON] The Brinson Funds - ------------------------------------------------------------------------------- Chicago . Bahrain . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne . New York . Paris . Rio de Janiero . Singapore . Sydney . Tokyo . Zurich 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 ------------------------- The Brinson Funds Brinson Global (Ex-U.S.) Equity Fund Annual Report June 30, 1999 [BRINSON LOGO] Institutional Asset Management ---------------------------- Trustees and Officers [BRINSON 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 David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary 1 The Fund's Advisor -- Brinson Partners, Inc. [BRINSON LOGO] Since the entrepreneurial founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value- added investment performance; and providing our clients with unrivaled, custom- tailored service of the highest quality. Now, in 1999, more than 1,100 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, with approximately USD 280 billion in assets under management, and industry recognition as a global thought leader. In North America, we make our services available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are diversified, no-load, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and services. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios-balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Brinson Division, the institutional asset management division of UBS AG. 2 Table of Contents [BRINSON LOGO] Shareholder Letter....................................... 4 Global Economic and Market Highlights.................... 5 Global (Ex-U.S.) Equity Fund............................. 6 Schedule of Investments.................................. 10 Financial Statements..................................... 14 Financial Highlights..................................... 17 Notes to Financial Statements............................ 19 Report of Independent Auditors........................... 22 3 Shareholder Letter [BRINSON LOGO] July 26, 1999 Dear Shareholder: We are pleased to present the Annual Report for the Global (Ex-U.S.) Equity Fund covering the year ended June 30, 1999. This report focuses on the current international economic outlook as well as our current strategy and performance update. Global Capital markets are becoming more integrated and global industries more homogenous. These trends have important implications for the management of both Global Equities and Global (Ex-U.S.) Equities. Allocation to, and the management of, industry exposure are increasing in relative importance, providing investors with important investment characteristics that require thoughtful attention. The accelerating globalization of business enterprise and integration of capital markets will also create a change in active equity portfolio management. During the coming years, capital market integration will reduce the market inefficiency produced by country segmentation. The period during which this inefficiency is reduced presents a compelling active management opportunity. To fully capture this opportunity for excess returns, portfolio mandates must be structured to allow active industry management across countries and active stock selection across the domestic/foreign boundary. The Global (Ex-U.S.) Equity Fund is an actively managed fund that provides integrated asset management across and within security markets. The Global (Ex-U.S.) Equity Fund employs a value-oriented investment philosophy. The Fund also uses the resources of our entire worldwide research team. All of our analysts apply the same value philosophy to their work. All of our portfolios are structured to specific objectives and focused upon both risk and return considerations in the context of full investment cycles. The enclosed report highlights the investment characteristics and the performance of the Fund. We very much appreciate your continued trust and the confidence you have placed in The Brinson Funds, and look forward to a long lasting, quality relationship. Sincerely, /s/ Gary P. Brinson Gary P. Brinson Chairman and Chief Investment Officer Brinson Partners, Inc. 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS [BRINSON LOGO] Thanks to a weaker euro and better prospects for the world economy, growth in Euroland is picking up steam after having experienced a slowdown in the first half of 1999. Business confidence is supported by ever stronger commitments of the European governments to implement structural reforms. This should eventually create a better environment for the labor market, boost employment and lift consumers' confidence. Due to divergence of inflation and GDP growth rates, the ECB is still facing a very heterogeneous situation, ranging from above average growth and below average inflation (as in France) to below average growth and above average inflation (as in Italy ). No signs of strain have emerged from this situation so far. In Japan, first quarter growth (at 7.9% QI/99 over QIV/98 annualized rate) caught market attention. The positive expectations shared by many market participants depend heavily on the government's massive injection of public funds rather than on increased productivity resulting from structural reforms undertaken in the private sector. Only the latter would allow the Japanese economy to move toward a sustainable long-term growth path. The Bank of Japan continues its policy of zero overnight call rates, which it sees as an alternative for full-fledged money supply targeting. Growing current account imbalances are emerging. A healthy American economy is attracting capital from all over the world, but at the same time private savings are falling in the U.S. (and this is only partly compensated by higher public savings). The result is a widening current account deficit. With growth picking up in the rest of the world, capital flows are likely to be rerouted. This should alleviate the current account problem and weaken the USD. Global (Ex-U.S.) Equity Environment
6 months 1 year 3 years 5 years 8/31/93* Major Markets ended ended ended ended to Total Return in U.S. Dollar Hedged Terms 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 - -------------------------------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 14.26% 9.72% 16.34% 14.07% 12.12% Europe Ex U.K. 9.08 3.60 31.73 24.48 20.59 U.K. 7.64 8.50 20.34 18.14 14.60 Canada 14.41 3.08 18.60 17.73 15.00 Japan 32.60 19.51 1.42 3.75 3.33 Asia Ex Japan 33.51 68.29 -4.08 1.75 4.67 - -------------------------------------------------------------------------------------------------------- 6 months 1 year 3 years 5 years 8/31/93* Major Currencies ended ended ended ended to Percent Change Relative to U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 - -------------------------------------------------------------------------------------------------------- Yen -6.81% 14.66% -3.23% -4.01% -2.46% Pound -5.26 -5.53 0.48 0.42 1.00 Euro** -12.18 -4.83 -7.07 -3.45 -2.08 Canadian Dollar 3.78 -0.64 -2.65 1.37 -1.93 - -------------------------------------------------------------------------------------------------------- *Performance inception date of the Brinson Global (Ex-U.S.) Equity Fund Class I **Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized total returns 5
GLOBAL (EX-U.S.) EQUITY FUND [SET BRINSON LOGO] In managing the Global (Ex-U.S.) Equity Fund, we apply our fundamental price/value philosophy with an integrated view of global capital markets. We add value by focusing on four key portfolio management activities. We select the best securities, focus on industries that have the best earnings prospects, concentrate investments in countries with above average political and structural environments, and control exposure to various global currencies. We manage the portfolio within predefined ranges (relative to the benchmark) and use both qualitative and quantitative techniques to control portfolio risk. Since its inception on August 31, 1993, the Brinson Global (Ex-U.S.) Equity Fund Class I has produced an annualized return of 8.08% compared to the 8.48% return of its benchmark, the MSCI World Ex USA (Free) Index. These results were achieved at a risk level or volatility well below that of the benchmark at 12.63% versus 14.29% respectively. For the most recent six months, the Fund has returned 2.47% versus the benchmark return of 4.34%. The main driver of the Fund's relative underperformance on a year-to-date basis was unfavorable security selection decisions. We continued to underweight many of the high-flying internet stocks and stocks in the growth sector of the market. While these stocks are overvalued in our opinion, and we did see some correction in favor of value stocks in the second quarter, growth stocks continued to drive the overall markets higher during the first half of 1999. Most European equity markets were very strong in the first quarter, and we took that strength as an opportunity to reduce our overweight position in Europe. Proceeds from the sales were deployed in Japan, where recent macroeconomic policy moves have recently served to support higher asset prices. The Japan equity position is now approximately equal to the benchmark weighting. During the first quarter we also increased the Fund's currency exposure to the euro, while decreasing exposure to the U.K. sterling and Japanese yen. Renewed investor confidence in global growth boosted economically sensitive stocks during the second quarter. Value stocks outperformed growth by a wide margin opposing a long-running trend of overperformance by growth issues. An improving economic picture coupled with increased profitability for value stocks suggests that there is scope for continued outperformance of growth stocks in the coming months. Our work continues to suggest that many large capitalization growth stocks remain significantly overvalued. As a result, the Fund's largest industry overweights (relative to the benchmark) are to producer goods, basic materials and consumer stocks. The largest underweights are maintained in financials, telecommunication services & equipment and information technology. With respect to country strategy, the Fund's largest overweights are to Australia/New Zealand, the U.K. and Germany, with the largest underweights in Hong Kong, Canada and Switzerland. Strong price increases among the European cyclicals prompted us to pare back on certain positions near the end of the second quarter. The unexciting outlook for the British steel industry prompted us to eliminate our position in British Steel after taking advantage of a recent rebound in the stock price. We maintain an overweight in cyclicals however, due to some strong value opportunities in Australia and New Zealand, a new position in the German tire manufacturer, Continental, and a position in Swiss construction and building group, Holderbank. 6 GLOBAL (EX-U.S.) EQUITY FUND Total Return 6 months 1 year 3 years 5 years 8/31/93* ended ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99 - -------------------------------------------------------------------------------------------------------- Brinson Global (Ex-U.S.) Equity Fund Class I 2.47% 3.65% 9.31% 10.03% 8.08% - -------------------------------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 4.34 7.18 8.90 8.50 8.48 - -------------------------------------------------------------------------------------------------------- * Performance inception date of the Brinson Global (Ex-U.S.) Equity Fund Class I Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns
Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global (Ex-U.S.) Equity Fund Class I and the MSCI World Ex U SA (Free) Index if you had invested $1,000,000 on August 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global (Ex-U.S.) Equity Fund Class I vs. MSCI World Ex USA (Free) Index Wealth Value with Dividends Reinvested [Graph appears here] Brinson Global (Ex-U.S.) MSCI World Equity Fund Ex USA Class I (Free) Index - ----------------------------------- 8/31/93 $1,000,000 $1,000,000 - ----------------------------------- 12/31/93 $965,500 $988,754 - ----------------------------------- 6/30/94 $975,547 $1,068,786 - ----------------------------------- 12/31/94 $974,540 $1,062,774 - ----------------------------------- 6/30/95 $974,540 $1,095,525 - ----------------------------------- 12/31/95 $1,126,103 $1,187,456 - ----------------------------------- 6/30/96 $1,204,891 $1,244,668 - ----------------------------------- 12/31/96 $1,269,637 $1,271,887 - ----------------------------------- 6/30/97 $1,449,115 $1,414,422 - ----------------------------------- 12/31/97 $1,342,509 $1,298,199 - ----------------------------------- 6/30/98 $1,518,353 $1,499,791 - ----------------------------------- 12/31/98 $1,535,729 $1,540,540 - ----------------------------------- 6/30/99 $1,573,726 $1,607,444 - -----------------------------------
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. 7 GLOBAL (EX-U.S.) EQUITY FUND Total Return
6 months 1 year 6/30/97* ended ended to 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------------- Brinson Global (Ex-U.S.) Equity Fund Class N 2.40% 3.30% 3.90% - ------------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index 4.34 7.18 6.61 - ------------------------------------------------------------------------------------- * Inception date of the Brinson Global (Ex-U.S.) Equity Fund Class N Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global (Ex-U.S.) Equity Fund Class N and the MSCI World Ex USA (Free) Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson Global (Ex-U.S.) Equity Fund Class N vs. MSCI World Ex USA (Free) Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
Brinson Global MSCI World (Ex-U.S.) Ex USA Equity Fund (Free) Index Class N - --------------------------------------------- 6/30/97 $1,000,000 $1,000,000 - --------------------------------------------- 9/30/97 $999,206 $994,869 - --------------------------------------------- 12/31/97 $925,127 $917,830 - --------------------------------------------- 3/31/98 $1,044,194 $1,052,548 - --------------------------------------------- 6/30/98 $1,045,088 $1,060,356 - --------------------------------------------- 9/30/98 $902,185 $904,473 - --------------------------------------------- 12/31/98 $1,054,292 $1,089,166 - --------------------------------------------- 3/31/99 $1,046,437 $1,105,498 - --------------------------------------------- 6/30/99 $1,079,597 $1,136,467 - ---------------------------------------------
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. 8 Global (Ex-U.S.) Equity Fund [Brinson Logo] Industry Diversification
As a Percent of Net Assets As of June 30, 1999 - ---------------------------------------------- GLOBAL (Ex-U.S.) EQUITIES Aerospace & Military.................. 1.05% Airlines.............................. 1.03 Appliances & Households............... 2.01 Autos/Durables........................ 2.69 Banking............................... 10.06 Beverages & Tobacco................... 2.98 Broadcasting & Publishing............. 4.06 Building Materials.................... 0.98 Business & Public Service............. 3.73 Chemicals............................. 4.26 Construction.......................... 0.64 Data Processing....................... 1.45 Electric Components................... 1.27 Electronics........................... 5.17 Energy................................ 6.05 Financial Services.................... 2.39 Food & House Products................. 4.00 Forest Products....................... 1.06 Health & Personal Care................ 6.36 Industrial Components................. 2.37 Insurance............................. 5.14 Leisure & Tourism..................... 0.32 Machinery & Engineering............... 0.75 Merchandising......................... 4.85 Metals-Steel.......................... 0.40 Multi-Industry........................ 1.67 Non-Ferrous Metals.................... 1.76 Real Estate........................... 0.72 Recreation............................ 0.92 Telecommunications.................... 8.39 Textiles & Apparel.................... 0.19 Transportation........................ 1.28 Utilities............................. 5.15 Wholesale & International Trade....... 0.56 ------ Total Global (Ex-U.S.) Equities.. 95.71 CONVERTIBLE BONDS..................... 0.03 SHORT-TERM INVESTMENTS................ 0.87 ------ TOTAL INVESTMENTS................ 96.61 CASH AND OTHER ASSETS, LESS LIABILITIES................. 3.39 NET ASSETS............................100.00% ======
Market and Currency Strategy
As of June 30, 1999 Fund ---------------------- Market Currency Strategy Strategy Index - ------------------------------------------------------------ Australia 5.74% 8.24% 2.75% Austria 0.16 0.00 0.00 Belgium 1.30 0.00 0.00 Canada 2.91 4.18 4.18 Denmark 0.38 0.73 0.73 Euro 0.00 43.79 35.36 Finland 1.94 0.00 0.00 France 9.50 0.00 0.00 Germany 10.80 0.00 0.00 Hong Kong 0.00 0.00 2.43 Italy 2.70 0.00 0.00 Japan 23.01 15.01 23.01 Netherlands 4.94 0.00 0.00 New Zealand 0.70 0.70 0.19 Norway 0.23 0.40 0.40 Portugal 0.42 0.00 0.00 Singapore 0.92 0.92 0.92 Spain 2.26 0.00 0.00 Sweden 2.75 6.19 2.19 Switzerland 5.49 6.49 6.49 U.K. 23.85 13.35 21.35 - ------------------------------------------------------------ 100.00% 100.00% 100.00%
Top Ten Global (Ex-U.S.) Equity Holdings As of June 30, 1999
Percent of Net Assets - ---------------------------------------------------- 1. BP Amoco PLC 1.67% 2. Veba AG 1.65 3. ING Groep NV 1.46 4. Nestle S.A. (Reg.) 1.40 5. Nippon Telegraph & Telephone Corp. 1.27 6. Lloyds TSB Group PLC 1.24 7. Bayer AG 1.24 8. Siemens AG 1.24 9. Glaxo Wellcome PLC 1.20 10. Novartis AG (Reg.) 1.20 - ----------------------------------------------------
9 Global (Ex-U.S.) Equity Fund -- Schedule of Investments June 30, 1999
Shares Value --------- ----------- Global (Ex-U.S.) Equities - 95.71% Australia - 5.79% Amcor Ltd................................. 85,740 $ 476,598 Amp Limited............................... 116,500 1,273,573 Brambles Industries Ltd................... 37,040 975,769 Broken Hill Proprietary Co., Ltd.......... 244,720 2,834,657 CSR Ltd................................... 350,590 1,002,481 David Jones Ltd........................... 334,200 327,387 Lend Lease Corp., Ltd..................... 92,296 1,267,207 National Australia Bank Ltd............... 221,648 3,667,726 News Corp. Ltd............................ 373,588 3,187,417 News Corp. Ltd., Preferred................ 157,179 1,197,465 Orica Ltd................................. 54,020 295,022 Qantas Airways Ltd........................ 473,538 1,564,042 QBE Insurance Group Ltd................... 211,823 806,184 Rio Tinto Ltd............................. 97,060 1,591,455 Santos Ltd................................ 241,340 790,729 Telstra Corp. Ltd......................... 632,310 3,623,185 Westpac Banking Corp., Ltd................ 373,841 2,424,968 WMC Ltd................................... 187,070 803,603 Woolworth's Ltd........................... 200,960 668,403 ------------ 28,777,871 ------------ Austria - 0.14% Austria Tabakwerke AG..................... 12,300 716,702 Belgium - 1.25% Fortis (B)................................ 149,047 4,680,535 KBC Bancassurance Holding................. 25,510 1,512,737 ------------ 6,193,272 ------------ Canada - 2.79% Agrium, Inc............................... 74,680 650,883 Alcan Aluminum Ltd........................ 31,240 986,737 Bank of Montreal.......................... 19,210 694,369 Canadian National Railway Co.............. 19,190 1,282,272 Canadian Pacific Ltd...................... 57,614 1,362,401 Hudson's Bay Co........................... 60,120 670,211 Imasco, Ltd............................... 31,200 836,862 Imperial Oil Ltd.......................... 47,960 907,290 Magna International, Inc., Class A........ 9,860 555,254 Newbridge Networks Corp. (b).............. 30,610 868,604 NOVA Chemicals Corp....................... 8,800 205,121 NOVA Corp................................. 26,521 618,184 Potash Corporation of Saskatchewan, Inc... 7,660 394,101 Royal Bank of Canada...................... 24,620 1,081,211 Seagram Co., Ltd.......................... 8,300 411,327 Shaw Communications, Inc., Class B........ 35,580 1,401,469 TransCanada Pipelines Ltd................. 42,876 601,093 Westcoast Energy, Inc..................... 17,120 334,280 ------------ 13,861,669 ------------ Denmark - 0.37% Tele Danmark A/S.......................... 36,800 1,811,346 ------------ Finland - 1.86% Merita Ltd., Class A...................... 357,400 2,030,912 Nokia Oyj................................. 49,060 4,300,624 UPM-Kymmene Corp.......................... 102,200 2,930,088 ------------ 9,261,624 ------------ France - 8.68% Aerospatiale Matra........................ 63,150 1,455,579 Air Liquide............................... 15,632 2,458,495 Banque Nationale de Paris................. 27,686 2,307,048 Carrefour S.A............................. 13,970 2,053,035 Cie de Saint Gobain....................... 10,813 1,722,898 Elf Aquitaine S.A......................... 26,244 3,851,412 France Telecom S.A........................ 44,530 3,363,917 Air France (b)............................ 95,890 1,710,820 Groupe Danone............................. 11,360 2,928,892 Michelin, Class B......................... 28,783 1,177,561 Rhone-Poulenc, Class A.................... 43,280 1,977,762 SEITA..................................... 83,099 4,799,200 Societe Generale.......................... 11,593 2,043,256 Suez Lyonnaise des Eaux S.A............... 16,052 2,895,369 Thomson CSF............................... 95,800 3,329,511 Total S.A., Class B....................... 21,443 2,766,482 Vivendi................................... 28,195 2,284,038 ------------ 43,125,275 ------------ Germany - 10.55% Allianz AG................................ 15,308 4,278,315 Bayer AG.................................. 148,206 6,167,289 Continental AG............................ 90,800 2,172,495 DaimlerChrysler AG........................ 49,513 4,325,015 Deutsche Bank AG.......................... 87,591 5,338,656 Deutsche Telekom AG....................... 98,910 4,156,740 Deutsche Telekom AG, Rights (b)........... 100,610 19,714 Dresdner Bank AG.......................... 88,030 3,422,607 Mannesmann AG............................. 34,250 5,121,694 SAP AG.................................... 4,280 1,467,643 Siemens AG................................ 79,940 6,166,671 Veba AG................................... 138,638 8,178,305 Volkswagen AG............................. 25,506 1,645,862 ------------ 52,461,006 ------------ Italy - 2.60% Assicurazioni Generali.................... 94,446 3,272,712 ENI Spa................................... 688,000 4,108,204 ENI Spa ADR............................... 11,080 664,800 La Rinascente Spa......................... 208,140 1,575,566 Montedison Spa............................ 849,305 1,383,903 San Paolo-imi, Spa........................ 141,610 1,927,760 ------------ 12,932,945 ------------ Japan - 22.25% Acom Co., Ltd............................. 24,400 2,106,576 Amada Co., Ltd............................ 127,000 897,100 Bank of Tokyo-Mitsubushi, Ltd............. 208,000 2,960,872 Bridgestone Corp.......................... 65,000 1,965,466 Canon, Inc................................ 102,000 2,932,584 Citizen Watch Co., Ltd.................... 117,000 1,014,954 Dai Nippon Printing Co., Ltd.............. 117,000 1,870,415 Daiichi Pharmaceutical Co., Ltd........... 103,000 1,598,100 Daikin Industries Ltd..................... 245,000 2,843,895 Daiwa House Industry Co., Ltd............. 61,000 641,548 East Japan Railway Co..................... 361 1,938,615 Fanuc..................................... 50,700 2,722,654 Fuji Photo Film........................... 34,000 1,286,517 Fujitsu................................... 213,000 4,284,988 Honda Motor Co............................ 88,000 3,729,676
10 Global (Ex-U.S.) Equity Fund -- Schedule of Investments June 30, 1999
Shares Value -------- ------------ Japan -- continued Hoya Corp. ................................ 28,000 $ 1,579,974 Ito Yokado Co., Ltd. ...................... 60,000 4,015,202 Kaneka Corp. .............................. 125,000 1,177,297 Kao Corp. ................................. 81,000 2,275,281 Kirin Brewery Co., Ltd. ................... 137,000 1,641,193 Kokuyo..................................... 41,000 660,525 Kuraray Co., Ltd. ......................... 154,000 1,852,479 Marui Co., Ltd. ........................... 66,000 1,090,549 Matsushita Electric Industrial Co. ........ 149,000 2,892,845 Mitsubishi Estate Co., Ltd. ............... 238,000 2,322,191 Mitsubishi Corp. .......................... 410,000 2,777,594 NGK Insulators............................. 205,000 2,140,780 Nintendo Corp., Ltd. ...................... 14,500 2,037,715 Nippon Denso Co., Ltd. .................... 106,000 2,154,329 Nippon Meat Packers, Inc. ................. 98,000 1,279,247 Nippon Steel Co. .......................... 865,000 2,008,138 Nippon Telegraph & Telephone Corp. ........ 544 6,337,079 Nomura Securities Co., Ltd. ............... 217,000 2,540,392 Obayashi Corp. ............................ 209,000 1,051,561 Osaka Gas Co. ............................. 578,000 1,962,640 Sankyo Co., Ltd. .......................... 91,000 2,293,044 Sanwa Bank Ltd. ........................... 146,000 1,436,600 Secom Co., Ltd. ........................... 29,000 3,018,837 Sega Enterprises Ltd. ..................... 16,100 212,955 Sekisui House Ltd. ........................ 138,000 1,488,995 Shin-Etsu Chemical Co., Ltd. .............. 25,000 836,500 Sony Corp. ................................ 28,800 3,105,089 Sumitomo Bank.............................. 148,000 1,835,327 Sumitomo Chemical Co. ..................... 329,000 1,508,551 Sumitomo Electric Industries............... 140,000 1,591,540 Taiheiyo Cement Corp. ..................... 600 1,720 Takeda Chemical Industries................. 77,000 3,568,820 TDK Corp. ................................. 22,000 2,012,062 Tokio Marine & Fire Insurance Co. ......... 115,000 1,249,380 Tokyo Electric Power....................... 129,400 2,731,469 Toshiba Corp. ............................. 295,000 2,103,313 Toyota Motor Corp. ........................ 116,000 3,670,522 Yamato Transport Co., Ltd. ................ 76,000 1,324,851 ------------ 110,580,546 ------------ Netherlands -- 4.70% Elsevier NV................................ 301,170 3,494,212 Heineken NV................................ 23,602 1,208,518 ING Groep NV............................... 134,000 7,255,195 Koninklijke KPN NV......................... 84,012 3,942,192 Royal Dutch Petroleum Co. ................. 80,180 4,696,771 Unilever NV................................ 41,143 2,772,851 ------------ 23,369,739 ------------ New Zealand -- 0.92% Auckland International Airport Ltd. ....... 223,210 343,009 Carter Holt Harvey Ltd. ................... 325,940 390,337 Fletcher Challenge Paper................... 500,840 374,207 Lion Nathan Ltd. .......................... 251,670 602,786 Telecom Corp. of New Zealand Ltd. ......... 670,890 2,879,585 ------------ 4,589,924 ------------ Norway -- 0.37% Norsk Hydro ASA............................ 20,510 773,766 Norske Skogindustrier ASA.................. 29,150 1,073,801 ------------ 1,847,567 ------------ Portugal -- 0.40% EDP Electricidade de Portugal S.A. ........ 111,000 1,998,721 ------------ Singapore -- 0.91% Singapore Press Holdings Ltd. ............. 181,975 3,099,721 United Overseas Bank Ltd. (Frgn.).......... 203,000 1,418,913 ------------ 4,518,634 ------------ Spain -- 2.17% Banco Popular Espanol S.A. ................ 27,615 1,986,435 Banco Santander Central Hispano, S.A. ..... 317,557 3,307,715 Endesa S.A. ............................... 100,186 2,136,695 Telefonica S.A. (b)........................ 69,915 3,367,947 ------------ 10,798,792 ------------ Sweden -- 2.58% Electrolux AB, B Shares.................... 191,870 4,017,038 Investor AB, B Shares...................... 179,480 2,005,481 Nordbanken Holding AB...................... 231,960 1,355,965 Swedish Match AB........................... 655,980 2,337,826 Ericsson LM, B Shares...................... 96,600 3,096,154 ------------ 12,812,464 ------------ Switzerland -- 5.24% Adecco S.A. ............................... 2,036 1,090,948 Holderbank Financiere Glarus AG, B Shares.. 1,795 2,118,760 Holderbank Financiere Glarus AG, Rights.... 1 15 Nestle S.A. (Reg.)......................... 3,854 6,943,943 Novartis AG (Reg.)......................... 4,093 5,976,528 Roche Holding AG (Gen.).................... 512 5,262,936 Swiss Reinsurance Co. (Reg.)............... 341 649,273 Swisscom AG (Reg.)......................... 10,674 4,016,654 ------------ 26,059,057 ------------ United Kingdom -- 22.14% Allied Zurich PLC.......................... 210,252 2,643,064 AstraZeneca Group PLC...................... 62,234 2,407,349 Barclays PLC............................... 105,230 3,062,021 BOC Group PLC.............................. 256,450 5,012,579 Boots Company PLC.......................... 176,340 2,094,454 British Aerospace PLC...................... 66,000 428,365 British Airways PLC........................ 268,000 1,849,259 BP Amoco PLC............................... 463,475 8,306,606 British Telecommunications PLC............. 183,000 3,066,346 Charter PLC................................ 461,988 2,709,009 Coats Viyella PLC.......................... 1,154,489 928,104 Diageo PLC................................. 297,935 3,111,317 FKI PLC.................................... 1,103,225 3,426,884 General Electric Co. PLC................... 561,240 5,723,869 Glaxo Wellcome PLC......................... 215,260 5,982,084 Greenalls Group PLC........................ 283,375 1,585,721 House of Fraser PLC........................ 555,090 765,611 John Mansfield Group PLC................... 108,500 13,682 Lloyds TSB Group PLC....................... 456,545 6,188,977 Marks & Spencer PLC........................ 1,013,550 5,863,380 Mirror Group PLC........................... 650,240 2,525,317 National Power PLC......................... 423,000 3,080,486
11 Global (Ex-U.S.) Equity Fund -- Schedule of Investments June 30, 1999
Shares Value ---------- ----------- United Kingdom - continued Nycomed Amersham PLC..................................... 363,090 $ 2,524,002 Peninsular & Oriental Steam Navigation Co................ 121,986 1,831,521 Pennon Group PLC......................................... 177 2,963 Prudential Corp. PLC..................................... 354,820 5,223,863 Reckitt & Colman PLC..................................... 168,000 1,751,765 Reed International PLC................................... 316,190 2,109,512 Rio Tinto Ltd............................................ 318,890 5,345,831 RJB Mining PLC........................................... 476,840 394,611 Royal & Sun Alliance Insurance Group PLC................. 163,794 1,469,086 Sainsbury (J.) PLC....................................... 120,950 762,610 Scottish & Southern Energy PLC........................... 448,720 4,590,468 Tesco PLC................................................ 1,647,830 4,240,357 Thames Water PLC......................................... 139,589 2,213,533 Unilever PLC............................................. 217,000 1,930,903 United News & Media PLC.................................. 327,580 3,149,808 Yorkshire Water PLC...................................... 249,000 1,730,911 ------------ 110,046,228 ------------ Total Global (Ex-U.S.) Equities (Cost $398,136,572).................................... 475,763,382 ------------ Face Amount -------- Convertible Bonds -- 0.03% Australia -- 0.03% Burns, Philp Treasury, 7.50%, due 08/14/03.....................................AUD 1,228,664 162,651 Burns, Philp & Co., Ltd., Warrants (b)................ 1,228,664 -- ------------ Total Convertible Bonds (Cost $147,071)............... 162,651 ------------ Short-Term Investments -- 0.87% Investment Companies -- 0.87% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $4,300,836).................................. 4,300,836 4,300,836 ------------ Total Investments (Cost $402,584,479) -- 96.61% (a).................. 480,226,869 Cash and other assets, less liabilities -- 3.39%...... 16,850,002 ------------ Net Assets -- 100%.................................... $497,076,871 ============
See accompanying notes to schedule of investments. 12 Global (Ex-U.S.) Equity Fund -- Schedule of Investments June 30, 1999 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $402,584,479; and net unrealized appreciation consisted of: Gross unrealized appreciation.............................. $ 92,641,130 Gross unrealized depreciation.............................. (14,998,740) ------------ Net unrealized appreciation.............................. $ 77,642,390 ============
(b) Non-income producing security FORWARD FOREIGN CURRENCY CONTRACTS The Global (Ex-U.S.) Equity Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- --------- ----------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar...................................... 8/19/99 38,300,000 $25,364,742 $ 617,401 British Pound.......................................... 8/19/99 7,800,000 12,299,541 (167,910) Canadian Dollar........................................ 8/19/99 11,800,000 7,978,040 48,838 Euro................................................... 8/19/99 39,350,000 40,735,833 (2,280,810) Swedish Krona.......................................... 8/19/99 142,600,000 16,824,549 (1,213,556) Swiss Franc............................................ 8/19/99 7,500,000 4,852,767 (364,721) Forward Foreign Currency Sale Contracts Australian Dollar...................................... 8/19/99 3,100,000 2,053,021 2,589 British Pound.......................................... 8/19/99 36,500,000 57,555,545 1,797,020 Euro................................................... 8/19/99 3,150,000 3,260,937 76,803 Japanese Yen........................................... 8/19/99 4,740,000,000 39,451,235 1,003,056 ----------- Total.......................................... $ (481,290) ===========
See accompanying notes to financial statements. 13 Global (Ex-U.S.) Equity Fund -- Financial Statements STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $398,283,643)................................................ $475,926,033 Affiliated issuers (Cost $4,300,836).................................................... 4,300,836 Foreign currency, at value (Cost $1,015,491).............................................. 1,049,683 Cash...................................................................................... 17,112,328 Receivables: Investment securities sold.............................................................. 13,832,745 Dividends............................................................................... 1,240,203 Interest................................................................................ 73,124 Fund shares sold........................................................................ 8,440,505 Variation margin.......................................................................... 575,931 ------------ TOTAL ASSETS.......................................................................... 522,551,388 ------------ LIABILITIES: Payables: Investment securities purchased......................................................... 2,012,851 Fund shares redeemed.................................................................... 22,339,144 Investment advisory fees................................................................ 360,906 Accrued expenses........................................................................ 280,326 Net unrealized depreciation on forward foreign currency contracts......................... 481,290 ------------ TOTAL LIABILITIES..................................................................... 25,474,517 ------------ NET ASSETS.................................................................................. $497,076,871 ============ NET ASSETS CONSIST OF: Paid in capital........................................................................... $416,353,774 Accumulated undistributed net investment income........................................... 2,738,174 Accumulated net realized gain............................................................. 823,091 Net unrealized appreciation............................................................... 77,161,832 ------------ NET ASSETS............................................................................ $497,076,871 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $490,322,498 and 39,737,271 shares issued and outstanding)............................ $ 12.34 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $15,148 and 1,232 shares issued and outstanding)...................................... $ 12.30 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $6,739,225 and 552,223 shares issued and outstanding)................................. $ 12.20 ============
See accompanying notes to financial statements. 14 Global (Ex-U.S.) Equity Fund -- Financial Statements STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999
INVESTMENT INCOME: Dividends (net of $1,179,337 for foreign taxes withheld)....................... $ 9,985,856 Interest (including securities lending income of $148,237)..................... 882,438 ------------ TOTAL INCOME........................................................... 10,868,294 ------------ EXPENSES: Advisory....................................................................... 3,713,448 Administrative................................................................. 347,175 Custodian...................................................................... 200,713 Distribution................................................................... 43,892 Other.......................................................................... 354,845 ------------ TOTAL EXPENSES......................................................... 4,660,073 ------------ NET INVESTMENT INCOME.................................................. 6,208,221 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................................. (2,681,583) Futures contracts............................................................ 575,931 Foreign currency transactions................................................ 188,730 ------------ Net realized loss...................................................... (1,916,922) ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency............................................... 17,631,875 Forward contracts.............................................................. 1,988,204 Translation of other assets and liabilities denominated in foreign currency.... (61,073) ------------ Change in net unrealized appreciation or depreciation.................. 19,559,006 ------------ Net realized and unrealized gain................................................. 17,642,084 ------------ Net increase in net assets resulting from operations............................. $ 23,850,305 ============
See accompanying notes to financial statements. 15 Global (Ex-U.S.) Equity Fund -- Financial Statements STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income........................................................... $ 6,208,221 $ 6,539,098 Net realized gain (loss)........................................................ (1,916,922) 12,223,856 Change in net unrealized appreciation or depreciation........................... 19,559,006 6,875,111 ------------- ------------- Net increase in net assets resulting from operations............................ 23,850,305 25,638,065 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I............................................................... (4,564,403) (6,380,973) Brinson Class N............................................................... (121) (58) UBS Investment Funds Class.................................................... (23,356) (51,271) Distributions from net realized gain: Brinson Class I............................................................... (4,498,729) (25,288,399) Brinson Class N............................................................... (126) (59) UBS Investment Funds Class.................................................... (52,439) (521,640) ------------- ------------- Total distributions to shareholders............................................. (9,139,174) (32,242,400) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................................................... 842,598,303 317,039,181 Shares issued in connection with acquisition of UBS International Equity Fund... 21,515,034 -- Shares issued on reinvestment of distributions.................................. 8,583,385 31,189,854 Shares redeemed................................................................. (834,980,130) (325,627,875) ------------- ------------- Net increase in net assets resulting from capital share transactions............ 37,716,592 22,601,160 ------------- ------------- TOTAL INCREASE IN NET ASSETS................................................ 52,427,723 15,996,825 ------------- ------------- NET ASSETS: Beginning of year............................................................... 444,649,148 428,652,323 ------------- ------------- End of year (including accumulated undistributed net investment income of $2,738,174 and $1,437,308, respectively)...................................... $ 497,076,871 $ 444,649,148 ============= =============
See accompanying notes to financial statements. 16 Global (Ex-U.S.) Equity Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, ------------------------------------------------------------- Brinson Class I 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............ $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69 -------- -------- -------- -------- -------- Income from investment operations: Net investment income...................... 0.16 0.18 0.18 0.18 0.15 Net realized and unrealized gain (loss).... 0.27 0.30 1.97 2.05 (0.16) -------- -------- -------- -------- -------- Total income (loss) from investment operations........................... 0.43 0.48 2.15 2.23 (0.01) -------- -------- -------- -------- -------- Less distributions: Distributions from investment income....... (0.12) (0.18) (0.17) (0.18) -- Distributions from net realized gain....... (0.12) (0.74) (0.56) (0.56) -- -------- -------- -------- -------- -------- Total distributions................... (0.24) (0.92) (0.73) (0.74) -- ======== ======== ======== ======== ======== Net asset value, end of period.................. $ 12.34 $ 12.15 $ 12.59 $ 11.17 $ 9.68 Total return.................................... 3.65% 4.78% 20.27% 23.64% (0.10)% Ratios/Supplemental data: Net assets, end of period (in 000s)........... $490,322 $439,329 $420,855 $212,366 $148,319 Ratio of expenses to average net assets: Before expense reimbursement............... 0.99 1.00% 1.00% 1.20% 1.23% After expense reimbursement................ N/A N/A N/A 1.00% 1.00% Ratio of net investment income to average net assets: Before expense reimbursement............... 1.35% 1.52% 1.83% 1.67% 1.93% After expense reimbursement................ N/A N/A N/A 1.87% 2.16% Portfolio turnover rate....................... 74% 49% 25% 20% 14%
N/A = Not Applicable See accompanying notes to financial statements. 17 Global (Ex-U.S.) Equity Fund -- Financial Highlights The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended Year Ended Brinson Class N June 30, 1999 June 30, 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period......................................... $ 12.14 $ 12.59 ------- ------- Income from investment operations: Net investment income................................................... 0.12 0.16 Net realized and unrealized gain........................................ 0.27 0.29 ------- ------- Total income from investment operations............................ 0.39 0.45 ------- ------- Less distributions: Distributions from net investment income................................ (0.11) (0.16) Distributions from net realized gain.................................... (0.12) (0.74) ------- ------- Total distributions................................................ (0.23) (0.90) ------- ------- Net asset value, end of period............................................... $ 12.30 $ 12.14 ======= ======= Total return................................................................. 3.30% 4.51% Ratios/Supplemental data: Net assets, end of period (in 000s)........................................ $ 15 $ 11 Ratio of expenses to average net assets.................................... 1.24% 1.25% Ratio of net investment income to average net assets....................... 1.10% 1.27% Portfolio turnover rate.................................................... 74% 49%
See accompany notes to financial statements. 18 Global (Ex-U.S.) Equity Fund -- Notes To Financial Statements 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class (formerly, 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 financial highlights of the UBS Investment Funds Class are presented separately. On December 19, 1998, the Global (Ex-U.S.) Equity Fund (the "Fund") acquired all the net assets of the UBS International Equity Fund pursuant to a plan of reorganization approved by shareholders on December 11, 1998. The acquisition was accomplished by a tax-free exchange of 1,827,955 Brinson Class I shares of the Global (Ex-U.S.) Equity Fund for the shares of UBS International Equity Fund outstanding on December 18, 1998. The net assets of the UBS International Equity Fund, including $38,003 of net unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Global (Ex-U.S.) Equity Fund and the UBS International Equity Fund immediately before the merger were $463,315,718 and $21,515,034, respectively. The following is a summary of significant accounting policies consistently followed by the Global (Ex-U.S.) Equity Fund in the preparation of its financial statements. A. Investment Valuation: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. Foreign Currency Translation: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C. Investment Transactions: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. Federal Income Taxes: It is the policy of the Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1999, therefore, no federal income tax provision was required. F. Distributions to Shareholders: It is the policy of the Fund to distribute its net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing tax treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. 19 GLOBAL (EX-U.S.) EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS G. Income and Expense Allocation: All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. H. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00%, 1.25% and 1.84% of the average daily net assets of the Brinson Class I, Brinson Class N and UBS Investment Funds Class, respectively. Investment advisory fees for the year ended June 30, 1999, were as follows:
Advisory Advisory Fee Fees ------------ ------------ Global (Ex-U.S.) Equity Fund....................................................................... 0.80% $3,713,448
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1999 were $6,792. The Fund invests in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments at June 30, 1999 and for the year then ended, were as follows:
% of Sales Interest Net Purchases Proceeds Income Value Assets -------------- ------------ ------------- ---------- ----------- Global (Ex-U.S.) Equity Fund...................... $424,308,794 $420,007,958 $331,042 $4,300,836 0.87%
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales --------------- -------------- Global (Ex U.S.) Equity Fund..................................................................... $ 358,514,001 $333,571,232
4. FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the year ended June 30, 1999, was the Fund's custodian or an affiliate of the Fund's custodian. 5. FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such 20 Global (Ex-U.S.) Equity Fund -- Notes To Financial Statements contracts to hedge a portion of its portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6. SECURITY LENDING The Fund loaned securities to certain brokers with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. The Fund receives securities, which are not reflected in the statement of assets and liabilities, as collateral against the loaned securities. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 105% of the value of non-U.S. securities loaned. The value of loaned securities and related collateral at June 30, 1999 was $19,889,426 and $21,802,826, respectively. 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the daily net assets of the Brinson Class N. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the UBS Investment Funds Class. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is based on the Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08% per year of the average daily unutilized balance of the line of credit. During the year ended June 30, 1999, the Global (Ex-U.S.) Equity Fund had borrowings of $1,300,000 and $3,600,000 outstanding for 1 day each under the agreement. 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Year Ended Year Ended June 30, 1999 June 30, 1998 -------------------------------- -------------------------------- Shares Value Shares Value ----------- ------------ ----------- ------------- Sales: Brinson Class I*....................................... 72,650,740 $857,199,838 26,268,807 $312,436,986 Brinson Class N ....................................... 365 4,263 798 9,817 UBS Investment Funds Class............................. 587,229 6,909,236 387,174 4,592,378 ---------- ------------ ---------- ----------- Total Sales....................................... 73,238,334 $864,113,337 26,656,779 $317,039,181 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I........................................ 726,832 $ 8,514,975 2,849,536 $ 30,664,100 Brinson Class N........................................ 21 247 10 117 UBS Investment Funds Class............................. 5,917 68,163 49,433 525,637 ---------- ------------ ---------- ------------ Total Dividend Reinvestment....................... 732,770 $ 8,583,385 2,898,979 $ 31,189,854 ========== ============ ========== ============ Redemptions: Brinson Class I........................................ 69,803,887 $829,422,705 26,391,131 $318,236,785 Brinson Class N........................................ 41 487 -- -- UBS Investment Funds Class............................. 481,376 5,556,938 620,542 7,391,090 ---------- ------------ ---------- ------------ Total Redemptions................................. 70,285,304 $834,980,130 27,011,673 $325,627,875 ========== ============ ========== ============
*Includes shares issued in connection with acquisition of UBS International Equity Fund. 21 Report of Independent Auditors The Board of Trustees and Shareholders The Brinson Funds--Global (Ex-U.S.) Equity We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Brinson Funds--Global (Ex-U.S.) Equity Fund (formerly Non-U.S. Equity Fund) as of June 30, 1999, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Global (Ex-U.S.) Equity Fund at June 30, 1999, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. /s/ Ernst & Young, LLP Chicago, Illinois August 11, 1999 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. [Brinson Logo] THE BRINSON FUNDS - ------------------------------------------------------------------------------- CHICAGO . BAHRAIN . BASEL . FRANKFURT . GENEVA . HONG KONG . LONDON . MELBOURNE . NEW YORK . PARIS . RIO DE JANIERO . SINGAPORE . SYDNEY . TOKYO . ZURICH 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 [LOGO]UBS Investment Funds U.S. BALANCED FUND U.S. EQUITY FUND U.S. LARGE CAPITALIZATION EQUITY FUND U.S. LARGE CAPITALIZATION GROWTH FUND U.S. SMALL CAPITALIZATION GROWTH FUND U.S. BOND FUND HIGH YIELD FUND ANNUAL REPORT JUNE 30, 1999 Trustees and Officers - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Chairman of the Board E. Thomas McFarlan President Thomas J. Digenan, CFA, CPA Vice President Debra L. Nichols Vice President Carolyn M. Burke, CPA Secretary and Treasurer David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary 1 The Funds Advisor - Brinson Partners, Inc. - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Since the entrepreneurial founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value- added investment performance; and providing our clients with unrivaled, custom- tailored service of the highest quality. Now, in 1999, more than 1,100 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, with approximately USD 280 billion in assets under management, and industry recognition as a global thought leader. In North America, we make our services available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are diversified, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and services. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios - balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Brinson Division, the institutional asset management division of UBS AG. 2 Table of Contents - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds
Shareholder Letter.......................................... 4 U.S. Economic and Market Highlights......................... 5 U.S. Balanced Fund.......................................... 6 Schedule of Investments.................................. 9 Financial Statements..................................... 12 Financial Highlights..................................... 15 U.S. Equity Fund............................................ 16 Schedule of Investments.................................. 19 Financial Statements..................................... 20 Financial Highlights..................................... 23 U.S. Large Capitalization Equity Fund....................... 24 Schedule of Investments.................................. 27 Financial Statements..................................... 28 Financial Highlights..................................... 31 U.S. Large Capitalization Growth Fund....................... 32 Schedule of Investments.................................. 35 Financial Statements..................................... 36 Financial Highlights..................................... 39 U.S. Small Capitalization Growth Fund....................... 40 Schedule of Investments.................................. 43 Financial Statements..................................... 45 Financial Highlights..................................... 48 U.S. Bond Fund.............................................. 49 Schedule of Investments.................................. 52 Financial Statements..................................... 55 Financial Highlights..................................... 58 High Yield Fund............................................. 59 Schedule of Investments.................................. 62 Financial Statements..................................... 65 Financial Highlights..................................... 68 The UBS Investment Funds - Notes to Financial Statements.... 69 Report of Independent Auditors.............................. 76
3 Shareholder Letter - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds July 26, 1999 Dear Shareholder: We are pleased to present the Annual Report for the UBS Investment Funds covering the year ended June 30, 1999. This report focuses on the current economic outlook as well as our current strategies and performance updates for our seven Domestic Funds: U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund. During the second quarter of 1999, momentum shifted away from growth stocks. Growth-oriented stocks had outperformed value for much of the last two years, leading to what we believe to be significant overvaluation among many of the largest capitalization issues. Several factors contributed to this shift, including improving expectations for global growth (bottoming in Asia and Latin America), firming in key industrial commodity prices (notably oil) and expectations for stronger corporate profits. Steeper yield curves and higher interest rates also contributed to this rotation. An improving economic picture, coupled with increased profitability for value stocks, suggests that there is scope for continued outperformance relative to growth stocks in the coming months. Our work continues to indicate that many large-capitalization growth stocks remain overvalued and are likely to underperform. Our current strategies for U.S. fixed income portfolios indicate that current U.S. market interest rates provide positive excess returns. Market expectations of higher inflation and Fed tightening (the Fed did raise rates by 25 basis points on June 30) have driven bond yields in the U.S. to levels above our estimates of fair value. The prevailing credit spreads provide more than adequate compensation for risk, given our assumptions about the economy and the probabilities we assign to different scenarios for default rates. The U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund are all actively managed funds that provide integrated asset management across and within the U.S. security markets. Each of our Funds employ the same value-oriented investment philosophy of applied growth 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. The reports that follow highlight the investment characteristics and the performance of the respective Funds. We appreciate your continued trust and the confidence you have placed in the UBS Investment Funds, and look forward to a long lasting, quality relationship. Sincerely, Hanspeter A. Walder Raymond Simon Executive Director Managing Director Private Banking Private Banking 4 U.S. Economic and Market Highlights - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds The U.S. economy continued to expand at a rapid pace in the second quarter of 1999, with weakness in the housing sector being largely compensated by rebounding activity in manufacturing. With no signs of a recession in sight, the current business cycle will break the record for longevity established by the business expansion of the 1960s. Despite the strong momentum in economic growth, price pressures, as measured by consumer prices excluding food and energy, have remained moderate. Largely as a result of higher energy prices, headline inflation has moved back above 2%. Strong momentum in domestic demand, sluggish demand for U.S. products in Asia, Europe and Latin America and higher oil prices all contributed to a massive widening in the nation's trade deficit in May. Large net capital imports--which reflects global investors' confidence in the U.S. economy--and a strong U.S. dollar are the flip side of the current account deficit. By increasing the federal funds rate on June 30, the Federal Reserve has partly reversed some of the rate cuts adopted during the Asia/Russia/LTCM crisis last year. The move reflects growing doubts about a permanent surge in productivity growth. Despite this tightening, the FOMC's policy stance continues to be expansionary with money supply expanding at rates inconsistent with long-run price stability. U.S. Environment Major Markets Salomon U.S. Treasury Benchmark Returns Year to date June 30, 1999 Year to date June 30, 1999 Total Return Total Return U.S. Cash U.S. U.S. 1 2 5 10 30 Equivalents Bonds Equities Maturity (Years) 2.17 -1.39 11.87 2.25 0.52 -2.35 -6.50 -10.54 Top Ten Industry Returns Relative to S&P 500 Year to date June 30, 1999 Aerospace 24.93 For. Petroleum Res. 22.84 Dom. Petroleum Res. 21.83 Electronics 21.4 Oil Service 19.41 Forest Products 14.54 Aluminum 12.91 Producer Goods 11.72 Media 11.08 Telephone, Telegraph 10.66 Source: BARRA Bottom Ten Industry Returns Relative to S&P 500 Year to date June 30, 1999 Miscellaneous -9.61 Containers -9.69 Health (Non-Drug) -9.78 Drugs, Medicine -11.03 Electric Utilities -16.05 Beverages -17.05 Trucking, Freight -22.07 Precious Metals -24.55 Water Transport -26.82 Tobacco -30.91 Source: BARRA - -------------------------------------------------------------------------------- 5 U.S. Balanced Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds We actively manage the U.S. Balanced Fund in all of its aspects. We seek out price/value discrepancies across capital markets (at the asset class level), and within capital markets (through sector, sub-sector and individual security selection). The Fund is monitored on an ongoing basis, and rebalanced with both risk and return considerations in mind. Our value estimates and investment decisions are based on comprehensive analysis of forward-looking investment fundamentals, drawing on the collective judgement of our seasoned investment teams. Since its performance inception on July 31, 1995, the UBS Investment Fund--U.S. Balanced has produced an annualized rate of return of 10.77% compared to the 18.82% return of its benchmark, the U.S. Balanced Mutual Fund Index. This performance record was obtained with significantly less risk or volatility than the benchmark, 5.55% versus 10.25%, respectively. The lower risk level implies that the Fund has generated a much more constant return stream over time, protecting its investors from abrupt fluctuations in the overall Fund's value. For the first six months of 1999, the Fund returned 0.64% versus 7.13% for the benchmark. The key reason for the Fund's underperformance is its relative underweight to the U.S. equity market, which we believe has reached historic levels of overvaluation. Today a record 76% of U.S. fund managers believe that Wall Street is overvalued. Based on our analysis, the U.S. equity market is now approximately 50% overvalued, a level higher than that seen prior to the market's "crash" in 1987. The Fund currently holds only 20% of its assets in equities versus 65% for the benchmark, which is the maximum underweight position. In 1998 and the first half of this year, the U.S. equity market was fueled by the desire to not miss out on market momentum. These feelings appear to have overshadowed concerns about the fundamentals of stock valuation, and the market has been driven to extremes. Infatuations with technology (especially internet- related) companies and a few other sectors were the key drivers of this phenomenon. The market had experienced an incredible lack of breadth leading into the second quarter of 1999, and was forced higher by an ever-smaller number of "in-vogue" stocks. Momentum shifted away from U.S growth stocks in the second quarter of 1999 after a long period of outperformance relative to value stocks. Factors contributing to this shift include higher global industrial production, the rebound in many commodity prices (notably oil) and expectations for stronger corporate profits. This is a significant change from the momentum in growth stocks over the past two years. While strong value stock performance this quarter helped broaden the market, valuation imbalances still remain. The market on the whole remains overvalued, with growth stocks at the extreme. With risk considerations uppermost in mind, overweight positions relative to the benchmark are held in conventional U.S. bonds at +25%, and in Treasury Inflation Protected Securities (TIPS) at +20%. TIPS are bonds linked to the Consumer Price Index whose future cash flows are regularly adjusted according to prevailing inflation. While it is likely that future average inflation will be moderate, it is also likely that it will be more pronounced than currently expected by market participants. In this type of environment, TIPS provide unusual upside potential. - -------------------------------------------------------------------------------- 6 U.S. Balanced Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Balanced 0.64% 4.13% 10.21% 10.77% - ------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 7.13 14.27 19.40 18.82 - ------------------------------------------------------------------------------- Wilshire 5000 Index 11.87 19.59 25.84 25.26 - ------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 7.24 6.87 - -------------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund -- U.S. Balanced. ** An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Smith Barney Broad Investment Grade 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 UBS Investment Fund -- U.S. Balanced, the U.S. Balanced Mutual Fund Index, the Wilshire 5000 Index and the Salomon Smith Barney BIG Bond Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- U.S. Balanced vs. U.S. Balanced Mutual Fund Index, Wilshire 5000 Index and Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
UBS Investment U.S. Balanced Wilshire Salomon Smith Fund -- U.S. Mutual Fund 5000 Barney BIG Balanced Index Index Bond Index - -------------------------------------------------------------------------------- 7/31/95 $10,000 $10,000 $10,000 $10,000 12/31/95 $10,841 $10,876 $10,994 $10,653 6/30/96 $11,154 $11,544 $12,123 $10,520 12/31/96 $12,018 $12,496 $13,326 $11,040 6/30/97 $12,826 $14,050 $15,677 $11,377 12/31/97 $13,540 $15,433 $17,496 $12,102 6/30/98 $14,338 $17,195 $20,202 $12,582 12/31/98 $14,835 $18,342 $21,595 $13,157 6/30/99 $14,931 $19,650 $24,159 $12,975 - --------------------------------------------------------------------------------
7/31/95 = $10,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 7 U.S. Balanced Fund - -------------------------------------------------------------------------------- [UBS Investment Funds LOGO APPEARS HERE] Industry Diversification As a Percent of Net Assets As of June 30, 1999
- ------------------------------------------- U.S. Equities Energy............................ 0.27% Capital Investment Capital Goods................... 4.71 Technology...................... 6.10 ------ 10.81 Basic Industries Chemicals....................... 1.82 Housing/Paper................... 3.13 Metals.......................... 1.18 ------ 6.13 Consumer Non-Durables.................... 1.39 Retail/Apparel.................. 2.43 Autos/Durables.................. 1.71 Health: Drugs................... 1.93 Health: Non-Drugs............... 2.25 ------ 9.71 Financial Banks........................... 4.71 Non-Banks....................... 3.48 ------ 8.19 Utilities Electric........................ 1.75 Telephone....................... 0.71 ------ 2.46 Transportation.................... 3.78 Services/Misc..................... 2.61 ------ Total U.S. Equities........... 43.96* U.S. BONDS Corporate Bonds Asset-Backed.................... 0.99 CMO............................. 0.46 Consumer........................ 1.05 Financial Services.............. 1.06 Industrial Components........... 0.59 Services/Miscellaneous.......... 0.91 Utilities....................... 2.43 ------ Total U.S. Corporate Bonds.... 7.49 International Dollar Bonds........ 3.10 Mortgage-Backed Securities........ 5.13 U.S. Government Agencies.......... 12.14 U.S. Government Obligations....... 24.97 ------ Total U.S. Bonds.............. 52.83* SHORT-TERM INVESTMENTS............ 2.17* ------ TOTAL INVESTMENTS............. 98.96 CASH AND OTHER ASSETS, LESS LIABILITIES................ 1.04 ------ NET ASSETS........................ 100.00% ======
- -------------------------------------------------------------------------------- *The Fund held a long position in U.S. Treasury futures on June 30, 1999 which increased U.S. bond exposure from 52.83% to 77.27%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 43.96% to 18.53%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 2.17% to 3.16%. Asset Allocation As of June 30, 1999
Current Benchmark Strategy - ---------------------------------------- U.S. Equity 65% 20% U.S. Bonds 35 80 - ---------------------------------------- 100% 100%
Top Ten U.S. Equity Holdings As of June 30, 1999
Percent of Net Assets - ---------------------------------------- 1. Xerox Corp. 2.46% 2. FDX Corp. 1.68% 3. Burlington Northern Santa Fe Corp. 1.57% 4. Raytheon Co., Class B 1.45% 5. Electronic Data Systems Corp. 1.42% 6. Corning, Inc. 1.39% 7. Aetna, Inc. 1.34% 8. Lockheed Martin Corp. 1.19% 9. CIGNA Corp. 1.08% 10. General Instrument Corp. 1.08% - ----------------------------------------
================================================================================ 8 U.S. Balanced Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ---------- ---------- U.S. Equities -- 43.96% Advanced Micro Devices, Inc. (b).................. 8,900 $ 160,756 Aetna, Inc........................................ 5,900 527,681 Allergan, Inc..................................... 1,900 210,900 Alza Corp. (b).................................... 7,700 391,737 American Standard Companies, Inc. (b)............. 4,100 196,800 Aon Corp.......................................... 10,050 414,562 Armstrong World Industries, Inc................... 1,100 63,594 BankBoston Corp................................... 2,200 112,475 Baxter International, Inc......................... 4,400 266,750 Burlington Northern Santa Fe Corp................. 19,900 616,900 Champion Enterprises, Inc. (b).................... 3,500 65,188 Champion International Corp....................... 1,200 57,450 Chase Manhattan Corp.............................. 3,400 294,525 CIGNA Corp........................................ 4,800 427,200 Circuit City Stores-Circuit City Group............ 3,700 344,100 CMS Energy Corp................................... 3,700 154,937 CommScope, Inc. (b)............................... 3,166 97,355 Compaq Computer Corp.............................. 1,100 26,056 Computer Sciences Corp. (b)....................... 1,900 131,456 Compuware Corp. (b)............................... 3,200 101,800 Comverse Technology, Inc. (b)..................... 1,230 92,865 Consolidated Stores Corp. (b)..................... 5,100 137,700 Corning, Inc...................................... 7,800 546,975 Covance, Inc. (b)................................. 3,075 73,608 Delphi Automotive Systems Corp.................... 7,200 133,650 Dial Corp......................................... 2,100 78,094 Dominion Resources, Inc........................... 600 25,988 Eastman Chemical Co............................... 2,200 113,850 Electronic Data Systems Corp...................... 9,900 559,969 Eli Lilly and Company............................. 2,200 157,575 Entergy Corp...................................... 10,400 325,000 FDX Corp. (b)..................................... 12,200 661,850 Federal-Mogul Corp................................ 2,000 104,000 First American Corp. of Tennessee................. 1,000 41,563 First Data Corp................................... 7,958 389,445 First Security Corp............................... 1,925 52,456 First Union Corp.................................. 3,300 155,100 Fleet Financial Group, Inc........................ 5,000 221,875 Fleetwood Enterprises, Inc........................ 2,200 58,163 Food Lion Inc., Class A........................... 11,600 137,750 Fort James Corp................................... 7,000 265,125 General Instrument Corp. (b)...................... 10,000 425,000 Genzyme Corp. (b)................................. 1,600 77,600 Genzyme Surgical Products Division (b)............ 286 1,262 Geon Co........................................... 1,000 32,250 GreenPoint Financial Corp......................... 6,400 210,000 Hibernia Corp., Class A........................... 4,700 73,731 Household International, Inc...................... 6,400 303,200 Illinois Tool Works, Inc.......................... 1,300 106,600 IMC Global, Inc................................... 7,200 126,900 Johnson Controls, Inc............................. 1,900 131,694 Kimberly-Clark Corp............................... 3,600 205,200 Lafarge Corp...................................... 2,200 77,963 Lear Corp. (b).................................... 4,800 238,800 Lockheed Martin Corp.............................. 12,542 467,189 Lyondell Chemical Company......................... 5,700 117,563 Martin Marietta Materials, Inc.................... 1,136 67,024 Masco Corp........................................ 12,400 358,050 Mattel, Inc....................................... 5,600 148,050 MCN Energy Group, Inc............................. 800 16,600 Nabisco Holdings Corp., Class A................... 1,100 47,575 National Service Industries, Inc.................. 2,000 72,000 New York Times Co................................. 2,100 77,306 Newell Rubbermaid, Inc............................ 4,100 190,650 Nextel Communications, Inc. (b)................... 5,600 281,050 Norfolk Southern Corp............................. 7,000 210,875 Peco Energy Co.................................... 4,400 184,250 Pentair, Inc...................................... 2,100 96,075 Philip Morris Companies, Inc...................... 6,400 257,200 PNC Bank Corp..................................... 3,200 184,400 Praxair, Inc...................................... 3,400 166,387 Raytheon Co., Class B............................. 8,100 570,037 Regions Financial Corp............................ 1,000 38,438 Southdown, Inc.................................... 2,316 148,803 St. Jude Medical, Inc. (b)........................ 5,600 199,500 Tyson Foods, Inc., Class A........................ 7,400 166,500 U.S. Bancorp...................................... 5,059 172,006 Ultramar Diamond Shamrock Corp.................... 4,090 89,213 United Healthcare Corp............................ 4,000 250,500 USG Corp.......................................... 2,100 117,600 Vencor, Inc. (b).................................. 4,200 630 Ventas, Inc....................................... 2,800 15,050 Viad Corp......................................... 3,900 120,656 W.W. Grainger, Inc................................ 1,200 64,575 Wells Fargo and Co................................ 7,000 299,250 Westvaco Corp..................................... 1,400 40,600 Xerox Corp........................................ 16,400 968,625 York International Corp........................... 2,500 107,031 ---------- Total U.S. Equities (Cost $14,121,165)............ 17,316,281 ---------- Face Amount ---------- Bonds -- 52.83% U.S. Corporate Bonds -- 7.49% Archer Daniels 6.950%, due 12/15/69............... $ 250,000 232,287 Donaldson Lufkin & Jenrette, FRN 6.700%, due 06/30/00............................. 415,000 417,222 Heller Financial Commercial Mortgage Assets, 99-PH1, Class A1 6.500%, due 05/15/61..................................... 184,130 182,451 MBNA Global Capital Securities, FRN 5.795%, due 02/01/27......................... 215,000 186,425 Noram Energy Corp. 6.375%, due 11/01/03........... 200,000 195,519 PanAmSat Corp. 6.000%, due 01/15/03............... 335,000 327,904 Peco Energy Transition Trust 6.130%, due 03/01/09..................................... 215,000 203,857 Rite Aid Corp., 144A 6.125%, due 12/15/08......... 140,000 126,805 Sprint Capital Corp. 6.875%, due 11/15/28......... 200,000 182,106 TCI Communications, Inc. 8.750%, due 08/01/15..................................... 220,000 249,899 Time Warner, Inc. 7.570%, due 02/01/24............ 290,000 288,806 U.S.A. Waste Services 6.500%, due 12/15/02........ 360,000 356,994 ---------- 2,950,275 ----------
================================================================================ 9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- ----------- International Dollar Bonds -- 3.10% Abbey National PLC, Resettable Perpetual Preferred 6.700%, due 06/29/49............................... $ 250,000 $ 231,861 British Sky Broadcasting Group plc 6.875%, due 02/23/09............................... 125,000 113,989 Credit Suisse-London, 144A, Resettable Perpetual Preferred 7.900%, due 05/01/07..................... 270,000 262,863 Empresa Nacional de Electricidad S.A. 8.125%, due 02/01/97............................... 200,000 155,920 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14............................... 235,000 216,865 Tyco International Group, S.A. 5.875%, due 11/01/04. 250,000 241,254 ----------- 1,222,752 ----------- Mortgage-Backed Securities -- 5.13% LB Commercial Conduit Mortgage Trust, 99-C1, Class A1, 6.410%, due 10/15/30..................... 90,000 88,809 Prudential Home Mortgage Securities, 93-43, Class A9 6.750%, due 10/25/23............................... 711,829 695,607 Residential Asset Securitization Trust 97-A10, Class A1, 7.250%, due 12/25/27..................... 432,331 434,501 97-A11, Class A2, 7.000%, due 01/25/28.............. 93,689 93,927 UCFC Home Equity Loan 97-C, Class A8, FRN 5.069%, due 09/15/27....................................... 710,969 709,256 ----------- 2,022,100 ----------- U.S. Government Agencies -- 12.14% Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.............................. 386,445 398,293 9.000%, due 03/01/24.............................. 178,064 189,558 Federal Home Loan Mortgage Corp. 9.000%, due 01/01/29.............................. 164,979 174,620 Federal National Mortgage Assoc. 5.250%, due 01/15/09.............................. 440,000 401,812 7.500%, due 07/01/10.............................. 277,137 281,711 7.500%, due 12/01/27.............................. 228,125 230,712 Federal National Mortgage Assoc. Series 97-72 Class EG 0.000%, due 09/25/22...................... 263,539 234,686 FNCI 8.000%, due 02/01/13........................... 327,222 337,170 Government National Mortgage Association 7.000%, due 12/15/23.............................. 651,117 645,402 7.500%, due 06/15/24.............................. 478,831 485,108 8.000%, due 08/15/22.............................. 506,068 521,774 Jordan Aid 8.750%, due 09/01/19..................... 775,765 881,285 ----------- 4,782,131 ----------- U.S. Government Obligations -- 24.97% U.S. Treasury Bond 8.000%, due 11/15/21............. $1,535,000 $ 1,846,797 U.S. Treasury Inflation Indexed Note 3.625%, due 01/15/08.............................. 5,140,000 5,137,858 3.625%, due 04/15/28.............................. 2,940,000 2,852,343 ----------- 9,836,998 ----------- Total U.S. Bonds (Cost $21,149,598)................. 20,814,256 ----------- Short-Term Investments -- 2.17% U.S. Treasury Bills -- 1.57% U.S. Treasury Bill 4.46%, due 08/05/99.............. 620,000 617,348 ----------- Investment Companies -- 0.60% Shares ---------- Brinson Supplementary Trust U.S. Cash Management Prime Fund......................................... 236,079 236,079 ----------- Total Short-Term Investments (Cost $853,397).................................... 853,427 ----------- Total Investments (Cost $36,124,160) -- 98.96% (a)................... 38,983,964 Cash and other assets, less liabilities -- 1.04%.... 409,130 ----------- Net Assets -- 100%.................................. $39,393,094 ===========
See accompanying notes to Schedule of Investments. 10 U.S. Balanced Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $36,124,160; and net unrealized appreciation consisted of: Gross unrealized appreciation......................... $ 3,895,161 Gross unrealized depreciation......................... (1,035,357) ------------ Net unrealized appreciation..................... $ 2,859,804 ============
(b) Non-income producing security FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1999. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $606,533, or 1.54% 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 The U.S. Balanced Fund had the following open futures contracts as of June 30, 1999:
Settlement Cost/ Current Unrealized Date Proceeds Value Loss -------------- ---------- ----------- ---------- Interest Rate Futures Buy Contracts 5 Year U.S. Treasury Note, 57 contracts.................... September 1999 $6,256,594 $ 6,213,000 $ (43,594) 10 Year U.S. Treasury Note, 14 contracts................... September 1999 1,574,551 1,556,625 (17,926) 30 Year U.S. Treasury Bond, 16 contracts................... September 1999 1,881,096 1,854,500 (26,596) Index Futures Sale Contracts Standard & Poor's 500, 29 contracts........................ September 1999 9,569,072 10,017,325 (448,254) --------- Total............................................... $(536,370) =========
The segregated cash and aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1999 were $83,300 and $617,348, respectively. See accompanying notes to financial statements. ================================================================================ 11 U.S. Balanced Fund--Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES June 30, 1999
ASSETS: Investments, at value: Unaffiliated issuers (Cost $35,888,081)....................... $38,747,885 Affiliated issuers (Cost $236,079)............................ 236,079 Cash............................................................ 69,398 Receivables: Investment securities sold.................................... 334,340 Dividends..................................................... 21,037 Interest...................................................... 273,042 Fund shares sold.............................................. 87,121 Other assets.................................................... 1,621 ----------- TOTAL ASSETS................................................ 39,770,523 ----------- LIABILITIES: Payables: Investment securities purchased............................... 67,513 Fund shares redeemed.......................................... 120,328 Investment advisory fees...................................... 15,906 Variation margin.............................................. 111,813 Accrued expenses.............................................. 61,869 ----------- TOTAL LIABILITIES........................................... 377,429 ----------- NET ASSETS........................................................ $39,393,094 =========== NET ASSETS CONSIST OF: Paid in capital................................................. $36,848,035 Accumulated undistributed net investment income................. 200,223 Accumulated net realized gain................................... 21,402 Net unrealized appreciation..................................... 2,323,434 ----------- NET ASSETS.................................................. $39,393,094 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $37,603,028 and 4,010,404 shares issued and outstanding)...................................... $ 9.38 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,266 and 135 shares issued and outstanding)................................................. $ 9.38 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,788,800 and 191,943 shares issued and outstanding) $ 9.32 ===========
See accompanying notes to financial statements. 12
U.S. Balanced Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Interest....................................................... $ 1,648,958 Dividends...................................................... 315,958 ----------- TOTAL INCOME............................................... 1,964,916 ----------- EXPENSES: Advisory....................................................... 347,297 Professional................................................... 43,123 Registration................................................... 36,449 Printing....................................................... 27,654 Distribution................................................... 9,774 Other.......................................................... 21,483 ----------- TOTAL EXPENSES............................................. 485,780 Expenses waived by Advisor................................. (79,286) ----------- NET EXPENSES ............................................. 406,494 ----------- NET INVESTMENT INCOME ..................................... 1,558,422 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................. 4,805,976 Futures contracts............................................ (548,763) ----------- Net realized gain.......................................... 4,257,213 ----------- Change in net unrealized appreciation or depreciation on: Investments.................................................... (4,679,394) Futures contracts.............................................. (482,951) ----------- Change in net unrealized appreciation or depreciation........ (5,162,345) ----------- Net realized and unrealized loss................................. (905,132) ----------- Net increase in net assets resulting from operations............. $ 653,290 ===========
See accompanying notes to financial statements. ================================================================================ 13 U.S. Balanced Fund--Financial Statements
- ---------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income.......................................... $ 1,558,422 $ 9,285,597 Net realized gain.............................................. 4,257,213 43,393,817 Change in net unrealized appreciation or depreciation.......... (5,162,345) (19,387,830) ------------- ------------- Net increase in net assets resulting from operations........... 653,290 33,291,584 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.............................................. (2,554,055) (11,202,072) Brinson Class N.............................................. (68) (62) UBS Investment Funds Class................................... (123,921) (96,209) Distributions from net realized gain: Brinson Class I.............................................. (9,074,452) (20,202,719) Brinson Class N.............................................. (243) (75) UBS Investment Funds Class................................... (483,100) (121,168) ------------- ------------- Total distributions to shareholders.............................. (12,235,839) (31,622,305) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.................................................... 14,184,340 58,797,856 Shares issued on reinvestment of distributions................. 12,036,064 31,535,417 Shares redeemed................................................ (57,681,932) (294,075,195) ------------- ------------- Net decrease in net assets resulting from capital share transactions........................................... (31,461,528) (203,741,922) ------------- ------------- TOTAL DECREASE IN NET ASSETS................................. (43,044,077) (202,072,643) ------------- ------------- NET ASSETS: Beginning of period............................................ 82,437,171 284,509,814 ------------- ------------- End of period (including accumulated undistributed net investment income of $200,223 and $1,337,239, respectively)................................................ $ 39,393,094 $ 82,437,171 ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. Balanced Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, August 31, 1995* --------------------------------------- Through UBS Investment Funds Class 1999 1998 1997 June 30, 1996 - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period................... $ 12.19 $ 12.46 $ 11.67 $ 11.38 ------- ------- ------- ------- Income from investment operations: Net investment income.............................. 0.27** 0.42** 0.38 0.42 Net realized and unrealized gain................... 0.18 0.95 1.31 0.86 ------- ------- ------- ------- Total income from investment operations........ 0.45 1.37 1.69 1.28 ------- ------- ------- ------- Less distributions: Distributions from net investment income........... (0.67) (0.70) (0.36) (0.42) Distributions from net realized gain............... (2.65) (0.94) (0.54) (0.57) ------- ------- ------- ------- Total distributions............................ (3.32) (1.64) (0.90) (0.99) ------- ------- ------- ------- Net asset value, end of period......................... $ 9.32 $ 12.19 $ 12.46 $ 11.67 ======= ======= ======= ======= Total return (non-annualized).......................... 4.13% 11.79% 14.99% 11.54% Ratios/Supplemental data: Net assets, end of period (in 000s).................. $ 1,789 $ 1,880 $ 1,649 $ 779 Ratio of expenses to average net assets: Before expense reimbursement....................... 1.46% 1.31% 1.38% 1.51%*** After expense reimbursement........................ 1.30% 1.30% 1.30% 1.30%*** Ratio of net investment income to average net assets: Before expense reimbursement....................... 2.50% 3.38% 3.28% 3.26%*** After expense reimbursement........................ 2.66% 3.39% 3.36% 3.47%*** Portfolio turnover rate.............................. 113% 194% 329% 240%
* Commencement of UBS Investment Funds Class ** The net investment income per share data was determined by using average shares outstanding throughout the period. ***Annualized See accompanying notes to financial statements. ================================================================================ 15 U.S. Equity Fund [LOGO]UBS Investment Funds The investment strategies implemented in the U.S. Equity Fund are designed to enhance returns, while controlling risk. Our investment strategies emphasize stock selection with attention to avoiding unintended concentrations in particular industry and other common characteristic exposures. The Fund is typically 70% invested in large capitalization stocks with the remaining 30% in intermediate and small capitalization stocks. Industry exposures are normally maintained within 10% of the benchmark weightings. Since its performance inception on July 31, 1995, the UBS Investment Fund --U.S. Equity has produced an annualized return of 23.48%, compared to the 25.26% return of its benchmark, the Wilshire 5000 Equity Index. These results have been achieved with a risk level or volatility very similar to that of the benchmark: 15.03% versus 15.44%, respectively. For the last six months, the Fund has underperformed the benchmark, returning 10.18% compared to the benchmark return of 11.87%. Stock selection has provided the largest positive contribution to the Fund's returns over the last six months. Positions in Circuit City, First Data Corp. and FDX Corp. were some of the best performers. The Fund's underperformance on a year-to-date basis results mainly from our protective industry and common characteristic exposures which we feel are appropriate given the current environment of increasing volatility and stratification of equity returns across market segments. The equity market continued to favor a small group of fashionable large capitalization growth and technology (especially internet-related) stocks in the first quarter of 1999. These types of stocks represent, in our opinion, the most overvalued segments of the U.S. equity market. They have been driven to extremes by investors' unwillingness to miss out on the market's momentum. Demand for this niche group of stocks alone drove the entire market higher in the first quarter. Momentum, however, shifted away from U.S. growth stocks in the second quarter of 1999 after a long period of outperformance relative to "value" stocks. Factors contributing to this shift include higher global industrial production, the rebound in many commodity prices (notably oil) and expectations for stronger corporate profits. That shift helped the Fund regain nearly 400 basis points relative to the benchmark during the second quarter, with the Fund holding a pronounced overweight in stocks with "value" style affiliations. This is a significant change from the momentum in growth stocks over the past two years. While strong value stock performance this quarter helped broaden the market, valuation imbalances still remain, and growth stocks are likely to underperform. In addition to the value overweight, common characteristic exposures include underweights to size, momentum and earnings variability -- chief characteristics of the "growth" segment of the market. While these underweights have hampered performance on a year-to-date basis, they were beneficial in the second quarter, and we believe the Fund is well positioned for the coming months. 16 U.S. Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Equity 10.18% 14.63% 22.04% 23.48% - ------------------------------------------------------------------------------- Wilshire 5000 Equity Index 11.87 19.59 25.84 25.26 - -------------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund -- U.S. Equity Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- U.S. Equity and the Wilshire 5000 Equity Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- U.S. Equity vs. Wilshire 5000 Equity Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
UBS Investment Wilshire Fund -- U.S. 5000 Equity Equity Index - -------------------------------------------------------------------------------- 7/31/95 $10,000 $10,000 12/31/95 11,335 10,994 6/30/96 12,570 12,123 12/31/96 14,157 13,326 6/30/97 16,499 15,677 12/31/97 17,587 17,496 6/30/98 19,931 20,202 12/31/98 20,737 21,595 6/30/99 22,847 24,159 - --------------------------------------------------------------------------------
7/31/95 = $10,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 17 U.S. Equity Fund [LOGO]UBS Investment Funds Industry Diversification
As a Percent of Net Assets As of June 30, 1999 - --------------------------------------------- U.S. EQUITIES Energy............................... 0.69% Capital Investment Capital Goods...................... 10.54 Technology......................... 13.90 ------ 24.44 Basic Industries Chemicals.......................... 4.00 Housing/Paper...................... 7.07 Metals............................. 2.61 ------ 13.68 Consumer Non-Durables....................... 2.93 Retail/Apparel..................... 5.42 Autos/Durables..................... 3.81 Health: Drugs...................... 4.32 Health: Non-Drugs.................. 5.02 ------ 21.50 Financial Banks.............................. 10.62% Non-Banks.......................... 7.81 ------ 18.43 Utilities Electric........................... 3.91 Telephone.......................... 1.58 ------ 5.49 Transportation....................... 8.60 Services/Misc........................ 5.89 ------ Total U.S. Equities............ 98.72 SHORT-TERM INVESTMENTS............... 4.77 ------ TOTAL INVESTMENTS.............. 103.49 LIABILITIES, LESS CASH AND OTHER ASSETS........................ (3.49) ------ NET ASSETS........................... 100.00% ====== - ---------------------------------------------
Top Ten U.S. Equity Holdings
As of June 30, 1999 Percent of Net Assets - ------------------------------------------------ 1. Xerox Corp. 5.51% 2. FDX Corp. 3.75 3. Burlington Northern Santa Fe Corp. 3.51 4. Raytheon Co., Class B 3.22 5. Electronic Data Systems Corp. 3.18 6. Corning, Inc. 3.11 7. Aetna, Inc. 3.01 8. Lockheed Martin Corp. 2.66 9. CIGNA Corp. 2.44 10. General Instrument Corp. 2.44 - ------------------------------------------------
18 U.S. Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------------ ------------ U.S. Equities -- 98.72% Advanced Micro Devices, Inc. (b).............. 400,500 $ 7,234,031 Aetna, Inc.................................... 265,800 23,772,487 Allergan, Inc................................. 84,600 9,390,600 Alza Corp. (b)................................ 349,150 17,763,006 American Standard Companies, Inc. (b)......... 183,900 8,827,200 Aon Corp...................................... 451,950 18,642,937 Armstrong World Industries, Inc............... 48,200 2,786,563 BankBoston Corp............................... 97,200 4,969,350 Baxter International, Inc..................... 195,400 11,846,125 Burlington Northern Santa Fe Corp............. 894,000 27,714,000 Champion Enterprises, Inc. (b)................ 157,000 2,924,125 Champion International Corp................... 55,500 2,657,063 Chase Manhattan Corp.......................... 154,700 13,400,887 CIGNA Corp.................................... 216,950 19,308,550 Circuit City Stores-Circuit City Group........ 164,000 15,252,000 CMS Energy Corp............................... 164,850 6,903,094 CommScope, Inc. (b)........................... 140,999 4,335,719 Compaq Computer Corp.......................... 50,100 1,186,744 Computer Sciences Corp. (b)................... 94,100 6,510,544 Compuware Corp. (b)........................... 184,600 5,872,588 Comverse Technology, Inc. (b)................. 51,847 3,914,449 Consolidated Stores Corp. (b)................. 221,100 5,969,700 Corning, Inc.................................. 350,200 24,557,775 Covance, Inc. (b)............................. 140,050 3,352,447 Delphi Automotive Systems Corp................ 323,700 6,008,681 Dial Corp..................................... 92,400 3,436,125 Dominion Resources, Inc....................... 43,300 1,875,431 Eastman Chemical Co........................... 98,450 5,094,788 Electronic Data Systems Corp.................. 443,600 25,091,125 Eli Lilly and Co.............................. 97,000 6,947,625 Entergy Corp.................................. 467,800 14,618,750 FDX Corp. (b)................................. 545,800 29,609,650 Federal-Mogul Corp............................ 89,900 4,674,800 First American Corp. of Tennessee............. 46,700 1,940,969 First Data Corp............................... 358,430 17,540,668 First Security Corp........................... 88,300 2,406,175 First Union Corp.............................. 148,400 6,974,800 Fleet Financial Group, Inc.................... 223,900 9,935,562 Fleetwood Enterprises, Inc.................... 107,900 2,852,606 Food Lion Inc., Class A....................... 528,600 6,277,125 Fort James Corp............................... 320,100 12,123,787 GATX Corp..................................... 30,200 1,149,488 General Instrument Corp. (b).................. 454,250 19,305,625 Genzyme Corp. (b)............................. 72,150 3,499,275 Genzyme Surgical Products Division (b)........ 12,916 56,909 Geon Co....................................... 24,550 791,738 GreenPoint Financial Corp..................... 288,000 9,450,000 Hibernia Corp................................. 226,750 3,557,141 Household International, Inc.................. 289,200 13,700,850 Illinois Tool Works, Inc...................... 54,600 4,477,200 IMC Global, Inc............................... 323,700 5,705,213 Johnson Controls, Inc......................... 84,500 5,856,906 Kimberly-Clark Corp........................... 180,650 10,297,050 Lafarge Corp.................................. 96,700 3,426,806 Lear Corp. (b)................................ 214,050 10,648,987 Lockheed Martin Corp.......................... 565,052 21,048,187 Lyondell Chemical Company..................... 257,250 5,305,781 Martin Marietta Materials, Inc................ 52,307 3,086,113 Masco Corp.................................... 557,500 16,097,812 Mattel, Inc................................... 258,700 6,839,381 MCN Energy Group, Inc......................... 66,900 1,388,175 Nabisco Holdings Corp......................... 20,300 877,975 National Service Industries, Inc.............. 88,000 3,168,000 New York Times Co............................. 105,100 3,868,994 Newell Rubbermaid, Inc........................ 183,200 8,518,800 Nextel Communications, Inc., Class A (b)...... 249,450 12,519,272 Norfolk Southern Corp......................... 314,600 9,477,325 Peco Energy Co................................ 179,600 7,520,750 Pentair, Inc.................................. 94,500 4,323,375 Philip Morris Companies, Inc.................. 283,450 11,391,147 PNC Bank Corp................................. 145,500 8,384,438 Praxair, Inc.................................. 153,400 7,507,013 Raytheon Co., Class B......................... 361,950 25,472,232 Regions Financial Corp........................ 45,900 1,764,281 Southdown, Inc................................ 102,840 6,607,470 St. Jude Medical, Inc. (b).................... 253,100 9,016,687 Tyson Foods, Inc.............................. 332,350 7,477,875 U.S. Bancorp.................................. 229,141 7,790,794 Ultramar Diamond Shamrock Corp................ 184,218 4,018,255 United Healthcare Corp........................ 178,700 11,191,087 USG Corp...................................... 71,600 4,009,600 Vencor, Inc. (b).............................. 169,000 25,350 Ventas, Inc................................... 119,700 643,388 Viad Corp..................................... 175,650 5,434,172 W.W. Grainger, Inc............................ 54,400 2,927,400 Wells Fargo and Co............................ 311,900 13,333,725 Westvaco Corp................................. 72,800 2,111,200 Xerox Corp.................................... 737,900 43,582,219 York International Corp....................... 111,300 4,765,031 ------------ Total U.S. Equities (Cost $611,467,321)....... 779,917,143 ------------ Short-Term Investments -- 4.77% Investment Companies -- 4.77% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $37,684,984)............... 37,684,984 37,684,984 ------------ Total Investments (Cost $649,152,305) -- 103.49% (a).......... 817,602,127 Liabilities, less cash and other assets -- (3.49%)........................... (27,551,605) ------------ Net Assets -- 100%............................ $790,050,522 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $649,152,305; and net unrealized appreciation consisted of:
Gross unrealized appreciation............... $191,506,645 Gross unrealized depreciation............... (23,056,823) ------------ Net unrealized appreciation............... $168,449,822 ============
(b) Non-income producing security See accompanying notes to financial statements. ================================================================================ 19 U.S. Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $611,467,321).................................... $ 779,917,143 Affiliated issuers (Cost $37,684,984)....................................... 37,684,984 Cash.......................................................................... 939 Receivables: Investment securities sold.................................................. 4,034,378 Dividends................................................................... 935,568 Interest.................................................................... 163,922 Fund shares sold............................................................ 1,589,198 Other assets.................................................................. 914 ------------- TOTAL ASSETS.............................................................. 824,327,046 ------------- LIABILITIES: Payables: Investment securities purchased............................................. 4,197,075 Fund shares redeemed........................................................ 29,582,170 Investment advisory fees.................................................... 462,359 Accrued expenses............................................................ 34,920 ------------- TOTAL LIABILITIES......................................................... 34,276,524 ------------- NET ASSETS...................................................................... $ 790,050,522 ============= NET ASSETS CONSIST OF: Paid in capital............................................................... $ 577,012,442 Accumulated undistributed net investment income............................... 1,363,158 Accumulated net realized gain................................................. 43,225,100 Net unrealized appreciation................................................... 168,449,822 ------------- NET ASSETS................................................................ $ 790,050,522 ============= OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $713,320,572 and 33,205,246 shares issued and outstanding).............................................................. $ 21.48 ============= Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $7,563,160 and 353,550 shares issued and outstanding)....... $ 21.39 ============= UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $69,166,790 and 3,233,960 shares issued and outstanding).............................................................. $ 21.39 =============
See accompanying notes to financial statements. ================================================================================ 20 U.S. Equity Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999
INVESTMENT INCOME: Dividends.................................................... $ 10,840,069 Interest..................................................... 860,262 ------------ TOTAL INCOME........................................... 11,700,331 ------------ EXPENSES: Advisory..................................................... 5,047,492 Distribution................................................. 363,195 Administration............................................... 267,455 Other........................................................ 459,718 ------------ TOTAL EXPENSES......................................... 6,137,860 ------------ NET INVESTMENT INCOME.................................. 5,562,471 ------------ NET REALIZED AND UNREALIZED GAIN: Net realized gain on: Investments................................................ 52,263,712 Futures contracts.......................................... 1,685,319 ------------ Net realized gain........................................ 53,949,031 ------------ Change in net unrealized appreciation or depreciation on: Investments.................................................. 51,764,886 Futures contracts............................................ (96,948) ------------ Change in net unrealized appreciation or depreciation...... 51,667,938 ------------ Net realized and unrealized gain............................... 105,616,969 ------------ Net increase in net assets resulting from operations........... $111,179,440 ============
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 21 U.S. Equity Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income............................................................. $ 5,562,471 $ 5,791,742 Net realized gain................................................................. 53,949,031 44,131,079 Change in net unrealized appreciation or depreciation............................. 51,667,938 58,277,883 ------------ ------------ Net increase in net assets resulting from operations.............................. 111,179,440 108,200,704 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................. (5,223,351) (4,978,081) Brinson Class N................................................................. (28,171) (832) UBS Investment Funds Class...................................................... (190,578) (249,586) Distributions from net realized gain: Brinson Class I................................................................. (36,404,562) (28,383,478) Brinson Class N................................................................. (234,496) (64) UBS Investment Funds Class...................................................... (3,937,537) (2,678,143) ------------ ------------ Total distributions to shareholders............................................... (46,018,695) (36,290,184) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................................................... 283,730,686 346,081,960 Shares issued in connection with the acquisition of the UBS Value Equity Fund..... 23,269,419 -- Shares issued on reinvestment of distributions.................................... 42,645,369 33,981,329 Shares redeemed................................................................... (285,854,547) (163,864,419) ------------ ------------ Net increase in net assets resulting from capital share transactions.............. 63,790,927 216,198,870 ------------ ------------ TOTAL INCREASE IN NET ASSETS................................................ 128,951,672 288,109,390 ------------ ------------ NET ASSETS: Beginning of period............................................................... 661,098,850 372,989,460 ------------ ------------ End of period (including accumulated undistributed net investment income of $1,363,158 and $1,242,787, respectively).......................................... $790,050,522 $661,098,850 ============ ============
See accompanying notes to financial statements. ================================================================================ 22 U.S. Equity Fund -- Financial Highlights - ------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, August 31, 1995* ------------------------------- Through UBS Investment Funds Class 1999 1998 1997 June 30, 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period...................................... $ 19.83 $ 17.59 $ 14.58 $ 11.94 ------- ------- ------- ------- Income from investment operations: Net investment income................................................. 0.06** 0.09 0.11 0.10 Net realized and unrealized gain...................................... 2.67 3.38 4.22 2.92 ------- ------- ------- ------- Total income from investment operations......................... 2.73 3.47 4.33 3.02 ------- ------- ------- ------- Less distributions: Distributions from net investment income.............................. (0.05) (0.10) (0.09) (0.13) Distributions from net realized gain.................................. (1.12) (1.13) (1.23) (0.25) ------- ------- ------- ------- Total distributions............................................. (1.17) (1.23) (1.32) (0.38) ------- ------- ------- ------- Net asset value, end of period............................................ $ 21.39 $ 19.83 $ 17.59 $ 14.58 ======= ======= ======= ======= Total return (non-annualized)............................................. 14.63% 20.80% 31.28% 25.70% Ratios/Supplemental data: Net assets, end of period (in 000s)..................................... $69,167 $55,063 $35,039 $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement.......................................... 1.32% 1.32% 1.41% 1.66%*** After expense reimbursement........................................... N/A N/A 1.32% 1.32%*** Ratio of net investment income to average net assets: Before expense reimbursement.......................................... 0.30% 0.60% 0.54% 0.61%*** After expense reimbursement........................................... N/A N/A 0.63% 0.95%*** Portfolio turnover rate................................................. 48% 42% 43% 36% *Commencement of UBS Investment Funds Class **The net investment income per share data was determined by using average shares outstanding throughout the period. ***Annualized N/A = Not Applicable
See accompanying notes to financial statements. ================================================================================ 23 U.S. Large Capitalization Equity Fund [LOGO]UBS Investment Funds The investment strategies implemented in the U.S. Large Capitalization Equity Fund are designed to enhance returns, while controlling risk. Our investment strategies emphasize stock selection with attention directed to avoiding unintended concentrations in particular industry and other common characteristic exposures. Issues are selected from a universe of less than 300 of the largest capitalization domestic stocks, collectively comprising approximately 65% of the value of the U.S. equity market. Since its performance inception on April 30, 1998, the UBS Investment Fund -- U.S. Large Capitalization Equity has produced an annualized return of 11.45%, compared to the 21.53% return of its benchmark, the S&P 500 Equity Index. These results have been achieved with a risk level or volatility somewhat lower than that of the benchmark: 19.90% versus 21.14% respectively. For the last six months, the Fund has underperformed the benchmark, returning 7.78% compared to the benchmark return of 12.38%. In 1998 and the first quarter of this year, the U.S. equity market has been fueled by the desire to not miss out on market momentum. The very largest stocks and stocks characterized as growth stocks have outperformed the broader market by historic margins, driving the market to extremes. Based on current prices, the market is extrapolating super-normal earnings growth for a small group of "in vogue" stocks far into the future, making the realization of such projections increasingly unattainable. For the year-to-date period, this momentum has created a difficult environment for the U.S. Large Capitalization Equity Fund. We believe that many of the largest, most successful companies (in terms of recent price appreciation) are currently among the most overvalued. However, market momentum has continued to carry them higher. The largest 25 stocks by market capitalization in the S&P 500 were up 6.59% in the first quarter of the year compared to an increase of 3.79% for the bottom 475 stocks. The largest four stocks alone accounted for 33% of the S&P 500 return for the quarter. Some of the best performing stocks for the quarter were again found in the computer, electronics, and telecommunications industries. While many of the companies driving the market are characterized as "good companies," their future prospects simply cannot support current prices. Momentum did, in fact, shift away from growth stocks in the second quarter of 1999 to the benefit of value stocks, and our Fund. The Fund outperformed the benchmark in the second quarter by more than 100 basis points due to this value shift. Contributing factors included higher global industrial production, the rebound in many commodity prices (notably oil) and expectations for stronger corporate profits. This is a significant change from the momentum driving growth stocks over the past two years. While strong value stock performance this quarter helped broaden the market, valuation imbalances still remain. Based on our analysis, growth stocks are likely to underperform the broader market by a wide margin in the coming months. Such conditions should benefit the Fund which maintains underweight positions in common characteristics such as size, momentum and earnings variability and overweights to more traditional value measures. 24 U.S. Large Capitalization Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 1 year 4/30/98* ended ended to 6/30/99 6/30/99 6/30/99 - -------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Large Capitalization Equity 7.78% 13.86% 11.45% - -------------------------------------------------------------------------------- S&P 500 Equity Index 12.38 22.76 21.53 - --------------------------------------------------------------------------------
*Performance inception date of the UBS Investment Fund -- U.S. Large Capitalization Equity Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- U.S. Large Capitalization Equity and the S&P 500 Equity Index if you had invested $10,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- U.S. Large Capitalization Equity vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
UBS Investment Fund -- U.S. Large S&P 500 Capitalization Equity Equity Index - -------------------------------------------------------------------------------- 4/30/98 $10,000 $10,000 6/30/98 9,968 10,227 9/30/98 9,133 9,210 12/31/98 10,529 11,171 3/31/99 10,509 11,728 6/30/99 11,349 12,555 - --------------------------------------------------------------------------------
4/30/98 = $10,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 25 U.S. Large Capitalization Equity Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Industry Diversification As a Percent of Net Assets As of June 30, 1999
- --------------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods.......................... 13.52% Technology............................. 15.47 ------ 28.99 Basic Industries Chemicals.............................. 1.41 Housing/Paper.......................... 1.79 Metals................................. 3.90 ------ 7.10 Consumer Non-Durables........................... 2.17 Retail/Apparel......................... 2.88 Autos/Durables......................... 0.88 Health: Drugs.......................... 1.30 Health: Non-Drugs...................... 4.96 ------ 12.19 Financial Banks.................................. 12.24 Non-Banks.............................. 11.76 ------ 24.00 Utilities Electric............................... 3.11 Transportation........................... 12.68 Services/Miscellaneous................... 5.95 ------ Total U.S. Equities................. 94.02 SHORT-TERM INVESTMENTS................... 5.80 ------ TOTAL INVESTMENTS................... 99.82 CASH AND OTHER ASSETS, LESS LIABILITIES....................... 0.18 ------ NET ASSETS...............................100.00% ======
- -------------------------------------------------------------------------------- Top 10 U.S. Equity Holdings As of June 30, 1999
Percent of Net Assets - --------------------------------------------------- 1. Xerox Corp. 8.29% 2. FDX Corp. 5.64 3. Burlington Northern Santa Fe Corp. 5.28 4. Raytheon Co., Class B 4.85 5. Electronic Data Systems Corp. 4.77 6. Corning, Inc. 4.67 7. Aetna, Inc. 4.53 8. Lockheed Martin Corp. 4.02 9. CIGNA Corp. 3.67 10. Aon Corp. 3.55 - ---------------------------------------------------
================================================================================ 26 U.S. Large Capitalization Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ----------- ----------- U.S. Equities -- 94.02% Aetna, Inc........................................ 13,400 $ 1,198,462 Aon Corp.......................................... 22,750 938,437 BankBoston Corp................................... 4,800 245,400 Baxter International, Inc......................... 9,800 594,125 Burlington Northern Santa Fe Corp................. 45,000 1,395,000 Chase Manhattan Corp.............................. 7,800 675,675 CIGNA Corp........................................ 10,900 970,100 Compaq Computer Corp.............................. 2,500 59,219 Computer Sciences Corp. (b)....................... 4,400 304,425 Compuware Corp. (b)............................... 8,600 273,588 Corning, Inc...................................... 17,600 1,234,200 Covance, Inc. (b)................................. 6,900 165,169 Delphi Automotive Systems Corp.................... 12,500 232,031 Dominion Resources, Inc........................... 2,000 86,625 Electronic Data Systems Corp...................... 22,300 1,261,344 Eli Lilly and Company............................. 4,800 343,800 Entergy Corp...................................... 23,500 734,375 FDX Corp. (b)..................................... 27,500 1,491,875 First Data Corp................................... 18,000 880,875 First Union Corp.................................. 7,300 343,100 Fleet Financial Group, Inc........................ 11,100 492,562 Household International, Inc...................... 14,600 691,675 Illinois Tool Works, Inc.......................... 2,700 221,400 Kimberly-Clark Corp............................... 8,300 473,100 Lockheed Martin Corp.............................. 28,500 1,061,625 Masco Corp........................................ 28,000 808,500 Mattel, Inc....................................... 12,800 338,400 Newell Rubbermaid, Inc............................ 9,100 423,150 Norfolk Southern Corp............................. 15,400 463,925 Philip Morris Companies, Inc...................... 14,300 574,681 PNC Bank Corp..................................... 7,200 414,900 Praxair, Inc...................................... 7,600 371,925 Raytheon Co., Class B............................. 18,200 1,280,825 U.S. Bancorp...................................... 11,500 391,000 United Healthcare Corp............................ 8,800 551,100 Wells Fargo and Co................................ 15,700 671,175 Xerox Corp........................................ 37,100 2,191,219 ----------- Total U.S. Equities (Cost $22,653,111)............ 24,848,987 ----------- Investment Companies -- 5.80% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,533,005)............................... 1,533,005 1,533,005 ----------- Total Investments (Cost $24,186,116) -- 99.82% (a)................ 26,381,992 Cash and other assets, less liabilities -- 0.18%....................... 47,712 ----------- Net Assets -- 100%................................ $26,429,704 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $24,186,116; and net unrealized appreciation consisted of:
Gross unrealized appreciation.................. $2,715,404 Gross unrealized depreciation.................. (519,528) ---------- Net unrealized appreciation................. $2,195,876 ==========
(b) Non-income producing security See accompanying notes to financial statements. ================================================================================ 27 U.S. Large Capitalization Equity Fund -- Financial Statements - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $22,653,111).......................... $24,848,987 Affiliated issuers (Cost $1,533,005)............................. 1,533,005 Receivables: Investment securities sold....................................... 68,635 Dividends........................................................ 40,400 Interest......................................................... 5,840 Fund shares sold................................................. 75,369 ----------- TOTAL ASSETS................................................... 26,572,236 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 83,692 Fund shares redeemed............................................. 22,374 Investment advisory fees......................................... 7,436 Accrued expenses................................................. 29,030 ----------- TOTAL LIABILITIES.............................................. 142,532 ----------- NET ASSETS......................................................... $26,429,704 =========== NET ASSETS CONSIST OF: Paid in capital.................................................. $23,882,590 Accumulated undistributed net investment income.................. 81,256 Accumulated net realized gain.................................... 269,982 Net unrealized appreciation...................................... 2,195,876 ----------- NET ASSETS..................................................... $26,429,704 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $22,668,003 and 2,036,524 shares issued and outstanding)........ $ 11.13 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $3,755,814 and 337,580 shares issued and outstanding)......................................... $ 11.13 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,887 and 532 shares issued and outstanding)................................................. $ 11.07 ===========
See accompanying notes to financial statements. ================================================================================ 28 U.S. Large Capitalization Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999
INVESTMENT INCOME: Dividends.......................................................... $ 315,848 Interest........................................................... 52,331 ---------- TOTAL INCOME.................................................... 368,179 ---------- EXPENSES: Advisory........................................................... 137,200 Professional....................................................... 35,054 Distribution....................................................... 24,699 Other.............................................................. 82,697 ---------- TOTAL EXPENSES.................................................. 279,650 Expenses waived by Advisor...................................... (97,158) ---------- NET EXPENSES.................................................... 182,492 ---------- NET INVESTMENT INCOME........................................... 185,687 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments....................................................... 233,080 Futures contracts................................................. 106,203 ---------- Net realized gain............................................... 339,283 ---------- Change in net unrealized appreciation or depreciation on: Investments....................................................... 2,383,598 Futures contracts................................................. (9,036) ---------- Change in net unrealized appreciation or depreciation................ 2,374,562 ---------- Net realized and unrealized gain..................................... 2,713,845 ---------- Net increase in net assets resulting from operations................. $2,899,532 ==========
See accompanying notes to financial statements. ================================================================================ 29 U.S. Large Capitalization Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year April 6, 1998* Ended Through June 30, 1999 June 30, 1998 ------------- -------------- OPERATIONS: Net investment income....................................................... $ 185,687 $ 32,434 Net realized gain (loss).................................................... 339,283 (69,301) Change in net unrealized appreciation or depreciation....................... 2,374,562 (178,686) ------------ ----------- Net increase (decrease) in net assets resulting from operations............. 2,899,532 (215,553) ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.......................................................... (87,626) (191) Brinson Class N.......................................................... (69,880) (20,605) UBS Investment Funds Class............................................... (12) (1) ------------ ----------- Total distributions to shareholders......................................... (157,518) (20,797) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold................................................................. 24,853,429 16,922,491 Shares issued on reinvestment of distributions.............................. 147,324 20,775 Shares redeemed............................................................. (17,500,436) (519,553) ------------ ----------- Net increase in net assets resulting from capital share transactions........ 7,500,317 16,423,713 ------------ ----------- TOTAL INCREASE IN NET ASSETS.......................................... 10,242,331 16,187,363 ------------ ----------- NET ASSETS: Beginning of period......................................................... 16,187,373 10 ------------ ----------- End of period (including accumulated undistributed net investment income of $81,256 and $11,637, respectively)............................... $ 26,429,704 $16,187,373 ============ ===========
*Commencement of investment operations See accompanying notes to financial statements. ================================================================================ 30 U.S. Large Capitalization Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
April 6, 1998* Year Ended Through UBS Investment Funds Class June 30, 1999 June 30, 1998 - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period............................................. $ 9.79 $ 10.00 ------- -------- Income from investment operations: Net investment income.......................................................... 0.04** 0.02 Net realized and unrealized gain (loss)........................................ 1.31 (0.22) ------- -------- Total income (loss) from investment operations............................... 1.35 (0.20) ------- -------- Less distributions: Distributions from net investment income........................................ (0.07) (0.01) ------- -------- Total distributions.......................................................... (0.07) (0.01) ------- -------- Net asset value, end of period................................................... $ 11.07 $ 9.79 ======= ======== Total return (non-annualized).................................................... 13.86% (2.06)% Ratios/Supplemental data: Net assets, end of period (in 000s)............................................. $ 6 $ 1 Ratio of expenses to average net assets: Before expense reimbursement................................................... 1.81% 2.11%*** After expense reimbursement.................................................... 1.32% 1.32%*** Ratio of net investment income to average net assets: Before expense reimbursement.................................................... 0.05% 0.00%*** After expense reimbursement..................................................... 0.54% 0.79%*** Portfolio turnover rate.......................................................... 88% 12%
*Commencement of investment operations **The net investment income per share data was determined using average shares outstanding throughout the period. ***Annualized See accompanying notes to financial statements. =============================================================================== 31 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds The investment strategies implemented in the U.S. Large Capitalization Growth Fund are designed to enhance returns while controlling risk. We invest in large companies with market capitalizations of $3 billion and larger that we believe possess a unique competitive advantage that will allow them to achieve high returns through above average sales and profit growth. We employ quantitative and qualitative analysis to identify companies that are undervalued relative to current market prices, and construct portfolios with attention to both risk and return. Since its inception on December 31, 1998, the UBS Investment Fund -- U.S. Large Capitalization Growth has returned 16.98% compared to 12.38% for its benchmark, the S&P 500 Equity Index. While large growth stocks have outperformed the broader market over this period, the Fund's success on a year-to-date basis is not a result of its large growth style affiliation. The Fund also outperformed the Russell 1000 Growth Index (an index of the market's largest 1000 growth companies) by a wide margin. The Russell 1000 Growth Index posted a return of 10.45% for the six months ending June 30, more than 650 basis points lower than the Fund. At the inception of the UBS Investment Funds class on December 31, 1998, we had expectations of improving earnings for cyclical companies in 1999, and we incorporated the consequences of those expectations for the growth segment of the market into our investment decision making process. At that time, our solution was to look for growth companies that were hurt by global economic woes, and which we expected to perform well in this emerging environment. We consciously underweighted the major companies in most sectors unless we were extremely confident of the underlying fundamentals. In the second quarter of 1999 we did in fact experience a shift in favor of cyclicals. The Fund was well- positioned for that occurrence. The strongest positive contribution to performance came from issue selection, while the remainder came from our industry allocation decisions. The strongest performing stocks for the Fund were Qualcomm (up more than 450%), Texas Instruments (up nearly 70%), and Sun Microsystems (up approximately 60%). Other positives for the Fund were holdings in Immunex and Liberty Media, while positions in Compaq computer and Becton Dickinson caused a slight on performance. With respect to industry weightings, the largest positive contributors to performance were overweights in electronics, media and oil services. On the opposing side, negative contributions came from our underweight of producer goods and our overweight of the business machines industry. As we enter the remainder of the year, the Fund is positioned to take advantage of a continuation in the trends that helped performance in the first half of 1999. The largest overweights relative to the S&P 500 Equity Index are held in the consumer staples, healthcare and technology sectors. The largest relative industry underweight is maintained to financials. 32 ----------------------------------------------------------------------------- U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
12/31/98* to 6/30/99 - -------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Large Capitalization Growth 16.98% - -------------------------------------------------------------------------------- S&P 500 Equity Index 12.38 - --------------------------------------------------------------------------------
*Performance inception date of the UBS Investment Fund -- U.S. Large Capitalization Growth. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- U.S. Large Capitalization Growth and the S&P 500 Equity Index if you had invested $10,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- U.S. Large Capitalization Growth vs. S&P 500 Equity Index Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE]
UBS Investment Fund -- U.S. Large S&P 500 Capitalization Growth Equity Index - -------------------------------------------------------------------------------- 12/31/98 $10,000 $10,000 1/31/99 10,617 10,418 2/28/99 10,152 10,094 3/31/99 10,633 10,498 4/30/99 11,030 10,905 5/31/99 10,887 10,648 6/30/99 11,698 11,238 - --------------------------------------------------------------------------------
12/31/98 = $10,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 33 U.S. Large Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Industry Diversification As a Percent of Net Assets As of June 30, 1999 ------------------------------------------------------------------------
U.S. EQUITIES Energy........................ 3.52% Basic Industries Chemicals.................... 1.35 Housing/Paper................ 1.68 ------ 3.03 Capital Investment Capital Goods................ 2.04 Technology................... 19.26 ------ 21.30 Consumer Non-Durables................. 4.40 Retail/Apparel............... 7.21 Autos/Durables............... 1.23 Health: Drugs................ 9.49 Health: Non-Drugs............ 8.05 ------ 30.38 Financial Banks........................ 1.72 Non-Banks.................... 6.45 ------ 8.17 Utilities Telephone.................... 13.46 Transportation............... 1.58 Services/Miscellaneous........ 13.74 ------ Total U.S. Equities........ 95.18 ------ TOTAL INVESTMENTS.......... 95.18 CASH AND OTHER ASSETS, LESS LIABILITIES............. 4.82 ------ NET ASSETS.................... 100.00% ======
Top 10 U.S. Equity Holdings As of June 30, 1999
Percent of Net Assets - -------------------------------------------------------- 1. International Business Machines Corp. 3.36% 2. General Electric Co. 3.35 3. Texas Instruments, Inc. 3.23 4. Oracle Corp. 2.50 5. Dayton-Hudson Corp. 2.41 6. Waste Management, Inc. 2.39 7. Qualcomm, Inc. 2.31 8. SBC Communications, Inc. 2.22 9. Wal-Mart Stores, Inc. 2.21 10. Sun Microsystems, Inc. 2.13 - --------------------------------------------------------
34 U.S. Large Capitalization Growth Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ---------- ---------- U.S. Equities -- 95.18% Abbott Laboratories............................. 2,000 $ 91,000 AFLAC, Inc...................................... 3,300 157,987 Albertson's, Inc................................ 2,000 103,125 American Express, Co............................ 1,100 143,137 American International Group, Inc............... 700 81,944 AT&T Corp....................................... 2,950 164,647 AT&T Corp. - Liberty Media Goup, Inc. (b)....... 4,156 152,733 Autozone, Inc................................... 3,300 99,413 Avon Products, Inc.............................. 2,000 111,000 Bank of America Corp............................ 1,900 139,294 Becton Dickinson & Co........................... 2,300 69,000 Bell Atlantic Corp.............................. 1,200 78,450 BMC Software, Inc. (b).......................... 2,100 113,400 Boeing Co....................................... 2,900 128,144 Boston Scientific Corp. (b)..................... 1,800 79,088 Bristol-Myers Squibb Co......................... 2,200 154,962 CBS Corp. (b)................................... 2,600 112,937 Citigroup, Inc.................................. 1,900 90,250 Dayton Hudson Corp.............................. 3,000 195,000 E.I. du Pont de Nemours & Co.................... 1,600 109,300 Electronic Data Systems Corp.................... 2,100 118,781 Exxon Corp...................................... 900 69,413 Federal Home Loan Association Co................ 1,900 110,200 General Electric Co............................. 2,400 271,200 Gillette Co..................................... 1,500 61,500 Halliburton Co.................................. 1,800 81,450 Hewlett-Packard Co.............................. 1,200 120,600 Immunex Corp. (b)............................... 800 101,950 Intel Corp...................................... 1,700 101,150 International Business Machines Corp............ 2,100 271,425 Johnson & Johnson Co............................ 1,300 127,400 Lilly (Eli) & Co................................ 1,500 107,438 Loral Space & Communications Ltd. (b)........... 5,900 106,200 Lowe's Companies, Inc........................... 2,400 136,050 Lucent Technologies, Inc........................ 1,700 114,644 Medtronic, Inc.................................. 2,000 155,750 Merck & Co., Inc................................ 1,800 133,200 Merrill Lynch & Co.............................. 1,200 95,925 Microsoft, Inc. (b)............................. 1,400 126,262 Motorola, Inc................................... 1,000 94,750 Nortel Networks, Inc............................ 1,200 104,175 Oracle Corp. (b)................................ 5,450 202,331 Pepsi Bottling Group, Inc....................... 5,200 119,925 Philip Morris Companies, Inc.................... 3,300 132,619 Proctor & Gamble Co............................. 1,100 98,175 QUALCOMM, Inc. (b).............................. 1,300 186,550 Raytheon Co., Class A........................... 2,400 165,300 SBC Communications, Inc......................... 3,100 179,800 Schering Plough Corp............................ 3,100 164,300 Schlumberger Ltd................................ 2,100 133,744 Sun Microsystems, Inc. (b)...................... 2,500 172,187 Texas Instruments, Inc.......................... 1,800 261,000 Time Warner, Inc................................ 2,300 169,050 Tyco International Co........................... 900 85,275 Wal-Mart Stores, Inc............................ 3,700 178,525 Walt Disney Co.................................. 2,700 83,194 Waste Management, Inc........................... 3,600 193,500 Watson Pharmaceutical Co........................ 400 14,025 Xerox Corp...................................... 2,900 171,281 ---------- Total Equities (Cost $6,642,892)................ 7,695,055 ---------- Total Investments (Cost $6,642,892) -- 95.18% (a)............... 7,695,055 ---------- Cash and other assets, less liabilities -- 4.82%..................... 389,844 ---------- Net Assets -- 100%.............................. $8,084,899 ==========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $6,642,892; and net unrealized appreciation consisted of:
Gross unrealized appreciation............ $1,141,787 Gross unrealized depreciation............ (89,624) ---------- Net unrealized appreciation............ $1,052,163 ==========
(b) Non-income producing security See accompanying notes to financial statements. ================================================================================ 35 U.S. Large Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999
ASSETS: Investments, at value: Unaffiliated issuers (Cost $6,642,892)................................................. $7,695,055 Cash..................................................................................... 409,188 Receivables: Due from Advisor....................................................................... 23,548 Dividends.............................................................................. 5,334 Investment securities sold............................................................. 73,230 Fund shares sold....................................................................... 30,752 Other assets........................................................................... 18,639 ---------- TOTAL ASSETS....................................................................... 8,255,746 ---------- LIABILITIES: Payables: Investment securities purchased........................................................ 126,965 Accrued expenses....................................................................... 43,882 TOTAL LIABILITIES.................................................................. 170,847 ---------- NET ASSETS................................................................................. $8,084,899 ========== NET ASSETS CONSIST OF: Paid in capital.......................................................................... $6,447,525 Accumulated net realized gain............................................................ 585,211 Net unrealized appreciation.............................................................. 1,052,163 ---------- NET ASSETS......................................................................... $8,084,899 ========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $2,947,293 and 211,874 shares issued and outstanding)................................ $ 13.91 ========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,166 and 84 shares issued and outstanding)......................................... $ 13.88 ========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,136,440 and 370,958 shares issued and outstanding).................................. $ 13.85 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 36 U.S. Large Capitalization Growth Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends....................................................... $ 20,814 Interest........................................................ 9,130 -------- TOTAL INCOME................................................ 29,944 -------- EXPENSES: Registration.................................................... 23,053 Advisory........................................................ 18,582 Professional.................................................... 17,394 Distribution.................................................... 8,837 Other........................................................... 4,337 -------- TOTAL EXPENSES.............................................. 72,203 Expenses waived and reimbursed by Advisor................... (42,136) -------- NET EXPENSES................................................ 30,067 -------- NET INVESTMENT LOSS......................................... (123) -------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments................................ 408,525 Change in net unrealized appreciation or depreciation on investments.................................................... 463,877 -------- Net realized and unrealized gain................................ 872,402 -------- Net increase in net assets resulting from operations............ $872,279 ======== See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 37 U.S. Large Capitalization Growth Fund -- Financial Statements
- ----------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Period Ended Year Ended June 30, 1999 December 31, 1998 ------------- ----------------- OPERATIONS: Net investment income (loss)................................................................... $ (123) $ 20,269 Net realized gain.............................................................................. 408,525 438,421 Change in net unrealized appreciation or depreciation.......................................... 463,877 554,465 ---------- ---------- Net increase in net assets resulting from operations........................................... 872,279 1,013,155 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I.............................................................................. - (19,205) Distributions from net realized gain: Brinson Class I.............................................................................. - (151,936) ---------- ---------- Total distributions to shareholders............................................................ - (171,141) ---------- ---------- Capital share transactions: Shares sold.................................................................................... 5,233,678 4,973,380 Shares issued on reinvestment of distributions................................................. - 170,881 Shares redeemed................................................................................ (2,169,846) (5,974,601) ---------- ---------- Net increase (decrease) in net assets resulting from capital share transactions................ 3,063,832 (830,340) ---------- ---------- TOTAL INCREASE IN NET ASSETS................................................................. 3,936,111 11,674 ---------- ---------- NET ASSETS: Beginning of period........................................................................... 4,148,788 4,137,114 ---------- ---------- End of period................................................................................. $8,084,899 $4,148,788 ========== ========== See accompanying notes to financial statements. ==================================================================================================================================
38 U.S. Large Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Period Ended UBS Investment Funds Class June 30, 1999* - ---------------------------------------------------------------------------- Net asset value, beginning of period............................. $11.84 ------ Income from investment operations: Net investment loss......................................... (0.04) Net realized and unrealized gain............................ 2.05 ------ Total income from investment operations.................. 2.01 ------ Net asset value, end of period................................... $13.85 ====== Total return (non-annualized).................................... 16.98% Ratios/Supplemental data: Net assets, end of period (in 000s)............................ $5,136 Ratio of expenses to average net assets: Before expense reimbursement................................ 3.15%** After expense reimbursement................................. 1.57%** Ratio of net investment loss to average net assets: Before expense reimbursement................................ (2.03)%** After expense reimbursement................................. (0.45)%** Portfolio turnover rate........................................ 51%
* Commencement of UBS Investment Funds Class was December 31, 1998. ** Annualized See accompanying notes to financial statements. ================================================================================ 39 U.S. Small Capitalization Growth Fund - -------------------------------------------------------------------------------- [LOGO]UBS Investment Funds The investment strategies implemented in the U.S. Small Capitalization Growth Fund are designed to enhance returns while controlling risk. We invest in smaller companies with market capitalizations less than $1 billion that we believe possess a unique competitive advantage that will allow them to achieve high returns through above average sales and profit growth. We employ quantitative and qualitative analysis to identify companies that are undervalued relative to current market prices, and construct portfolios with attention to both risk and return. Since its inception on December 31, 1998, the UBS Investment Fund -- U.S. Small Capitalization Growth has returned 3.86% compared to 9.28% for its benchmark, the Russell 2000 Index. Small stocks have dramatically underperformed large stocks over the period since the Fund's inception making the environment difficult for small capitalization equity managers. The market has been driven to extremes. Valuation imbalances between large and small stocks reached a historical peak during this period. Additionally, the market has experienced an incredible lack of breadth, with a small number of fashionable stocks driving index returns. Our positions relative to the benchmark in some broad common characteristics were the biggest detractors from relative performance for the year-to-date period. Our underweight of the "variability in market" characteristic had the worst effect, costing us more than 100 basis points of relative performance. This was largely due to our underweight of the high-flying internet sector, which has notoriously high variability in returns. Our overweight to the "labor intensity" factor was also a negative for the year-to-date period, resulting from poor performance of some of the stocks we owned in the services sector. Stock selection was negative for the first half of the year, while our active industry positions relative to the index added value. These two factors combined for a negligible effect on overall performance. The Fund was helped by its overweight to electronics and oil services, but hurt by underweights to producer goods and telephones. While the Fund's underperformance over the period is uncomfortable, it has come during a unique period in the market's history, and should not be indicative of our future performance. As a result of both a recent broadening of the market, and steps that we have taken to reposition the Fund, we have experienced a strong uptick in recent performance. For the month of June, the Fund returned 6.78%, beating the benchmark's return of 4.52% by 226 basis points. We remain committed to uncovering price/value discrepancies in the small capitalization segment of the market. We are confident that our sound investment philosophy and consistent, long-term approach can create value for our clients. - -------------------------------------------------------------------------------- 40 U.S. Small Capitalization Growth Fund [LOGO FOR UBS Investment Funds APPEARS HERE] Total Return
12/31/98* to 6/30/99 - ------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Small Capitalization Growth 3.86% - ------------------------------------------------------------------------------- Russell 2000 Index 9.28 - -------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund -- U.S. Small Capitalization Growth. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- U.S. Small Capitalization Growth and the Russell 2000 Index if you had invested $10,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- U.S. Small Capitalization Growth vs. Russell 2000 Index Wealth Value with Dividends Reinvested [CHART APPEARS HERE] UBS Investment Fund -- U.S. Small Capitalization Growth Russell 2000 Index - ------------------------------------------------------------------------- 12/31/98 10,000 10,000 1/31/99 9,989 10,133 2/28/99 9,148 9,312 3/31/99 9,352 9,458 4/30/99 9,318 10,305 5/31/99 9,727 10,456 6/30/99 10,386 10,928 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 41 U.S. Small Capitalization Growth Fund [LOGO FOR UBS Investment Funds APPEARS HERE] Industry Diversification As a Percent of Net Assets As of June 30, 1999
- ---------------------------------------------------------- U.S. EQUITIES Capital Investment Capital Goods.................................. 2.76% Technology..................................... 17.19 ------ 19.95 Basic Industries Chemicals...................................... 1.23 Housing/Paper.................................. 0.70 ------ 1.93 Consumer Non-Durables................................... 6.29 Retail/Apparel................................. 7.99 Autos/Durables................................. 10.97 Health: Drugs.................................. 1.37 Health: Non-Drugs.............................. 6.65 ------ 33.27 Financial Banks.......................................... 7.79 Non-Banks...................................... 8.38 ------ 16.17 Utilities Telephone...................................... 1.29 Transportation................................. 5.05 Services/Miscellaneous......................... 13.31 ------ Total U.S. Equities......................... 90.97 SHORT-TERM INVESTMENTS........................... 5.95 ------ TOTAL INVESTMENTS........................... 96.92 CASH AND OTHER ASSETS, LESS LIABILITIES.............................. 3.08 ------ NET ASSETS....................................... 100.00% ======
Top 10 U.S. Equity Holdings As of June 30, 1999
Percent of Net Assets - ------------------------------------------------------------ 1. Waters Corp. 2.86% 2. Foodmaker, Inc. 2.81 3. U.S. Trust Corp. 2.79 4. U.S. Foodservice, Inc. 2.37 5. Protective Life Corp. 2.24 6. Swift Transportation Co., Inc. 2.06 7. North Fork Bancorporation, Inc. 1.99 8. Expeditors International of Washington, Inc. 1.97 9. Smith International, Inc. 1.87 10. Investors Financial Services Corp. 1.82
================================================================================ 42 U.S. Small Capitalization Growth Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value --------- ----------- U.S. Equities -- 90.97% Aeroflex, Inc. (b)............................... 29,800 $ 588,550 AFC Cable Systems, Inc. (b)...................... 8,400 296,625 Airborne Freight Corp............................ 5,700 157,819 American Italian Pasta Co., Class A (b).......... 13,100 397,912 Ariba, Inc. (b).................................. 2,000 194,500 Ask Jeeves, Inc. (b)............................. 2,500 35,000 Astec Industries, Inc. (b)....................... 12,100 493,075 AVT Corp. (b).................................... 14,900 564,337 Bally Total Fitness Holdings, Inc. (b)........... 14,100 400,087 Bindley Western Industries, Inc. ................ 21,066 485,849 Casey's General Stores, Inc. .................... 30,000 450,000 Comfort Systems USA, Inc. (b).................... 14,000 252,000 Commercial Federal Corp.......................... 11,000 255,063 Consolidated Graphics, Inc. (b).................. 7,100 355,000 Copper Mountain Networks, Inc. (b)............... 2,300 177,675 Cost Plus, Inc. (b).............................. 11,400 518,700 Critical Path, Inc. (b).......................... 600 33,188 CTS Corp. ....................................... 2,000 140,000 Dendrite International, Inc. (b)................. 15,800 570,775 DII Group, Inc. (b).............................. 14,300 533,569 DLJdirect (b).................................... 2,700 79,650 Eclipsys Corp. (b)............................... 6,100 146,019 Elcor Corp. ..................................... 12,600 550,462 Emmis Communications Corp. (b)................... 6,800 335,750 Ethan Allen Interiors, Inc. ..................... 10,450 394,487 eToys Inc. (b)................................... 2,100 85,575 Expeditors International of Washington, Inc...... 25,900 705,775 Finova Group, Inc. .............................. 10,700 563,087 Foodmaker, Inc. (b).............................. 35,500 1,007,312 FPIC Insurance Group, Inc. (b)................... 9,300 451,050 H.B. Fuller Co. ................................. 6,400 437,600 Haverty Furniture Cos., Inc. .................... 5,000 175,938 Hooper Holmes, Inc. ............................. 21,200 431,950 Horace Mann Educators Corp. ..................... 6,100 165,844 Insight Enterprises, Inc. (b).................... 15,500 383,625 Investors Financial Services Corp. .............. 16,300 652,000 Juniper Networks, Inc. (b)....................... 1,400 208,600 Kellstrom Industries, Inc. (b)................... 18,200 332,150 Kenneth Cole Productions, Inc. (b)............... 13,800 384,675 Kronos, Inc. (b)................................. 3,400 154,700 Labor Ready, Inc. (b)............................ 11,000 357,500 Level One Communications, Inc. (b)............... 7,300 357,244 Manitowoc Co., Inc. ............................. 5,500 228,938 MapQuest.com, Inc. (b)........................... 900 14,681 Marimba, Inc. (b)................................ 1,800 94,838 Media Metrix, Inc. (b)........................... 900 47,925 MedQuist, Inc. (b)............................... 11,900 520,625 Mercury Computer Systems, Inc. (b)............... 14,500 467,625 Mercury Interactive Corp. (b).................... 12,700 449,262 Mesaba Holdings, Inc. (b)........................ 16,400 209,100 Metro Information Services, Inc. (b)............. 14,000 232,750 Monaco Coach Corp. (b)........................... 13,400 566,987 MotivePower Industries, Inc. (b)................. 17,850 321,300 North Fork Bancorporation, Inc. ................. 33,500 713,969 Ocular Sciences, Inc. (b)........................ 10,700 185,913 Orthodontic Centers of America, Inc. (b)......... 17,900 252,838 Pacific Sunwear of California, Inc. (b).......... 16,650 405,844 Pantry, Inc. (b)................................. 19,900 320,887 Patterson Dental Co. ............................ 17,900 622,025 Peoples Heritage Financial Group, Inc. .......... 30,400 571,900 Peregrine Systems, Inc. (b)...................... 20,400 524,025 Personnel Group of America, Inc. (b)............. 11,700 117,000 Phone.com, Inc. (b).............................. 1,200 67,200 Prime Group Realty Trust......................... 18,100 311,094 Protective Life Corp. ........................... 24,300 801,900 QRS Corp. (b).................................... 5,500 429,000 ResMed, Inc. (b)................................. 7,700 255,544 Sanmina Corp. (b)................................ 7,800 591,825 Scient Corp. (b)................................. 4,600 218,788 Smith Int'l, Inc. (b)............................ 15,400 668,937 Sonic Automotive, Inc. (b)....................... 18,400 253,000 StarMedia Network, Inc. (b)...................... 1,900 121,838 Sunrise Assisted Living, Inc. (b)................ 13,500 470,812 Swift Transportation Co., Inc. (b)............... 33,600 739,200 Sykes Enterprises, Inc. (b)...................... 15,100 503,962 Tetra Tech, Inc. (b)............................. 15,750 259,875 TheStreet.com, Inc. (b).......................... 1,800 64,800 TMP Worldwide, Inc. (b).......................... 7,800 495,300 Tower Automotive, Inc. (b)....................... 10,900 277,269 U.S. Foodservice (b)............................. 19,900 848,237 U.S. Trust Corp. ................................ 10,800 999,000 United Stationers, Inc. (b)...................... 8,400 184,800 Vignette Corp. (b)............................... 800 60,000 Waters Corp. (b)................................. 19,300 1,025,312 Zebra Technologies Corp., Class A (b)............ 15,200 584,250 Zions Bancorporation............................. 4,000 254,000 ----------- Total U.S. Equities (Cost $28,475,224)........... 32,615,092 ----------- Investment Companies -- 5.95% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,134,217).............................. 2,134,217 2,134,217 ----------- Total Investments (Cost $30,609,441) -- 96.92% (a)............... 34,749,309 Cash and other assets, less liabilities -- 3.08%...................... 1,102,657 ----------- Net Assets -- 100%............................... $35,851,966 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 43 U.S. Small Capitalization Growth Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $30,609,441; and net unrealized appreciation consisted of: Gross unrealized appreciation.... $5,312,470 Gross unrealized depreciation.... (1,172,602) ---------- Net unrealized appreciation...... $4,139,868 ========== (b) Non-income producing security See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 44 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $28,475,224)...................... $32,615,092 Affiliated issuers (Cost $2,134,217)......................... 2,134,217 Cash........................................................... 142,822 Receivables: Investment securities sold................................... 719,015 Dividends.................................................... 9,768 Interest..................................................... 9,943 Fund shares sold............................................. 553,305 Other assets................................................... 18,639 ----------- TOTAL ASSETS........................................... 36,202,801 ----------- LIABILITIES: Payables: Investment securities purchased.............................. 257,629 Investment advisory fees..................................... 17,969 Fund shares purchased........................................ 31,580 Accrued expenses............................................. 43,657 ----------- TOTAL LIABILITIES...................................... 350,835 ----------- NET ASSETS....................................................... $35,851,966 =========== NET ASSETS CONSIST OF: Paid in capital................................................ $35,967,096 Accumulated net realized loss.................................. (4,254,998) Net unrealized appreciation.................................... 4,139,868 ----------- NET ASSETS............................................. $35,851,966 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $35,211,394 and 3,836,230 shares issued and outstanding).............................. $ 9.18 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,044 and 114 shares issued and outstanding)..................................... $ 9.16 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $639,528 and 69,990 shares issued and outstanding).............................. $ 9.14 =========== See accompanying notes to financial statements. ================================================================================ 45 U.S. Small Capitalization Growth Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends...................................................... $ 57,456 Interest....................................................... 47,194 ----------- TOTAL INCOME........................................... 104,650 ----------- EXPENSES: Advisory....................................................... 148,873 Registration................................................... 22,283 Professional................................................... 15,150 Other.......................................................... 12,307 ----------- TOTAL EXPENSES......................................... 198,613 Expenses waived by Advisor............................. (25,786) ----------- NET EXPENSES........................................... 172,827 ----------- NET INVESTMENT LOSS.................................... (68,177) ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss on investments............................... (633,451) Change in net unrealized appreciation or depreciation on investments................................................ 1,970,811 ----------- Net realized and unrealized gain............................... 1,337,360 ----------- Net increase in net assets resulting from operations........... $ 1,269,183 =========== See accompanying notes to financial statements. ================================================================================ 46 U.S. Small Capitalization Growth Fund -- Financial Statements
- ----------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS Period Ended Year Ended June 30, 1999 December 31, 1998 ------------- ----------------- OPERATIONS: Net investment loss........................................................ $ (68,177) $ (49,900) Net realized loss.......................................................... (633,451) (3,615,782) Change in net unrealized appreciation or depreciation...................... 1,970,811 2,695,815 ------------ ----------- Net increase (decrease) in net assets resulting from operations............ 1,269,183 (969,867) ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net realized gain: Brinson Class I........................................................... -- (10,014) ------------ ----------- Total distributions to shareholders........................................ -- (10,014) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold................................................................ 23,560,273 18,352,730 Shares issued on reinvestment of distributions............................. -- 9,859 Shares redeemed............................................................ (11,586,801) (6,727,395) ------------ ----------- Net increase in net assets resulting from capital share transactions....... 11,973,472 11,635,194 ------------ ----------- TOTAL INCREASE IN NET ASSETS........................................... 13,242,655 10,655,313 ------------ ----------- NET ASSETS: Beginning of period........................................................ 22,609,311 11,953,998 ------------ ----------- End of period.............................................................. $ 35,851,966 $22,609,311 ============ ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 47 U.S. Small Capitalization Growth Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Period Ended UBS Investment Funds Class June 30, 1999* - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $8.80 ----- Income from investment operations: Net investment loss.......................................... (0.06) Net realized and unrealized gain............................. 0.40 ----- Total income from investment operations.................... 0.34 ----- Net asset value, end of period................................... $9.14 ===== Total return (non-annualized).................................... 3.86% Ratios/Supplemental data: Net assets, end of period (in 000s)............................ $640 Ratio of expenses to average net assets: Before expense reimbursement................................. 2.09%** After expense reimbursement.................................. 1.92%** Ratio of net investment loss to average net assets: Before expense reimbursement................................. (1.39%)** After expense reimbursement.................................. (1.22%)** Portfolio turnover rate........................................ 71% *Commencement of UBS Investment Funds Class was December 31, 1998. **Annualized
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 48 U.S. Bond Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds In selecting issues for the U.S. Bond Fund, we incorporate our analysis of interest rate sensitivity, maturity mix and sector valuation, as well as security specific research compiled by our fixed income and equity research teams. We invest the Fund's assets in investment grade (high quality) securities. Since its inception on August 31, 1995, the UBS Investment Fund -- U.S. Bond has produced an annualized return of 6.11%, compared to the 6.71% return of its benchmark, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. The annualized volatility of the Fund was similar to that of the benchmark at 4.04% and 3.54% respectively. During the first half of 1999, the Fund was down 1.69% while the benchmark was down similarly by 1.39%. U.S. bond markets were characterized by a high level of volatility in the first quarter of 1999. After a fairly stable January, February turned in the worst one-month performance record for U.S. Treasury securities in 18 years. The largest changes took place among securities with longer terms to maturity, while shorter-term treasury bills were relatively stable. This volatility was spurred somewhat by Federal Reserve (Fed) chairman Alan Greenspan's testimony to Congress in February. He stated that the Fed expects stronger growth and higher inflation in the U.S. than was originally called for in the fall of 1998. Even though these adjustments were modest, they were sufficient enough to disappoint investors. During this period of volatility, corporate bonds and other spread sectors (bonds that have credit risk because they are not backed by the U.S. Government) performed well, retracing some of the weakness caused by a general flight-to-quality that rounded out 1998. We trimmed our corporate bond weighting on the heels of this strong showing, but maintained a meaningful overweight to corporate bonds and, to a lesser extent, mortgages throughout the first half of the year. U.S. bond yields in the second quarter were driven well above our estimates of fair value by market expectations of higher inflation and anticipation of the 25 basis point rate hike by the Federal Reserve which occurred on June 30. As a result we have set representative duration strategies longer than the benchmark--at 1.05 times the benchmark. From a sector standpoint, we believe that prevailing credit spreads provide more than adequate compensation for risk--given our assumptions about the economy and the probabilities we assign to different scenarios for default rates. While credit fundamentals have modestly deteriorated in recent months, this has already been accounted for in our sector modeling. As a consequence, exposure to corporate bonds remains one of the largest active portfolio positions relative to the index. Overweights are also maintained in the mortgage and asset-backed sectors. - -------------------------------------------------------------------------------- 49 U.S. Bond Fund - ------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return
6 months 1 year 3 years Annualized ended ended ended 8/31/95* to 6/30/99 6/30/99 6/30/99 6/30/99 - -------------------------------------------------------------------------------------------------------------------- UBS Investment Fund -- U.S. Bond -1.69% 2.45% 6.73% 6.11% - -------------------------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 7.24 6.71 - --------------------------------------------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund -- U.S. Bond. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- U.S. Bond and the Salomon Smith Barney BIG Bond Index if you had invested $10,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- U.S. Bond vs. Salomon Smith Barney BIG Bond Index Wealth Value with Dividends Reinvested
Salomon UBS Smith Barney Investment Fund BIG Bond --U.S. Bond Index - ------------------------------------------------------- 8/31/95 10,000 10,000 - ------------------------------------------------------- 12/31/95 10,529 10,532 - ------------------------------------------------------- 6/30/96 10,324 10,400 - ------------------------------------------------------- 12/31/96 10,861 10,914 - ------------------------------------------------------- 6/30/97 11,141 11,248 - ------------------------------------------------------- 12/31/97 11,844 11,964 - ------------------------------------------------------- 6/30/98 12,252 12,439 - ------------------------------------------------------- 12/31/98 12,767 13,007 - ------------------------------------------------------- 6/30/99 12,552 12,827 - -------------------------------------------------------
8/31/95 = $10,000 Data through 6/30/99 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. =============================================================================== 50 U.S. Bond Fund - ------------------------------------------------------------------------------- [LOGO HERE] UBS Investment Funds Industry Diversification As a Percent of Net Assets As of June 30, 1999 - -------------------------------------------------------------------
U.S. BONDS Corporate Bonds Airlines......................................... 0.07% Asset-Backed..................................... 7.08 Banks............................................ 0.98 CMO.............................................. 4.98 Consumer......................................... 2.40 Energy........................................... 0.27 Financial Services............................... 4.78 Industrial Components............................ 0.45 Services/Miscellaneous........................... 2.43 Utilities........................................ 3.50 -------- Total U.S. Corporate Bonds............... 26.94 International Dollar Bonds............................... 9.14 Mortgage-Backed Securities............................... 8.72 U.S. Government Agencies................................. 32.62 U.S. Government Obligations.............................. 16.46 -------- Total U.S. Bonds......................... 93.88 SHORT-TERM INVESTMENTS................................... 5.61 -------- TOTAL INVESTMENTS........................ 99.49 CASH AND OTHER ASSETS, LESS LIABILITIES.................. 0.51 -------- NET ASSETS............................................... 100.00% ======
- ------------------------------------------------------------------------------- 51 U.S. Bond Fund -- Schedule of Investments
June 30, 1999 - ------------------------------------------------------------------------------- Face Amount Value ------------- ------------ Bonds -- 93.88% U.S. Corporate Bonds -- 26.94% ABN Amro Mortgage Corp., 99-2 IA2, 6.300%, due 04/25/29..................... $ 2,100,000 $ 2,040,612 ABN Amro Mortgage Corp., 99-3, Class A2, 6.300%, due 05/25/29..................... 1,000,000 972,050 Cendant Corp., 7.750%, due 12/01/03........ 1,060,000 1,070,622 Centaur Funding Corp., 144A, (b) 0.000%, due 04/21/20..................... 1,355 209,348 9.080%, due 04/21/20..................... 715 767,284 Chase Mortgage Finance Corp., 93-J1, Class 1A5, 6.625%, due 08/25/09............ 60,423 58,912 Ches Pot Tel MD, 8.000%, due 10/15/29...... 87,000 95,466 Chrysler Financial Corp., 7.400%, due 08/01/97..................... 100,000 97,942 Continental Airlines, Inc., 98-1B, 6.748%, due 09/15/18..................... 71,387 67,966 Countrywide Funding Corp. FRN, 5.420%, due 12/01/03..................... 250,000 237,500 Farmers Exchange Capital, 144A, 7.050%, due 07/15/28..................... 1,090,000 985,126 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03............ 980,000 982,852 General Motors Acceptance Corp., 9.625%, due 12/15/01..................... 294,000 315,322 Heller Financial Commercial Mortgage Assets, 99-PH1 A1, 6.500%, due 05/15/61.......... 1,244,122 1,232,775 Illinois Power Special Purpose Trust, 98-1, 5.650%, due 12/25/10..................... 1,565,000 1,445,590 LB Commercial Conduit Mortgage Trust, 99-C1 A1, 6.410%, due 10/15/30........... 705,000 695,673 Lehman Brothers, Inc., Senior Note 7.250%, due 04/15/03..................... 225,000 225,783 MBNA Global Capital Securities FRN, 5.795%, due 02/01/27..................... 90,000 78,038 Merrill Lynch & Co., Inc., 6.000%, due 02/17/09..................... 1,000,000 921,990 Mid-America Energy, 6.375%, due 06/15/06..................... 275,000 261,566 Monsanto Co., 144A, 6.600%, due 12/01/28..................... 1,250,000 1,110,850 Morgan Stanley Dean Witter, MTN, 5.625%, due 01/20/04..................... 1,000,000 960,268 News America Holdings, 7.750%, due 12/01/45..................... 358,000 339,350 Norwest Asset Securities Corp., 98-25, Class A5, 6.000%, due 12/25/28........... 2,400,000 2,306,280 PanAmSat Corp., 6.000%, due 01/15/03..................... 375,000 367,057 6.375%, due 01/15/08..................... 500,000 472,114 Peco Energy Transition Trust, 6.130%, due 03/01/09..................... 1,135,000 1,076,173 Premier Auto Trust 96-4A, Class A4, 6.400%, due 10/06/01..................... 350,000 351,421 Rite Aid Corp., 144A, 6.125%, due 12/15/08..................... 890,000 806,115 Salomon, Inc., 6.750%, due 02/15/03........ 300,000 300,693 Service Corp., International, 6.000%, due 12/15/05..................... 750,000 689,197 Sprint Capital Corp., 6.875%, due 11/15/28..................... 1,000,000 910,531 Tele-Communications, Inc, 9.800%, due 02/01/12..................... 950,000 1,160,336 Texas Utilities, 5.940%, due 10/15/11...... 420,000 416,947 Thrift Financial Corp., 11.250%, due 01/01/16.................... 34,157 35,681 Time Warner Entertainment, Inc., Debenture 8.375%, due 03/15/23........... Pool #298198............................. 94,000 101,723 Time Warner, Inc., 7.570%, due 02/01/24.... 340,000 338,600 U.S.A. Waste Services, 6.500%, due 12/15/02..................... 400,000 396,660 Vendee Mortgage Trust, 92-1, Class 2Z, 7.750%, due 05/15/22..................... 532,364 548,565 Westdeutsche Landesbank NY, 6.050%, due 01/15/09..................... 1,035,000 957,835 ----------- 26,408,813 ----------- Mortgage-Backed Securities -- 8.72% Chemical Mortgage Securities Inc. 93-1 Class A5, 7.450%, due 02/25/23........... 327,646 329,661 Citicorp Mortgage Securities, Inc. 94-9 Class A8, 5.750%, due 06/25/09........... 1,069,783 1,000,065 GE Capital Mortgage Services, Inc., 97-HE4, Class A7, 6.735%, due 12/25/28........... 410,000 408,930 GreenTree Financial Corp., 94-5, Class A5, 8.300%, due 11/15/19..................... 320,000 335,797 PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%, due 07/25/24........... 215,000 212,766 Prudential Home Mortgage Securities, 93-43, Class A9, 6.750%, due 10/25/23........... 275,025 268,757 Prudential Home Mortgage Securities, 94-3, Class A10, 97-HE4 A76.500%, due 02/25/24............................. 170,000 164,492 Residential Accredit Loans, Inc., 96-QS4, Class Al10, 7.900%, due 08/25/26......... 275,000 279,570 Residential Accredit Loans, Inc., 98-QS4, Class AI5, 7.000%, due 03/25/28.......... 2,850,000 2,842,296 Residential Asset Securitization Trust, 97-A10, Class A1, 7.250%, due 12/25/27........... 490,952 493,417 Residential Funding Mortgage, Series 95-S6, Class A7, 7.500%, due 11/25/25........... 955,358 961,730 SASCO LLC., 98-RF1, Class A, 7.900%, 144A, due 10/15/28....................... 517,811 530,109 Structured Asset Securities Corp., 98-RF1, Class A, 8.712%, due 03/15/27............ 434,456 455,093 Structured Asset Securities Corp., 98-RF2, 8.582%, due 07/15/27..................... 152,810 159,687
- ------------------------------------------------------------------------------- 52 U.S. Bond Fund -- Schedule of Investments
June 30, 1999 - ------------------------------------------------------------------------------- Face Amount Value ---------- ----------- Mortgage-Backed Securities -- (Continued) UCFC Home Equity Loan 97-C, Class A8, FRN, 5.069%, due 09/15/27................. $ 106,786 $ 106,529 ----------- 8,548,899 ----------- International Dollar Bonds -- 9.14% Banco Santiago S.A., 7.000%, due 07/18/07.............................. 380,000 333,217 Banque Paribas, Sub. Notes, 6.875%, due 03/01/09...................... 700,000 675,146 British Sky Broadcasting Group plc, 6.875%, due 02/23/09...................... 820,000 747,771 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.90%, due 05/01/07....................... 500,000 486,783 Empresa Nacional de Electricidad S.A., 7.875%, due 02/01/27...................... 594,000 502,946 Interamer Development Bank, 6.80%, due 10/15/25.............................. 100,000 100,188 Korea Development Bank, 7.125%, due 09/17/01.............................. 500,000 498,573 Pemex Finance Ltd., 2A-B1, 8.450%, due 02/15/07, 144A........................ 940,000 942,406 Petroliam Nasional Berhad, 144A, 7.625%, due 10/15/26...................... 430,000 344,523 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14................ 450,000 415,274 Repsol International Finance, 7.000%, due 08/01/05...................... 200,000 198,779 Republic of South Africa, 9.625%, due 12/15/99...................... 71,000 71,710 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49.............................. 80,000 77,767 Skandinaviska Enskilda Banken, 144A, 6.625%, due 03/29/49...................... 960,000 949,317 Skandinaviska Enskilda Banken, 144A, Resettable Perpetual Preferred, 6.500%, due 12/29/49...................... 305,000 290,079 Southern Investments UK, 6.800%, due 12/01/06.............................. 1,345,000 1,296,974 Tyco International Group, S.A., 5.875%, due 11/01/04...................... 595,000 574,186 7.000%, due 06/15/28...................... 500,000 463,137 ----------- 8,968,776 ----------- U.S. Government Agencies -- 32.62% Aid-Israel, Series 10-Z, 0.000%, due 02/15/03 (b).......................... 805,000 650,286 Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25............. 138,477 144,700 Federal Home Loan Mortgage Corp., 7.000%, due 10/15/13...................... 492,125 486,244 7.238%, due 05/01/26...................... 15,110 15,224 Federal Home Loan Mortgage Corp. Gold, 8.000%, due 11/01/22...................... 99,552 102,604 9.000%, due 03/01/24...................... 76,257 81,179 Federal National Mortgage Association 5.625%, due 03/15/01...................... 5,080,000 5,068,458 6.500%, due 03/01/19...................... 488,377 475,426 6.000%, due 03/01/28...................... 689,567 649,320 6.000%, due 01/01/29...................... 1,624,551 1,528,964 6.000%, due 02/01/29...................... 3,480,663 3,277,511 6.500%, due 06/01/28...................... 750,168 726,093 6.500%, due 09/01/28...................... 241,593 233,840 6.500%, due 11/01/28...................... 1,965,912 1,901,493 6.500%, due 11/01/28...................... 3,407,597 3,298,235 6.500%, due 02/01/29...................... 512,629 495,832 7.000%, due 12/01/24...................... 2,790,375 2,762,223 7.000%, due 03/01/29...................... 47,731 47,275 7.500%, due 12/01/23...................... 523,038 528,969 7.500%, due 01/01/28...................... 285,300 288,975 8.000%, due 08/01/08...................... 637,337 656,714 8.000%, due 12/18/11...................... 100,000 104,443 8.000%, due 05/25/21...................... 2,260,000 2,301,753 8.500%, due 07/01/22...................... 11,754 12,362 8.500%, due 07/15/21...................... 61,292 63,438 9.500%, due 08/01/22...................... 72,528 77,376 Federal National Mortgage Assoc., Series 97-72, Class EG, 0.000%, due 09/25/22.............................. 344,151 306,473 Federal National Mortgage Assoc. Strips, 8.000%, due 08/01/23...................... 333,287 85,297 0.000%, due 02/01/28 (b).................. 239,536 168,071 Federal National Mortgage Assoc. TBA N12L8, 0.000%............................. 1,090,000 1,025,281 Federal National Mortgage Association, FNCI, 8.000%, due 02/01/13................ 200,460 206,555 Freddie Mac, 5.750%, due 06/15/01........... 1,000,000 998,241 Government National Mortgage Association Class L SEQ, 7.000%, due 02/16/24......... 150,000 149,410 Government National Mortgage Association, 7.000%, due 07/15/25...................... 91,342 90,490 7.500%, due 12/15/22...................... 226,748 229,914 7.500%, due 12/15/23...................... 949,000 962,014 7.500%, due 01/15/24...................... 64,928 65,779 7.500%, due 06/15/25...................... 79,422 80,486 8.000%, due 08/15/22...................... 45,546 46,960 9.000%, due 11/15/04...................... 7,671 8,079 9.000%, due 11/15/04...................... 3,126 3,292 9.000%, due 12/15/17...................... 32,630 34,783 10.000%, due 09/15/00..................... 1,306 1,392 10.000%, due 05/15/01..................... 1,527 1,628 Jordan Aid, 8.750%, due 09/01/19............ 1,357,589 1,542,248 ----------- 31,985,330 -----------
- -------------------------------------------------------------------------------- 53 U.S. Bond Fund -- Schedule of Investments
June 30, 1999 - ------------------------------------------------------------------------------- Face Amount Value --------- ----------- U.S. Government Obligations -- 16.46% U.S. Treasury Bond, 8.000%, due 11/15/21....................... $7,985,000 $ 9,606,953 U.S. Treasury Inflation Indexed Note, 3.625%, due 04/15/28....................... 1,770,000 1,717,227 U.S. Treasury Note, 5.000%, due 04/30/01....................... 3,400,000 3,370,250 5.625%, due 05/15/08....................... 1,470,000 1,439,681 ----------- 16,134,111 ----------- Total Bonds (Cost $94,549,344)............... 92,045,929 ----------- Shares ---------- Short-Term Investments -- 5.61% Investment Companies -- 5.61% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $5,504,377).......................... 5,504,377 5,504,377 ----------- Total Investments (Cost $100,053,721) -- 99.49% (a).......... 97,550,306 Cash and other assets, less liabilities -- 0.51%....................... 495,277 ----------- Net Assets -- 100%........................... $98,045,583 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $100,053,721; and net unrealized depreciation consisted of: Gross unrealized appreciation ............... $ 342,432 Gross unrealized depreciation ............... (2,845,847) ----------- Net unrealized depreciation ............... $(2,503,415) =========== FRN: Floating rate note -- The rate disclosed is that in effect at June 30, 1999. TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $7,837,214, or 7.99% 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. - ------------------------------------------------------------------------------- 54 U.S. Bond Fund -- Financial Statements
- -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $94,549,344).............. $ 92,045,929 Affiliated issuers (Cost $5,504,377)................. 5,504,377 Receivables: Investment securities sold........................... 299 Fund shares sold..................................... 757,363 Interest............................................. 930,662 Other assets........................................... 3,248 ------------- TOTAL ASSETS....................................... 99,241,878 ------------- LIABILITIES: Payables: Investment securities purchased...................... 1,022,193 Fund shares redeemed................................. 102,892 Investment advisory fees............................. 39,926 Accrued expenses..................................... 31,284 ------------- TOTAL LIABILITIES.................................. 1,196,295 ------------- NET ASSETS.............................................. $ 98,045,583 ============= NET ASSETS CONSIST OF: Paid in capital........................................ $ 100,639,632 Accumulated undistributed net investment income........ 961,121 Distributions in excess of net realized gain........... (1,051,755) Net unrealized depreciation............................ (2,503,415) ------------- NET ASSETS......................................... $ 98,045,583 ============= OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $92,029,678 and 8,955,888 shares issued and outstanding)........... $ 10.28 ============= Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,133 and 110 shares issued and outstanding)............................ $ 10.30 ============= UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $6,014,772 and 587,717 shares issued and outstanding)............. $ 10.23 =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 55 U.S. Bond Fund -- Financial Statements - -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends............................................. $ 29,756 Interest.............................................. 5,014,331 ---------- TOTAL INCOME..................................... 5,044,087 EXPENSES: Advisory.............................................. 418,445 Registration.......................................... 36,405 Professional.......................................... 27,870 Distribution.......................................... 25,254 Other................................................. 30,338 ---------- TOTAL EXPENSES................................... 538,312 Expenses waived by Advisor....................... (11,372) ---------- NET EXPENSES..................................... 526,940 ---------- NET INVESTMENT INCOME............................ 4,517,147 ---------- NET REALIZED AND UNREALIZED LOSS: Net realized loss..................................... (338,906) Change in net unrealized appreciation or depreciation. (3,036,340) Net realized and unrealized loss...................... (3,375,246) Net increase in net assets resulting from operations.. $ 1,141,901 ===========
See accompanying notes to financial statements. =============================================================================== 56 U.S. Bond Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income.............................................................. $ 4,517,147 $ 1,638,048 Net realized gain (loss)........................................................... (338,906) 801,133 Change in net unrealized appreciation or depreciation.............................. (3,036,340) 335,673 ------------- ------------- Net increase in net assets resulting from operations............................... 1,141,901 2,774,854 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income........................................... (3,812,376) (1,629,719) Distributions from net realized gain............................................... (55,782) (361,568) Distributions in excess of net realized gain....................................... (1,051,755) -- ------------- ------------- Total distributions to shareholders*............................................... (4,919,913) (1,991,287) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold........................................................................ 156,386,946 21,794,978 Shares issued in connection with the acquisition of UBS Bond Fund.................. 15,177,263 -- Shares issued on reinvestment of distributions..................................... 4,271,987 1,174,894 Shares redeemed.................................................................... (115,331,025) (6,255,720) ------------- ------------- Net increase in net assets resulting from capital share transactions............... 60,505,171 16,714,152 ------------- ------------- TOTAL INCREASE IN NET ASSETS.................................................. 56,727,159 17,497,719 ------------- ------------- NET ASSETS: Beginning of period............................................................. 41,318,424 23,820,705 ------------- ------------- End of period (including accumulated undistributed net investment income of $961,121 and $300,973, respectively).......................................... $98,045,583 $41,318,424 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from net investment income: Brinson Class I............................................................... (3,583,162) (1,526,152) Brinson Class N............................................................... (46) (54) UBS Investment Funds Class.................................................... (229,168) (103,513) Distributions from and in excess of net realized gain: Brinson Class I............................................................... (1,038,553) (335,742) Brinson Class N............................................................... (16) (14) UBS Investment Funds Class.................................................... (68,968) (25,812) ------------- ------------- Total distributions to shareholders............................................. (4,919,913) (1,991,287) ------------- -------------
See accompanying notes to financial statements. =============================================================================== 57 U.S. Bond Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, August 31, 1995* -------------------------- Through UBS Investment Funds Class 1999 1998 1997 June 30, 1996 - ------------------------------------------------------------------------------------------------- Net asset value, beginning of period.............. $10.54 $10.22 $ 9.92 $10.00 Income from investment operations: ------ ------ ------ ------ Net investment income......................... 0.52** 0.50 0.46** 0.46 Net realized and unrealized gain (loss)....... (0.26) 0.49 0.32 (0.13) ------ ------ ------ ------ Total income from investment operations... 0.26 0.99 0.78 0.33 ------ ------ ------ ------ Less distributions: Distributions from net investment income...... (0.42) (0.53) (0.48) (0.38) Distributions in excess of net realized gain.. (0.15) (0.14) -- (0.03) Total distributions....................... (0.57) (0.67) (0.48) (0.41) Net asset value, end of period.................... $10.23 $10.54 $10.22 $ 9.92 ====== ====== ====== ====== Total return (non-annualized)..................... 2.45% 9.97% 7.91% 3.24% Ratios/Supplemental data: Net assets, end of period (in 000s)............. $6,015 $2,444 $1,399 $ 636 Ratio of expenses to average net assets: Before expense reimbursement.................. 1.08% 1.31% 2.12% 4.10%*** After expense reimbursement................... 1.07% 1.07% 1.07% 1.07%*** Ratio of net investment income to average net assets: Before expense reimbursement.................. 4.95% 5.14% 4.67% 2.53%*** After expense reimbursement................... 4.96% 5.38% 5.72% 5.56%*** Portfolio turnover rate......................... 260% 198% 410% 363%
*Commencement of investment operations **The net investment income per share data was determined by using average shares outstanding throughout the period. ***Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 58 High Yield Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds In selecting issues for the High Yield Fund, we incorporate our analysis of interest rate sensitivity, maturity mix, sector valuation, as well as security specific research compiled by our fixed income and equity research teams. Successful high yield fixed income investing involves capturing the market's high total return potential while minimizing losses due to credit deterioration or default. We believe that many high yield managers sacrifice safety while reaching for high current income. In contrast, at the forefront of our philosophy is a focus on asset coverage and preservation of principal. Our disciplined process avoids taking large risks solely for the sake of a high indicated yield. Our investment process consists of four stages: . Identify high quality issuers with substantial asset coverage. . Identify issuers generating free cash flow with a focus on deleveraging their balance sheet. . Consider relative value: does expected return from the investment adequately compensate for risk? . Diversify holdings by issuer and industry. Since its inception on December 31, 1998, the UBS Investment Fund -- High Yield has returned 2.61% compared to 1.76% for its benchmark, the Merrill Lynch High Yield Master Index. Rising U.S. Treasury yields, above-trend GDP growth and a more benign global economic outlook resulted in tighter high yield bond spreads in the first half of 1999. Prices of high yield bonds increased relative to U.S. treasuries, bringing forward-looking "risky" bond yields closer to those of "riskless" government-backed treasury bonds. Spreads over treasuries tightened significantly from 5.55% at December 31, 1998 to 4.51% at June 30, 1999. Lower rated high yield bonds have generally outperformed their higher quality counterparts thus far in 1999, as investors have, to some degree, reversed the flight-to-quality which occurred during the second half of 1998. We continue to believe that additional spread tightening is warranted at current levels. Our valuation model indicates that the high yield bond market is expected to generate an annualized total return of approximately 10.5% over the course of the next 3 years. We continue to believe that issue selection remains paramount in generating solid returns from a high yield portfolio, and our focus remains on single-B rated companies that we expect will demonstrate improving credit quality over a 12 to 18 month horizon. Specifically, we have reduced our underweight in cyclical industries which performed well during the first half of the year, including paper and energy, and modestly reduced our overweight in cable television and broadcasting. - -------------------------------------------------------------------------------- 59 High Yield Fund - -------------------------------------------------------------------------------- [LOGO] UBS Investment Funds Total Return 12/31/98* to 6/30/99 - -------------------------------------------------------------------------------- UBS Investment Fund -- High Yield 2.61% - -------------------------------------------------------------------------------- Merrill Lynch High Yield Master Index 1.76 - -------------------------------------------------------------------------------- * Inception date of the UBS Investment Fund -- High Yield. Total return includes reinvestment of all capital gain and income distributions. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- High Yield and the Merrill Lynch High Yield Master Index if you had invested $10,000 on December 31, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- High Yield vs. Merrill Lynch High Yield Master Index Wealth Value with Dividends Reinvested [Graph appears here] $10,261 -- UBS Investment Fund -- High Yield 12/31/98 10,000 1/31/99 10,240 2/28/99 10,281 3/31/99 10,391 4/30/99 10,541 5/31/99 10,311 6/30/99 10,261 $10,176 -- Merrill Lynch High Yield Master Index 12/31/98 10,000 1/31/99 10,099 2/28/99 10,022 3/31/99 10,108 4/30/99 10,266 5/31/99 10,195 6/30/99 10,176 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. - -------------------------------------------------------------------------------- 60 High Yield Fund - -------------------------------------------------------------------------------- [LOGO]UBS Industry Diversification Investment Funds As a Percent of Net Assets As of June 30, 1999 ---------------------------------------------------------
U.S. BONDS Corporate Bonds Auto................................... 2.51% Business & Public Service.............. 3.29 Chemicals.............................. 3.23 Construction........................... 2.19 Consumer............................... 3.59 Electronics and Electric Components.... 1.10 Energy................................. 0.68 Financial Services..................... 1.13 Food & House Products.................. 5.83 Health................................. 6.39 Industrial............................. 0.41 Multi-Industry......................... 0.59 Radio Broadcasting..................... 3.75 Real Estate............................ 0.76 Recreation............................. 8.53 Retail................................. 4.81 Services/Miscellaneous................. 19.24 Telecommunications..................... 12.22 Television Broadcasting................ 13.21 ------ Total U.S. Corporate Bonds........ 93.46 International Dollar Bonds............. 1.69 ------ Total U.S. Bonds.................. 95.15 SHORT-TERM INVESTMENTS................. 3.39 ------ TOTAL INVESTMENTS................. 98.54 CASH AND OTHER ASSETS, LESS LIABILITIES..................... 1.46 ------ NET ASSETS............................. 100.00% ====== ---------------------------------------------------------
Top Ten U.S. Bond Holdings As of June 30, 1999 Percent of Net Assets --------------------------------------------------------- 1. Phoenix Color Corp. 1.48% 2. Mediacomm LLC. 1.42 3. Mail Well Corp. 1.32 4. Waterford Gaming LLC. 1.27 5. Outdoor Communications, Inc. 1.27 6. Scotts Co. 1.26 7. Group Maintenance America 1.26 8. Dobson/Sygnet Communications 1.25 9. Eagle Family Foods, Inc. 1.20 10. Cumulus Media, Inc. 1.20
--------------------------------------------------------- 61 High Yield Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------
Face Amount Value ----------- ---------- U.S. Bonds -- 95.15% U.S. Corporate Bonds -- 93.46% Ackerley Group, Inc. Series B, 9.000%, due 01/15/09....................... $675,000 $666,562 Adams Outdoor Advertising, 10.750%, due 03/15/06...................... 550,000 585,750 Allbritton Communications Co., Series B, 8.875%, due 02/01/08....................... 550,000 529,375 Alliance Laundry Systems, 144A, 9.625%, due 05/01/08....................... 425,000 389,938 American Plumbing & Mechanic, Inc., 144A, 11.625%, due 11/15/08...................... 650,000 627,250 Aurora Foods, Inc., Series B, 9.875%, due 02/15/07....................... 700,000 724,500 Avalon Cable Holdings, 144A, 9.375%, due 12/01/08....................... 600,000 609,750 Bally Total Fitness Corp., Series B, 9.875%, due 10/15/07....................... 750,000 727,500 BGF Industries, Inc. 144A, 10.250%, due 01/15/09...................... 300,000 273,000 Big City Radio, Inc., (c) 0.000%, due 03/15/05....................... 1,100,000 781,000 Big Flower Holdings, Inc., 8.625%, due 12/01/08....................... 800,000 736,000 Bresnan Communications Group, 144A, (d) 0.000%, due 02/01/09....................... 500,000 325,000 Budget Group, Inc., 9.125%, due 04/01/06....................... 500,000 465,000 Capstar Broadcasting Partners, Inc., (e) 0.000%, due 02/01/09....................... 500,000 422,500 CB Richard Ellis Services, Inc., 8.875%, due 06/01/06....................... 525,000 506,625 Centennial Cellular, 144A, 10.750%, due 12/15/08...................... 750,000 774,375 Century Communications Corp., 0.000%, due 01/15/08....................... 425,000 189,125 Century Communications Corp., 8.375%, due 11/15/17....................... 300,000 276,375 Collins & Alkman Corp., 11.500%, due 04/15/06...................... 700,000 703,500 CSC Holdings, Inc., 7.625%, due 07/15/18....................... 600,000 555,750 Cumulus Media, Inc., 10.375%, due 07/01/08...................... 750,000 795,000 Dan River, Inc., Snr-Sub-Nts, 10.125%, due 12/15/03...................... 500,000 510,000 Diamond Triumph Autoglass, Inc., 144A, 9.250%, due 04/01/08,...................... 700,000 679,000 Digital Television Services, Series B, 12.500%, due 08/01/07...................... 550,000 604,312 Dobson Sygnet Communications, Inc., 12.250%, due 12/15/08...................... 800,000 832,000 Eagle Family Foods, Series B, 8.750%, due 01/15/08....................... 890,000 796,550 Echostar DBS Corp. 144A, 9.375%, due 02/01/09....................... 250,000 254,375 Exodus Communications, Inc., 144A, 11.250%, due 07/01/08...................... 500,000 525,000 Exodus Communications, Inc., 11.250%, due 07/01/08...................... 250,000 262,500 Falcon Holding Group, Series B, (f) 0.000%, due 04/15/10....................... 750,000 525,000 Fedders North America, 9.375%, due 08/15/07....................... 500,000 505,000 Federal-Mogul Corp. 144A, 7.500%, due 01/15/09....................... 500,000 460,813 Florida Panthers Corp., 9.875%, due 04/15/09....................... 750,000 701,250 Fox/Liberty Networks, Step, 0.000%, due 08/15/07....................... 500,000 390,000 Global Imaging Systems, Inc. 144A, 10.750%, due 02/15/07...................... 500,000 490,000 Golden Sky DBS, Inc., 144A, (g) 0.000%, due 03/01/07....................... 375,000 223,125 Golden Sky Systems, Inc., Series B, (h) 12.375%, due 08/01/06...................... 700,000 784,000 Granite Broadcasting Corp., 10.375%, due 05/15/05...................... 400,000 404,000 Group Maintenance America Corp., 144A, 9.750%, due 01/15/09....................... 850,000 834,062 Harvey Casinos Resorts, 10.625%, due 06/01/06...................... 450,000 468,000 Hollinger International Publishing Corp., 9.250%, due 02/01/06....................... 750,000 765,937 ICG Holdings, Inc., (i) 0.000%, due 05/01/06....................... 750,000 585,000 Integrated Electrical Services, Inc., 144A, 9.375%, due 02/01/09....................... 750,000 738,750 Interep National Radio Sales, Series B, 10.000%, due 07/01/08...................... 650,000 664,625 Intermedia Communications, Series B, (j) 8.600%, due 06/01/08....................... 250,000 230,000 Intermedia Communications, Inc., Series B, 0.000%, due 07/15/07............. 550,000 391,875 Iron Mountain, Inc., 10.125%, due 10/01/06...................... 200,000 207,000 Iron Mountain, Inc., 8.750%, due 09/30/09....................... 500,000 485,000 Isle of Capri Casinos, Inc., 144A, 8.750%, due 04/15/09....................... 500,000 468,750 ISP Holdings Inc., Series B, 9.000%, due 10/15/03....................... 415,000 412,925 J.H. Heafner Co., 144A, 10.000%, due 05/15/08...................... 425,000 422,875 J.H. Heafner Co., Inc., 10.000%, due 05/15/08...................... 100,000 99,500 JCAC, Inc., 10.125%, due 06/15/06...................... 450,000 487,688
- ------------------------------------------------------------------------------- 62 High Yield Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ------------ --------- Level 3 Communications, Inc., (k) 0.000%, due 12/01/08..................... $1,250,000 $768,750 Liberty Group Operating, 9.375%, due 02/01/08..................... 800,000 752,000 Lifepoint Hospitals Holdings, 144A, 10.750%, due 05/15/09.................... 650,000 661,375 LIN Holdings Corp., Step, (l) 0.000%, due 03/01/08..................... 1,000,000 660,000 Lyondell Chemical Co.,144A, 9.875%, due 05/01/07..................... 750,000 766,875 Mail Well Corp., 8.750%, due 12/15/08..................... 900,000 873,000 Mediacom LLC., Series B, 8.500%, due 04/15/08..................... 1,000,000 940,000 Mohegan Tribal Gaming Authority, 8.750%, due 01/01/09..................... 600,000 594,000 MTS, Inc., 9.375%, due 05/01/05..................... 750,000 570,000 NationsRent, Inc., 10.375%, due 12/15/08.................... 675,000 668,250 NBTY, Inc., Series B, 8.625%, due 09/15/07..................... 550,000 473,000 New World Pasta Co., 144A, 9.250%, due 02/15/09..................... 795,000 773,137 Newpark Resources, Inc., Series B, 8.625%, due 12/15/07..................... 500,000 482,500 Nextel Communications, Inc., (n) 0.000%, due 02/15/08..................... 250,000 171,250 Nextel Communications, Inc., Step, 144A, (o) 0.000%, due 09/15/07..... 800,000 582,000 Nortek, Inc, 144A, 8.875%, due 08/01/08..................... 375,000 367,500 Nortex, Inc., 9.875%, due 03/01/04..................... 450,000 454,500 NTL Communications Corp., Series B, Step, (p) 0.000%, due 10/01/08........... 900,000 614,250 Outdoor Communications, Inc., Snr-Sub-Nts, 9.250%, due 08/15/07........ 800,000 842,000 Packaging Corp. of America, 144A, 9.625%, due 04/01/09..................... 500,000 507,500 Paxson Communications Corp., (b) 0.000%, due 10/31/06..................... 750 684,375 Pegasus Communications Corp., Series B, 9.625%, due 10/15/05..................... 750,000 735,000 Pegasus Communications Corp., Series B, 9.750%, due 12/01/06..................... 150,000 150,000 Supreme International Corp., 144A, 12.250%, due 04/01/06.................... 650,000 656,500 Phoenix Color, Inc., 10.375%, due 02/01/09.................... 1,000,000 980,000 Pilgrim's Pride Corp., Snr-Sub-Nts, 10.875%, due 08/01/03.................... 200,000 204,000 Premier Parks, Inc., Step, (q) 0.000%, due 04/01/08..................... 1,100,000 731,500 Protection One Alarm, Inc., (r) 13.625%, due 06/30/05.................... 250,000 279,688 PSINet Inc., 11.500%, due 11/01/08.................... 700,000 738,500 Quest Diagnostic, 144A, 9.875%, due 07/01/09..................... 500,000 506,250 Qwest Communications International, Inc., (s) 0.000%, due 10/15/07................. 500,000 390,000 R. H. Donnelly, Inc., 9.125%, due 06/01/08..................... 750,000 751,875 Range Resources Corp., 8.750%, due 01/15/07..................... 500,000 450,000 Rayovac Corp., Series B, 10.250%, due 11/01/06.................... 500,000 535,000 RCN Corp., Step, (t) 0.000%, due 10/15/07..................... 450,000 302,625 Revlon Consumer Products, 8.625%, due 02/01/08..................... 650,000 607,750 Scotts Co., 144A, 8.625%, due 01/15/09..................... 850,000 837,250 SFX Entertainment, Inc., Series B, 9.125%, due 02/01/08..................... 800,000 784,000 Simmons Co., 144A, 10.250%, due 03/15/09.................... 700,000 710,500 Sinclair Broadcast Group, 10.000%, due 09/30/05.................... 250,000 255,625 Sinclair Broadcast Group, 8.750%, due 12/15/07..................... 425,000 412,250 Sleepmaster Corp., 144A, 11.000%, due 05/15/09.................... 650,000 661,375 Speedway Motorsports, Inc., 8.500%, due 08/15/07..................... 600,000 606,000 Speedway Motorsports, Inc., 144A, 8.500%, due 08/15/07..................... 250,000 252,500 T/SF Communications Corp., Series B, 10.375%, due 11/01/07.................... 550,000 550,000 Telecorp PCS Inc., 144A, (u) 0.000%, due 04/15/09..................... 500,000 276,250 TeleWest Communications PLC,144A, 0.000%, due 04/15/09..................... 500,000 333,125 Tenet Healthcare Corp., 8.625%, due 01/15/07..................... 750,000 738,750 Trans-Resources, Inc., Series B, (v) 0.000%, due 03/15/08..................... 650,000 328,250 TransWestern Publishing Co., 9.625%, due 11/15/07..................... 625,000 614,844
- -------------------------------------------------------------------------------- 63 High Yield Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- ----------- Triton PCS, Inc., (w) 0.000%, due 05/01/08....................... $1,000,000 $ 642,500 Twin Labs, Inc., 10.250%, due 05/15/06...................... 500,000 525,000 Unisys Corp., 11.750%, due 10/15/04...................... 450,000 499,500 United Artists Theatre Circuit, Inc., Series B, 9.750%, due 04/15/08............. 150,000 106,500 United Artists Theatre Circuit, Inc., Series B, Snr-Sub-Nts, 9.375%, due 10/15/07............................... 125,000 98,750 United Industries Corp., 144A, 9.875%, due 04/01/09....................... 700,000 637,000 United Rentals, Inc., Series B, 9.500%, due 06/01/08....................... 625,000 628,125 United Rentals, Inc., Series B, 9.250%, due 01/15/09....................... 250,000 246,250 Verio Inc., 13.500%, due 06/15/04...................... 550,000 616,000 Waterford Gaming, 144A, 9.500%, due 03/15/10....................... 850,000 843,625 Wesco Distribution, Inc., Series B, 9.125%, due 06/01/08....................... 250,000 241,875 Young Broadcasting, Inc., Series B, 8.750%, due 06/15/07....................... 475,000 460,750 ----------- 62,004,331 ----------- International Dollar Bonds -- 1.69% Energis plc, Series 144A, 9.750%, due 06/15/09....................... 250,000 253,125 Imax, Corp., 7.875%, due 12/01/05....................... 500,000 470,625 Microcell Telecommunications, Inc., Series B, (m) 0.000%, due 06/01/06......... 490,000 395,675 ----------- 1,119,425 ----------- Total U.S. Bonds (Cost $65,268,225).......... 63,123,756 ----------- Shares ------------ Short-Term Investments -- 3.39% Brinson Supplementary Trust U.S. Cash Management Prime Fund, (Cost $2,246,149).......................... 2,246,149 2,246,149 ----------- Total Investments (Cost $67,514,374) -- 98.54% (a)........... 65,369,905 ----------- Cash and other assets, less liabilities -- 1.46%.................. 967,242 ----------- Net Assets -- 100%........................... $66,337,147 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purpose was $67,514,374; and net unrealized depreciation consisted of: Gross unrealized appreciation....... $ 239,974 Gross unrealized depreciation....... (2,384,443) ----------- Net unrealized depreciation......... $(2,144,469) =========== (b) Non-income producing security (c) Interest rate 0.000% until 03/15/01, then 11.125% to maturity (d) Interest rate 0.000% until 02/01/04, then 9.25% to maturity (e) Interest rate 0.000% until 02/01/02, then 12.750% to maturity (f) Interest rate 0.000% until 04/15/03, then 9.285% to maturity (g) Interest rate 0.000% until 03/01/04, then 13.50% to maturity (h) Interest rate 12.875% until 03/22/99, then 12.375% to maturity (i) Interest rate 0.000% until 05/01/01, then 12.50% to maturity (j) Interest rate 0.000% until 07/15/02, then 11.250% to maturity (k) Interest rate 0.000% until 12/01/03, then 10.50% to maturity (l) Interest rate 0.000% until 03/01/03, then 10.00% to maturity (m) Interest rate 0.000% until 12/01/01, then 14.00% to maturity (n) Interest rate 0.000% until 10/01/03, then 12.375% to maturity (o) Interest rate 0.000% until 10/15/02, then 11.125% to maturity (p) Interest rate 0.000% until 10/01/03, then 12.375% to maturity (q) Interest rate 0.000% until 04/01/03, then 10.000% to maturity (r) Interest rate 0.000% until 06/30/98, then 13.625% to maturity (s) Interest rate 0.000% until 10/15/02, then 9.47% to maturity (t) Interest rate 0.000% until 10/15/02, then 11.125% to maturity (u) Interest rate 0.000% until 04/15/01, then 11.625% to maturity (v) Interest rate 0.000% until 03/15/08, then 12.00% to maturity (w) Interest rate 0.000% until 05/01/03, then 11.00% to maturity 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $17,139,950 or 25.84% of net assets. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 64 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999
ASSETS: Investments, at value: Unaffiliated issuers (Cost $65,268,225)..................... $63,123,756 Affiliated issuers (Cost $2,246,149)........................ 2,246,149 Cash.......................................................... 170 Receivables: Investment securities sold.................................. 77,562 Interest.................................................... 1,328,077 Fund shares sold............................................ 496,649 Other assets.................................................. 18,638 ----------- Total Assets.............................................. 67,291,001 ----------- LIABILITIES: Payables: Fund shares redeemed........................................ 5,281 Investment securities purchased............................. 893,623 Investment advisory fees.................................... 8,858 Accrued expenses............................................ 46,092 ----------- TOTAL LIABILITIES......................................... 953,854 ----------- NET ASSETS...................................................... $66,337,147 =========== NET ASSETS CONSIST OF: Paid in capital............................................... $67,513,756 Accumulated undistributed net investment income............... 611,744 Accumulated net realized gain................................. 356,116 Net unrealized depreciation................................... (2,144,469) ---------- NET ASSETS...................................................... $66,337,147 =========== OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $60,043,677 and 6,029,168 shares issued and outstanding)...................................... $ 9.96 =========== Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,025 and 103 shares issued and outstanding)........................................... $ 9.95 =========== UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $6,292,445 and 632,435 shares issued and outstanding)..................................... $ 9.95 ===========
See accompanying notes to financial statements. ================================================================================ 65 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1999
INVESTMENT INCOME: Interest........................................................ $2,705,081 ---------- TOTAL INCOME................................................. 2,705,081 ---------- EXPENSES: Advisory........................................................ 173,302 Professional.................................................... 27,506 Registration.................................................... 22,303 Distribution.................................................... 15,676 Other........................................................... 15,372 ---------- TOTAL EXPENSES............................................... 254,159 Expenses waived by Advisor................................... (36,263) ---------- NET EXPENSES................................................. 217,896 ---------- NET INVESTMENT INCOME........................................ 2,487,185 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on investments................................ 420,129 Change in net unrealized appreciation or depreciation........... (1,916,114) ---------- Net realized and unrealized loss................................ (1,495,985) ---------- Net increase in net assets resulting from operations............ $ 991,200 ==========
See accompanying notes to financial statements. ================================================================================ 66 High Yield Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Period Ended Year Ended June 30, 1999 December 31, 1998 --------------- ------------------ OPERATIONS: Net investment income................................................................... $ 2,487,185 $ 1,385,364 Net realized gain....................................................................... 420,129 261,744 Change in net unrealized appreciation or depreciation................................... (1,916,114) (260,233) ----------- ----------- Net increase in net assets resulting from operations.................................... 991,200 1,386,875 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I....................................................................... (1,845,754) (1,395,944) Brinson Class N....................................................................... (30) -- UBS Investment Funds Class............................................................ (167,575) -- Distributions from net realized gain: Brinson Class I....................................................................... -- (196,916) ----------- ----------- Total distributions to shareholders..................................................... (2,013,359) (1,592,860) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold............................................................................. 52,695,849 29,258,184 Shares issued on reinvestment of distributions.......................................... 1,797,826 1,381,731 Shares redeemed......................................................................... (22,036,291) (3,393,269) ----------- ----------- Net increase in net assets resulting from capital share transactions.................... 32,457,384 27,246,646 ----------- ----------- TOTAL INCREASE IN NET ASSETS...................................................... 31,435,225 27,040,661 ----------- ----------- NET ASSETS: Beginning of period..................................................................... 34,901,922 7,861,261 ----------- ----------- End of period (including accumulated undistributed net investment income of $611,744 and $0, respectively).............................................. $66,337,147 $34,901,922 =========== ===========
See accompanying notes to financial statements. ================================================================================ 67 High Yield Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
Period Ended UBS Investment Funds Class June 30, 1999* - -------------------------------------------------------------------------------- Net asset value, beginning of period........................... $ 9.98 ------ Income from investment operations: Net investment income...................................... 0.41** Net realized and unrealized loss........................... (0.15) ------ Total income from investment operations................ 0.26 ------ Less distributions: Distributions from net investment income................... (0.29) ------ Total distributions.................................... (0.29) ------ Net asset value, end of period................................. $ 9.95 ------ Total return (non-annualized).................................. 2.61% Ratios/Supplemental data: Net assets, end of period (in 000s).......................... $6,292 Ratio of expenses to average net assets: Before expense reimbursement............................... 1.68%*** After expense reimbursement................................ 1.55%*** Ratio of net investment income to average net assets: Before expense reimbursement............................... 7.69%*** After expense reimbursement................................ 7.82%*** Portfolio turnover rate...................................... 77%
* Commencement of UBS Investment Funds Class was December 31, 1998. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized See accompanying notes to financial statements. ================================================================================ 68 The UBS Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class (formerly, 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 financial highlights of the Brinson Class I and the Brinson Class N are presented separately. Prior to December 19, 1998, the U.S. Large Capitalization Growth Fund (formerly, UBS Large Cap Growth Fund), U.S. Small Capitalization Growth Fund (formerly, UBS Small Cap Fund), High Yield Fund (formerly, UBS High Yield Bond Fund), UBS Value Equity Fund and UBS Bond Fund sought to achieve their investment objectives by investing substantially all of their investable assets in a corresponding portfolio of UBS Investor Portfolios Trust (each a "Portfolio" and collectively, the "Portfolios"), an open-end management investment company that had the same investment objective. On October 20, 1998, the Board of Directors approved a tax-free plan of reorganization (the "Reorganization"). Pursuant to the Reorganization, the net assets of the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were withdrawn from their corresponding Portfolio and thereafter each began to operate, under its new name, as a separate Fund in the Trust. In addition, pursuant to the Reorganization, the net assets of the UBS Value Equity Fund and UBS Bond Fund were withdrawn from their corresponding Portfolio and acquired by the U.S. Equity Fund and U.S. Bond Fund, respectively, in a tax- free exchange solely for Brinson Class I shares of each Fund. The UBS Value Equity Fund and UBS Bond Fund were then dissolved. Shares issued in exchange, net asset value and corresponding net unrealized appreciation at December 18, 1998, were as follows: Net Net Unrealized Fund Shares Asset Value Appreciation - ---- --------- ----------- ------------ UBS Value Equity Fund................. 1,233,797 $23,269,419 $774,047 UBS Bond Fund......................... 1,429,121 15,177,263 27,192 The aggregate net assets of the U.S. Equity Fund and U.S. Bond Fund immediately before the mergers were $729,679,727 and $80,523,890, respectively. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund in the preparation of their financial statements. The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund have each changed its fiscal year-end from December 31 to June 30. A. Investment Valuation: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Equity securities traded over-the-counter are valued at the most recent bid price. Securities for which the most recent bid price or market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. Investment Transactions: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. - -------------------------------------------------------------------------------- 69 The UBS Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- C. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the period ended June 30, 1999, therefore, no federal income tax provision was required. E. Distributions to Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 10.26%, 44.82%, 34.64%, and 0.49% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, and U.S. Bond Fund, respectively. At June 30, 1999, the U.S. Small Capitalization Growth Fund had a capital loss carry forward for Federal income tax purposes of approximately $4,242,000 available to offset future net capital gains, of which $1,768,000 expires on December 31, 2006 and $2,474,000 expires on June 30, 2007. F. Income and Expense Allocations: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. G. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions for the year ended June 30, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fees Fee Expense Cap Expense Cap Expense Cap Fees Waived -------- --------------- --------------- -------------- ---------- ------- U.S. Balanced Fund..................... 0.70% 0.80% 1.05% 1.30% $ 347,297 $79,286 U.S. Equity Fund....................... 0.70 0.80 1.05 1.32 5,047,492 -- U.S. Large Capitalization Equity Fund.. 0.70 0.80 1.05 1.32 137,200 97,158 U.S. Bond Fund......................... 0.50 0.60 0.85 1.07 418,445 11,372
Investment advisory fees and other transactions for the period ended June 30, 1999, were as follows:
UBS Investment Fee Waived Advisory Brinson Class I Brinson Class N Funds Class Advisory and/or Fee Expense Cap Expense Cap Expense Cap Fees Reimbursed -------- --------------- --------------- -------------- ---------- ---------- U.S. Large Capitalization Growth Fund.. 0.70% 0.80% 1.05% 1.57% $ 18,582 $ 42,136 U.S. Small Capitalization Growth Fund.. 1.00 1.15 1.40 1.92 148,873 25,786 High Yield Fund........................ 0.60 0.70 0.95 1.55 173,302 36,263
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1999 were $7,665, $6,205, $3,665 and $4,015 for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S. Bond Fund, respectively. For the six months ended June 30, 1999, Trustees' fees paid to unaffiliated trustees were $1,955, $1,877 and $1,949 for the U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund, respectively. ================================================================================ 70 THE UBS INVESTMENT FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The following Funds invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments at June 30, 1999 and for the period then ended, were as follows:
% of Sales Interest Net Fund Purchases Proceeds Income Value Assets - ---- ------------- ------------ -------- ------------ -------- U.S. Balanced Fund................................ $ 12,954,575 $ 12,718,496 $ 24,984 $ 236,079 0.60% U.S. Equity Fund.................................. 149,752,656 112,067,672 496,321 37,684,984 4.77 U.S. Large Capitalization Equity Fund............. 17,583,562 16,050,557 33,979 1,533,005 5.80 U.S. Large Capitalization Growth Fund............. 3,645,460 3,777,151 7,359 -- -- U.S. Small Capitalization Growth Fund............. 26,063,602 24,888,256 47,338 2,134,217 5.95 U.S. Bond Fund.................................... 110,752,960 105,248,583 190,546 5,504,377 5.61 High Yield Fund................................... 49,314,348 48,413,642 84,390 2,246,149 3.39
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales -------------- -------------- U.S. Balanced Fund........................................................................ $ 52,357,150 $ 87,129,265 U.S. Equity Fund.......................................................................... 344,235,845 337,180,719 U.S. Large Capitalization Equity Fund..................................................... 23,604,030 16,716,289 U.S. Bond Fund............................................................................ 252,784,699 204,053,072
Investment transactions for the period ended June 30, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales -------------- -------------- U.S. Large Capitalization Growth Fund..................................................... $ 5,470,029 $ 2,638,632 U.S. Small Capitalization Growth Fund..................................................... 29,120,655 19,843,223 High Yield Fund........................................................................... 72,095,801 41,178,328
4. FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, total 0.50%, 0.52%, 0.52%, 0.77%, 0.77%, 0.47%, and 0.85% of the average daily net assets of the UBS Investment Funds Class of the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund, respectively. ================================================================================ 71 The UBS Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 6. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds rate plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the period ended June 30, 1999, the Funds had no borrowings under the agreement. 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. Balanced Fund --------------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------ -------------------------- Shares Value Shares Value --------- ----------- --------- ------------ Sales: Brinson Class I.............................................. 1,174,303 $12,704,822 4,720,912 $ 58,173,143 Brinson Class N.............................................. 1,652 15,306 -- -- UBS Investment Funds Class................................... 135,474 1,464,212 49,659 624,713 --------- ----------- --------- ------------ Total Sales........................................ 1,311,429 $14,184,340 4,770,571 $ 58,797,856 ========= =========== ========= ============ Dividend Reinvestment: Brinson Class I.............................................. 1,235,079 $11,512,192 2,662,862 $ 31,359,575 Brinson Class N.............................................. 33 311 11 136 UBS Investment Funds Class................................... 56,474 523,561 14,933 175,706 --------- ----------- --------- ------------ Total Dividend Reinvestment........................ 1,291,586 $12,036,064 2,677,806 $ 31,535,417 ========= =========== ========= ============ Redemptions: Brinson Class I.............................................. 4,977,791 $56,107,946 23,388,425 $293,534,522 Brinson Class N.............................................. 1,641 15,210 -- -- UBS Investment Funds Class................................... 154,266 1,558,776 42,682 540,673 --------- ----------- ---------- ------------ Total Redemptions.................................. 5,133,698 $57,681,932 23,431,107 $294,075,195 ========= =========== ========== ============
================================================================================ 72 The UBS Investment Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Equity Fund ----------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------- ------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I*............... 14,157,093 $272,587,287 16,875,765 $314,205,812 Brinson Class N................ 417,980 8,022,220 13,398 269,368 UBS Investment Funds Class..... 1,317,474 26,390,598 1,697,355 31,606,780 ---------- ------------ ---------- ------------ Total Sales.................. 15,892,547 $307,000,105 18,586,518 $346,081,960 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I................ 2,164,601 $ 40,726,871 1,861,660 $ 32,092,717 Brinson Class N................ 12,904 239,980 47 896 UBS Investment Funds Class..... 89,839 1,678,518 110,158 1,887,716 ---------- ------------ ---------- ------------ Total Dividend Reinvestment.. 2,267,344 $ 42,645,369 1,971,865 $ 33,981,329 ========== ============ ========== ============ Redemptions: Brinson Class I................ 13,543,224 $265,910,621 7,470,182 $144,565,891 Brinson Class N................ 90,831 1,768,705 5 100 UBS Investment Funds Class..... 950,265 18,175,221 1,023,014 19,298,428 ---------- ------------ ---------- ------------ Total Redemptions............ 14,584,320 $285,854,547 8,493,201 $163,864,419 ========== ============ ========== ============
*Includes shares issued in connection with the acquisition of the UBS Value Equity Fund.
U.S. Large Capitalization Equity Fund ----------------------------------------------------- Year Ended Period Ended June 30, 1999 June 30, 1998** ------------------------- ------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I................ 2,384,176 $ 24,164,112 16,662 $ 163,328 Brinson Class N................ 61,091 684,700 1,688,092 16,758,163 UBS Investment Funds Class..... 427 4,617 104 1,000 ---------- ------------ ---------- ------------ Total Sales.................. 2,445,694 $ 24,853,429 1,704,858 $ 16,922,491 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I................ 7,506 $ 77,433 18 $ 168 Brinson Class N................ 7,094 69,880 2,204 20,606 UBS Investment Funds Class..... 1 11 -- 1 ---------- ------------ ---------- ------------ Total Dividend Reinvestment.. 14,601 $ 147,324 2,222 $ 20,775 ========== ============ ========== ============ Redemptions: Brinson Class I................ 370,824 $ 3,862,037 1,015 $ 9,875 Brinson Class N................ 1,369,240 13,638,399 51,661 509,678 UBS Investment Funds Class..... -- -- -- -- ---------- ------------ ---------- ------------ Total Redemptions............ 1,740,064 $ 17,500,436 52,676 $ 519,553 ========== ============ ========== ============
**The Fund commenced operations on April 6, 1998. - -------------------------------------------------------------------------------- 73 The UBS Investment Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Large Capitalization Growth Fund ---------------------------------------------------- Year Ended Year Ended June 30, 1999 December 31, 1998 ------------------------ ------------------------ Shares Value Shares Value --------- ----------- --------- ----------- Sales: Brinson Class I*........................ 35,111 $ 451,776 349,475 $ 4,971,380 Brinson Class N......................... -- -- 84 1,000 UBS Investment Funds Class.............. 372,727 4,781,902 84 1,000 --------- ----------- --------- ----------- Total Sales......................... 407,838 $ 5,233,678 349,643 $ 4,973,380 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I......................... -- -- 15,430 $ 170,881 Brinson Class N......................... -- -- -- -- UBS Investment Funds Class.............. -- -- -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment......... -- $ -- 15,430 $ 170,881 ========= =========== ========= =========== Redemptions: Brinson Class I......................... 173,449 $ 2,143,629 56,390 $ 5,974,601 Brinson Class N......................... -- -- -- -- UBS Investment Funds Class.............. 1,853 26,217 -- -- --------- ----------- --------- ----------- Total Redemptions................... 175,302 $ 2,169,846 56,390 $ 5,974,601 ========= =========== ========= ===========
*Includes 298,108 shares issued in 10 for 1 share split.
U.S. Small Capitalization Growth Fund ---------------------------------------------------- Year Ended Year Ended June 30, 1999 December 31, 1998 ------------------------ ------------------------ Shares Value Shares Value --------- ----------- --------- ----------- Sales: Brinson Class I**...................... 2,641,837 $22,702,120 2,571,818 $18,350,730 Brinson Class N........................ -- -- 114 1,000 UBS Investment Funds Class............. 99,579 858,153 114 1,000 ---------- ----------- --------- ----------- Total Sales........................ 2,741,416 $23,560,273 2,572,046 $18,352,730 ========== =========== ========= =========== Dividend Reinvestment: Brinson Class I........................ -- -- 132 $ 9,859 Brinson Class N........................ -- -- -- -- UBS Investment Funds Class............. -- -- -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment........ -- $ -- 132 $ 9,859 ========= =========== ========= =========== Redemptions: Brinson Class I........................ 1,375,470 $11,346,801 128,744 $ 6,727,395 Brinson Class N........................ -- -- -- -- UBS Investment Funds Class............. 29,703 240,000 -- -- --------- ----------- --------- ----------- Total Redemptions.................. 1,405,173 $11,586,801 128,744 $ 6,727,395 ========= ============ ========= ===========
**Includes 2,227,053 shares issued in 10 for 1 share split. ================================================================================ 74 The UBS Investment Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
U.S. Bond Fund ---------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------- ----------------------- Shares Value Shares Value ---------- ------------ --------- ----------- Sales: Brinson Class I*..................................................... 15,463,879 $165,316,122 1,926,960 $20,378,131 Brinson Class N...................................................... 2,379 25,964 -- -- UBS Investment Funds Class........................................... 582,475 6,222,123 134,362 1,416,847 ---------- ------------ --------- ----------- Total Sales................................................ 16,048,733 $171,564,209 2,061,322 $21,794,978 ========== ============ ========= =========== Dividend Reinvestment: Brinson Class I...................................................... 386,462 $ 4,042,561 107,565 $ 1,114,591 Brinson Class N...................................................... 6 62 6 68 UBS Investment Funds Class........................................... 22,041 229,364 5,825 60,235 ---------- ------------ --------- ----------- Total Dividend Reinvestment................................ 408,509 $ 4,271,987 113,396 $ 1,174,894 ========== ============ ========= =========== Redemptions: Brinson Class I...................................................... 10,568,875 $112,692,202 549,381 $ 5,780,080 Brinson Class N...................................................... 2,379 25,905 -- -- UBS Investment Funds Class........................................... 248,522 2,612,918 45,413 475,640 ---------- ------------ --------- ----------- Total Redemptions.......................................... 10,819,776 $115,331,025 594,794 $ 6,255,720 ========== ============ ========= ===========
*Includes shares issued in connection with the acquisition of the UBS Bond Fund.
High Yield Fund ---------------------------------------------------- Year Ended Year Ended June 30, 1999 December 31, 1998 ----------------------- ------------------------- Shares Value Shares Value --------- ----------- --------- ----------- Sales: Brinson Class I**.................................................... 4,509,034 $46,327,741 3,412,082 $29,256,184 Brinson Class N...................................................... -- -- 100 1,000 UBS Investment Funds Class........................................... 620,093 6,368,108 100 1,000 --------- ----------- --------- ----------- Total Sales................................................ 5,129,127 $52,695,849 3,412,282 $29,258,184 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class I...................................................... 166,520 $ 1,658,538 47,240 $ 1,381,731 Brinson Class N...................................................... 3 30 -- -- UBS Investment Funds Class........................................... 13,996 139,258 -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment................................ 180,519 $ 1,797,826 47,240 $ 1,381,731 ========= =========== ========= =========== Redemptions: Brinson Class I...................................................... 2,144,630 $22,018,291 39,259 $ 3,393,269 Brinson Class N...................................................... -- -- -- -- UBS Investment Funds Class........................................... 1,754 18,000 -- -- --------- ----------- --------- ----------- Total Redemptions......................................... 2,146,384 $22,036,291 39,259 $ 3,393,269 ========= =========== ========= ===========
**Includes 2,898,051 shares issued in 10 for 1 share split. ================================================================================ 75 Report of Independent Auditors - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- U.S. Balanced Fund U.S. Equity Fund U.S. Large Capitalization Equity Fund U.S. Large Capitalization Growth Fund U.S. Small Capitalization Growth Fund U.S. Bond Fund High Yield Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds -- U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund as of June 30, 1999, and the related statements of operations and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund for the period ended December 31, 1997, were audited by other auditors whose report dated February 17, 1998, expressed an unqualified opinion on those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds -- U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund at June 30, 1999, the results of their operations, the changes in their net assets and the financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 11, 1999 ================================================================================ 76 Distributed by: Funds Distributor, Inc. 60 State Street Boston, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. ================================================================================ [LOGO FOR UBS INVESTMENT FUNDS APPEARS HERE] P.O. Box 2798, Boston, Massachusetts 02208-9915 . (800) 794-7753 [UBS LOGO APPEARS HERE] Global Fund Global Equity Fund Global Bond Fund Annual Report June 30, 1999 Trustees and Officers - -------------------------------------------------------------------------------- [UBS 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 David E. Floyd, CPA Assistant Secretary Mark F. Kemper Assistant Secretary ================================================================================ 1 The Funds' Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Since the entrepreneurial founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with unrivaled, custom-tailored service of the highest quality. Now, in 1999, more than 1,100 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, with approximately USD 280 billion in assets under management, and industry recognition as a global thought leader. In North America, we make our services available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are diversified, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and services. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios--balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Brinson Division, the institutional asset management division of UBS AG. ================================================================================ 2 Table of Contents - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Shareholder Letter.......................................................................... 4 Global Economic and Market Highlights....................................................... 5 Global Fund................................................................................. 6 Schedule of Investments................................................................. 10 Financial Statements.................................................................... 17 Financial Highlights.................................................................... 21 Global Equity Fund.......................................................................... 22 Schedule of Investments................................................................. 26 Financial Statements.................................................................... 30 Financial Highlights.................................................................... 33 Global Bond Fund............................................................................ 34 Schedule of Investments................................................................. 37 Financial Statements.................................................................... 40 Financial Highlights.................................................................... 43 The Brinson Funds--Notes to Financial Statements............................................ 44 Report of Independent Auditors.............................................................. 49
================================================================================ 3 Shareholder Letter - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] July 26, 1999 Dear Shareholder: We are pleased to present the Annual Report for the UBS Investment Funds covering the year ended June 30, 1999. This report focuses on the current global economic outlook as well as our current strategies and performance updates for our three Global Funds: Global Fund, Global Equity Fund and Global Bond Fund. We would also like to take this opportunity to discuss a new theme that we will call, "The Industrial Evolution." Accelerating globalization of business enterprise and integration of capital markets is altering the equity investment environment. In prior decades, equity investing typically focused on a collection of separate country-defined markets with foreign countries considered as diversifying alternatives to an investor's domestic equity market. Within this framework, individuals and advisors typically structured their equity portfolios into separate domestic and foreign allocations. Today, investors confront a global equity market in which the country-level distinction is but one of several important determinants on equity returns. The home country of a company is declining in relative importance, and the industry classification is becoming increasingly important. Consequently, relative comparisons of stock prices within global industries should become a more prominent feature of active portfolio management. As such, individuals will likely reconsider the separation of their equity portfolios into domestic and foreign components. Today, an allocation to Global Equity is likely to lead to a more efficient portfolio, maximizing the return/risk relationship, than separate allocation to domestic and foreign equities. We believe the UBS Investment Funds provide you with optimal access to the global capital markets and desirable configurations of global assets. The Global Fund, the Global Equity Fund and the Global Bond Fund are all actively managed funds that provide integrated asset management across and within security markets. Each of our Funds employ 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 independent team investment approach allows for rapid responses to market changes, while providing each investor with the benefit of our talent and the flexibility to deliver portfolios that produce returns appropriate to a client's risk tolerance. The reports that follow highlight the investment characteristics and the performance of the respective Funds. We very much appreciate your continued trust and the confidence you have placed in the UBS Investment Funds, and look forward to a long lasting, quality relationship. Sincerely, /s/ Hanspeter A. Walder /s/ Raymond Simon Hanspeter A. Walder Raymond Simon Executive Director Managing Director Private Banking Private Banking ================================================================================ 4 Global Economic and Market Highlights - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Thanks to a weaker euro and better prospects for the world economy, growth in Euroland is picking up steam after having experienced a slowdown in the first half of 1999. Business confidence is supported by ever stronger commitments of the European governments to implement structural reforms. This should eventually create a better environment for the labor market, boost employment and lift consumers' confidence. Due to divergence of inflation and GDP growth rates, the ECB is still facing a very heterogeneous situation, ranging from above average growth and below average inflation (as in France) to below average growth and above average inflation (as in Italy). No signs of strain have emerged from this situation so far. In Japan, first quarter growth (at 7.9% QI/99 over QIV/98 annualized rate) caught market attention. The positive expectations shared by many market participants depend heavily on the government's massive injection of public funds rather than on increased productivity resulting from structural reforms undertaken in the private sector. Only the latter would allow the Japanese economy to move toward a sustainable long-term growth path. The Bank of Japan continues its policy of zero overnight call rates, which it sees as an alternative for full-fledged money supply targeting. Growing current account imbalances are emerging. A healthy American economy is attracting capital from all over the world, but at the same time private savings are falling in the U.S. (and this is only partly compensated by higher public savings). The result is a widening current account deficit. With growth picking up in the rest of the world, capital flows are likely to be rerouted. This should alleviate the current account problem and weaken the USD. Global Environment
6 months 1 year 3 years 7/31/95* Major Markets ended ended ended to Total Return in U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------------------------ U.S. Equity 11.87% 19.59% 25.84% 25.26% Global (Ex-U.S.) Equities (currency unhedged) 4.34 7.18 8.90 8.64 Global (Ex-U.S.) Equities (currency hedged) 14.26 9.72 16.34 18.18 U.S. Bonds -1.39 3.12 7.24 6.87 Global (Ex-U.S.) Bonds (currency unhedged) -9.12 4.86 2.62 1.43 Global (Ex-U.S.) Bonds (currency hedged) 1.20 7.06 10.62 10.76 U.S. Cash Equivalents 2.46 5.32 5.57 5.62 - ------------------------------------------------------------------------------------------------ 6 months 1 year 3 years 7/31/95* Major Currencies ended ended ended to Percent Change Relative to U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------------------------ Yen -6.81% 14.66% -3.23% -7.81% Pound -5.26 -5.53 0.48 -0.38 Euro** -12.18 -4.83 -7.07 -7.79 Canadian Dollar 3.78 -0.64 -2.65 -1.91 - ------------------------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund -- Global **Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized returns. ================================================================================ 5 Global Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] The Global Fund provides investors with a single investment vehicle for comprehensive diversification across global markets and asset classes. It is a long-term, value-driven investment option designed to maximize total U.S. dollar return without assuming unnecessary risk. Its benchmark is the Global Securities Markets Mutual Fund Index. In selecting securities for the Global Fund, we seek out price/value discrepancies across capital markets at the asset class, country and currency levels, and within capital markets through sector, sub-sector and individual security selection. The Fund is monitored on an ongoing basis, and rebalanced with both risk and return considerations in mind. Our value estimates and investment decisions are based on comprehensive analysis of forward-looking investment fundamentals, drawing on the collective judgment of our global investment teams. Since its inception on July 31, 1995, the UBSInvestment Fund -- Global has produced an annualized return of 10.83%, compared to the 14.35% return of its benchmark. This performance record was achieved with significantly less risk or volatility than the benchmark; 7.80% versus 10.03%, respectively. The lower risk level implies that the Fund has generated a much more constant return stream over time, protecting its investors from unwanted fluctuations in the Fund's value. For the year-to-date period, the Fund has returned 2.30% versus the benchmark return of 5.83%. The greatest reason for the Fund's underperformance relative to the benchmark is its underweight of what we consider to be overvalued global equity markets. Our analysis indicates that the current overvaluation of the U.S. market exceeds that seen prior to the "crash" in 1987. Other major equity markets throughout the world are significantly overvalued but not to the same extent as the U.S. However, these markets would be expected to suffer in the wake of a setback in the U.S., and as a consequence, equity allocation for the Fund is at its minimum limit. Offsetting the Fund's equity underweight is a general overweight to global bond markets. The largest of these overweights is to the U.S. market (+20%), of which 15.5% is in Treasury Inflation Protected Securities (TIPS). The next largest overweight in the Fund is to Australian bonds (+9.7%), which we believe are undervalued at current levels. Emerging market debt offers the best valuation among all asset classes. The returns from the still very high spreads to Treasuries outweigh the probabilities of loss due to default risk and the required risk premium that is related to the high volatility of these securities. As a result, the Fund holds a 3% overweight position in emerging market debt. The Fund's largest currency overweight positions are in the euro, Swedish krona and Australian dollars. The Australian dollar has benefited from slightly firmer commodities prices and robust domestic growth, but we estimate that it is still undervalued against the U.S. dollar. The krona has strengthened this year against the euro, and has appreciated to a level closer to fundamental value. Due to pessimism regarding economies and policy-setting within the EMU currency area, the euro was one of the weakest currencies over the last quarter. However, a cyclical strengthening seems to be underway, and we maintain our overweight position. ================================================================================ 6 Global Fund - ----------- [UBS LOGO APPEARS HERE] Total Return - ------------
6 months 1 year 3 years 7/31/95* ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 - ----------------------------------------------------------------------------------------------- UBS Investment Fund -- Global 2.30% 3.92% 9.72% 10.83% - ----------------------------------------------------------------------------------------------- GSMI Mutual Fund Index** 5.83 11.87 14.52 14.35 - ----------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 8.57 15.87 18.53 17.58 - ----------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't. Bond Index -7.17 4.13 4.11 3.17 - -----------------------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund -- Global ** An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI World Ex USA (Free) Index; 21% Salomon Smith Barney BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% MSCI Emerging Markets Free Index; and 3% Merrill Lynch High Yield Master Index. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 ------------------------------------------------ This chart shows the growth in the value of an investment in the UBSInvestment Fund -- Global, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and the Salomon Smith Barney World Govt. Bond Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. Brinson UBS Investment Fund -- Global vs. GSMI Mutual Fund Index, MSCI World Equity (Free) Index and Salomon Smith Barney World Govt. Bond Index Wealth Value with Dividends Reinvested
- ------------------------------------------------------------------------------------------------------------------------- Date UBS Investment Fund-Global GSMI Mutual Fund Index MCSI World Equity (Free) Saloman World Govt. Bond - ------------------------------------------------------------------------------------------------------------------------- 7/31/95 $10,000 $10,000 $10,000 $10,000 8/31/95 $10,129 $ 9,965 $ 9,777 $ 9,656 9/30/95 $10,293 $10,232 $10,068 $ 9,871 10/31/95 $10,362 $10,167 $ 9,909 $ 9,944 11/30/95 $10,655 $10,472 $10,255 $10,057 12/31/95 $10,861 $10,665 $10,558 $10,162 1/31/96 $11,063 $10,839 $10,753 $10,037 2/29/96 $11,008 $10,870 $10,818 $ 9,986 3/31/96 $11,091 $10,963 $10,998 $ 9,972 4/30/96 $11,229 $11,152 $11,258 $ 9,932 5/31/96 $11,266 $11,234 $11,265 $ 9,934 6/30/96 $11,324 $11,257 $11,325 $10,013 7/31/96 $11,157 $10,961 $10,925 $10,205 8/31/96 $11,334 $11,138 $11,054 $10,245 9/30/96 $11,687 $11,505 $11,488 $10,287 10/31/96 $11,873 $11,620 $11,567 $10,479 11/30/96 $12,329 $12,109 $12,219 $10,617 12/31/96 $12,332 $12,001 $12,025 $10,531 1/31/97 $12,475 $12,177 $12,172 $10,250 2/28/97 $12,567 $12,234 $12,311 $10,173 3/31/97 $12,373 $11,965 $12,064 $10,096 4/30/97 $12,506 $12,207 $12,460 $10,007 5/31/97 $13,008 $12,824 $13,231 $10,279 6/30/97 $13,377 $13,283 $13,889 $10,402 7/31/97 $13,797 $13,812 $14,531 $10,321 8/31/97 $13,428 $13,306 $13,547 $10,314 9/30/97 $13,838 $13,882 $14,284 $10,534 10/31/97 $13,428 $13,434 $13,534 $10,753 11/30/97 $13,449 $13,554 $13,771 $10,589 12/31/97 $13,589 $13,717 $13,939 $10,557 1/31/98 $13,735 $13,902 $14,330 $10,659 2/28/98 $14,230 $14,575 $15,299 $10,746 3/31/98 $14,556 $14,988 $15,943 $10,639 4/30/98 $14,568 $15,135 $16,099 $10,810 5/31/98 $14,478 $14,922 $15,904 $10,834 6/30/98 $14,394 $15,111 $16,276 $10,851 7/31/98 $14,349 $15,032 $16,251 $10,865 8/31/98 $13,193 $13,512 $14,085 $11,160 9/30/98 $13,601 $13,978 $14,335 $11,754 10/31/98 $14,088 $14,813 $15,634 $12,102 11/30/98 $14,473 $15,418 $16,565 $11,931 12/31/98 $14,622 $15,974 $17,370 $12,171 31-Jan-99 14,647 16,196 17,752 12,059 28-Feb-99 14,274 15,766 17,280 11,672 31-Mar-99 14,498 16,264 17,997 11,701 30-Apr-99 15,083 16,830 18,709 11,697 31-May-99 14,796 16,404 18,020 11,500 6/30/99 14,958 16,906 18,858 11,299
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 7 Global Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Asset Allocation As of June 30, 1999
Current Benchmark Strategy - ---------------------------------------------------------------- U.S. Equities 40.0% 17.0% Global (Ex-U.S.) Equities 22.0 15.0 Emerging Markets Equities 3.0 3.0 Dollar Bonds 21.0 41.0 High Yield Bonds 3.0 3.0 Global (Ex-U.S.) Bonds 9.0 16.0 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 June 30, 1999 Percent of Net Assets - ---------------------------------------------------------------- 1. Xerox Corp. 1.39% 2. FDX Corp. 0.94 3. Burlington Northern Santa Fe Corp. 0.88 4. Raytheon Co., Class B 0.81 5. Electronic Data Systems Corp. 0.80 6. Corning, Inc. 0.78 7. Aetna, Inc. 0.76 8. Lockheed Martin Corp. 0.67 9. CIGNA Corp. 0.62 10. General Instrument Corp. 0.61 - ---------------------------------------------------------------- Currency Allocation As of June 30, 1999 Current Benchmark Strategy - --------------------------------------------------------------------------- U.S. 66.0% 62.5% Japan 7.8 0.0 U.K. 5.5 0.0 Euro 12.4 19.7 Other Europe 2.6 6.6 Canada 1.3 1.3 Emerging Markets 3.0 3.0 Other 1.4 6.9 - --------------------------------------------------------------------------- 100.0% 100.0% Top Ten Global (Ex-U.S.) Equity Holdings As of June 30, 1999 Percent of Net Assets - ---------------------------------------------------------------------------------------- 1. BP Amoco PLC 0.25% 2. Veba AG 0.24 3. ING Groep NV 0.22 4. Lloyds TSB Group PLC 0.20 5. Nippon Telegraph & Telephone Corp. 0.19 6. Nestle S.A. (Reg.) 0.19 7. General Electric Co. PLC 0.18 8. Glaxo Wellcome PLC 0.18 9. Marks & Spencer PLC 0.18 10. Siemens AG 0.17 - ----------------------------------------------------------------------------------------
================================================================================ 8 Global Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Industry Diversification
As a Percent of Net Assets As of June 30, 1999 - -------------------------------------------------------------------------------- U.S. Equities Energy..................................... 0.17% Capital Investment......................... Capital Goods............................. 2.41 Technology 3.50 ----- 5.91 Basic Industries Chemicals................................. 1.01 Housing/Paper............................. 1.93 Metals.................................... 0.75 ----- 3.69 Consumer Non-Durables.............................. 0.74 Retail/Apparel............................ 1.37 Autos/Durables............................ 0.95 Health: Drugs............................. 1.09 Health: Non-Drugs......................... 1.26 ------ 5.41 Financial Banks..................................... 2.37 Non-Banks................................. 2.27 ------ 4.64 Utilities Electric.................................. 0.99 Telephone................................. 0.40 ------ 1.39 Transportation............................. 2.15 Services/Misc.............................. 1.48 Post Venture............................... 1.55 ------ Total U.S. Equities................... 26.39* GLOBAL (EX-U.S.) EQUITIES Aerospace & Military....................... 0.16 Airlines................................... 0.12 Appliances & Household..................... 0.20 Autos/Durables............................. 0.37 Banking.................................... 1.57 Beverages & Tobacco........................ 0.44 Broadcasting & Publishing.................. 0.67 Building Materials......................... 0.14 Business & Public Service.................. 0.63 Chemicals.................................. 0.61 Construction............................... 0.10 Data Processing............................ 0.21 Electric Components........................ 0.18 Electronics................................ 0.84 Energy..................................... 0.81 Financial Services......................... 0.36 Food & House Products...................... 0.57 Forest Products............................ 0.17 Health: Drugs.............................. 0.93 Industrial Components...................... 0.35 Insurance.................................. 0.76% Leisure & Tourism.......................... 0.05 Machinery & Engineering.................... 0.12 Merchandising.............................. 0.69 Metals--Steel.............................. 0.06 Multi-Industry............................. 0.23 Non-Ferrous Metals......................... 0.40 Real Estate................................ 0.12 Recreation................................. 0.14 Telecommunications......................... 1.30 Textiles & Apparel......................... 0.03 Transportation............................. 0.23 Utilities.................................. 0.75 Wholesale & International Trade............ 0.08 ------ Total Global (Ex-U.S.) Equities....... 14.39 Emerging Markets Equities.................. 3.56 ------ Total Equities............................. 44.34 U.S. Bonds Corporate Bonds Aerospace & Military...................... 0.61 Airlines.................................. 0.03 Asset-Backed.............................. 0.72 Banks..................................... 0.03 CMO....................................... 0.10 Consumer.................................. 0.44 Energy.................................... 0.32 Financial Services........................ 0.44 Food and Housing Products................. 0.41 Services and Miscellaneous................ 0.96 Telecommunications........................ 0.48 Transportation............................ 0.31 ------ 4.85 International Dollar Bonds................. 1.96 Mortgage-Backed Securities................. 1.86 U.S. Government Agencies................... 5.08 U.S. Government Obligations................ 15.43 ------ Total U.S. Bonds...................... 29.18* High Yield Bonds........................... 2.89 Global (Ex-U.S.) Bonds Foreign Financial Bonds.................... 1.62 Foreign Government Bonds................... 13.57 ------ Total Global (Ex-U.S.) Bonds.......... 15.19 Emerging Markets Debt 5.02 Short-Term Investments..................... 25.10* ------ Total Investments...................... 121.72 Liabilities, Less Cash and Other Assets.............................. (21.72) ------ Net Assets............................ 100.00% ======
- -------------------------------------------------------------------------------- * The Fund held a long position in U.S. Treasury futures on June 30, 1999 which increased U.S. Bond exposure from 29.18% to 39.37%. * The Fund held a short position in stock index futures on June 30, 1999 which reduced U.S. Equity exposure from 26. ================================================================================ 9 Global Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------- ------------ Equities -- 44.34% U.S. Equities -- 26.39% Advanced Micro Devices, Inc. (b)............ 62,700 $ 1,132,519 Aetna, Inc.................................. 41,700 3,729,544 Allergan, Inc............................... 13,300 1,476,300 Alza Corp. (b).............................. 55,100 2,803,212 American Standard Companies, Inc. (b)....... 28,900 1,387,200 Aon Corp.................................... 70,947 2,926,564 Armstrong World Industries, Inc............. 7,700 445,156 BankBoston Corp............................. 15,300 782,213 Baxter International, Inc................... 30,700 1,861,187 Brinson Post-Venture Fund (b)............... 397,192 7,660,445 Burlington Northern Santa Fe Corp........... 140,400 4,352,400 Champion Enterprises, Inc. (b).............. 24,700 460,038 Champion International Corp................. 8,700 416,513 Chase Manhattan Corp........................ 24,300 2,104,987 CIGNA Corp.................................. 34,100 3,034,900 Circuit City Stores-Circuit City Group...... 25,800 2,399,400 CMS Energy Corp............................. 25,900 1,084,562 CommScope, Inc. (b)......................... 22,133 680,590 Compaq Computer Corp........................ 7,800 184,763 Computer Sciences Corp. (b)................. 14,600 1,010,137 Compuware Corp. (b)......................... 29,000 922,563 Comverse Technology, Inc. (b)............... 8,540 644,770 Consolidated Stores Corp. (b)............... 34,900 942,300 Corning, Inc................................ 55,000 3,856,875 Covance, Inc. (b)........................... 22,072 528,349 Delphi Automotive Systems Corp.............. 50,600 939,262 Dial Corp................................... 14,500 539,219 Dominion Resources Inc...................... 7,000 303,188 Eastman Chemical Co......................... 15,500 802,125 Electronic Data Systems Corp................ 69,700 3,942,406 Eli Lilly and Co............................ 15,200 1,088,700 Entergy Corp................................ 73,500 2,296,875 FDX Corp. (b)............................... 85,700 4,649,225 Federal-Mogul Corp.......................... 14,100 733,200 First American Corp. of Tennessee........... 7,300 303,406 First Data Corp............................. 56,230 2,751,756 First Security Corp......................... 13,875 378,094 First Union Corp............................ 23,300 1,095,100 Fleet Financial Group, Inc.................. 35,200 1,562,000 Fleetwood Enterprises, Inc.................. 16,300 430,931 Food Lion Inc., Class A..................... 82,700 982,062 Fort James Corp............................. 48,600 1,840,725 GATX Corp................................... 4,000 152,250 General Instrument Corp. (b)................ 71,200 3,026,000 Genzyme Corp. (b)........................... 11,300 548,050 Genzyme Surgical Products Division (b)...... 2,023 8,913 Geon Co..................................... 4,500 145,125 GreenPoint Financial Corp................... 45,400 1,489,687 Hibernia Corp............................... 34,800 545,925 Household International, Inc................ 45,400 2,150,825 Illinois Tool Works, Inc.................... 8,300 680,600 IMC Global Inc.............................. 50,800 895,350 Johnson Controls, Inc....................... 13,300 921,856 Kimberly-Clark Corp......................... 28,200 1,607,400 Lafarge Corp................................ 15,200 538,650 Lear Corp. (b).............................. 33,600 1,671,600 Lockheed Martin Corp........................ 89,046 3,316,963 Lyondell Chemical Company................... 40,400 833,250 Martin Marietta Materials, Inc.............. 8,184 $ 482,856 Masco Corp.................................. 87,600 2,529,450 Mattel, Inc................................. 40,700 1,076,006 MCN Energy Group, Inc....................... 10,700 222,025 Nabisco Holdings Corp....................... 3,100 134,075 National Service Industries, Inc............ 13,800 496,800 New York Times Co........................... 16,200 596,363 Newell Rubbermaid, Inc...................... 28,800 1,339,200 Nextel Communications, Inc.................. 39,200 1,967,350 Norfolk Southern Corp....................... 48,100 1,449,012 Peco Energy Co.............................. 28,100 1,176,687 Pentair, Inc................................ 14,896 681,492 Philip Morris Companies, Inc................ 44,500 1,788,344 PNC Bank Corp............................... 22,800 1,313,850 Praxair, Inc................................ 24,100 1,179,394 Raytheon Co., Class B....................... 56,800 3,997,300 Regions Financial Corp...................... 7,200 276,750 Southdown, Inc.............................. 16,136 1,036,738 St. Jude Medical, Inc. (b).................. 39,600 1,410,750 Tyson Foods, Inc............................ 52,198 1,174,455 U.S. Bancorp................................ 35,980 1,223,320 Ultramar Diamond Shamrock Corp.............. 28,902 630,425 United Healthcare Corp...................... 28,100 1,759,762 USG Corp.................................... 12,600 705,600 Vencor, Inc. (b)............................ 28,100 4,215 Ventas, Inc................................. 19,200 103,200 Viad Corp................................... 27,600 853,875 W.W. Grainger, Inc.......................... 7,500 403,594 Wells Fargo and Co.......................... 49,000 2,094,750 Westvaco Corp............................... 11,400 330,600 Xerox Corp.................................. 115,900 6,845,344 York International Corp..................... 17,500 749,219 ----------- Total U.S. Equities......................... 130,031,006 ----------- Global (Ex-U.S.) Equities -- 14.39% Australia -- 1.17% Amcor Ltd................................... 16,420 91,273 Amp Limited................................. 23,100 252,528 Brambles Industries Ltd..................... 9,570 252,109 Broken Hill Proprietary Co., Ltd............ 49,610 574,646 CSR Ltd..................................... 62,270 178,056 David Jones Ltd............................. 73,830 72,325 Lend Lease Corp., Ltd....................... 16,432 225,608 National Australia Bank Ltd................. 49,427 817,894 News Corp. Ltd.............................. 74,389 634,680 News Corp. Ltd., Preferred.................. 20,436 155,691 Orica Ltd................................... 10,350 56,525 Pacific Dunlop Ltd.......................... 10,610 15,310 Qantas Airways Ltd.......................... 95,837 316,539 QBE Insurance Group Ltd..................... 37,683 143,419 Rio Tinto Ltd............................... 16,945 277,840 Santos Ltd.................................. 39,790 130,368 Telstra Corp., Ltd.......................... 131,300 752,359 Westpac Banking Corp., Ltd.................. 82,028 532,085 WMC Ltd..................................... 39,840 171,142 Woolworth's Ltd............................. 40,060 133,242 --------- 5,783,639 --------- Austria -- 0.02% Austria Tabakwerke AG....................... 1,800 104,883 ---------
================================================================================ 10 Global Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------ ------------ ......................................... Belgium -- 0.17% Fortis (B).................................. 20,367 $ 639,587 KBC Bancassurance Holding................... 3,490 206,956 ------------ 846,543 ------------ Canada -- 0.35% Agrium, Inc................................. 9,940 86,633 Alcan Aluminum Ltd.......................... 3,720 117,499 Bank of Montreal............................ 2,320 83,859 Canadian National Railway Co................ 2,260 151,013 Canadian Pacific Ltd........................ 6,873 162,526 Hudson's Bay Co............................. 7,210 80,376 Imasco, Ltd................................. 3,690 98,975 Imperial Oil Ltd............................ 5,710 108,020 Magna International, Inc., Class A.......... 1,360 76,587 Newbridge Networks Corp. (b)................ 4,060 115,208 Nova Chemicals Corp. NPV.................... 4,204 97,992 Potash Corporation of Saskatchewan, Inc..... 960 49,391 Royal Bank of Canada........................ 3,170 139,214 Seagram Co., Ltd............................ 1,250 61,947 Shaw Communications, Inc., Class B.......... 4,580 180,403 TransCanada Pipelines Ltd................... 5,490 76,966 Westcoast Energy, Inc....................... 2,050 40,028 ------------ 1,726,637 ------------ Denmark -- 0.05% Tele Danmark A/S............................ 4,920 242,169 ------------ Finland -- 0.26% Merita PLC, Class A......................... 47,730 271,224 Nokia Oyj................................... 7,160 627,649 UPM-Kymmene Corp............................ 13,670 391,921 ------------ 1,290,794 ------------ France -- 1.24% Aerospatiale Matra.......................... 9,160 211,134 Air Liquide................................. 2,205 346,787 Banque Nationale de Paris................... 3,899 324,900 Carrefour S.A............................... 1,920 282,164 Cie de Saint Gobain......................... 1,597 254,459 Elf Aquitaine S.A........................... 3,734 547,979 France Telecom S.A.......................... 6,070 458,544 Groupe Air France (b)....................... 13,060 233,010 Groupe Danone............................... 1,620 417,676 Michelin, Class B........................... 4,239 173,425 Rhone-Poulenc, Class A...................... 6,094 278,477 SEITA....................................... 11,830 683,216 Societe Generale............................ 1,705 300,505 Suez Lyonnaise des Eaux S.A................. 2,261 407,826 Thomson CSF................................. 14,210 493,866 Total Fina S.A., Class B.................... 3,016 389,111 Vivendi..................................... 4,040 327,275 ------------ 6,130,354 ------------ Germany -- 1.43% Allianz AG.................................. 2,030 567,349 Bayer AG.................................... 19,880 827,266 Continental AG.............................. 12,200 291,899 DaimlerChrysler AG.......................... 6,456 563,939 Deutsche Bank AG............................ 11,740 $ 715,551 Deutsche Telekom AG......................... 13,260 557,258 Deutsche Telekom AG, Rights (b)............. 13,260 2,598 Dresdner Bank AG............................ 11,670 453,730 Mannesmann AG............................... 4,530 677,409 SAP AG...................................... 570 195,457 Siemens AG.................................. 10,750 829,268 Veba AG..................................... 20,089 1,185,057 Volkswagen AG............................... 2,970 191,650 ------------ 7,058,431 ------------ Italy -- 0.37% Assicurazioni Generali...................... 12,800 443,542 ENI Spa..................................... 83,000 495,612 ENI Spa ADR................................. 3,070 184,200 La Rinascente Spa........................... 29,740 225,124 Montedison Spa.............................. 119,964 195,476 San Paolo-imi Spa........................... 19,511 265,606 ------------ 1,809,560 ------------ Japan -- 3.31% Acom Co., Ltd............................... 3,800 328,073 Amada Co., Ltd.............................. 19,000 134,212 Bank of Tokyo-Mitsubushi, Ltd............... 31,000 441,284 Bridgestone Corp............................ 10,000 302,379 Canon, Inc.................................. 15,000 431,262 Citizen Watch Co., Ltd...................... 18,000 156,147 Dai Nippon Printing Co., Ltd................ 17,000 271,770 Daiichi Pharmaceutical Co., Ltd............. 15,000 232,733 Daikin Industries Ltd....................... 38,000 441,094 Daiwa House Industry Co., Ltd............... 9,000 94,655 East Japan Railway Co....................... 53 284,617 Fanuc....................................... 7,400 397,389 Fuji Photo Film............................. 5,000 189,194 Fujitsu..................................... 31,000 623,637 Honda Motor Co.............................. 13,000 550,975 Hoya Corp................................... 4,000 225,710 Ito Yokado Co., Ltd......................... 9,000 602,280 Kaneka Corp................................. 19,000 178,949 Kao Corp.................................... 12,000 337,079 Kirin Brewery Co., Ltd...................... 20,000 239,590 Kokuyo...................................... 6,000 96,662 Kuraray Co., Ltd............................ 22,000 264,640 Marui Co., Ltd.............................. 10,000 165,235 Matsushita Electric Industrial Co........... 22,000 427,132 Mitsubishi Estate Co., Ltd.................. 35,000 341,499 Mitsubishi Corp............................. 60,000 406,477 NGK Insulators.............................. 30,000 313,285 Nintendo Corp., Ltd......................... 2,200 309,171 Nippon Denso Co., Ltd....................... 16,000 325,182 Nippon Meat Packers, Inc.................... 14,000 182,749 Nippon Steel Co............................. 127,000 294,836 Nippon Telegraph & Telephone Corp........... 80 931,923 Nomura Securities Co., Ltd.................. 32,000 374,620 Obayashi Corp............................... 32,000 161,005 Osaka Gas Co................................ 90,000 305,601 Sankyo Co., Ltd............................. 13,000 327,578 Sanwa Bank Ltd.............................. 21,000 206,634 Secom Co., Ltd.............................. 4,000 416,391 Sega Enterprises Ltd........................ 2,400 31,745
================================================================================ 11 Global Fund -- Schedule Of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------ ----------- Sekisui House Ltd........................ 20,000 $ 215,796 Shin-Etsu Chemical Co., Ltd.............. 4,000 133,840 Sony Corp................................ 4,200 452,826 Sumitomo Bank............................ 23,000 285,220 Sumitomo Chemical Co..................... 51,000 233,848 Sumitomo Electric Industries............. 20,000 227,363 Takeda Chemical Industries............... 11,000 509,831 TDK Corp................................. 3,000 274,372 Tokio Marine & Fire...................... 18,000 195,555 Tokyo Electric Power..................... 19,000 401,066 Toshiba Corp............................. 45,000 320,844 Toyota Motor Corp........................ 17,000 537,921 Yamato Transport Co., Ltd................ 11,000 191,755 ----------- 16,325,631 ----------- Netherlands -- 0.67% Elsevier NV.............................. 41,570 482,300 Heineken NV.............................. 3,152 161,395 ING Groep NV............................. 19,727 1,068,084 Koninklijke KPN NV....................... 11,276 529,117 Royal Dutch Petroleum Co................. 11,090 649,628 Unilever NV.............................. 5,723 385,704 ----------- 3,276,228 ----------- New Zealand -- 0.25% Auckland International Airport Ltd....... 62,150 95,507 Carter Holt Harvey Ltd................... 70,640 84,597 Fletcher Challenge Paper................. 138,030 103,130 Lion Nathan Ltd.......................... 53,920 129,146 Telecom Corp. of New Zealand Ltd......... 189,010 811,266 ----------- 1,223,646 ----------- Norway -- 0.06% Norsk Hydro ASA.......................... 3,190 120,347 Norske Skogindustrier ASA................ 4,550 167,608 ----------- 287,955 ----------- Portugal -- 0.06% EDP Electricidade de Portugal S.A........ 15,300 275,499 ----------- Singapore -- 0.20% Singapore Press Holdings Ltd............. 39,820 678,285 United Overseas Bank Ltd. (Frgn.)........ 44,360 310,064 ----------- 988,349 ----------- Spain -- 0.31% Banco Popular............................ 4,329 311,399 Banco Santander Central Hispano SA....... 42,398 441,623 Endesa S.A............................... 14,323 305,470 Telefonica S.A. (b)...................... 9,278 446,940 ----------- 1,505,432 ----------- Sweden -- 0.35% Electrolux AB, B Shares................. 25,740 538,899 Investor AB - B Shares................... 24,400 272,642 Nordbanken Holding AB.................... 32,110 187,705 Swedish Match AB......................... 92,620 330,085 Telefonaktiebolaget LM Ericsson, B Shares 12,940 414,744 ----------- 1,744,075 ----------- Switzerland -- 0.71% Adecco S.A............................... 289 154,855 Holderbank Financiere Glarus AG, B Shares 234 $ 276,206 Nestle S.A. (Reg.)....................... 515 927,901 Novartis AG (Reg.)....................... 543 792,879 Roche Holding AG (Gen.).................. 69 709,263 Swiss Reinsurance Co. (Reg.)............. 46 87,585 Swisscom AG (Reg.)....................... 1,416 532,844 ----------- 3,481,533 ----------- United Kingdom -- 3.41% Allied Zurich PLC........................ 31,052 390,352 AstraZeneca Group PLC.................... 12,002 464,264 Barclays PLC............................. 16,050 467,029 BOC Group PLC............................ 38,350 749,590 Boots Company PLC........................ 26,230 311,543 British Aerospace PLC.................... 10,000 64,904 British Airways PLC...................... 40,000 276,009 BP Amoco PLC............................. 69,473 1,245,126 British Telecommunications PLC........... 29,000 485,924 Charter PLC.............................. 69,676 408,567 Coats Viyella PLC........................ 181,970 146,287 Diageo PLC............................... 44,209 461,672 FKI PLC.................................. 165,040 512,654 General Electric Co. PLC................. 88,360 901,149 Glaxo Wellcome PLC....................... 32,260 896,507 Greenalls Group PLC...................... 42,358 237,028 House of Fraser PLC...................... 82,780 114,175 Lloyds TSB Group PLC..................... 71,969 975,620 Marks & Spencer PLC...................... 153,060 885,451 Mirror Group PLC......................... 101,390 393,765 National Power PLC....................... 63,500 462,437 Nycomed Amersham PLC..................... 54,844 381,245 Peninsular & Oriental Steam Navigation Co. 18,540 278,363 Prudential Corp. PLC..................... 55,540 817,692 Reckitt & Colman PLC..................... 26,000 271,106 Reed International PLC................... 47,010 313,635 Rio Tinto Ltd............................ 48,190 807,851 RJB Mining PLC........................... 66,590 55,107 Royal & Sun Alliance Insurance Group PLC 21,884 196,280 Sainsbury (J.) PLC....................... 19,300 121,690 Scottish Hydro-Electric PLC.............. 67,880 694,422 Tesco PLC................................ 259,190 666,973 Thames Water PLC......................... 20,997 332,960 Unilever PLC............................. 34,000 302,538 United News & Media PLC.................. 48,490 466,250 Yorkshire Water PLC...................... 37,080 257,760 ----------- 16,813,925 ----------- Total Global (Ex-U.S.) Equities 70,915,283 ----------- Emerging Markets Equities -- 3.56% Brinson Emerging Markets Equity Fund (b)............................... 1,868,295 17,543,286 ----------- Total Equities (Cost $193,689,005) 218,489,575 -----------
================================================================================ 12 Global Fund -- Schedule Of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ------ ---------- Bonds -- 52.28% U.S. Bonds -- 29.18% U.S. Corporate Bonds -- 4.85% Banque Paribas, Sub. Notes, 6.875%, due 03/01/09.............................. $ 175,000 $ 168,787 Bell Atlantic Corp., 8.000%, due 10/15/29... 78,000 85,590 Cendant Corp., 7.750%, due 12/01/03......... 640,000 646,414 Centaur Funding Corp., 144A................. 750 804,844 Centaur Funding Corp., 144A (b)............. 1,430 220,935 Chase Manhattan Auto Owner Trust, 96-C, Class A4, 6.150%, due 03/15/02............ 730,000 733,570 Chemical Master Credit Card Trust, 95-Z, Class A, 6.230%, due 06/15/03............. 1,055,000 1,061,193 Continental Airlines, Inc., 98-1B, 6.748%, due 09/15/18.............................. 166,569 158,588 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03............. 1,055,000 1,058,070 GATX Capital Corp., 6.500%, due 11/01/00 1,500,000 1,510,387 General Motors Acceptance Corp., 9.625%, due 12/15/01.............................. 241,000 258,478 Hertz Corp., 6.625%, due 07/15/00........... 2,500,000 2,525,184 International Telecom Satelite, 8.125%, due 02/28/05.............................. 245,000 258,423 Lehman Brothers, Inc., 7.250%, due 04/15/03.............................. 510,000 511,775 MBNA Global Capital Securities FRN, 5.795%, due 02/01/27...................... 810,000 702,346 Monsanto Co., 144A, 6.600%, due 12/01/28 545,000 484,331 Morgan Stanley Dean Witter, Series MTN, 5.625%, due 01/20/04...................... 355,000 340,895 Noram Energy Corp., 6.375%, due 11/01/03 615,000 601,222 Norwest Asset Securities Corp., 96-2, Class A9, 7.000%, due 09/25/11............ 435,000 430,167 PanAmSat Corp............................... 6.000%, due 01/15/03...................... 225,000 220,234 6.375%, due 01/15/08...................... 1,000,000 944,227 Raytheon Co., 6.300%, due 08/15/00.......... 3,000,000 3,027,356 Rohm & Haas Co., 144A, 7.400%, due 07/15/09.............................. 750,000 749,820 Safeway, Inc., 5.750%, due 11/15/00......... 1,000,000 998,792 Service Corp., International, 6.000%, due 12/15/05.............................. 1,000,000 918,929 Sprint Capital Corp., 6.875%, due 11/15/28 750,000 682,898 Supervalu Stores, Inc., Series A, MTN 6.500%, due 10/06/00...................... 1,000,000 1,008,079 Telecommunicaciones de Puerto Rico Inc., 144A, 6.150%, due 05/15/02................ 200,000 197,923 Thrift Financial Corp., 11.250%, due 01/01/16 59,949 62,625 Time Warner Entertainment, Inc., 8.375%, due 03/15/23.............................. 386,000 417,715 Time Warner, Inc., 6.625%, due 05/15/29..... 550,000 484,490 Waste Management, Inc., 6.875%, 144A, due 05/15/09.............................. 640,000 623,763 Western Resources, Inc., 6.875%, due 08/01/04.............................. 975,000 972,777 ---------- 23,870,827 ---------- Mortgage-Backed Securities -- 1.86% Asset Securitization Corp., 96-D, Class A1B, 7.210%, due 10/13/26........... $1,695,000 $1,730,612 Prudential Home Mortgage Securities, 94-3, Class A10, 6.500%, due 02/25/24........... 730,000 706,348 Residential Asset Securitization Trust, 97-A11, Class A2, 7.000%, due 01/25/28 60,229 60,382 97-A7, Class A1, 7.500%, due 09/25/27..... 324,501 327,143 97-A7, Class A1, 7.250%, due 12/25/27..... 1,080,000 1,060,106 Structured Asset Securities Corp., 98-RF1, Class A, 8.712%, due 03/15/27..... 1,125,637 1,179,105 98-RF2, 144A, 8.582%, due 07/15/27........ 1,433,113 1,497,603 UCFC Home Equity Loan 97-C, Class A8, FRN, 5.069%, due 09/15/27....... 904,870 902,689 Vendee Mortgage Trust, 98-2, Class 1G, 6.750%, due 06/15/28............ 1,760,000 1,700,459 ---------- 9,164,447 ---------- International Dollar Bonds -- 1.96% Abbey National PLC, Resettable Perpetual Preferred, 6.700%, due 06/29/49 1,075,000 997,001 Amvescap PLC, 6.600%, due 05/15/05................................ 870,000 822,067 Banco Santiago S.A., 7.000%, due 07/18/07 650,000 569,976 Banque Centrale de Tunisie, 8.250%, due 09/19/27................................ 785,000 651,550 British Sky Broadcasting Group PLC, 6.875%, due 02/23/09................................ 135,000 123,109 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.900%, due 05/01/07 600,000 584,139 Empresa Nacional de Electricidad S.A., 7.875%, due 02/01/27........................ 166,000 140,554 Government of Malaysia, 8.750%, due 06/01/09................................ 690,000 695,175 Korea Development Bank, 7.125%, due 09/17/01................................ 180,000 179,487 National Australia Bank, FRN, 6.400%, due 12/10/07................................ 700,000 690,468 Pan Pacific Industry PLC 144A, 0.000%, due 04/28/07................................ 1,565,000 759,025 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14.................. 1,000,000 922,830 Repsol International Finance, 7.000%, due 08/01/05................................ 575,000 571,491 Republic of South Africa, 9.625%, due 12/15/99................................ 794,000 801,940 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49 505,000 490,902 Skandinaviska Enskilda Banken, 144A, 6.625%, due 03/29/49................................ 285,000 281,829 144A, Resettable Perpetual Preferred, 6.500%, due 12/29/49................................ 415,000 394,697 --------- 9,676,240 ---------
================================================================================ 13 Global Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------
Face Amount Value ------------- ------------ U.S. Government Agencies -- 5.08% Aid-Israel, Series 10-Z, 0.000%, due 02/15/03............................... $ 4,935,000 $ 3,986,537 Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25............... 22,488 23,498 Federal Home Loan Mortgage Corp. 6.200%, due 08/15/07....................... 446,183 440,013 7.238%, due 05/01/26....................... 125,917 126,868 Federal Home Loan Mortgage Corp. Gold 8.000%, due 11/01/22....................... 75,066 77,367 8.000%, due 05/01/23....................... 806,381 831,105 9.000%, due 03/01/24....................... 543,328 578,400 Federal National Mortgage Association 5.625%, due 05/14/04....................... 1,790,000 1,746,852 8.000%, due 02/25/07....................... 1,045,657 1,066,888 6.500%, due 03/01/19....................... 286,120 278,532 8.000%, due 05/25/21....................... 1,300,000 1,324,018 8.500%, due 07/15/21....................... 498,509 515,960 8.000%, due 05/01/22....................... 63,828 65,501 8.500%, due 07/01/22....................... 352,813 371,076 7.500%, due 07/25/22....................... 2,425,413 2,424,210 7.000%, due 10/01/28....................... 979,919 970,033 6.500%, due 02/01/29....................... 1,523,101 1,473,192 7.000%, due 03/01/29....................... 272,067 269,468 Federal National Mortgage Association Strips 8.000%, due 08/01/23....................... 1,417,412 362,753 0.000%, due 02/01/28....................... 1,017,105 713,655 FGGI, 7.500%, due 10/01/11.................. 795,665 809,113 FNCI, 8.000%, due 02/01/13.................. 589,589 607,514 Freddie Mac Series 194 Class PO, 0.000%, due 04/01/28......... 745,014 491,765 2121 Class H, 5.500%, due 02/15/14......... 2,302,392 2,153,174 Government National Mortgage Association 10.000%, due 09/15/00...................... 1,482 1,579 10.000%, due 05/15/01...................... 1,735 1,849 9.000%, due 11/15/04....................... 8,714 9,177 9.000%, due 11/15/04....................... 3,532 3,720 8.000%, due 08/15/22....................... 304,236 313,678 8.000%, due 11/15/22....................... 231,255 238,750 TBA, 7.000%, due 06/15/29.................. 2,780,000 2,745,250 ------------ 25,021,495 ------------ U.S. Government Obligations -- 15.43% U.S. Treasury Bond, 8.000%, due 11/15/21............................... 7,200,000 8,662,500 U.S. Treasury Inflation Indexed Note 3.625%, due 01/15/08....................... 6,945,000 6,942,105 3.625%, due 04/15/28....................... 45,590,000 44,230,725 3.875%, due 04/15/29....................... 15,000,000 14,962,259 U.S. Treasury Note 4.875%, due 03/31/01....................... 970,000 959,997 5.625%, due 05/15/08....................... 290,000 284,019 ------------ 76,041,605 ------------ Total U.S. Bonds............................ 143,774,614 ------------ Shares ------------- High Yield Bonds -- 2.89% Brinson High Yield Fund (b)................. 1,058,868 14,221,334 ------------ Face Amount Value ------------- ------------ Global (Ex-U.S.) Bonds -- 15.19% Australia -- 1.48% Queensland Treasury Corp., Series 05-G, 6.500%, due 06/14/05....................AUD 10,900,000 $ 7,303,822 ------------ Canada -- 1.48% Government of Canada 7.000%, due 12/01/06.....................CAD 2,640,000 1,943,141 6.000%, due 06/01/08....................... 1,600,000 1,108,574 4.250%, due 12/01/21....................... 5,440,000 4,227,844 ------------ 7,279,559 ------------ Denmark -- 1.12% Kingdom of Denmark 9.000%, due 11/15/00....................DKK 11,100,000 1,654,505 7.000%, due 12/15/04....................... 7,980,000 1,248,484 8.000%, due 03/15/06....................... 12,100,000 2,008,479 7.000%, due 11/10/24....................... 3,850,000 624,072 ------------ 5,535,540 ------------ France -- 2.31% Government of France (BTAN), 5.750%, due 03/12/01....................EUR 990,000 1,064,481 Government of France (OAT) 9.500%, due 01/25/01....................... 3,200,000 3,607,405 7.500%, due 04/25/05....................... 850,000 1,026,943 8.500%, due 12/26/12....................... 3,499,999 4,950,496 5.500%, due 04/25/29....................... 700,000 728,407 ------------ 11,377,732 ------------ Germany -- 1.95% Bundesrepublik Deutscheland 8.375%, due 05/21/01....................... 3,500,000 3,944,516 6.250%, due 01/04/24....................... 2,000,000 2,309,699 DePfa Deutsche Pfandbriefbank AG, 4.750%, due 03/20/03....................... 1,080,000 1,144,879 Treuhandanstalt, 6.250%, due 03/04/04....... 1,950,000 2,205,502 ------------ 9,604,596 ------------ Italy -- 0.60% Buoni Poliennali Del Tes, 5.000%, due 05/01/08....................... 1,700,000 1,784,066 Republic of Italy (BTP) 12.000%, due 09/01/02....................... 900,000 1,152,416 8.500%, due 04/01/04....................... 1 1 ------------ 2,936,483 ------------ Netherlands -- 1.51% Government of Netherlands 8.250%, due 02/15/02....................... 3,700,000 4,258,444 5.500%, due 01/15/28....................... 1,600,000 1,664,931 Koninklijke KPN NV.......................... 550,000 557,686 LBW Finance NV, 5.125%, due 03/05/04........ 900,000 964,879 ------------ 7,445,940 ------------ Spain -- 0.77% Government of Spain 8.000%, due 05/30/04....................... 1,352,277 1,633,196 6.150%, due 01/31/13....................... 1,900,001 2,161,341 ------------ 3,794,537 ------------
================================================================================ 14 Global Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ------------- ------------ Sweden -- 1.08% Government of Sweden 10.250%, due 05/05/03....................SEK 29,700,000 $ 4,199,664 6.750%, due 05/05/14....................... 8,400,000 1,117,057 ------------- 5,316,721 ------------- United Kingdom -- 2.89% Halifax PLC, Series E, MTN, 8.75% due 07/10/06............................GBP 2,980,000 5,302,925 UK Treasury 7.250%, due 12/07/07....................... 4,450,000 7,929,894 8.750%, due 08/25/17....................... 440,000 1,012,610 ------------- 14,245,429 ------------- Total Global (Ex-U.S.) Bonds................ 74,840,359 ------------- Shares ---------- Emerging Markets Debt -- 5.02% Brinson Emerging Markets Debt Fund (b)...... 1,240,578 24,713,550 ------------- Total Bonds (Cost $256,399,033)............. 257,549,857 ------------- Short-Term Investments -- 25.10% Investment Companies -- 6.51% Brinson Supplementary Trust U.S. Cash Management Prime Fund...................... 32,094,680 32,094,680 ------------- Face Amount ------------- U.S. Corporate Bonds -- 10.08% Burlington Resources, 6.875%, due 08/01/99........................ $ 2,000,000 2,001,755 Centex Corp., Series A, MTN 5.828%, due 06/30/00....................... 5,000,000 5,000,000 Enron Corp., 5.778%, due 03/30/00........... 5,000,000 5,000,000 General Motors Corporate Notes, 9.375%, due 04/01/00........................ 2,000,000 2,058,750 James River Corp., 6.750%, due 10/01/99..... 1,000,000 1,002,560 Lehman Brothers, Inc., Series A, MTN 6.920%, due 10/04/99........................ 3,000,000 3,007,690 Lehman Brothers, Inc., Series E, MTN 6.300%, due 08/11/99....................... 2,000,000 2,001,016 MCI Communications Corp., 7.125%, due 01/20/00........................ 1,200,000 1,210,857 MCI Communications Corp., Series A, MTN 6.260%, due 03/03/00....................... 2,000,000 2,011,325 Nabisco Inc., 6.300%, due 08/26/99.......... 1,000,000 1,000,786 Occidental Petroleum, Inc., Series B, MTN 6.080%, due 11/26/99....................... 3,000,000 3,005,074 Philadelphia Electric Co., 9.250%, due 10/01/99........................ 1,000,000 1,009,845 Quaker Oats, Inc., Series B, MTN 9.100%, due 08/31/99....................... 1,800,000 1,811,690 Sonat, Inc. 9.500%, due 08/15/99....................... 2,000,000 2,008,509 Supervalu Stores, Inc. 7.250%, due 07/15/99........................ $ 2,000,000 $ 2,001,026 Texas Utilities, Inc. 7.375%, due 11/01/99....................... 3,500,000 3,520,893 Textron Financial Corp., Series C, MTN 5.299%, due 12/20/99....................... 3,000,000 3,000,307 Ultramar Corp., 8.250%, due 07/01/99........ 1,500,000 1,500,000 Union Carbide, Inc., 7.000%, due 08/01/99... 5,000,000 5,004,598 Vastar Resources, Inc. 6.000%, due 04/20/00....................... 2,500,000 2,508,589 ------------- 49,665,270 ------------- U.S. Government Obligations -- 0.65% U.S. Treasury Bill, 0.000%, due 08/05/99.... 3,200,000 3,186,310 ------------- Commercial Paper -- 7.86% FMC Corp., 6.25%, due 07/01/99.............. 5,000,000 5,000,000 GPU Australia, 5.15%, due 07/07/99.......... 5,000,000 4,995,708 Kroger Corp., 6.40%, due 07/01/99........... 3,560,000 3,560,000 Phillips Petroleum Co., 5.22%, due 07/15/99......................... 5,236,000 5,225,368 Rohm & Haas Co., 6.30%, due 07/01/99........ 5,000,000 5,000,000 Tyco International Corp., 5.12%, due 07/30/99......................... 5,000,000 4,979,378 U.S. Generating LLC, 6.30%, due 07/01/99......................... 5,000,000 5,000,000 Union Pacific Corp., 5.30%, due 07/30/99.... 5,000,000 4,978,653 ------------- 38,739,107 ------------- Total Short-Term Investments (Cost $123,682,048)......................... 123,685,367 ------------- Total Investments (Cost $573,770,086) -- 121.72% (a)......... 599,724,799 Liabilities, less cash and other assets -- (21.72%)................... (107,008,544) ------------- Net Assets -- 100%......................... $ 492,716,255 =============
================================================================================ 15 Global Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $573,770,086; and net unrealized appreciation consisted of: Gross unrealized appreciation....................... $ 42,244,574 Gross unrealized depreciation....................... (16,289,861) ------------ Net unrealized appreciation....................... $ 25,954,713 ============ (b) Non-income producing security. FRN: Floating Rate Note -- The rate disclosed is that in effect at June 30, 1999 TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 1999, the value of these securities amounted to $7,521,739 or 1.53% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ------------- ------------ ------------ Forward Foreign Currency Buy Contracts Australian Dollar....................................... 8/6/99 33,200,000 $ 21,984,134 $ 1,052,514 British Pound........................................... 8/6/99 3,200,000 5,045,488 (80,133) Canadian Dollar......................................... 8/6/99 26,100,000 17,643,122 454,542 Danish Kroner........................................... 8/6/99 7,600,000 1,059,269 (65,191) Euro.................................................... 8/6/99 22,200,000 22,959,263 (1,244,933) Japanese Yen............................................ 8/6/99 200,000,000 1,661,403 (9,986) Swedish Krona........................................... 8/6/99 114,000,000 13,439,371 (1,470,093) Swiss Franc............................................. 8/6/99 4,400,000 2,842,616 (315,581) Forward Foreign Currency Sale Contracts Australian Dollar....................................... 8/6/99 2,500,000 1,655,432 (102,182) British Pound........................................... 8/6/99 18,700,000 29,484,572 1,319,939 Danish Kroner........................................... 8/6/99 42,800,000 5,965,356 742,414 Euro.................................................... 8/6/99 6,500,000 6,722,307 878,273 Japanese Yen............................................ 8/6/99 1,950,000,000 16,198,681 248,437 ------------ Total................................................. $ 1,408,020 ============
FUTURES CONTRACTS The Global Fund had the following open futures contracts as of June 30, 1999:
Settlement Cost/ Current Unrealized Date Proceeds Value Loss -------------- ------------- ------------ ------------ U.S. Interest Rate Futures Buy Contracts 5 year U.S. Treasury Notes, 297 contracts............. September 1999 $ 32,600,149 $ 32,373,000 $ (227,149) 10 year U.S. Treasury Notes, 72 contracts............. September 1999 8,097,692 8,005,500 (92,192) 30 year U.S. Treasury Bonds, 85 contracts............. September 1999 9,977,704 9,852,031 (125,673) Index Futures Sales Contracts Standard & Poor's 500, 142 contracts.................. September 1999 46,854,992 49,050,350 (2,195,358) ------------ Total................................................ $ (2,640,372) ============
The segregated cash and aggregate market value of investments pledged to cover margin requirements for the open positions at June 30, 1999 were $291,353 and $3,186,310, respectively. See accompanying notes to financial statements. ================================================================================ 16 Global Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $480,775,779)....................................................... $503,491,504 Affiliated issuers (Cost $92,994,307).......................................................... 96,233,295 Cash............................................................................................ 1,791,353 Foreign currency, at value (Cost $2,375,814).................................................... 2,369,487 Receivables: Investment securities sold..................................................................... 8,893,781 Dividends...................................................................................... 343,049 Interest....................................................................................... 2,891,212 Fund shares sold............................................................................... 5,680,357 Net unrealized appreciation on forward foreign currency contracts............................... 1,408,020 Other assets.................................................................................... 1,548 ------------ TOTAL ASSETS................................................................................ 623,103,606 ------------ LIABILITIES: Payables: Securities loaned.............................................................................. 97,474,174 Investment securities purchased................................................................ 25,213,162 Investment advisory fees....................................................................... 321,311 Fund shares redeemed........................................................................... 6,648,047 Variation margin............................................................................... 525,125 Accrued expenses............................................................................... 205,532 ------------ TOTAL LIABILITIES........................................................................... 130,387,351 ------------ NET ASSETS....................................................................................... $492,716,255 ============ NET ASSETS CONSIST OF: Paid in capital................................................................................. $456,511,413 Accumulated undistributed net investment income................................................. 753,116 Accumulated net realized gain................................................................... 10,789,381 Net unrealized appreciation..................................................................... 24,662,345 ------------ NET ASSETS.................................................................................. $492,716,255 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $469,080,017 and 39,038,154 shares issued and outstanding)..................................... $ 12.02 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,576,267 and 131,510 shares issued and outstanding).......................................... $ 11.99 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $22,059,971 and 1,845,252 shares issued and outstanding)....................................... $ 11.95 ============
See accompanying notes to financial statements. ================================================================================ 17 Global Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Interest (net of $15,418 for foreign taxes withheld; including securities lending income of $442,842)...... $ 13,551,311 Dividends (net of $201,714 for foreign taxes withheld)..................................................... 4,051,102 ------------ TOTAL INCOME............................................................................................ 17,602,413 ------------ EXPENSES: Advisory................................................................................................... 4,403,642 Administration............................................................................................. 381,250 Professional............................................................................................... 173,750 Distribution............................................................................................... 173,246 Printing................................................................................................... 116,160 Custodian.................................................................................................. 98,852 Other...................................................................................................... 146,069 ------------ TOTAL EXPENSES......................................................................................... 5,492,969 ------------ NET INVESTMENT INCOME.................................................................................... 12,109,444 ------------ net realized and unrealized gain (loss): Net realized gain (loss) on: Investments............................................................................................... 54,822,140 Futures contracts......................................................................................... (5,993,590) Foreign currency transactions............................................................................. (4,134,930) ------------ Net realized gain...................................................................................... 44,693,620 ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency.......................................................................... (41,176,138) Futures contracts......................................................................................... (1,693,063) Forward contracts......................................................................................... 4,947,447 Translation of other assets and liabilities denominated in foreign currency............................... (71,293) ------------ Change in net unrealized appreciation or depreciation.................................................. (37,993,047) ------------ Net realized and unrealized gain........................................................................... 6,700,573 ------------ Net increase in net assets resulting from operations....................................................... $ 18,810,017 ============
See accompanying notes to financial statements. ================================================================================ 18 Global Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations........................................ $ 18,810,017 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activites: Net realized and unrealized gain on investments............................................ (6,700,573) Decrease in receivable for investment securities sold...................................... 8,618,236 Decrease in dividends and interest receivable.............................................. 2,683,034 Decrease in other assets................................................................... 55,119 Increase in payable for securities purchased............................................... 1,976,692 Decrease in payable for investment advisory fee............................................ (139,904) Decrease in accrued expenses............................................................... (4,070) Increase in variation margin............................................................... 967,434 Net amortization of premium................................................................ 716,822 --------------- Net cash provided by operating activities................................................. 26,982,807 --------------- CASH FLOWS USEDFOR FINANCING ACTIVITIES: Purchases of investments.................................................................... (2,072,240,772) Proceeds from sales of investments.......................................................... 2,290,447,040 Net realized loss on futures contracts...................................................... (5,993,590) Net realized loss on foreign currency transactions.......................................... (4,134,930) Change in net unrealized appreciaton or depreciation on futures contracts................... (1,693,063) Change in net unrealized appreciation or depreciation on other assets and liabilities....... (71,293) Net decrease in foreign currency............................................................ 312,488 --------------- Net cash provided by investing activities................................................. 206,625,880 --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net capital shares transactions............................................................. (220,959,157) Net decrease from securities lending........................................................ (7,471,870) Dividends and capital gain distributions paid............................................... (3,401,660) --------------- Net cash used for financing activities.................................................... (231,832,687) --------------- Net increase in cash......................................................................... 1,776,000 CASH AT BEGINNING OF YEAR.................................................................... 15,353 --------------- CASH AT END OF YEAR.......................................................................... $ 1,791,353 ===============
See accompanying notes to financial statements. ================================================================================ 19 Global Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income........................................................... $ 12,109,444 $ 17,956,852 Net realized gain............................................................... 44,693,620 39,774,075 Change in net unrealized appreciation or depreciation........................... (37,993,047) (6,545,821) ------------- ------------- Net increase in net assets resulting from operations............................ 18,810,017 51,185,106 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income......................................... (12,109,444) (28,265,915) Distributions in excess of net investment income................................. (6,197,274) (5,070,122) Distributions from net realized gain............................................. (33,009,121) (35,465,456) ------------- ------------- Total distributions to shareholders*............................................ (51,315,839) (68,801,493) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold..................................................................... 410,521,495 256,422,880 Shares issued on reinvestment of distributions.................................. 47,914,179 64,950,197 Shares redeemed................................................................. (632,556,320) (217,384,769) ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions................................................................... (174,120,646) 103,988,308 ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS...................................... (206,626,468) 86,371,921 ------------- ------------- NET ASSETS: Beginning of year............................................................... 699,342,723 612,970,802 ------------- ------------- End of year (including undistributed net investment income of $753,116 and ($845,490), respectively)............................... $ 492,716,255 $ 699,342,723 ============= ============= *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income: Brinson Class I................................................................. (17,500,696) (32,129,657) Brinson Class N................................................................. (753,377) (9,572) UBS Investment Funds Class...................................................... (52,645) (1,196,808) Distributions from net realized gain: Brinson Class I................................................................. (31,201,392) (33,973,096) Brinson Class N................................................................. (1,710,286) (53) UBS Investment Funds Class...................................................... (97,443) (1,492,307) ------------- ------------- Total distributions to shareholders.............................................. (51,315,839) (68,801,493) ============= =============
See accompanying notes to financial statements. =============================================================================== 20 Global Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, July 31, 1995* ------------------------------------------- Through UBS Investment Funds Class 1999 1998 1997 June 30, 1996 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year..................... $ 12.71 $ 13.05 $ 12.18 $ 11.60 Income from investment operations:.................... ---------- ------- ------- -------- Net investment income................................ 0.20 0.30 0.34 0.39 Net realized and unrealized gain..................... 0.25 0.61 1.75 1.10 ---------- ------- ------- -------- Total income from investment operations.......... 0.45 0.91 2.09 1.49 ---------- ------- ------- -------- Less distributions: Distributions from and in excess of net investment income................................... (0.37) (0.55) (0.57) (0.59) Distributions from net realized gain................. (0.84) (0.70) (0.65) (0.32) ---------- ------- ------- -------- Total distributions............................... (1.21) (1.25) (1.22) (0.91) ---------- ------- ------- -------- Net asset value, end of year........................... $ 11.95 $ 12.71 $ 13.05 $ 12.18 ========== ======= ======= ======== Total return (non-annualized).......................... 3.92% 7.60% 18.13% 13.24% Ratios/Supplemental data: Net assets, end of year (in 000s).................... $22,060 $30,436 $26,303 $ 14,030 Ratio of expenses to average net assets.............. 1.61% 1.59% 1.64% 1.69%** Ratio of net investment income to average net assets......................................... 1.58% 2.05% 2.38% 3.04%** Portfolio turnover rate.............................. 105% 88% 150% 142%
* Commencement of UBS Investment Funds Class ** Annualized See accompanying notes to financial statements. ================================================================================ 21 Global Bond Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] In managing the Global Equity Fund, our investment research focuses on identifying discrepancies between a security's fundamental value and its observed market price -- both across and within global equity markets. We exploit these discrepancies using a disciplined fundamental approach. Our research teams evaluate companies in their markets around the world and assign relative price/value rankings based on the present value of each company's expected future cash flows. Industry and factor teams, in cooperation with the dedicated country strategy team, use our global network of resources to systematically develop portfolio strategy in the context of integrated global capital markets. Currency strategies are separately developed and coordinated with country allocations. The UBS Investment Fund -- Global Equity has provided an annualized return of 14.44% since its inception, July 31, 1995. Its benchmark, the MSCI World Equity (Free) Index has returned 17.58% over the same period. The Fund achieved these results while maintaining a risk or volatility level much lower than the benchmark at 11.50% versus 13.76%. The lower risk level implies that the Fund has generated a relatively constant return stream over time, protecting its investors from unwanted fluctuations in the Fund's value. For the year-to-date period, the Fund has returned 6.68% versus the benchmark return of 8.57%. For the year-to-date period, security selection was the largest cause of the Fund's underperformance relative to the index. More specifically, our underweights of large growth-oriented stocks and internet-related technology stocks in the U.S. detracted from performance. While a shift toward value- oriented cyclicals boosted Fund performance in the second quarter, earlier influences dominate year-to-date results. We continue to believe that the U.S. equity market is overvalued by a wide margin, and maintain our underweight. Security selection in Japan also hampered performance as some of the financially risky stocks (which we have steered away from) provided strong returns during the first part of the year, as expectations for some strengthening in the Japanese economy were increased. Currency allocation provided the largest positive contribution, mainly due to the Fund's overweights in the Australian dollar and Swedish krona, two of the strongest performing currencies for the year. Equity prices in Australia/New Zealand are still depressed, having been disproportionately impacted by their geographic proximity to Asia and the related cyclical downturn in basic material prices. In the case of Japan, long- term fundamental valuation of the equity market is critically dependent upon expectations of government reform of the domestic microeconomic environment, and the nature and timing of overdue corporate restructuring. While we believe that restructuring may raise profit margins in Japan to levels of a decade ago, it is unlikely that they will reach levels similar to those found in Continental Europe or the U.K. The implications for employment, bankruptcy and social stress are too severe. As a result, we maintain our neutral exposure to Japan at the present time. The current set of socialist-oriented governments in core Europe seems to have slowed previous reform momentum there. While we continue to expect a policy that is more favorable to capital returns over the long run (driven by a combination of demographic pressure and globalization of capital markets), near term prospects have dimmed. As a result, we favor U.K. equities over those of Continental Europe. ================================================================================ 22 Global Equity Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 - ------------------------------------------------------------------------------------------------------------------------------- UBS Investment Fund -- Global Equity 6.68% 9.28% 12.46% 14.44% - ------------------------------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index 8.57 15.87 18.53 17.58 - -------------------------------------------------------------------------------------------------------------------------------
*Inception date of the UBS Investment Fund -- Global Equity. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- Global Equity and the MSCI World Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund - Global Equity vs. MSCI World Equity (Free) Index Wealth Value with Dividends Reinvested
- --------------------------------- Date Brinson MSCI Index - --------------------------------- 7/31/95 $10,000 $10,000 8/31/95 $10,155 $ 9,777 9/30/95 $10,329 $10,066 10/31/95 $10,300 $ 9,909 11/30/95 $10,667 $10,255 12/31/95 $10,993 $10,556 1/31/96 $11,312 $10,753 2/29/96 $11,354 $10,818 3/31/96 $11,539 $10,998 4/30/96 $11,858 $11,256 5/31/96 $11,889 $11,265 6/30/96 $11,925 $11,325 7/31/96 $11,544 $10,925 8/31/96 $11,739 $11,054 9/30/96 $12,110 $11,488 10/31/96 $12,152 $11,567 11/30/96 $12,760 $12,219 12/31/96 $12,787 $12,025 1/31/97 $12,899 $12,172 2/28/97 $13,067 $12,311 3/31/97 $13,011 $12,064 4/30/97 $13,067 $12,460 5/31/97 $13,832 $13,231 6/30/97 $14,351 $13,889 7/31/97 $14,813 $14,531 8/31/97 $14,125 $13,547 9/30/97 $14,711 $14,284 10/31/97 $13,900 $13,534 11/30/97 $13,888 $13,771 12/31/97 $14,048 $13,939 1/31/98 $14,271 $14,330 2/28/98 $15,138 $15,299 3/31/98 $15,757 $15,943 4/30/98 $15,720 $16,099 5/31/98 $15,658 $15,904 6/30/98 $15,520 $16,276 7/31/98 $15,433 $16,251 8/31/98 $13,734 $14,085 9/30/98 $13,932 $14,335 10/31/98 $14,850 $15,634 11/30/98 $15,408 $16,565 12/31/98 $15,897 $17,370 1/31/99 $15,897 $17,752 2/28/99 $15,404 $17,280 3/31/99 $15,885 $17,997 4/30/99 $16,960 $18,709 5/31/99 $16,340 $18,020 6/30/99 $16,960 $18,858
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 23 Global Equity Fund - ----------------------------------------------------------------- [UBS LOGO APPEARS HERE] Market Allocation As of June 30, 1999
Current Benchmark Strategy - ----------------------------------------------------------------- U.S. 52.0% 43.0% Australia 1.3 5.1 Austria 0.1 0.1 Belgium 0.6 0.7 Canada 2.0 1.7 Denmark 0.4 0.2 Finland 0.9 1.1 France 4.5 5.2 Germany 4.5 6.0 Hong Kong 1.2 0.0 Ireland 0.2 0.0 Italy 2.0 1.5 Japan 11.0 11.0 Netherlands 2.6 2.7 New Zealand 0.1 0.6 Norway 0.2 0.1 Portugual 0.2 0.2 Singapore 0.4 0.8 Spain 1.4 1.3 Sweden 1.1 1.5 Switzerland 3.1 3.0 United Kingdom 10.2 14.2 Cash Reserves 0.0 0.0 - ----------------------------------------------------------------- 100.0% 100.0%
Top Ten U.S. Equity Holdings As of June 30, 1999
Percent of Net Assets - ----------------------------------------------------------------- 1. Xerox Corp. 2.33% 2. FDX Corp. 1.58 3. Burlington Northern Santa Fe Corp. 1.48 4. Raytheon Co., Class B 1.36 5. Electronic Data Systems Corp. 1.34 6. Corning, Inc. 1.32 7. Aetna, Inc. 1.27 8. Lockheed Martin Corp. 1.13 9. General Instrument Corp. 1.04 10. CIGNA Corp. 1.03 - -----------------------------------------------------------------
Currency Allocation As of June 30, 1999
Current Benchmark Strategy - -------------------------------------------- U.S. 52.0% 49.2% Australia 1.3 6.8 Canada 2.0 2.0 Denmark 0.4 0.4 Euro 17.0 27.0 Hong Kong 1.2 0.0 Japan 11.0 3.0 New Zealand 0.1 0.6 Norway 0.2 0.2 Singapore 0.4 0.4 Sweden 1.1 5.1 Switzerland 3.1 3.1 United Kingdom 10.2 2.2 - -------------------------------------------- 100.0% 100.0%
Top Ten Global (Ex-U.S.) Equity Holdings As of June 30, 1999
Percent of Net Assets - ----------------------------------------------------------------------- 1. BP Amoco PLC 1.08% 2. Veba AG 1.01 3. ING Groep NV 0.86 4. Nestle S.A. (Reg.) 0.84 5. Lloyds TSB Group PLC 0.80 6. Glaxo Wellcome PLC 0.79 7. Marks & Spencer PLC 0.78 8. General Electric Co. PLC 0.73 9. Bayer AG 0.72 10. Siemens AG 0.72 - -----------------------------------------------------------------------
======================================================================= 24 Global Equity Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Industry Diversification As a Percent of Net Assets As of June 30, 1999 - --------------------------------------------------------------------------------------- U.S. EQUITIES Energy...................................................................... 0.28% Capital Investment Capital Goods............................................................ 4.46 Technology............................................................... 5.88 ------ 10.34 Basic Industries Chemicals................................................................ 1.69 Housing/Paper............................................................ 3.09 Metals................................................................... 1.17 ------ 5.95 Consumer Non-Durables............................................................. 1.28 Retail/Apparel........................................................... 2.29 Autos/Durables........................................................... 1.56 Health: Drugs............................................................ 1.83 Health: Non-Drugs........................................................ 2.12 ------ 9.08 Financial Banks.................................................................... 4.41 Non-Banks................................................................ 3.30 ------ 7.71 Utilities Electric................................................................. 1.66 Telephone................................................................ 0.67 ------ 2.33 Transportation.............................................................. 3.61 Services/Misc............................................................... 2.49 ------ Total U.S. Equities............................................. 41.79 GLOBAL (EX-U.S.) EQUITIES Aerospace & Military........................................................ 0.65 Airlines.................................................................... 0.73 Appliances &Household....................................................... 1.04 Autos/Durables.............................................................. 1.38 Banking..................................................................... 6.25 Beverages and Tobacco....................................................... 1.80 Broadcasting & Publishing................................................... 2.69 Building Materials.......................................................... 0.64 Business & Public Service................................................... 2.31 Chemicals................................................................... 2.38 Construction................................................................ 0.31% Data Processing............................................................. 0.72 Electric Components......................................................... 0.61 Electronics................................................................. 3.08 Energy...................................................................... 3.88 Financial Services.......................................................... 1.31 Food & House Products....................................................... 2.35 Forest Products............................................................. 0.70 Health & Personal Care...................................................... 3.76 Industrial Components....................................................... 1.22 Insurance................................................................... 3.13 Leisure & Tourism........................................................... 0.22 Machinery & Engineering..................................................... 0.39 Merchandising............................................................... 2.99 Metals--Steel............................................................... 0.20 Multi-Industry.............................................................. 0.92 Non-Ferrous Metals.......................................................... 1.19 Real Estate................................................................. 0.44 Recreation.................................................................. 0.43 Telecommunications.......................................................... 5.21 Textiles & Apparel.......................................................... 0.12 Transportation.............................................................. 0.66 Utilities................................................................... 3.07 Wholesale & International Trade............................................. 0.27 ------ Total Global (Ex-U.S.) Equities................................. 57.05 ------ SHORT-TERM INVESTMENTS...................................................... 1.18 ------ TOTAL INVESTMENTS............................................... 100.02 ------ LIABILITIES, LESS CASH AND OTHER ASSETS........................................................... (0.02) ------ NET ASSETS...................................................... 100.00% ====== - ---------------------------------------------------------------------------------------
================================================================================ 25 Global Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value -------- -------------- Equities--98.84% U.S. Equities--41.79% Advanced Micro Devices, Inc. (b).......................... 17,800 $ 321,513 Aetna, Inc................................................ 12,300 1,100,081 Allergan, Inc............................................. 3,900 432,900 Alza Corp. (b)............................................ 16,200 824,175 American Standard Companies, Inc. (b)..................... 8,500 408,000 Aon Corp.................................................. 20,925 863,156 Armstrong World Industries, Inc........................... 2,200 127,188 BankBoston Corp........................................... 4,500 230,063 Baxter International, Inc................................. 9,000 545,625 Burlington Northern Santa Fe Corp......................... 41,300 1,280,300 Champion Enterprises, Inc. (b)............................ 6,700 124,788 Champion International Corp............................... 2,600 124,475 Chase Manhattan Corp...................................... 7,100 615,037 CIGNA Corp................................................ 10,000 890,000 Circuit City Stores-Circuit City Group.................... 7,600 706,800 CMS Energy Corp........................................... 7,600 318,250 CommScope, Inc. (b)....................................... 7,133 219,340 Compaq Computer Corp...................................... 2,400 56,850 Computer Sciences Corp. (b)............................... 3,700 255,994 Compuware Corp. (b)....................................... 8,600 273,588 Comverse Technology, Inc. (b)............................. 2,637 199,094 Consolidated Stores Corp. (b)............................. 10,500 283,500 Corning, Inc.............................................. 16,200 1,136,025 Covance, Inc. (b)......................................... 6,500 155,594 Crown Cork & Seal Co., Inc................................ 2,100 59,850 Delphi Automotive Systems Corp............................ 14,900 276,581 Dial Corp................................................. 4,300 159,906 Dominion Resources, Inc................................... 2,000 86,625 Eastman Chemical Co....................................... 4,600 238,050 Electronic Data Systems Corp.............................. 20,500 1,159,531 Eli Lilly and Co.......................................... 4,500 322,312 Entergy Corp.............................................. 21,600 675,000 FDX Corp. (b)............................................. 25,200 1,367,100 Federal-Mogul Corp........................................ 4,100 213,200 First American Corp. of Tennessee......................... 2,200 91,438 First Data Corp........................................... 17,304 846,814 First Security Corp....................................... 4,050 110,363 First Union Corp.......................................... 6,900 324,300 Fleet Financial Group, Inc................................ 10,300 457,062 Fleetwood Enterprises, Inc................................ 5,300 140,119 Food Lion Inc., Class A................................... 24,100 286,188 Fort James Corp........................................... 14,300 541,612 GATX Corp................................................. 1,100 41,869 General Instrument Corp. (b).............................. 21,100 896,750 Genzyme Corp. (b)......................................... 3,300 160,050 Genzyme Surgical Products Division (b).................... 591 2,603 Geon Co................................................... 1,400 45,150 GreenPoint Financial Corp................................. 12,400 406,875 Hibernia Corp............................................. 8,700 136,481 Household International, Inc.............................. 13,400 634,825 Illinois Tool Works, Inc.................................. 2,500 205,000 IMC Global, Inc........................................... 15,000 264,375 Johnson Controls, Inc..................................... 3,900 270,319 Kimberly-Clark Corp....................................... 9,600 547,200 Lafarge Corp.............................................. 4,500 159,469 Lear Corp. (b)............................................ 9,900 $ 492,525 Lockheed Martin Corp...................................... 26,202 976,024 Lyondell Chemical Company................................. 11,900 245,438 Martin Marietta Materials, Inc............................ 2,435 143,665 Masco Corp................................................ 25,800 744,975 Mattel, Inc............................................... 11,700 309,319 MCN Energy Group, Inc..................................... 2,800 58,100 Nabisco Holdings Corp..................................... 1,600 69,200 National Service Industries, Inc.......................... 3,600 129,600 New York Times Co......................................... 4,400 161,975 Newell Rubbermaid, Inc.................................... 8,500 395,250 Nextel Communications, Inc. (b)........................... 11,500 577,156 Norfolk Southern Corp..................................... 14,200 427,775 Peco Energy Co............................................ 8,510 356,356 Pentair, Inc.............................................. 4,400 201,300 Philip Morris Companies, Inc.............................. 13,100 526,456 PNC Bank Corp............................................. 6,700 386,087 Praxair, Inc.............................................. 7,000 342,562 Raytheon Co., Class B..................................... 16,700 1,175,263 Regions Financial Corp.................................... 2,100 80,719 Southdown, Inc............................................ 4,776 306,858 St. Jude Medical, Inc. (b)................................ 11,700 416,812 Tyson Foods, Inc.......................................... 15,400 346,500 U.S. Bancorp.............................................. 10,563 359,142 Ultramar Diamond Shamrock Corp............................ 8,552 186,541 United Healthcare Corp.................................... 8,300 519,787 USG Corp.................................................. 3,800 212,800 Vencor, Inc. (b).......................................... 9,100 1,365 Ventas, Inc............................................... 5,600 30,100 Viad Corp................................................. 8,100 250,594 W.W. Grainger, Inc........................................ 1,700 91,481 Wells Fargo and Co........................................ 14,400 615,600 Westvaco Corp............................................. 3,600 104,400 Xerox Corp................................................ 34,100 2,014,031 York International Corp................................... 5,100 218,344 ----------- Total U.S. Equities....................................... 36,093,454 ----------- Global (Ex-U.S.) Equities--57.05% Australia--5.04% Amcor Ltd................................................. 14,200 78,933 Amp Ltd................................................... 17,300 189,123 Brambles Industries Ltd................................... 6,900 181,771 Broken Hill Proprietary Co., Ltd.......................... 39,350 455,802 CSR Ltd................................................... 54,400 155,552 David Jones Ltd........................................... 48,400 47,413 Lend Lease Corp., Ltd..................................... 13,194 181,151 National Australia Bank Ltd............................... 34,875 577,095 News Corp., Ltd........................................... 58,540 499,458 News Corp., Ltd., Preferred............................... 13,300 101,326 Orica Ltd................................................. 4,000 21,845 Qantas Airways Ltd........................................ 73,977 244,338 QBE Insurance Group Ltd................................... 25,042 95,308 Rio Tinto Ltd............................................. 14,363 235,504 Santos Ltd................................................ 26,000 85,187 Telstra Corp., Ltd........................................ 98,400 563,839 Westpac Banking Corp., Ltd................................ 57,945 375,868
================================================================================ 26 Global Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------ ---------- WMC Ltd.................................. 30,800 $ 132,309 Woolworth's Ltd.......................... 39,900 132,709 ---------- 4,354,531 ---------- Austria -- 0.06% Austria Tabakwerke AG.................... 900 52,442 ---------- Belgium -- 0.75% Fortis (B)............................... 15,562 488,695 KBC Bancassurance Holding................ 2,620 155,365 ---------- 644,060 ---------- Canada -- 1.19% Agrium, Inc.............................. 6,200 54,037 Alcan Aluminum Ltd....................... 2,300 72,647 Bank of Montreal......................... 1,400 50,605 Canadian National Railway Co............. 1,400 93,548 Canadian Pacific Ltd..................... 4,116 97,331 Hudson's Bay Co.......................... 4,300 47,936 Imasco Ltd............................... 2,300 61,692 Imperial Oil Ltd......................... 3,600 68,103 Magna International, Inc., Class A....... 600 33,788 Newbridge Networks Corp. (b)............. 1,900 53,915 NOVA Chemicals Corp...................... 2,597 60,534 Potash Corporation of Saskatchewan, Inc.. 600 30,870 Royal Bank of Canada..................... 1,600 70,265 Seagram Co., Ltd......................... 700 34,690 Shaw Communications, Inc., Class B....... 3,000 118,168 TransCanada Pipelines Ltd................ 3,988 55,909 Westcoast Energy, Inc.................... 1,000 19,526 ---------- 1,023,564 ---------- Denmark -- 0.22% Tele Danmark A/S......................... 3,800 187,041 ---------- Finland -- 1.14% Merita Ltd., Class A..................... 36,700 208,546 Nokia Oyj................................ 5,400 473,367 UPM-Kymmene Corp......................... 10,700 306,770 ---------- 988,683 ---------- France -- 5.30% Aerospatiale Matra....................... 7,180 165,496 Air Liquide.............................. 1,638 257,614 Banque Nationale de Paris................ 2,922 243,487 Carrefour S.A............................ 1,500 220,440 Cie de Saint Gobain...................... 1,136 181,005 Elf Aquitaine S.A........................ 2,832 415,607 France Telecom S.A....................... 4,540 342,964 Air France (b)........................... 9,780 174,490 Groupe Danone............................ 1,230 317,125 Michelin, Class B........................ 3,031 124,003 Rhone-Poulenc, Class A................... 4,550 207,921 SEITA.................................... 9,070 523,818 Societe Generale......................... 1,223 215,553 Suez Lyonnaise des Eaux S.A.............. 1,687 $ 304,292 Thomson CSF.............................. 10,045 349,112 Total Fina S.A., Class B................. 2,249 290,156 Vivendi.................................. 3,009 243,755 ---------- 4,576,838 ---------- Germany -- 6.01% Allianz AG............................... 1,463 408,882 Bayer AG................................. 14,890 619,617 Continental AG........................... 9,100 217,728 DaimlerChrysler AG....................... 4,625 403,999 Deutsche Bank AG......................... 8,811 537,029 Deutsche Telekom AG...................... 9,960 418,574 Deutsche Telekom AG, Rights (b).......... 9,960 1,951 Dresdner Bank AG......................... 8,400 326,592 Mannesmann AG............................ 3,250 486,000 SAP AG................................... 400 137,163 Siemens AG............................... 8,020 618,673 Veba AG.................................. 14,810 873,647 Volkswagen AG............................ 2,140 138,091 ---------- 5,187,946 ---------- Italy -- 1.53% Assicurazioni Generali................... 9,700 336,121 ENI Spa.................................. 66,000 394,101 ENI Spa ADR.............................. 1,700 102,000 La Rinascente Spa........................ 20,875 158,018 Montedison Spa........................... 86,091 140,282 San Paolo-imi, Spa....................... 13,911 189,373 ---------- 1,319,895 ---------- Japan -- 10.99% Acom Co., Ltd............................ 2,100 181,304 Amada Co., Ltd........................... 11,000 77,702 Bank of Tokyo-Mitsubushi Ltd............. 18,000 256,229 Bridgestone Corp......................... 6,000 181,428 Canon, Inc............................... 9,000 258,757 Citizen Watch Co., Ltd................... 10,000 86,748 Dai Nippon Printing Co., Ltd............. 10,000 159,864 Daiichi Pharmaceutical Co., Ltd.......... 9,000 139,640 Daikin Industries Ltd.................... 22,000 255,370 Daiwa House Industry Co., Ltd............ 5,000 52,586 Denso Corp., Ltd......................... 9,000 182,915 East Japan Railway Co.................... 31 166,474 Fanuc.................................... 4,300 230,915 Fuji Photo Film.......................... 3,000 113,516 Fujitsu.................................. 18,000 362,112 Honda Motor Co........................... 8,000 339,061 Hoya Corp................................ 2,000 112,855 Ito Yokado Co., Ltd...................... 5,000 334,600 Kaneka Corp.............................. 11,000 103,602 Kao Corp................................. 7,000 196,629 Kirin Brewery Co., Ltd................... 12,000 143,754 Kokuyo................................... 3,000 48,331 Kuraray Co., Ltd......................... 13,000 156,378 Marui Co., Ltd........................... 6,000 99,141 Matsushita Electric Industrial Co........ 13,000 252,396
================================================================================ 27 27 Global Equity Fund--Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ------ ----------- Mitsubishi Estate Co., Ltd...................... 20,000 $ 195,142 Mitsubishi Corp................................. 35,000 237,112 NGK Insulators.................................. 17,000 177,528 Nintendo Corp., Ltd............................. 1,100 154,585 Nippon Meat Packers, Inc........................ 8,000 104,428 Nippon Steel Co................................. 73,000 169,473 Nippon Telegraph & Telephone Corp............... 46 535,856 Nomura Securities Co., Ltd...................... 18,000 210,724 Obayashi Corp................................... 17,000 85,534 Osaka Gas Co.................................... 52,000 176,570 Sankyo Co., Ltd................................. 8,000 201,586 Sanwa Bank Ltd.................................. 12,000 118,077 Secom Co., Ltd.................................. 3,000 312,293 Sega Enterprises Ltd............................ 1,000 13,227 Sekisui House Ltd............................... 12,000 129,478 Shin-Etsu Chemical Co., Ltd..................... 2,000 66,920 Sony Corp....................................... 2,300 247,976 Sumitomo Bank................................... 13,000 161,211 Sumitomo Chemical Co............................ 26,000 119,217 Sumitomo Electric Industries.................... 12,000 136,418 Takeda Chemical Industries...................... 7,000 324,438 TDK Corp........................................ 2,000 182,915 Tokio Marine & Fire Insurance Co................ 10,000 108,642 Tokyo Electric Power............................ 11,000 232,196 Toshiba Corp.................................... 25,000 178,247 Toyota Motor Corp............................... 10,000 316,424 Yamato Transport Co., Ltd....................... 6,000 104,594 ----------- 9,493,118 ----------- Netherlands - 2.78% Elsevier NV..................................... 31,100 360,826 Heineken NV..................................... 2,393 122,531 ING Groep NV.................................... 13,762 745,120 Koninklijke KPN NV.............................. 8,644 405,612 Royal Dutch Petroleum Co........................ 8,275 484,732 Unilever NV..................................... 4,236 285,487 ----------- 2,404,308 ----------- New Zealand - 0.84% Auckland International Airport Ltd.............. 32,000 49,175 Carter Holt Harvey Ltd.......................... 48,000 57,483 Fletcher Challenge Paper........................ 73,100 54,617 Lion Nathan Ltd................................. 36,000 86,225 Telecom Corp. of New Zealand Ltd................ 111,400 478,150 ----------- 725,650 ----------- Norway - 0.22% Norsk Hydro ASA................................. 2,100 79,225 Norske Skogindustrier ASA....................... 3,000 110,511 ----------- 189,736 ----------- Portugal - 0.24% EDP Electricidade de Portugal S.A............... 11,500 207,075 ----------- Singapore - 0.69% Singapore Press Holdings Ltd.................... 24,046 409,594 United Overseas Bank Ltd. (Frgn.)............... 27,000 188,723 ----------- 598,317 ----------- Spain - 1.28% Banco Popular S.A............................... 2,883 $ 207,383 Banco Santander Central Hispano, S.A............ 32,134 334,712 Endesa, S.A..................................... 10,383 221,441 Telefonica, S.A. (b)............................ 7,090 341,540 ----------- 1,105,076 ----------- Sweden - 1.52% Electrolux AB, B Shares........................ 19,060 399,045 Ericsson LM, B Shares........................... 10,080 323,077 Investor AB, B Shares........................... 18,240 203,811 Nordbanken Holding AB........................... 23,910 139,770 Swedish Match AB................................ 69,250 246,798 ----------- 1,312,501 ----------- Switzerland - 3.10% Adecco S.A...................................... 220 117,882 Holderbank Financiere Glarus AG, B Shares....... 180 212,466 Holderbank Financiere Glarus AG, Rights......... 24 352 Nestle S.A. (Reg.).............................. 402 724,303 Novartis AG (Reg.).............................. 415 605,976 Roche Holding AG (Gen.)......................... 53 544,796 Swiss Reinsurance Co. (Reg.).................... 35 66,641 Swisscom AG (Reg.).............................. 1,083 407,536 ----------- 2,679,952 ----------- United Kingdom - 14.15% Allied Zurich PLC............................... 23,375 293,846 AstraZeneca PLC................................. 6,639 256,811 Barclays PLC.................................... 12,000 349,180 BOC Group PLC................................... 29,000 566,834 Boots Company PLC............................... 19,500 231,609 British Aerospace PLC........................... 7,000 45,433 British Airways PLC............................. 31,000 213,907 BP Amoco PLC.................................... 51,904 930,247 British Telecommunications PLC.................. 20,000 335,120 Charter PLC..................................... 49,922 292,733 Coats Viyella PLC............................... 128,250 103,101 Diageo PLC...................................... 32,630 340,753 FKI PLC......................................... 122,405 380,220 General Electric Co. PLC........................ 61,820 630,478 Glaxo Wellcome PLC.............................. 24,620 684,191 Greenalls Group PLC............................. 33,500 187,461 House of Fraser PLC............................. 45,250 62,411 Lloyds TSB Group PLC............................ 51,220 694,344 Marks & Spencer PLC............................. 116,120 671,753 Mirror Group PLC................................ 66,000 256,322 National Power PLC.............................. 49,500 360,482 Nycomed Amersham PLC............................ 41,000 285,009 Peninsular & Oriental Steam Navigation Co....... 13,475 202,316 Prudential Corp. PLC............................ 39,000 574,180 Reckitt & Colman PLC............................ 18,000 187,689 Reed International PLC.......................... 35,000 233,508 Rio Tinto Ltd................................... 35,020 587,071 RJB Mining PLC.................................. 52,500 43,447 Royal & Sun Alliance Insurance Group PLC........ 16,162 144,959 Sainsbury (J.) PLC.............................. 13,500 85,120
================================================================================ 28 Global Equity Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value ---------- ----------- Scottish Southern Energy PLC................ 49,650 $ 507,926 Tesco PLC................................... 190,250 489,570 Thames Water PLC............................ 15,458 245,125 Unilever PLC................................ 24,000 213,556 United News & Media PLC..................... 36,000 346,154 Yorkshire Water PLC......................... 27,500 191,165 ----------- 12,224,031 ----------- Total Global (Ex-U.S.) Equities............. 49,274,764 ----------- Total Equities (Cost $69,139,277)........... 85,368,218 ----------- Short-Term Investments - 1.18% Investment Companies - 1.18% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,022,188)......................... 1,022,188 $ 1,022,188 ----------- Total Investments (Cost $70,161,465) - 100.02% (a).......... 86,390,406 Liabilities, less cash and other assets - (0.02%).......................... (22,199) ----------- Net Assets - 100%........................... $86,368,207 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $70,161,465; and net unrealized appreciation consisted of: Gross unrealized appreciation............. $ 18,488,893 Gross unrealized depreciation............. (2,259,952) ------------ Net unrealized appreciation.......... $ 16,228,941 ============ (b) Non-income producing security FORWARD FOREIGN CURRENCY CONTRACTS The Global Equity Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ------------- --------------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar......................... 12/3/99 2,300,000 $ 1,525,877 $ 21,010 Canadian Dollar........................... 12/3/99 5,500,000 3,723,714 (7,123) Euro...................................... 12/3/99 3,400,000 3,549,505 (57,895) Swedish Krona............................. 12/3/99 26,600,000 3,161,221 30,520 Forward Foreign Currency Sale Contracts British Pound............................. 12/3/99 6,500,000 10,344,610 130,813 Japanese Yen.............................. 12/3/99 818,000,000 6,923,483 13,424 ---------- Total..................................... $ 130,749 ==========
See accompanying notes to financial statements. ================================================================================ 29 Global Equity Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $69,139,277)....................................................................... $ 85,368,218 Affiliated issuers (Cost $1,022,188).......................................................................... 1,022,188 Foreign currency, at value (Cost $517,126)...................................................................... 518,741 Receivables: Investment securities sold..................................................................................... 351,137 Dividends...................................................................................................... 183,865 Interest....................................................................................................... 2,812 Fund shares sold............................................................................................... 134,588 Net unrealized appreciation on forward foreign currency contracts............................................... 130,749 Other assets.................................................................................................... 2,450 ------------ TOTAL ASSETS................................................................................................ 87,714,748 ------------ LIABILITIES: Payables: Investment securities purchased................................................................................ 782,515 Fund shares redeemed........................................................................................... 423,872 Investment advisory fees....................................................................................... 53,551 Accrued expenses............................................................................................... 86,603 ------------ TOTAL LIABILITIES........................................................................................... 1,346,541 ------------ NET ASSETS....................................................................................................... $ 86,368,207 ============ NET ASSETS CONSIST OF: Paid in capital................................................................................................. $ 65,256,033 Accumulated undistributed net investment income................................................................. 302,311 Accumulated net realized gain................................................................................... 4,451,473 Net unrealized appreciation..................................................................................... 16,358,390 ------------ NET ASSETS.................................................................................................. $ 86,368,207 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $42,106,094 and 3,136,505 shares issued and outstanding)...................................................... $ 13.42 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $220,133 and 16,424 shares issued and outstanding)............................................................ $ 13.40 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $44,041,980 and 3,285,531 shares issued and outstanding)...................................................... $ 13.40 ============
See accompanying notes to financial statements. ================================================================================ 30 Global Equity Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends (net of $122,328 for foreign taxes withheld).......................................................... $1,543,814 Interest........................................................................................................ 103,965 ---------- TOTAL INCOME................................................................................................ 1,647,779 ---------- EXPENSES: Advisory........................................................................................................ 628,067 Distribution.................................................................................................... 362,686 Printing........................................................................................................ 66,751 Professional.................................................................................................... 44,351 Custodian....................................................................................................... 26,931 Other........................................................................................................... 58,844 ---------- TOTAL EXPENSES.............................................................................................. 1,187,630 ---------- Expenses waived by Advisor.................................................................................. (36,960) ---------- NET EXPENSES................................................................................................ 1,150,670 ---------- NET INVESTMENT INCOME....................................................................................... 497,109 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................................................................... 5,304,186 Futures contracts.............................................................................................. (511,514) Foreign currency transactions.................................................................................. 804,005 ---------- Net realized gain........................................................................................... 5,596,677 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency............................................................................... 346,586 Futures contracts.............................................................................................. 575,614 Forward contracts.............................................................................................. 214,544 Translation of other assets and liabilities denominated in foreign currency.................................... (4,441) ---------- Change in net unrealized appreciation or depreciation....................................................... 1,132,303 ---------- Net realized and unrealized gain................................................................................ 6,728,980 ---------- Net increase in net assets resulting from operations............................................................ $7,226,089 ==========
See accompanying notes to financial statements. ================================================================================ 31 Global Equity Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income............................................................................ $ 497,109 $ 677,369 Net realized gain................................................................................ 5,596,677 6,903,703 Change in net unrealized appreciation or depreciation............................................ 1,132,303 (1,282,988) ------------- ------------- Net increase in net assets resulting from operations............................................. 7,226,089 6,298,084 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I................................................................................. (384,423) (242,673) Brinson Class N................................................................................. (2,181) (11) UBSInvestment Funds Class....................................................................... (219,326) (397,017) Distributions from net realized gain: Brinson Class I................................................................................. (352,100) (1,266,777) Brinson Class N................................................................................. (2,950) (82) UBSInvestment Funds Class....................................................................... (713,059) (5,307,194) ------------- ------------- Total distributions to shareholders............................................................. (1,674,039) (7,213,754) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................................................................... 34,808,631 40,216,740 Shares issued on reinvestment of distributions................................................... 1,462,446 6,378,677 Shares redeemed.................................................................................. (37,326,928) (73,542,587) ------------- ------------- Net decrease in net assets resulting from capital share transactions............................. (1,055,851) (26,947,170) ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS...................................................... 4,496,199 (27,862,840) ------------- ------------- NET ASSETS: Beginning of year................................................................................ 81,872,008 109,734,848 ------------- ------------- End of year (including accumulated undistributed net investment income of $302,311 and $377,184, respectively)............................................................ $ 86,368,207 $ 81,872,008 ============= =============
See accompany notes to financial statements ================================================================================ 32 Global Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, July 31, 1995* ------------------------------------------ Through UBS Investment Funds Class 1999 1998 1997 June 30, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period........................... $ 12.51 $ 12.73 $ 11.57 $ 10.35 ------- ------- ------- ------- Income from investment operations: Net investment income (loss)................................. 0.04** 0.07 0.08 (0.01) Net realized and unrealized gain............................. 1.09 0.83 2.13 1.93 ------- ------- ------- ------- Total income from investment operations.................. 1.13 0.90 2.21 1.92 Less distributions:........................................... ------- ------- ------- ------- Distributions from net investment income.................... (0.06) (0.07) (0.06) (0.01) Distributions from net realized gain........................ (0.18) (1.05) (0.99) (0.69) ------- ------- ------- ------- Total distributions...................................... (0.24) (1.12) (1.05) (0.70) ------- ------- ------- ------- Net asset value, end of period................................. $ 13.40 $ 12.51 $ 12.73 $ 11.57 ======= ======= ======= ======= Total return (non-annualized).................................. 9.28% 8.15% 20.34% 19.25% Ratios/Supplemental data: Net assets, end of period (in 000s)........................... $44,042 $59,147 $61,680 $33,012 Ratio of expenses to average net assets: Before expense reimbursement................................ 1.81% 1.78% 2.00% 2.53%*** After expense reimbursement................................. 1.76% 1.76% 1.75% 1.76%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement................................ 0.29% 0.53% 0.60% (0.19)%*** After expense reimbursement................................. 0.34% 0.55% 0.85% 0.58%*** Portfolio turnover rate....................................... 86% 46% 32% 74% * Commencement of UBSInvestment Funds Class ** The net investment income per share data was determined by using average shares outstanding throughout the period. ***Annualized
See accompanying notes to financial statements ================================================================================ 33 Global Bond Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Our Global Bond Fund strategy is the result of several key investment decisions. We determine optimal country and currency weightings based on our assessments of global macroeconomic and political landscapes. We choose a maturity mix that provides opportunity for appreciation while also limiting interest rate risks. And importantly, we analyze and select the very best issues within each country or market. All of these decisions are made in a global asset allocation framework. They are interactive and synthesize the ideas of our fixed income professionals around the world. Since its inception on July 31, 1995, the UBS Investment Fund -- Global Bond has produced an annualized return of 5.38% compared to the 3.17% return of its benchmark, the Salomon Smith Barney World Government Bond Index. The annualized volatility of the Fund was lower than that of the benchmark at 4.92% and 5.83% respectively. During the first half of 1999, the Fund was down 6.67% while the benchmark was down 7.17%. The first half of 1999 was very difficult for global bond markets with two consecutive quarters of negative returns. Yield increases have been spurred by increasing volatility and strong economic activity that is causing market participants to worry increasingly about future inflation rates. Bond markets were characterized by a high level of volatility in the first quarter of 1999. After a fairly stable January, February turned in the worst one-month performance record for U.S. Treasury securities in 18 years. The largest changes took place among securities with longer terms to maturity, while shorter-term treasury bills were relatively stable. This volatility was spurred somewhat by Federal Reserve (Fed) chairman Alan Greenspan's testimony to Congress in February. He stated that the Fed expects stronger growth and higher inflation in the U.S. than was originally called for in the fall of 1998. Even though these adjustments were modest, they were sufficient enough to disappoint investors. U.S. bond yields in the second quarter were driven well above our estimates of fair value by market expectations of higher inflation and anticipation of the 25 basis point rate hike by the Fed which occurred on June 30. As a result, we have set representative duration strategies longer than the benchmark in the U.S. component of the Fund at 1.05 times the benchmark. Interest rates were cut in the U.K. and EMU during the second quarter. While these rate cuts might ordinarily be seen as bullish developments, easier monetary policy in the context of improving economic prospects has led instead to steeper yield curves providing further evidence that market participants are concerned about the longer-term inflation outlook. Downward movement in bond yields in Japan during the quarter took this already overvalued market to extremes not seen since last summer, and prompted us to eliminate our small exposure to Japan. Proceeds were invested in the U.K., taking it to an overweight position. Our strategies elsewhere continue to emphasize the higher yielding market of the U.S. (our largest country overweight), Australia and Canada. ================================================================================ 34 Global Bond Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Total Return
6 months 1 year 3 years 7/31/95* ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 - -------------------------------------------------------------------------------------------------------- UBS Investment Fund - Global Bond -6.67% 2.58% 4.00% 5.38% - -------------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index -7.17 4.13 4.11 3.17 - -------------------------------------------------------------------------------------------------------- *Inception date of the UBS Investment Fund - Global Bond.
Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns. Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund Global Bond and the Salomon Smith Barney World Government Bond Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund - Global Bond vs. Salomon Smith Barney World Government Bond Index Wealth Value with Dividends Reinvested UBS Investment Fund Global Bond Salomon Smith Barney World Govt Bond Index
- ------------------------------------------------------------------------------------------------- Date UBS Investment Fund Global Bond Salomon Smith Barney World Govt Bond Index - ------------------------------------------------------------------------------------------------- 7/31/95 $10,000 $10,000 8/31/95 $10,104 $ 9,656 9/30/95 $10,218 $ 9,871 10/31/95 $10,388 $ 9,944 11/30/95 $10,587 $10,057 12/31/95 $10,722 $10,162 1/31/96 $10,776 $10,037 2/29/96 $10,658 $ 9,986 3/31/96 $10,701 $ 9,972 4/30/96 $10,808 $ 9,932 5/31/96 $10,829 $ 9,934 6/30/96 $10,917 $10,013 7/31/96 $11,036 $10,205 8/31/96 $11,113 $10,245 9/30/96 $11,287 $10,287 10/31/96 $11,527 $10,479 11/30/96 $11,734 $10,617 12/31/96 $11,654 $10,531 1/31/97 $11,484 $10,250 2/28/97 $11,484 $10,173 3/31/97 $11,313 $10,096 4/30/97 $11,240 $10,007 5/31/97 $11,569 $10,279 6/30/97 $11,703 $10,402 7/31/97 $11,654 $10,321 8/31/97 $11,606 $10,314 9/30/97 $11,837 $10,534 10/31/97 $11,984 $10,753 11/30/97 $11,825 $10,589 12/31/97 $11,791 $10,557 1/31/98 $11,892 $10,659 2/28/98 $11,968 $10,746 3/31/98 $11,829 $10,639 4/30/98 $11,980 $10,810 5/31/98 $11,968 $10,834 6/30/98 $11,970 $10,851 7/31/98 $11,957 $10,865 8/31/98 $12,097 $11,160 9/30/98 $12,671 $11,754 10/31/98 $12,938 $12,102 11/30/98 $12,849 $11,931 12/31/98 $13,156 $12,171 1/31/99 $13,130 $12,059 2/28/99 $12,717 $11,672 3/31/99 $12,691 $11,701 4/30/99 $12,717 $11,697 5/31/99 $12,478 $11,500 6/30/99 $12,278 $11,299
Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ================================================================================ 35 Global Bond Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE]
Asset Allocation As of June 30, 1999 Current Benchmark Strategy - ------------------------------------------ U.S. 29.5% 39.5% Australia 0.7 5.7 Austria 0.9 0.0 Belgium 2.7 0.0 Canada 3.0 5.8 Denmark 1.5 4.5 Finland 0.7 0.0 France 8.1 9.2 Germany 8.5 6.7 Ireland 0.3 0.0 Italy 8.4 2.4 Japan 21.3 0.0 Netherlands 2.8 4.8 Portugal 0.4 0.0 Spain 3.3 3.1 Sweden 1.2 6.8 Switzerland 0.5 0.0 U.K. 6.2 9.2 Euro 0.0 2.3 - ------------------------------------------ 100.0% 100.0% Currency Allocation As of June 30, 1999 Current Benchmark Strategy - ------------------------------------------ U.S. 29.5% 25.5% Australia 0.7 6.7 Canada 3.0 3.0 Denmark 1.5 1.5 Euro 36.0 44.3 Japan 21.3 13.3 Sweden 1.3 5.2 Switzerland 0.5 0.5 U.K. 6.2 0.0 100.0% 100.0% Industry Diversification As a Percent of Net Assets As of June 30, 1999 - ------------------------------------------------ U.S. BONDS Corporate Bonds Airlines......................... 0.72% Asset-Backed..................... 2.05 CMO.............................. 1.38 Consumer......................... 0.57 Financial Services............... 1.28 Food and Housing Products........ 0.51 Industrial Components............ 0.55 Services/Miscellaneous........... 0.82 Utilities........................ 0.24 ----- 8.12 ----- International Dollar Bonds....... 3.95 Mortgage-Backed Securities....... 6.08 U.S. Government Agencies......... 10.74 U.S. Government Obligations...... 7.91 ----- 28.68 ----- Total U.S. Bonds.............. 36.80 ----- GLOBAL (EX-U.S.) BONDS Foreign Financial Bonds........... 8.52 Foreign Government Bonds.......... 70.21 ----- Total Global (Ex-U.S.) Bonds.. 78.73 SHORT-TERM INVESTMENTS............ 6.24 ----- TOTAL INVESTMENTS............. 121.77 LIABILITIES, LESS CASH AND OTHER ASSETS................. (21.77) ----- NET ASSETS.................... 100.00% ======
================================================================================ 36 Global Bond Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ------ ----- Bonds -- 115.53% U.S. Bonds -- 36.80% U.S. Corporate Bonds -- 8.12% ABN Amro Mortgage Corp., Series 99-2 IA2, 6.300%, due 04/25/29.................. $ 345,000 $ 335,243 Bear Stearns Mortgage Securities, Inc., 96-7A4 6.000%, due 01/28/09...................... 200,000 193,000 Cendant Corp., 7.750%, due 12/01/03............... 500,000 505,011 Centaur Funding Corp., 144A, 0.000%, due 04/21/20 (b)................................ 750 115,875 Centaur Funding Corp., 144A, 9.080%, due 04/21/20.................................... 390 418,519 Chase Manhattan Auto Owner Trust, 96-C, Class A4, 6.150%, due 03/15/02.................. 125,000 125,611 Citigroup Inc., 5.800%, due 03/15/04.............. 500,000 484,932 Comed Transitional Funding Trust, 98-1, Class A7, 5.740%, due 12/25/10.................. 370,000 345,081 Continental Airlines, Inc., 99-2, 7.056%, due 09/15/09.................................... 710,000 712,577 Countrywide Capital, Inc., 8.000%, due 12/15/26... 250,000 238,167 First Bank Corporate Card Master Trust, 97-1, Class A, 6.400%, due 02/15/03................... 240,000 240,698 First Union Lehman Brothers, 97-C2, Class A2, 6.600%, due 05/18/07.................. 240,000 235,702 Kroger Co., 6.000%, due 07/01/00.................. 500,000 499,475 News America Holdings, 7.750%, due 12/01/45....... 575,000 545,045 Noram Energy Corp., 6.375%, due 11/01/03.......... 75,000 73,320 Norwest Asset Securities Corp., 98-25, Class A5, 6.000%, due 12/25/28.................. 965,000 927,317 Peco Energy Transition Trust, 6.130%, due 03/01/09.................................... 540,000 512,012 Premier Auto Trust, 96-3, Class A4, 96-3A 6.750%, due 11/06/00...................... 400,365 402,183 The Money Store, 98-B, Class AF2, 6.115%, due 05/15/10............................ 56,335 56,272 Time Warner, Inc., 7.570%, due 02/01/04........... 560,000 557,693 USA Waste Services, 7.000%, due 10/01/04.......... 300,000 302,797 Western Resources, Inc., 6.875%, due 08/01/04..... 160,000 159,635 --------- 7,986,165 --------- Mortgage-Backed Securities -- 6.08% GE Capital Mortgage Services, Inc., 93-7F, Class FA3, 6.500%, due 09/25/08.................. 194,457 194,429 Heller Financial Commercial Mortgage Assets, Series 99-PH1 A1, 6.500%, due 05/15/31........... 413,048 409,281 LB Commercial Conduit Mortgage Trust, Series 99-C1 A1, 6.410%, due 10/15/30............ 560,000 552,591 PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%, due 07/25/24................... 190,000 188,026 Prudential Home Mortgage Securities 93-43, Class A9, 6.750%, due 10/25/23............ 206,269 201,568 96-7, Class A4, 6.750%, due 06/25/11............. 150,000 148,257 Residential Accredit Loans, Inc. 96-QS4, Class Al10, 7.900%, due 08/25/26......... 625,000 635,387 98-QS4, Class AI5, 7.000%, due 03/25/28.......... 400,000 398,919 Residential Asset Securitization Trust 97-A11, Class A2, 7.000%, due 01/25/28........... 86,997 87,218 97-A11, Class A6, 7.000%, due 01/25/28........... 430,000 418,515 97-A7, Class A1, 7.250%, due 12/25/27............ $ 335,000 $ 328,829 97-A7, Class A1, 7.500%, due 09/25/27............ 99,847 100,659 98-A1, Class A1, 7.000%, due 03/25/28............ 92,018 92,036 Structured Asset Securities Corp. 98-RF1, Class A, 8.712%, due 03/15/27............ 233,027 244,096 98-RF2, 144A, 8.582%, due 07/15/27............... 351,051 366,848 Structured Mortgage Asset Residential Trust, 96-5C, Class CI, 7.150%, due 03/25/23............ 925,000 917,563 UCFC Home Equity Loan 97-C, Class A8, FRN, 5.069%, due 09/15/27.............. 98,356 98,119 Vanderbilt Mortgage Finance, 98-B, Class 1A2, 6.120%, due 05/07/09.................. 600,000 599,892 --------- 5,982,233 --------- International Dollar Bonds -- 3.95% Banco Santiago S.A., 7.000%, due 07/18/07......... 400,000 350,754 Banque Centrale de Tunisie, 8.250%, due 09/19/27.................................... 400,000 332,000 British Sky Broadcasting Group plc, 6.875%, due 02/23/09............................ 130,000 118,549 Credit Suisse-London, 144A, Resettable Perpetual Preferred, 7.900%, due 05/01/07....... 500,000 486,783 Empresa National Electric, 7.875%, due 10/01/97.................................... 500,000 398,826 Korea Development Bank, 7.125%, due 09/17/01.................................... 300,000 299,144 National Australia Bank, FRN, 6.400%, due 12/10/07.................................... 640,000 631,285 Pan Pacific Industry PLC 144A, 0.000%, due 04/28/07.................................... 715,000 346,775 PDVSA Fin. LTD 1999-F, 144A, 8.750%, due 02/15/04.................................... 500,000 501,370 Republic of South Africa, 9.625%, due 12/15/99.................................... 125,000 126,250 Royal Bank of Scotland, Resettable Perpetual Preferred, 7.375%, due 04/29/49................. 300,000 291,625 --------- 3,883,361 --------- U.S. Government Agencies -- 10.74% Fannie Mae Whole Loan, Series 95-W3, Class A, 9.000%, due 04/25/25................... 10,652 11,131 Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13............................ 68,215 67,400 7.238%, due 05/01/26............................ 21,406 21,567 9.000%, due 01/01/29............................ 824,897 873,102 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23............................ 50,238 51,778 9.000%, due 03/01/24............................ 136,173 144,963 Federal National Mortgage Assoc. 6.000%, due 01/01/29............................ 157,532 148,263 6.500%, due 04/29/09............................ 1,170,000 1,127,039 6.500%, due 03/01/19............................ 123,327 120,057 6.500%, due 09/01/28............................ 1,236,954 1,197,256 6.500%, due 02/01/29............................ 611,212 591,184 7.000%, due 12/01/24............................ 435,297 430,905 7.000%, due 03/01/29............................ 28,639 28,365 7.500%, due 07/01/10............................ 852,730 866,802
================================================================================ 37 Global Bond Fund - Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- ----------- U.S. Government Agencies -- Continued $ 348,692 $ 352,646 7.500%, due 12/01/23..................... 250,000 251,937 7.500%, due 05/18/25..................... 675,821 683,484 7.500%, due 12/01/27..................... 213,724 218,950 7.890%, due 04/01/26..................... 79,069 81,473 8.000%, due 03/01/11..................... 9,961 10,476 8.500%, due 07/01/22..................... Federal National Mortgage Assoc. Strips 151,092 106,014 0.000%, due 02/01/28..................... 210,034 53,753 8.000%, due 08/01/23..................... 85,491 88,090 FNCI, 8.000%, due 02/01/13 Freddie Mac 32,399 30,299 5.500%, due 02/15/14..................... 1,300,000 1,297,713 5.750%, due 06/15/01..................... 9,180 8,858 6.000%, due 09/15/25..................... Government National Mortgage Assoc. 382,338 378,923 7.000%, due 08/15/24..................... 53,545 53,046 7.000%, due 07/15/25..................... 67,926 68,830 7.500%, due 08/15/23..................... 103,588 105,009 7.500%, due 12/15/23..................... 74,547 75,524 7.500%, due 01/15/24..................... 452,530 514,083 Jordan Aid, 8.750%, due 09/01/19 Tennesse Valley Authority, 6.375%, 500,000 501,468 due 06/15/05............................. ---------- 10,560,388 ---------- U.S. Government Obligations -- 7.91% 4,505,000 5,420,078 U.S. Treasury Bond, 8.000%, due 11/15/21 U.S. Treasury Inflation Indexed Note, 570,000 553,005 3.625%, due 04/15/28..................... U.S. Treasury Notes and Bonds, 6.625%, 1,765,000 1,801,956 due 07/31/01............................. ---------- 7,775,039 ---------- 36,187,186 Total U.S. ................................ ---------- Global (Ex-U.S.) Bonds -- 78.73% Australia -- 7.79% Queensland Treasury Corp.-Global Note AUD 5,230,000 3,504,495 6.500%, due 06/14/05..................... 3,000,000 2,124,206 8.000%, due 05/14/03..................... 2,800,000 2,033,493 8.000%, due 09/14/07..................... ---------- 7,662,194 ---------- Austria -- 2.19% Republic of Austria, 5.500%, EUR 1,951,347 2,152,590 due 01/18/04............................. ---------- Canada -- 7.94% Government of Canada CAD 5,550,000 4,313,333 4.250%, due 12/01/21..................... 2,800,000 1,951,558 6.000%, due 06/01/08..................... Province of Ontario, 7.500%, 2,100,000 1,548,858 due 01/19/06 ---------- 7,813,749 ---------- Denmark -- 5.77% City of Copenhagen, 6.250%, DKK 2,400,000 346,368 due 03/15/01............................. 3,650,000 553,006 Great Belt, 7.000%, due 09/02/03........... Kingdom of Denmark 7.000%, due 12/15/04....................... DKK 12,200,000 $ 1,908,710 7.000%, due 11/15/07....................... 1,400,000 224,230 7.000%, due 11/10/24....................... 5,200,000 842,903 8.000%, due 11/15/01....................... 11,800,000 1,797,400 ----------- 5,672,617 ----------- Finland -- 1.37% Republic of Finland, 9.000%, due 08/13/03............................... EUR 1,097,633 1,345,029 France -- 7.33% Government of France (BTAN), 7.750%, due 04/12/00............................... 609,796 652,654 Government of France (OAT) 6.000%, due 10/25/25....................... 950,000 1,056,154 7.500%, due 04/25/05....................... 2,000,000 2,416,337 8.500%, due 04/25/23....................... 1,350,000 1,971,433 9.500%, due 01/25/01....................... 990,000 1,116,041 ---------- 7,212,619 ---------- Germany -- 8.72% Bundesrepublik Deutschland 5.250%, due 01/04/08....................... 900,000 973,465 5.625%, due 01/04/28....................... 1,000,000 1,063,064 6.250%, due 01/04/24....................... 357,904 413,326 European Economic Community, 6.500%, due 03/10/00............................... 567,534 599,286 International Bank of Recon & Dev, 7.125%, due 04/12/05....................... 2,019,603 2,372,536 KFW International Finance, 6.625%, due 04/15/03............................... 2,800,000 3,154,891 ---------- 8,576,568 ---------- Ireland -- 1.73% Republic of Ireland, 7.250%, due 03/18/03............................... 1,482,746 1,700,881 ---------- Italy -- 2.73% Republic of Italy (BTP) 7.750%, due 11/01/06....................... 1,800,000 2,203,537 9.000%, due 10/01/03....................... 387,849 477,026 ---------- 2,680,563 ---------- Netherlands -- 7.32% LKB Baden-Wuerttemberg Finance, 6.500%, due 09/15/08....................... 818,067 942,382 Netherlands Government 5.500%, due 01/15/28....................... 1,700,000 1,768,989 8.250%, due 02/15/02....................... 3,900,000 4,490,283 ---------- 7,201,654 ---------- Portugal -- 1.19% Republic of Portugal, 5.625%, due 04/03/07............................... 1,067,143 1,173,731 ---------- Spain -- 4.00% Kingdom of Spain 7.350%, due 03/31/07....................... 2,150,000 2,597,162 10.000%, due 02/28/05...................... 1,000,000 1,332,773 ---------- 3,929,935 ----------
=============================================================================== 38 Global Bond Fund -- Schedule of Investments June 30, 1999 - --------------------------------------------------------------------------------
Face Amount Value ---------- ------------ Sweden -- 5.69% Government of Sweden 6.000%, due 02/09/05..................SEK 15,000,000 $ 1,876,937 6.750%, due 05/05/14.................. 6,900,000 917,582 10.250%, due 05/05/03................. 19,800,000 2,799,777 ------------ 5,594,296 ------------ United Kingdom -- 14.96% Abbey National Treasury Service, 6.500%, due 03/05/04..................GBP 850,000 1,346,816 British Gas PLC, 8.125%, due 03/31/03 795,000 1,316,248 European Investment Bank, 7.625%, due 12/07/06.......................... 1,400,000 2,414,029 UK Treasury 7.250%, due 12/07/07.................. 4,800,000 8,553,594 8.000%, due 09/27/13.................. 530,000 1,082,724 ------------ 14,713,411 ------------ Total Global (Ex-U.S.) Bonds............ 77,429,837 ------------ Total Bonds (Cost $118,625,590)......... 113,617,023 ------------
Shares Value --------- ------------ Short-Term Investments -- 6.24% Investment Companies -- 6.24% Brinson Supplementary Trust U.S. Cash Management Prime Fund, (Cost $6,139,233)................... 6,139,233 $ 6,139,233 ------------ Total Investments (Cost $124,764,823) -- 121.77% (a).. 119,756,256 Liabilities, less cash and other assets-- (21.77%)............. (21,410,524) ------------ Net Assets-- 100%..................... $ 98,345,732 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $124,764,823; and net unrealized depreciation consisted of: Gross unrealized appreciation..................................... $ 503,056 Gross unrealized depreciation..................................... (5,511,623) ------------ Net unrealized depreciation........................... ($ 5,008,567) ============
(b) Non-income producing security. FRN: Floating Rate Note TBA: Security is subject to delayed delivery. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 1999, the value of these securities amounted to $2,236,170 or 2.27% of net assets. Resettable Perpetual Preferred: A bond with either no maturity date or a maturity date that is so far in the future that the bond will pay interest indefinitely. The issuer generally retains the right to call such a bond. FORWARD FOREIGN CURRENCY CONTRACTS The Global Bond Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- ------------- ----------- ----------- Forward Foreign Currency Buy Contracts Australian Dollar............................................ 9/1/99 2,500,000 $ 1,655,936 $ 63,936 British Pound................................................ 9/1/99 1,700,000 2,681,177 (25,427) Canadian Dollar.............................................. 9/1/99 3,100,000 2,096,351 14,976 Danish Kroner................................................ 9/1/99 3,900,000 544,495 676 Euro......................................................... 9/1/99 22,100,000 22,902,978 (1,856,372) Japanese Yen................................................. 9/1/99 2,510,000,000 20,934,897 (356,029) Swedish Krona................................................ 9/1/99 18,200,000 2,149,237 (162,901) Forward Foreign Currency Sale Contracts British Pound................................................ 9/1/99 11,100,000 17,506,506 344,192 Canadian Dollar.............................................. 9/1/99 1,000,000 676,242 8,896 Danish Kroner................................................ 9/1/99 32,400,000 4,523,497 351,852 Euro......................................................... 9/1/99 5,400,000 5,596,203 247,654 Japanese Yen................................................. 9/1/99 310,000,000 2,585,585 28,750 Swedish Krona................................................ 9/1/99 3,300,000 389,697 14,888 ----------- Total.............................................. ($1,324,909) ===========
See accompanying notes to financial statements. ================================================================================ 39 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $118,625,590)........................................................ $113,617,023 Affiliated issuers (Cost $6,139,233)............................................................ 6,139,233 Foreign currency, at value (Cost $64,733)......................................................... 65,260 Receivables: Investment securities sold...................................................................... 15,848,438 Interest........................................................................................ 1,940,121 Fund shares sold................................................................................ 3,474,923 Other assets...................................................................................... 17,566 ------------ TOTAL ASSETS............................................................................... 141,102,564 ------------ LIABILITIES: Payables: Investment securities purchased................................................................. 637,698 Fund shares redeemed............................................................................ 39,306,083 Investment advisory fees........................................................................ 89,477 Accrued expenses................................................................................ 34,638 Due to custodian bank........................................................................... 1,364,027 Net unrealized depreciation on forward foreign currency contracts................................. 1,324,909 ------------ TOTAL LIABILITIES.......................................................................... 42,756,832 ------------ NET ASSETS........................................................................................... $ 98,345,732 ============ NET ASSETS CONSIST OF: Paid in capital................................................................................... $105,466,609 Accumulated undistributed net investment income................................................... 1,161,994 Distribution in excess of net realized gain....................................................... (1,902,730) Net unrealized depreciation....................................................................... (6,380,141) ------------ NET ASSETS................................................................................. $ 98,345,732 ------------ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $92,832,427 and 10,117,968 shares issued and outstanding)..................... $ 9.18 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $1,084,713 and 118,464 shares issued and outstanding)............................ $ 9.16 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $4,428,592 and 483,424 shares issued and outstanding).......................................... $ 9.16 ============
See accompanying notes to financial statements. ================================================================================ 40 Global Bond Fund -- Financial Statements - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Interest (net of $13,362 for foreign taxes withheld)............................ $ 6,294,138 Dividends....................................................................... 16,230 ---------------- TOTAL INCOME................................................................. 6,310,368 ---------------- EXPENSES: Advisory........................................................................ 957,176 Professional.................................................................... 38,814 Distribution.................................................................... 21,834 Administration.................................................................. 15,889 Other........................................................................... 136,719 ---------------- TOTAL EXPENSES............................................................... 1,170,432 ---------------- NET INVESTMENT INCOME........................................................ 5,139,936 ---------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments.................................................................... 435,436 Foreign currency transactions.................................................. 1,064,191 ---------------- Net realized gain............................................................. 1,499,627 ---------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency............................................... (5,039,115) Forward contracts.............................................................. (968,525) Translation of other assets and liabilities denominated in foreign currency.... (44,778) ---------------- Change in net unrealized appreciation or depreciation......................... (6,052,418) ---------------- Net realized and unrealized loss................................................ (4,552,791) ---------------- Net increase in net assets resulting from operations............................ $ 587,145 ================
See accompanying notes to financial statements. ================================================================================ 41 Global Bond Fund -- Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income................................................................... $ 5,139,936 $ 3,009,836 Net realized gain (loss)................................................................ 1,499,627 (1,114,801) Change in net unrealized appreciation or depreciation................................... (6,052,418) (276,626) ------------- ------------- Net increase in net assets resulting from operations.................................... 587,145 1,618,409 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I....................................................................... (5,705,972) (2,070,571) Brinson Class N....................................................................... (13,166) (98) UBS Investment Funds Class............................................................ (180,397) (112,673) Distributions from net realized gain: Brinson Class I....................................................................... (925,451) (969,902) Brinson Class N....................................................................... (811) (18) UBS Investment Funds Class............................................................ (35,005) (71,935) ------------- ------------- Total distributions to shareholders..................................................... (6,860,802) (3,225,197) ------------- ------------- Capital share transactions: Shares sold............................................................................. 115,882,090 46,034,839 Shares issued on reinvestment of distributions.......................................... 4,872,310 2,230,731 Shares redeemed......................................................................... (111,795,220) (9,266,587) ------------- ------------- Net increase in net assets resulting from capital share transactions.................... 8,959,180 38,998,983 ------------- ------------- TOTAL INCREASE IN NET ASSETS....................................................... 2,685,523 37,392,195 ------------- ------------- NET ASSETS: Beginning of year....................................................................... 95,660,209 58,268,014 ------------- ------------- End of year (including accumulated undistributed net investment income of $1,161,994 and $1,003,399, respectively)............................................... $ 98,345,732 $ 95,660,209 ============= =============
See accompanying notes to financial statements. ================================================================================ 42 Global Bond Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
July 31, 1995* Year Ended June 30, Through ------------------------------- UBS Investment Funds Class 1999 1998 1997 June 30, 1996 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period...................................... $ 9.39 $ 9.61 $ 10.02 $ 10.56 ------- -------- ------- -------- Income from investment operations: Net investment income................................................... 0.34** 0.38** 0.62 0.78 Net realized and unrealized gain (loss)................................. (0.07) (0.18) 0.10 0.15 ------- -------- ------- -------- Total income from investment operations............................... 0.27 0.20 0.72 0.93 ------- -------- ------- -------- Less distributions: Distributions from and in excess of net investment income............... (0.42) (0.25) (0.94) (1.37) Distributions from net realized gain.................................... (0.08) (0.17) (0.19) (0.10) ------- -------- ------- -------- Total distributions................................................... (0.50) (0.42) (1.13) (1.47) ------- -------- ------- -------- Net asset value, end of period............................................ $ 9.16 $ 9.39 $ 9.61 $ 10.02 ======= ======== ======= ======== Total return (non-annualized)............................................. 2.58% 2.28% 7.20% 9.17% Ratios/Supplemental data: Net assets, end of period (in 000s)..................................... $ 4,429 $ 4,377 $ 4,110 $ 3,653 Ratio of expenses to average net assets: Before expense reimbursement............................................ 1.39% 1.45% 1.81% 2.14%*** After expense reimbursement............................................. N/A 1.39% 1.39% 1.39%*** Ratio of net investment income to average net assets: Before expense reimbursement............................................ 3.56% 3.98% 4.41% 4.49%*** After expense reimbursement............................................. N/A 4.04% 4.83% 5.24%*** Portfolio turnover rate................................................. 138% 151% 235% 184%
* Commencement of investment operations ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized N/A = Not Applicable See accompanying notes to financial statements. ================================================================================ 43 The UBS Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 1. Significant Accounting Policies The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBSInvestment Funds Class (formerly, 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 financial highlights of the Brinson Class I and the Brinson Class N are presented separately. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund in the preparation of their financial statements. A. Investment Valuation: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. U.S. equity securities traded over-the-counter are priced at the most recent bid price. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. Foreign Currency Translation: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate of the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C. Investment Transactions: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. Investment Income: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. Federal Income Taxes: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1999, therefore, no federal income tax provision was required. F. Distributions To Shareholders: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 14.04% and 58.92% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Global Fund and Global Equity Fund, respectively. G. Income And Expense Allocation: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. =============================================================================== 44 The UBS Investment Funds -- Notes To Financial Statements - ------------------------------------------------------------------------------- H. Use Of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2. Investment Advisory Fees And Other Transactions With Affiliates Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions for the year ended June 30, 1999, were as follows:
UBS Investment Advisory Brinson Class I Brinson Class N Funds Class Advisory Fee Expense Cap Expense Cap Expense Cap Fees Fees Waived -------- --------------- --------------- ------------- --------- ----------- Global Fund.......... 0.80% 1.10% 1.35% 1.75% $4,403,642 $ -- Global Equity Fund... 0.80 1.00 1.25 1.76 628,067 36,960 Global Bond Fund..... 0.75 0.90 1.15 1.39 957,176 --
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1999 were $11,680, $4,993 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. The Global Fund invests in shares of certain affiliated investment companies also sponsored by the Advisor. These investments represented 19.53% of the Fund's total net assets at June 30, 1999. Activity for the year ended June 30, 1999 was as follows:
Net Change In Sales Realized Net Unrealized Interest Affiliates Purchases Proceeds Gain/(loss) Gain/(loss) Income Value - ---------- ------------ ------------ ----------- -------------- --------- ----------- Brinson Post-Venture Fund.............. $ 1,500,000 $ 1,949,866 $ 448,329 $ (850,533) $ -- $ 7,660,445 Brinson High Yield Fund................ 3,900,000 6,400,682 1,016,827 (840,129) -- 14,221,334 Brinson Emerging Markets Equity Fund... -- 7,602,574 3,701,103 1,483,000 -- 17,543,286 Brinson Emerging Markets Debt Fund..... 6,400,000 15,503,323 4,019,383 (699,055) -- 24,713,550 Brinson Supplementary Trust U.S. Cash Management Prime Fund.................. 319,658,653 287,563,973 -- -- 500,538 32,094,680
The Global Equity Fund and Global Bond Fund also invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income in the statement of operations. Amounts relating to those investments at June 30, 1999 and for the year then ended were as follows:
% of Sales Interest Net Affiliates Purchases Proceeds Income Value Assets - ---------- ------------ ----------- -------- ----------- ------ Global Equity Fund........................................ $26,901,425 $25,879,238 $ 43,064 $ 1,022,188 1.18% Global Bond Fund.......................................... 77,341,746 71,202,513 276,943 6,139,233 6.24%
3. Investment Transactions Investment transactions for the year ended June 30, 1999, excluding short-term investments, were as follows:
Proceeds Purchases From Sales ------------ ------------ Global Fund.......................................................................................... $555,636,189 $775,205,447 Global Equity Fund................................................................................... 68,882,280 65,637,189 Global Bond Fund..................................................................................... 194,378,936 160,439,778
=============================================================================== 45 The Ubs Investment 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 each Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the year ended June 30, 1999, was the Funds' custodian or an affiliate of the Funds' custodian. 5. FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as net unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6. SECURITY LENDING The Global Fund loaned securities to certain brokers, with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. Securities loaned are recorded at the amount of cash collateral received. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 102% of the value of domestic securities loaned and 105% of the value of non-U.S. securities loaned. The cash collateral received is invested in short-term investments. The value of loaned securities and related collateral outstanding at June 30, 1999 were as follows: Value of Loaned Cash Collateral Securities Received --------------- --------------- Global Fund................................. $90,987,855 $97,474,174 =============== =============== 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the `'Plans'') pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBSInvestment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBSInvestment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBSInvestment Funds Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the UBSInvestment Funds Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364-day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds Rate plus 0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily unutilized balance of the line of credit. During the year ended June 30, 1999, the Global Equity and Global Bond Funds had no borrowings under the agreement. During the year ended June 30, 1999, the Global Fund had borrowings of $33,900,000, $62,000,000 and $47,400,000 outstanding for 1 day each under the agreement. ================================================================================ 46 The Ubs Investment Funds -- Notes To Financial Statements - -------------------------------------------------------------------------------- 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Global Fund ------------------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------------------------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I................................... 33,634,272 $404,497,836 18,850,057 $244,898,004 Brinson Class N................................... 31,878 401,372 90,370 1,177,290 UBS Investment Funds Class........................ 469,115 5,622,287 803,666 10,347,586 ---------- ------------ ---------- ------------ Total Sales.................................. 34,135,265 $410,521,495 19,744,093 $256,422,880 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I................................... 3,914,936 $ 45,438,730 5,179,618 $ 62,332,662 Brinson Class N................................... 12,826 148,599 769 9,625 UBS Investment Funds Class........................ 201,293 2,326,850 217,810 2,607,910 ---------- ------------ ---------- ------------ Total Dividend Reinvestment.................. 4,129,055 $ 47,914,179 5,398,197 $ 64,950,197 ========== ============ ========== ============ Redemptions: Brinson Class I................................... 50,809,625 $617,784,220 16,402,396 $209,137,318 Brinson Class N................................... 4,388 53,226 21 276 UBS Investment Funds Class........................ 1,220,493 14,718,874 641,736 8,247,175 ---------- ------------ ---------- ------------ Total Redemptions............................ 52,034,506 $632,556,320 17,044,153 $217,384,769 ========== ============ ========== ============ Global Equity Fund ------------------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------------------------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales: Brinson Class I................................... 2,413,314 $ 30,206,170 1,466,054 $ 17,934,645 Brinson Class N................................... 15,911 200,000 -- -- UBS Investment Funds Class........................ 352,164 4,402,461 1,779,376 22,282,095 --------- ------------ --------- ------------ Total Sales.................................. 2,781,389 $ 34,808,631 3,245,430 $ 40,216,740 ========= ============ ========= ============ Dividend Reinvestment: Brinson Class I................................... 54,126 $ 661,376 126,859 $ 1,426,171 Brinson Class N................................... 426 5,130 9 93 UBS Investment Funds Class........................ 66,261 795,940 442,472 4,952,413 --------- ------------ --------- ------------ Total Dividend Reinvestment.................. 120,813 $ 1,462,446 569,340 $ 6,378,677 ========== ============ ========= ============ Redemptions: Brinson Class I................................... 1,142,595 $ 14,484,716 3,546,702 $ 44,596,092 Brinson Class N................................... -- -- -- -- UBS Investment Funds Class........................ 1,860,700 22,842,212 2,339,080 28,946,495 ---------- ------------ --------- ------------ Total Redemptions............................ 3,003,295 $ 37,326,928 5,885,782 $ 73,542,587 ========== ============ ========= ============
================================================================================ 47 The UBS Investment Funds -- Notes To Financial Statements - --------------------------------------------------------------------------------
Global Bond Fund ------------------------------------------------------------------- Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------------------------------------------------- Shares Value Shares Value ------------- -------------- -------------- -------------- Sales: Brinson Class I.................. 11,338,295 $110,539,879 4,561,105 $43,233,367 Brinson Class N.................. 117,021 1,120,104 860 8,169 UBS Investment Funds Class....... 432,357 4,222,107 293,533 2,793,303 ------------- -------------- -------------- -------------- Total Sales.................. 11,887,673 $115,882,090 4,855,498 $46,034,839 ============= ============== ============== ============== Dividend Reinvestment: Brinson Class I.................. 484,490 $ 4,679,150 220,347 $ 2,058,040 Brinson Class N.................. 579 5,581 12 115 UBS Investment Funds Class....... 19,366 187,579 18,525 172,576 ------------- -------------- --------------- -------------- Total Dividend Reinvestment.. 504,435 $ 4,872,310 238,884 $ 2,230,731 ============= ============== =============== ============== Redemptions: Brinson Class I.................. 11,403,020 $107,591,860 699,882 $ 6,667,104 Brinson Class N.................. 90 871 22 210 UBS Investment Funds Class....... 434,492 4,202,489 273,680 2,599,273 ------------------------------------------------------------------- Total Redemptions............ 11,837,602 $111,795,220 973,584 $ 9,266,587 ===================================================================
================================================================================ 48 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds-- Global Fund Global Equity Fund Global Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund as of June 30, 1999, the related statements of operations and cash flows (Global Fund only) for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30, 1999, the results of their operations and cash flows (Global Fund only) for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 11, 1999 ================================================================================ 49 Distributed by: Funds Distributor, Inc. 60 State Street Boston, MA 02109 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. ================================================================================ [UBS LOGO APPEARS HERE] P.O. Box 2798, Boston, Massachusetts 02208-9915 . Tel: (800) 794-7753 [UBS LOGO APPEARS HERE] Global (Ex-U.S.) Equity Fund Annual Report June 30, 1999 Trustees And Officers - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Trustees Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Officers Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Secretary and Treasurer E. Thomas McFarlan David E. Floyd, CPA President Assistant Secretary Thomas J. Digenan, CFA, CPA Mark F. Kemper Vice President Assistant Secretary Debra L. Nichols Vice President ================================================================= 1 The Fund's Advisor -- Brinson Partners, Inc. - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Since the entrepreneurial founding of our organization nearly twenty years ago, we have focused our collective energy on two goals: creating meaningful value-added investment performance; and providing our clients with unrivaled, custom-tailored service of the highest quality. Now, in 1999, more than 1,100 employees located in 11 countries around the world continue to deliver investment strategies that meet our clients' needs. With an unrelenting focus on our goals, we have grown into one of the world's premier investment management organizations, with approximately USD 280 billion in assets under management, and industry recognition as a global thought leader. In North America, we make our services available to institutions and individual investors through the Brinson Family of Funds. The Brinson Funds are diversified, institutionally priced mutual funds that provide investors convenient access to our global investment expertise and services. Within a framework of integrated capital markets, we select portfolio investments by focusing on long-term investment fundamentals. Investment performance for our clients is maximized within and across asset classes through a comprehensive understanding of global investment markets and their interrelationships. We apply a systematic, disciplined approach to valuing investments and combine the seasoned judgement of our global investment teams to construct optimal portfolios-- balancing considerations for both risk and return. Brinson Partners, Inc. is a member of the UBS Brinson Division, the institutional asset management division of UBS AG. ================================================================= 2 Table Of Contents - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Shareholder Letter......................................... 4 Global Economic and Market Highlights...................... 5 Global (Ex-U.S.) Equity Fund............................... 6 Schedule of Investments.................................... 9 Financial Statements....................................... 13 Financial Highlights....................................... 16 Notes to Financial Statements.............................. 17 Report of Independent Auditors............................. 20
================================================================= 3 Shareholder Letter - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] July 26, 1999 Dear Shareholder: We are pleased to present the Annual Report for the Global (Ex- U.S.) Equity Fund covering the year ended June 30, 1999. This report focuses on the current international economic outlook as well as our current strategy and performance update. Global Capital markets are becoming more integrated and global industries more homogenous. These trends have important implications for the management of both Global Equities and Global (Ex-U.S.) Equities. Allocation to, and the management of, industry exposure are increasing in relative importance, providing investors with important investment characteristics that require thoughtful attention. The accelerating globalization of business enterprise and integration of capital markets will also create a change in active equity portfolio management. During the coming years, capital market integration will reduce the market inefficiency produced by country segmentation. The period during which this inefficiency is reduced presents a compelling active management opportunity. To fully capture this opportunity for excess returns, portfolio mandates must be structured to allow active industry management across countries and active stock selection across the domestic/foreign boundary. The Global (Ex-U.S) Equity Fund is an actively managed fund that provides integrated asset management across and within security markets. The Global (Ex-U.S.) Equity Fund employs a value- oriented investment philosophy. The Fund also uses the resources of our entire worldwide research team. All of our analysts apply the same value philosophy to their work. All of our portfolios are structured to specific objectives and focused upon both risk and return considerations in the context of full investment cycles. The enclosed report highlights the investment characteristics and the performance of the Fund. We very much appreciate your continued trust and the confidence you have placed in the UBS Investment Funds, and look forward to a long lasting, quality relationship. Sincerely, /s/ Hanspeter A. Walder /s/ Raymond Simon ----------------------- ------------------ Hanspeter A. Walder Raymond Simon Executive Director Managing Director Private Banking Private Banking ================================================================= 4 Global Economcic And Market Highlights - ------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] Thanks to a weaker euro and better prospects for the world economy, growth in Euroland is picking up steam after having experienced a slowdown in the first half of 1999. Business confidence is supported by ever stronger commitments of the European governments to implement structural reforms. This should eventually create a better environment for the labor market, boost employment and lift consumers' confidence. Due to divergence of inflation and GDP growth rates, the ECB is still facing a very heterogeneous situation, ranging from above average growth and below average inflation (as in France) to below average growth and above average inflation (as in Italy). No signs of strain have emerged from this situation so far. In Japan, first quarter growth (at 7.9% QI/99 over QIV/98 annualized rate) caught market attention. The positive expectations shared by many market participants depend heavily on the government's massive injection of public funds rather than on increased productivity resulting from structural reforms undertaken in the private sector. Only the latter would allow the Japanese economy to move toward a sustainable long-term growth path. The Bank of Japan continues its policy of zero overnight call rates, which it sees as an alternative for full-fledged money supply targeting. Growing current account imbalances are emerging. A healthy American economy is attracting capital from all over the world, but at the same time private savings are falling in the U.S. (and this is only partly compensated by higher public savings). The result is a widening current account deficit. With growth picking up in the rest of the world, capital flows are likely to be rerouted. This should alleviate the current account problem and weaken the USD. Global (Ex-U.S.) Equity Environment
6 months 1 year 3 years 7/31/95* Major Markets ended ended ended to Total Return in U.S. Dollar Hedged Terms 6/30/99 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------------------ MSCI World Ex USA (Free) Index 14.26% 9.72% 16.34% 18.18% Europe Ex U.K. 9.08 3.60 31.73 29.19 U.K. 7.64 8.50 20.34 17.80 Canada 14.41 3.08 18.60 17.38 Japan 32.60 19.51 1.42 9.03 Asia Ex Japan 33.51 68.29 -4.08 0.13 ------------------------------------------------------------------------------------------------------------------ 6 months 1 year 3 years 7/31/95* Major Currencies ended ended ended to Percent Change Relative to U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------------------ Yen -6.81% 14.66% -3.23% -7.81% Pound -5.26 -5.53 0.48 -0.38 Euro** -12.18 -4.83 -7.07 -7.79 Canadian Dollar 3.78 -0.64 -2.65 -1.91 ------------------------------------------------------------------------------------------------------------------
*Performance inception date of the UBS Investment Fund -- Global (Ex-U.S.) Equity **Deutschemark prior to 1/1/99 All total returns in excess of 1 year are average annualized total returns ================================================================= 5 Global (Ex-U.S.) Equity Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE] In managing the Global (Ex-U.S.) Equity Fund, we apply our fundamental price/value philosophy with an integrated view of global capital markets. We add value by focusing on four key portfolio management activities. We select the best securities, focus on industries that have the best earnings prospects, concentrate investments in countries with above average political and structural environments, and control exposure to various global currencies. We manage the portfolio within predefined ranges (relative to the benchmark) and use both qualitative and quantitative techniques to control portfolio risk. Since its inception on July 31, 1995, the UBSInvestment Fund-- Global (Ex-U.S.) Equity has produced an annualized return of 10.43% compared to the 8.64% return of its benchmark, the MSCI World Ex USA (Free) Index. These results were achieved at a risk level or volatility well below that of the benchmark at 13.07% versus 14.43% respectively. For the most recent six months, the Fund has returned 2.00% versus the benchmark return of 4.34%. The main driver of the Fund's relative underperformance on a year-to-date basis was unfavorable security selection decisions. We continued to underweight many of the high-flying internet stocks and stocks in the growth sector of the market. While these stocks are overvalued in our opinion, and we did see some correction in favor of value stocks in the second quarter, growth stocks continued to drive the overall markets higher during the first half of 1999. Most European equity markets were very strong in the first quarter, and we took that strength as an opportunity to reduce our overweight position in Europe. Proceeds from the sales were deployed in Japan, where recent macroeconomic policy moves have recently served to support higher asset prices. The Japan equity position is now approximately equal to the benchmark weighting. During the first quarter we also increased the Fund's currency exposure to the euro, while decreasing exposure to the U.K. sterling and Japanese yen. Renewed investor confidence in global growth boosted economically sensitive stocks during the second quarter. Value stocks outperformed growth by a wide margin opposing a long-running trend of overperformance by growth issues. An improving economic picture coupled with increased profitability for value stocks suggests that there is scope for continued outperformance of growth stocks in the coming months. Our work continues to suggest that many large capitalization growth stocks remain significantly overvalued. As a result, the Fund's largest industry overweights (relative to the benchmark) are to producer goods, basic materials and consumer stocks. The largest underweights are maintained in financials, telecommunication services & equipment and information technology. With respect to country strategy, the Fund's largest overweights are to Australia/New Zealand, the U.K. and Germany, with the largest underweights in Hong Kong, Canada and Switzerland. Strong price increases among the European cyclicals prompted us to pare back on certain positions near the end of the second quarter. The unexciting outlook for the British steel industry prompted us to eliminate our position in British Steel after taking advantage of a recent rebound in the stock price. We maintain an overweight in cyclicals however, due to some strong value opportunities in Australia and New Zealand, a new position in the German tire manufacturer, Continental, and a position in Swiss construction and building group, Holderbank. ================================================================================ 6 Global (Ex-U.S.) Equity Fund - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE]
TOTAL RETURN 6 months 1 year 3 years 7/31/95* ended ended ended to 6/30/99 6/30/99 6/30/99 6/30/99 ------------------------------------------------------------------------------------------------------------------ UBS INVESTMENT FUND -- GLOBAL (EX-U.S.) EQUITY 2.00% 2.78% 8.41% 10.43% ------------------------------------------------------------------------------------------------------------------ MSCI World Ex USA (Free) Index 4.34 7.18 8.90 8.64 ------------------------------------------------------------------------------------------------------------------
*Inception date of the UBS Investment Fund -- Global (Ex-U.S.) Equity Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. All total returns in excess of 1 year are average annualized returns Illustration of an Assumed Investment of $10,000 This chart shows the growth in the value of an investment in the UBS Investment Fund -- Global (Ex-U.S.) Equity and the MSCI World Ex USA (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1999. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. UBS Investment Fund -- Global (Ex-U.S.) Equity VS. MSCI World Ex USA (Free) Index Wealth Value with Dividends Reinvested ------------------------------------------------- UBS Fund MSCI Index ------------------------------------------------- 7/31/95 $10,000 $10,000 ------------------------------------------------- $10,146 $ 9,632 ------------------------------------------------- 9/30/95 $10,302 $ 9,817 ------------------------------------------------- $10,205 $ 9,563 ------------------------------------------------- $10,448 $ 9,835 ------------------------------------------------- 12/31/95 $10,858 $10,220 ------------------------------------------------- $11,065 $10,291 ------------------------------------------------- $11,024 $10,320 ------------------------------------------------- 3/31/96 $11,158 $10,538 ------------------------------------------------- $11,563 $10,848 ------------------------------------------------- $11,500 $10,662 ------------------------------------------------- 6/30/96 $11,578 $10,713 ------------------------------------------------- $11,256 $10,398 ------------------------------------------------- $11,287 $10,443 ------------------------------------------------- 9/30/96 $11,630 $10,727 ------------------------------------------------- $11,578 $10,654 ------------------------------------------------- $12,161 $11,099 ------------------------------------------------- 12/31/96 $12,140 $10,947 ------------------------------------------------- $12,074 $10,612 ------------------------------------------------- $12,262 $10,770 ------------------------------------------------- 3/31/97 $12,328 $10,775 ------------------------------------------------- $12,405 $10,844 ------------------------------------------------- $13,220 $11,561 ------------------------------------------------- 6/30/97 $13,815 $12,174 ------------------------------------------------- $14,059 $12,400 ------------------------------------------------- $13,063 $11,468 ------------------------------------------------- 9/30/97 $13,782 $12,111 ------------------------------------------------- $12,920 $11,200 ------------------------------------------------- $12,687 $11,068 ------------------------------------------------- 12/31/97 $12,750 $11,174 ------------------------------------------------- $13,166 $11,653 ------------------------------------------------- $13,844 $12,411 ------------------------------------------------- 3/31/98 $14,379 $12,814 ------------------------------------------------- $14,486 $12,912 ------------------------------------------------- $14,475 $12,855 ------------------------------------------------- 6/30/98 $14,354 $12,909 ------------------------------------------------- $14,497 $12,994 ------------------------------------------------- $12,698 $11,335 ------------------------------------------------- 9/30/98 $12,377 $11,011 ------------------------------------------------- $13,318 $12,160 ------------------------------------------------- $13,985 $12,778 ------------------------------------------------- 12/31/98 $14,463 $13,259 ------------------------------------------------- 1/31/99 14,415 13,257 ------------------------------------------------- 2/28/99 13,945 12,924 ------------------------------------------------- 3/31/99 14,331 13,458 ------------------------------------------------- 4/30/99 14,994 14,039 ------------------------------------------------- 5/31/99 14,198 13,321 ------------------------------------------------- 6/30/99 14,752 13,835 ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. =============================================================================== 7 GLOBAL (EX-U.S.) EQUITY FUND - -------------------------------------------------------------------------------- [UBS LOGO APPEARS HERE]
INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1999 - --------------------------------------------------------- GLOBAL (Ex-U.S.) EQUITIES Aerospace & Military......................... 1.05% Airlines..................................... 1.03 Appliances &Households....................... 2.01 Autos/Durables............................... 2.69 Banking...................................... 10.06 Beverages &Tobacco........................... 2.98 Broadcasting & Publishing.................... 4.06 Building Materials........................... 0.98 Business & Public Service.................... 3.73 Chemicals.................................... 4.26 Construction................................. 0.64 Data Processing.............................. 1.45 Electric Components.......................... 1.27 Electronics.................................. 5.17 Energy....................................... 6.05 Financial Services........................... 2.39 Food & House Products........................ 4.00 Forest Products.............................. 1.06 Health &Personal Care........................ 6.36 Industrial Components........................ 2.37 Insurance.................................... 5.14 Leisure & Tourism............................ 0.32 Machinery &Engineering....................... 0.75 Merchandising................................ 4.85 Metals-Steel................................. 0.40 Multi-Industry............................... 1.67 Non-Ferrous Metals........................... 1.76 Real Estate.................................. 0.72 Recreation................................... 0.92 Telecommunications........................... 8.39 Textiles & Apparel........................... 0.19 Transportation............................... 1.28 Utilities.................................... 5.15 Wholesale & International Trade.............. 0.56 ------ Total Global (Ex-U.S.) Equities........... 95.71 CONVERTIBLEBONDS............................. 0.03 SHORT-TERM INVESTMENTS....................... 0.87 ------ TOTAL INVESTMENTS......................... 96.61 CASH AND OTHER ASSETS, LESS LIABILITIES.......................... 3.39 ------ NET ASSETS................................... 100.00% ======
MARKET AND CURRENCY STRATEGY As of June 30, 1999
Fund ------------------- Market Currency Strategy Strategy Index - -------------------------------------------------- Australia 5.74% 8.24% 2.75% Austria 0.16 0.00 0.00 Belgium 1.30 0.00 0.00 Canada 2.91 4.18 4.18 Denmark 0.38 0.73 0.73 Euro 0.00 43.79 35.36 Finland 1.94 0.00 0.00 France 9.50 0.00 0.00 Germany 10.80 0.00 0.00 Hong Kong 0.00 0.00 2.43 Italy 2.70 0.00 0.00 Japan 23.01 15.01 23.01 Netherlands 4.94 0.00 0.00 New Zealand 0.70 0.70 0.19 Norway 0.23 0.40 0.40 Portugal 0.42 0.00 0.00 Singapore 0.92 0.92 0.92 Spain 2.26 0.00 0.00 Sweden 2.75 6.19 2.19 Switzerland 5.49 6.49 6.49 U.K. 23.85 13.35 21.35 - -------------------------------------------------- 100.00% 100.00% 100.00%
Top Ten Global (Ex-U.S.) Equity Holdings As Of June 30, 1999
Percent of Net Assets - --------------------------------------------------- 1. BPAmoco PLC 1.67% 2. Veba AG 1.65 3. ING Groep NV 1.46 4. Nestle S.A. (Reg.) 1.40 5. Nippon Telegraph & Telephone Corp. 1.27 6. Lloyds TSB Group PLC 1.24 7. Bayer AG 1.24 8. Siemens AG 1.24 9. Glaxo Wellcome PLC 1.20 10. Novartis AG (Reg.) 1.20 - ---------------------------------------------------
================================================================================ 8 Global (Ex-U.S.) Equity Fund -- Schedule of Investments June 30, 1999 - ------------------------------------------------------------------------------
Shares Value -------- ---------- Global (Ex-U.S.) Equities -- 95.71% Australia -- 5.79% Amcor Ltd................................. 85,740 $ 476,598 Amp Limited............................... 116,500 1,273,573 Brambles Industries Ltd................... 37,040 975,769 Broken Hill Proprietary Co., Ltd.......... 244,720 2,834,657 CSR Ltd................................... 350,590 1,002,481 David Jones Ltd........................... 334,200 327,387 Lend Lease Corp., Ltd..................... 92,296 1,267,207 National Australia Bank Ltd............... 221,648 3,667,726 News Corp. Ltd............................ 373,588 3,187,417 News Corp. Ltd., Preferred................ 157,179 1,197,465 Orica Ltd................................. 54,020 295,022 Qantas Airways Ltd........................ 473,538 1,564,042 QBE Insurance Group Ltd................... 211,823 806,184 Rio Tinto Ltd............................. 97,060 1,591,455 Santos Ltd................................ 241,340 790,729 Telstra Corp. Ltd......................... 632,310 3,623,185 Westpac Banking Corp., Ltd................ 373,841 2,424,968 WMC Ltd................................... 187,070 803,603 Woolworth's Ltd........................... 200,960 668,403 ---------- 28,777,871 ---------- Austria -- 0.14% Austria Tabakwerke AG..................... 12,300 716,702 ---------- Belgium -- 1.25% Fortis (B)................................ 149,047 4,680,535 KBC Bancassurance Holding................. 25,510 1,512,737 ---------- 6,193,272 ---------- Canada -- 2.79% Agrium, Inc............................... 74,680 650,883 Alcan Aluminum Ltd........................ 31,240 986,737 Bank of Montreal.......................... 19,210 694,369 Canadian National Railway Co.............. 19,190 1,282,272 Canadian Pacific Ltd...................... 57,614 1,362,401 Hudson's Bay Co........................... 60,120 670,211 Imasco, Ltd............................... 31,200 836,862 Imperial Oil Ltd.......................... 47,960 907,290 Magna International, Inc., Class A........ 9,860 555,254 Newbridge Networks Corp. (b).............. 30,610 868,604 NOVA Chemicals Corp....................... 8,800 205,121 NOVA Corp................................. 26,521 618,184 Potash Corporation of Saskatchewan, Inc... 7,660 394,101 Royal Bank of Canada...................... 24,620 1,081,211 Seagram Co., Ltd.......................... 8,300 411,327 Shaw Communications, Inc., Class B........ 35,580 1,401,469 TransCanada Pipelines Ltd................. 42,876 601,093 Westcoast Energy, Inc..................... 17,120 334,280 ---------- 13,861,669 ---------- Denmark -- 0.37%.......................... Tele Danmark A/S.......................... 36,800 1,811,346 ---------- Finland -- 1.86% Merita Ltd., Class A...................... 357,400 2,030,912 Nokia Oyj................................. 49,060 4,300,624 UPM-Kymmene Corp.......................... 102,200 2,930,088 --------- 9,261,624 --------- France -- 8.68% Aerospatiale Matra........................ 63,150 $1,455,579 Air Liquide............................... 15,632 2,458,495 Banque Nationale de Paris................. 27,686 2,307,048 Carrefour S.A............................. 13,970 2,053,035 Cie de Saint Gobain....................... 10,813 1,722,898 Elf Aquitaine S.A......................... 26,244 3,851,412 France Telecom S.A........................ 44,530 3,363,917 Air France (b)............................ 95,890 1,710,820 Groupe Danone............................. 11,360 2,928,892 Michelin, Class B......................... 28,783 1,177,561 Rhone-Poulenc, Class A.................... 43,280 1,977,762 SEITA..................................... 83,099 4,799,200 Societe Generale.......................... 11,593 2,043,256 Suez Lyonnaise des Eaux S.A............... 16,052 2,895,369 Thomson CSF............................... 95,800 3,329,511 Total S.A., Class B....................... 21,443 2,766,482 Vivendi................................... 28,195 2,284,038 ---------- 43,125,275 ---------- Germany -- 10.55% Allianz AG................................ 15,308 4,278,315 Bayer AG.................................. 148,206 6,167,289 Continental AG............................ 90,800 2,172,495 DaimlerChrysler AG........................ 49,513 4,325,015 Deutsche Bank AG.......................... 87,591 5,338,656 Deutsche Telekom AG....................... 98,910 4,156,740 Deutsche Telekom AG, Rights (b)........... 100,610 19,714 Dresdner Bank AG.......................... 88,030 3,422,607 Mannesmann AG............................. 34,250 5,121,694 SAP AG.................................... 4,280 1,467,643 Siemens AG................................ 79,940 6,166,671 Veba AG................................... 138,638 8,178,305 Volkswagen AG............................. 25,506 1,645,862 ---------- 52,461,006 ---------- Italy -- 2.60% Assicurazioni Generali.................... 94,446 3,272,712 ENI Spa................................... 688,000 4,108,204 ENI Spa ADR............................... 11,080 664,800 La Rinascente Spa......................... 208,140 1,575,566 Montedison Spa............................ 849,305 1,383,903 San Paolo-imi, Spa........................ 141,610 1,927,760 ---------- 12,932,945 ---------- Japan -- 22.25% Acom Co., Ltd............................. 24,400 2,106,576 Amada Co., Ltd............................ 127,000 897,100 Bank of Tokyo-Mitsubushi, Ltd............ 208,000 2,960,872 Bridgestone Corp.......................... 65,000 1,965,466 Canon, Inc............................... 102,000 2,932,584 Citizen Watch Co., Ltd.................... 117,000 1,014,954 Dai Nippon Printing Co., Ltd.............. 117,000 1,870,415 Daiichi Pharmaceutical Co., Ltd........... 103,000 1,598,100 Daikin Industries Ltd..................... 245,000 2,843,895 Daiwa House Industry Co., Ltd............. 61,000 641,548 East Japan Railway Co..................... 361 1,938,615 Fanuc..................................... 50,700 2,722,654 Fuji Photo Film........................... 34,000 1,286,517 Fujitsu................................... 213,000 4,284,988 Honda Motor Co............................ 88,000 3,729,676
================================================================================ 9 Global (Ex-U.S.) Equity Fund -- Schedule of Investments June 30, 1999 - -------------------------------------------------------------------------------
Shares Value -------- ----------- Japan -- continued Hoya Corp................................. 28,000 $1,579,974 Ito Yokado Co., Ltd....................... 60,000 4,015,202 Kaneka Corp............................... 125,000 1,177,297 Kao Corp.................................. 81,000 2,275,281 Kirin Brewery Co., Ltd.................... 137,000 1,641,193 Kokuyo.................................... 41,000 660,525 Kuraray Co., Ltd.......................... 154,000 1,852,479 Marui Co., Ltd............................ 66,000 1,090,549 Matsushita Electric Industrial Co......... 149,000 2,892,845 Mitsubishi Estate Co., Ltd................ 238,000 2,322,191 Mitsubishi Corp........................... 410,000 2,777,594 NGK Insulators............................ 205,000 2,140,780 Nintendo Corp., Ltd....................... 14,500 2,037,715 Nippon Denso Co., Ltd..................... 106,000 2,154,329 Nippon Meat Packers, Inc................. 98,000 1,279,247 Nippon Steel Co........................... 865,000 2,008,138 Nippon Telegraph & Telephone Corp......... 544 6,337,079 Nomura Securities Co., Ltd................ 217,000 2,540,392 Obayashi Corp............................. 209,000 1,051,561 Osaka Gas Co.............................. 578,000 1,962,640 Sankyo Co., Ltd........................... 91,000 2,293,044 Sanwa Bank Ltd............................ 146,000 1,436,600 Secom Co., Ltd............................ 29,000 3,018,837 Sega Enterprises Ltd...................... 16,100 212,955 Sekisui House Ltd......................... 138,000 1,488,995 Shin-Etsu Chemical Co., Ltd.............. 25,000 836,500 Sony Corp................................. 28,800 3,105,089 Sumitomo Bank............................. 148,000 1,835,327 Sumitomo Chemical Co...................... 329,000 1,508,551 Sumitomo Electric Industries.............. 140,000 1,591,540 Taiheiyo Cement Corp...................... 600 1,720 Takeda Chemical Industries................ 77,000 3,568,820 TDK Corp.................................. 22,000 2,012,062 Tokio Marine & Fire Insurance Co.......... 115,000 1,249,380 Tokyo Electric Power...................... 129,400 2,731,469 Toshiba Corp.............................. 295,000 2,103,313 Toyota Motor Corp......................... 116,000 3,670,522 Yamato Transport Co., Ltd................ 76,000 1,324,851 ----------- 110,580,546 ----------- Netherlands -- 4.70% Elsevier NV............................... 301,170 3,494,212 Heineken NV............................... 23,602 1,208,518 ING Groep NV.............................. 134,000 7,255,195 Koninklijke KPN NV........................ 84,012 3,942,192 Royal Dutch Petroleum Co.................. 80,180 4,696,771 Unilever NV............................... 41,143 2,772,851 ----------- 23,369,739 ----------- New Zealand -- 0.92% Auckland International Airport Ltd........ 223,210 343,009 Carter Holt Harvey Ltd.................... 325,940 390,337 Fletcher Challenge Paper.................. 500,840 374,207 Lion Nathan Ltd........................... 251,670 602,786 Telecom Corp. of New Zealand Ltd.......... 670,890 2,879,585 ----------- 4,589,924 ----------- Norway -- 0.37% Norsk Hydro ASA........................... 20,510 $ 773,766 Norske Skogindustrier ASA................. 29,150 1,073,801 ---------- 1,847,567 ---------- Portugal -- 0.40% EDP Electricidade de Portugal S.A......... 111,000 1,998,721 ---------- Singapore -- 0.91% Singapore Press Holdings Ltd.............. 181,975 3,099,721 United Overseas Bank Ltd. (Frgn.)......... 203,000 1,418,913 ---------- 4,518,634 ---------- Spain -- 2.17% Banco Popular Espanol S.A................. 27,615 1,986,435 Banco Santander Central Hispano, S.A...... 317,557 3,307,715 Endesa S.A................................ 100,186 2,136,695 Telefonica S.A. (b)....................... 69,915 3,367,947 ---------- 10,798,792 ---------- Sweden -- 2.58% Electrolux AB, B Shares.................. 191,870 4,017,038 Investor AB, B Shares..................... 179,480 2,005,481 Nordbanken Holding AB..................... 231,960 1,355,965 Swedish Match AB.......................... 655,980 2,337,826 Ericsson LM, B Shares..................... 96,600 3,096,154 ---------- 12,812,464 ---------- Switzerland -- 5.24% Adecco S.A................................ 2,036 1,090,948 Holderbank Financiere Glarus AG, B Shares. 1,795 2,118,760 Holderbank Financiere Glarus AG, Rights... 1 15 Nestle S.A. (Reg.)........................ 3,854 6,943,943 Novartis AG (Reg.)........................ 4,093 5,976,528 Roche Holding AG (Gen.)................... 512 5,262,936 Swiss Reinsurance Co. (Reg.).............. 341 649,273 Swisscom AG (Reg.)........................ 10,674 4,016,654 ---------- 26,059,057 ---------- United Kingdom -- 22.14% Allied Zurich PLC......................... 210,252 2,643,064 AstraZeneca Group PLC..................... 62,234 2,407,349 Barclays PLC.............................. 105,230 3,062,021 BOC Group PLC............................. 256,450 5,012,579 Boots Company PLC......................... 176,340 2,094,454 British Aerospace PLC..................... 66,000 428,365 British Airways PLC....................... 268,000 1,849,259 BP Amoco PLC.............................. 463,475 8,306,606 British Telecommunications PLC............ 183,000 3,066,346 Charter PLC............................... 461,988 2,709,009 Coats Viyella PLC......................... 1,154,489 928,104 Diageo PLC................................ 297,935 3,111,317 FKI PLC................................... 1,103,225 3,426,884 General Electric Co. PLC.................. 561,240 5,723,869 Glaxo Wellcome PLC........................ 215,260 5,982,084 Greenalls Group PLC....................... 283,375 1,585,721 House of Fraser PLC....................... 555,090 765,611 John Mansfield Group PLC.................. 108,500 13,682 Lloyds TSB Group PLC...................... 456,545 6,188,977 Marks & Spencer PLC....................... 1,013,550 5,863,380 Mirror Group PLC.......................... 650,240 2,525,317 National Power PLC........................ 423,000 3,080,486
================================================================================ 10 GLobal (Ex-U.S.) Equity Fund -- Schedule Of Investments June 30, 1999 - --------------------------------------------------------------------------------
Shares Value -------- ---------- UNITED KINGDOM -- continued Nycomed Amersham PLC........................................ 363,090 $ 2,524,002 Peninsular & Oriental Steam Navigation Co................... 121,986 1,831,521 Pennon Group PLC............................................ 177 2,963 Prudential Corp. PLC........................................ 354,820 5,223,863 Reckitt & Colman PLC........................................ 168,000 1,751,765 Reed International PLC...................................... 316,190 2,109,512 Rio Tinto Ltd............................................... 318,890 5,345,831 RJB Mining PLC.............................................. 476,840 394,611 Royal & Sun Alliance Insurance Group PLC.................... 163,794 1,469,086 Sainsbury (J.) PLC.......................................... 120,950 762,610 Scottish & Southern Energy PLC.............................. 448,720 4,590,468 Tesco PLC................................................... 1,647,830 4,240,357 Thames Water PLC............................................ 139,589 2,213,533 Unilever PLC................................................ 217,000 1,930,903 United News & Media PLC..................................... 327,580 3,149,808 Yorkshire Water PLC......................................... 249,000 1,730,911 ------------ 110,046,228 ------------ Total Global (Ex-U.S.) Equities (Cost $398,136,572)................................. 475,763,382 ------------ Face Amount ------ Convertible Bonds -- 0.03% AUSTRALIA -- 0.03% Burns, Philp Treasury, 7.50%, due 08/14/03.............................................AUD 1,228,664 162,651 Burns, Philp & Co., Ltd., Warrants (b)...................... 1,228,664 -- ----------- Total Convertible Bonds (Cost $147,071)..................... 162,651 ----------- Shares Value -------- ---------- Short-Term Investments Companies -- 0.87% Short-Term Investments Companies -- 0.87% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $4,300,836).......................................... 4,300,836 $ 4,300,836 ------------ Total Investments (Cost $402,584,479) -- 96.61% (a).......................... 480,226,869 Cash and other assets, less liabilities -- 3.39%............ 16,850,002 ------------ Net Assets -- 100%.......................................... $497,076,871 ============
See accompanying notes to schedule of investments. ================================================================================ 11 GLobal (Ex-U.S.) Equity Fund -- Schedule Of Investments June 30, 1999 - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $402,584,479; and net unrealized appreciation consisted of: Gross unrealized appreciation....................................... $ 92,641,130 Gross unrealized depreciation....................................... (14,998,740) ------------ Net unrealized appreciation.................................... $ 77,642,390 ------------
(b) Non-income producing security FORWARD FOREIGN CURRENCY CONTRACTS The Global (Ex-U.S.) Equity Fund had the following open forward foreign currency contracts as of June 30, 1999:
Settlement Local Current Unrealized Date Currency Value Gain/(Loss) ---------- -------- ------- ---------- Forward Foreign Currency Buy Contracts Australian Dollar.......................................................... 8/19/99 38,300,000 $25,364,742 $ 617,401 British Pound.............................................................. 8/19/99 7,800,000 12,299,541 (167,910) Canadian Dollar............................................................ 8/19/99 11,800,000 7,978,040 48,838 Euro....................................................................... 8/19/99 39,350,000 40,735,833 (2,280,810) Swedish Krona.............................................................. 8/19/99 142,600,000 16,824,549 (1,213,556) Swiss Franc................................................................ 8/19/99 7,500,000 4,852,767 (364,721) Forward Foreign Currency Sale Contracts Australian Dollar.......................................................... 8/19/99 3,100,000 2,053,021 2,589 British Pound.............................................................. 8/19/99 36,500,000 57,555,545 1,797,020 Euro....................................................................... 8/19/99 3,150,000 3,260,937 76,803 Japanese Yen............................................................... 8/19/99 4,740,000,000 39,451,235 1,003,056 ----------- Total................................................................. $ (481,290) ===========
See accompanying notes to financial statements. ================================================================================ 12 GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 ASSETS: Investments, at value: Unaffiliated issuers (Cost $398,283,643)......................................................... $475,926,033 Affiliated issuers (Cost $4,300,836)............................................................. 4,300,836 Foreign currency, at value (Cost $1,015,491)...................................................... 1,049,683 Cash.............................................................................................. 17,112,328 Receivables: Investment securities sold....................................................................... 13,832,745 Dividends........................................................................................ 1,240,203 Interest......................................................................................... 73,124 Fund shares sold................................................................................. 8,440,505 Variation margin.................................................................................. 575,931 ------------ TOTAL ASSETS.................................................................................. 522,551,388 ------------ LIABILITIES: Payables: Investment securities purchased.................................................................. 2,012,851 Fund shares redeemed............................................................................. 22,339,144 Investment advisory fees......................................................................... 360,906 Accrued expenses................................................................................. 280,326 Net unrealized depreciation on forward foreign currency contracts................................. 481,290 ------------ TOTAL LIABILITIES............................................................................. 25,474,517 ------------ NET ASSETS......................................................................................... $497,076,871 ============ NET ASSETS CONSIST OF: Paid in capital................................................................................... $416,353,774 Accumulated undistributed net investment income................................................... 2,738,174 Accumulated net realized gain..................................................................... 823,091 Net unrealized appreciation....................................................................... 77,161,832 ------------ NET ASSETS.................................................................................... $497,076,871 ============ OFFERING PRICE PER SHARE: Brinson Class I: Net asset value, offering price and redemption price per share (Based on net assets of $490,322,498 and 39,737,271 shares issued and outstanding)...................................... $ 12.34 ============ Brinson Class N: Net asset value, offering price and redemption price per share (Based on net assets of $15,148 and 1,232 shares issued and outstanding)................................................ $ 12.30 ============ UBS Investment Funds Class: Net asset value, offering price and redemption price per share (Based on net assets of $6,739,225 and 552,223 shares issued and outstanding)........................................... $ 12.20 ============
See accompanying notes to financial statements. ================================================================================ 13 GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 INVESTMENT INCOME: Dividends (net of $1,179,337 for foreign taxes withheld)........................ $ 9,985,856 Interest (including securities lending income of $148,237)...................... 882,438 ------------ TOTAL INCOME................................................................ 10,868,294 ------------ EXPENSES: Advisory........................................................................ 3,713,448 Administration.................................................................. 347,175 Custodian....................................................................... 200,713 Distribution.................................................................... 43,892 Other........................................................................... 354,845 ------------ TOTAL EXPENSES.............................................................. 4,660,073 ------------ NET INVESTMENT INCOME....................................................... 6,208,221 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................................... (2,681,583) Futures contracts.............................................................. 575,931 Foreign currency transactions.................................................. 188,730 ------------ Net realized loss............................................................ (1,916,922) ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency............................................... 17,631,875 Forward contracts.............................................................. 1,988,204 Translation of other assets and liabilities denominated in foreign currency.... (61,073) ------------ Change in net unrealized appreciation or depreciation........................ 19,559,006 ------------ Net realized and unrealized gain................................................ 17,642,084 ------------ Net increase in net assets resulting from operations............................ $ 23,850,305 ============
See accompanying notes to financial statements. ================================================================================ 14 GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
Year Year Ended Ended June 30, 1999 June 30, 1998 ------------- ------------- OPERATIONS: Net investment income................................................................ $ 6,208,221 $ 6,539,098 Net realized gain (loss)............................................................. (1,916,922) 12,223,856 Change in net unrealized appreciation or depreciation................................ 19,559,006 6,875,111 ------------- ------------- Net increase in net assets resulting from operations................................. 23,850,305 25,638,065 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class I..................................................................... (4,564,403) (6,380,973) Brinson Class N..................................................................... (121) (58) UBS Investment Funds Class.......................................................... (23,356) (51,271) Distributions from net realized gain: Brinson Class I..................................................................... (4,498,729) (25,288,399) Brinson Class N..................................................................... (126) (59) UBS Investment Funds Class.......................................................... (52,439) (521,640) ------------- ------------- Total distributions to shareholders.................................................. (9,139,174) (32,242,400) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Shares sold.......................................................................... 842,598,303 317,039,181 Shares issued in connection with acquisition of UBS International Equity Fund........ 21,515,034 -- Shares issued on reinvestment of distributions....................................... 8,583,385 31,189,854 Shares redeemed...................................................................... (834,980,130) (325,627,875) ------------- ------------- Net increase in net assets resulting from capital share transactions................. 37,716,592 22,601,160 ------------- ------------- TOTAL INCREASE IN NET ASSETS..................................................... 52,427,723 15,996,825 ------------- ------------- NET ASSETS: Beginning of year.................................................................... 444,649,148 428,652,323 ------------- ------------- End of year (including accumulated undistributed net investment income of $2,738,174 and $1,437,308, respectively)............................................ $ 497,076,871 $ 444,649,148 ============= =============
See accompany notes to financial statements ================================================================================ 15 Global (Ex-U.S.) Equity Fund -- Financial Highlights - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
Year Ended June 30, July 31, 1995* ------------------------------------------------- Through UBS Investment Funds Class 1999 1998 1997 June 30, 1996 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period..................... $ 12.05 $ 12.49 $ 11.12 $ 10.26 ------------- ------------ ------------ ------------- Income from investment operations: Net investment income................................. 0.05 0.08 0.11 0.12 Net realized and unrealized gain...................... 0.27 0.30 1.93 1.45 ------------- ------------ ------------ ------------- Total income from investment operations............ 0.32 0.38 2.04 1.57 ------------- ------------ ------------ ------------- Less distributions: Distributions from investment income.................. (0.05) (0.08) (0.11) (0.15) Distributions from net realized gain.................. (0.12) (0.74) (0.56) (0.56) ------------- ------------ ------------ ------------- Total distributions................................ (0.17) (0.82) (0.67) (0.71) ------------- ------------ ------------ ------------- Net asset value, end of period........................... $ 12.20 $ 12.05 $ 12.49 $ 11.12 ============= ============ ============ ============= Total return (non-annualized)............................ 2.78% 3.90% 19.32% 15.78% Ratios/Supplemental data: Net assets, end of period (in 000s)..................... $ 6,739 $ 5,310 $ 7,797 $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement.......................... 1.83% 1.84% 1.81% 2.04%** After expense reimbursement........................... N/A N/A N/A 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement.......................... 0.51% 0.68% 1.02% 0.83%** After expense reimbursement........................... N/A N/A N/A 1.03%** Portfolio turnover rate................................. 74% 49% 25% 20% * Commencement of UBS Investment Funds Class ** Annualized N/A = Not Applicable
See accompanying notes to financial statements. ================================================================================ 16 GLOBAL (EX-U.S.) EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class (formerly, 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 financial highlights of the Brinson Class I and the Brinson Class N are presented separately. On December 19, 1998, the Global (Ex-U.S.) Equity Fund (the "Fund") acquired all the net assets of the UBS International Equity Fund pursuant to a plan of reorganization approved by shareholders on December 11, 1998. The acquisition was accomplished by a tax-free exchange of 1,827,955 Brinson Class I shares of the Global (Ex-U.S.) Equity Fund for the shares of UBS International Equity Fund outstanding on December 18, 1998. The net assets of the UBS International Equity Fund, including $38,003 of net unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Global (Ex-U.S.) Equity Fund and the UBS International Equity Fund immediately before the merger were $463,315,718 and $21,515,034, respectively. The following is a summary of significant accounting policies consistently followed by the Global (Ex-U.S.) Equity Fund in the preparation of its financial statements. A. INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statement of operations. C. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1999, therefore, no federal income tax provision was required. F. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing tax treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. ================================================================================ 17 GLOBAL (EX-U.S.) EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- G. INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor the UBS Investment Funds Class. H. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00%, 1.25% and 1.84% of the average daily net assets of the Brinson Class I, Brinson Class N and UBS Investment Funds Class, respectively. Investment advisory fees for the year ended June 30, 1999, were as follows: Advisory Advisory Fee Fees ---------- ---------- Global (Ex-U.S.) Equity Fund........................ 0.80% $3,713,448 Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 1999 were $6,792. The Fund invests in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary Trust is offered as a cash management option to mutual funds and other accounts managed by the Advisor. The Supplementary Trust charges no management fees. Distributions received from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments at June 30, 1999 and for the year then ended, were as follows:
% of Sales Interest Net Purchases Proceeds Income Value Assets ------------ ------------ ---------- ---------- ---------- Global (Ex-U.S.) Equity Fund......... $424,308,794 $420,007,958 $331,042 $4,300,836 0.87%
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1999, excluding short-term investments, were as follows: Proceeds Purchases From Sales ------------ ------------ Global (Ex-U.S.) Equity Fund................... $358,514,001 $333,571,232 4. FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at and for the year ended June 30, 1999, was the Fund's custodian or an affiliate of the Fund's custodian. 5. FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such ================================================================================ 18 Global (Ex-U.S.) Equity Fund--Notes To Finacial Statements - ------------------------------------------------------------------------------- contracts to hedge a portion of its portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6. SECURITY LENDING The Fund loaned securities to certain brokers with the Fund's custodian acting as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are included in interest income in the statement of operations. The Fund receives securities, which are not reflected in the statement of assets and liabilities, as collateral against the loaned securities. The Fund monitors the market value of securities loaned on a daily basis and initially requires collateral against the loaned securities in an amount at least equal to 105% of the value of non- U.S. securities loaned. The value of loaned securities and related collateral at June 30, 1999 was $19,889,426 and $21,802,826, respectively. 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the daily net assets of the Brinson Class N. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, shall not exceed 0.84% of the average daily net assets of the UBS Investment Funds Class. 8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364 day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is based on the Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08% per year of the average daily unutilized balance of the line of credit. During the year ended June 30, 1999, the Global (Ex-U.S.) Equity Fund had borrowings of $1,300,000 and $3,600,000 outstanding for 1 day each under the agreement. 9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
Year Ended Year Ended June 30, 1999 June 30, 1998 ------------------------ ---------------------- Shares Value Shares Value --------- ------------ --------- ------------ Sales: Brinson Class I*........................................... 72,650,740 $857,199,838 26,268,807 $312,436,986 Brinson Class N............................................ 365 4,263 798 9,817 UBS Investment Funds Class................................. 587,229 6,909,236 387,174 4,592,378 ---------- ------------ ---------- ------------ Total Sales............................................. 73,238,334 $864,113,337 26,656,779 $317,039,181 ========== ============ ========== ============ Dividend Reinvestment: Brinson Class I............................................ 726,832 $ 8,514,975 2,849,536 $ 30,664,100 Brinson Class N............................................ 21 247 10 117 UBS Investment Funds Class................................. 5,917 68,163 49,433 525,637 ---------- ------------ ---------- ------------ Total Dividend Reinvestment............................. 732,770 $ 8,583,385 2,898,979 $ 31,189,854 ========== ============ ========== ============ Redemptions: Brinson Class I............................................ 69,803,887 $829,422,705 26,391,131 $318,236,785 Brinson Class N............................................ 41 487 -- -- UBS Investment Funds Class................................. 481,376 5,556,938 620,542 7,391,090 ---------- ------------ ---------- ------------ Total Redemptions....................................... 70,285,304 $834,980,130 27,011,673 $325,627,875 ========== ============ ========== ============
* Includes shares issued in connection with acquisition of UBS International Equity Fund. ================================================================================ 19 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds--Global (Ex-U.S.) Equity We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Brinson Funds--Global (Ex-U.S.) Equity Fund (formerly Non-U.S. Equity Fund) as of June 30, 1999, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Global (Ex-U.S.) Equity Fund at June 30, 1999, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. /s/ Ernest & Young LLP Chicago, Illinois August 11, 1999 ================================================================================ 20 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. ================================================================================ [UBS LOGO APPEARS HERE] -----END PRIVACY-ENHANCED MESSAGE-----