<PAGE>
----------------------------
THE BRINSON FUNDS
BRINSON GLOBAL FUND
BRINSON GLOBAL EQUITY FUND
BRINSON GLOBAL BOND FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
LOGO
GLOBAL INSTITUTIONAL ASSET MANAGEMENT
----------------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
LOGO
TRUSTEES
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
OFFICERS
Frank K. Reilly, CFA Carolyn M. Burke, CPA
Chairman of the Board Assistant Secretary
E. Thomas McFarlan Catherine E. Macrae
President and Treasurer Assistant Secretary
Thomas J. Digenan, CFA, CPA Debra L. Nichols
Assistant Treasurer Assistant Secretary
Bruce G. Leto
Secretary
------------------------------------------------------------
1
<PAGE>
THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
LOGO
In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their
institutional investment management organizations into a single investment
management business operating as Brinson Partners, Inc. in North America and
SBC Brinson in its other world-wide locations. We are a global investment
management organization with over $72 billion in institutional assets under
discretionary active management. We are also the investment advisor for SBC
Private Banking mutual fund assets which total $47 billion. The firm manages
investment portfolios for corporations, public funds, endowments, foundations,
central banks and other institutional investors located throughout the world.
Our organization employs over 590 people in offices in Chicago, Basel,
Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo
and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients and has offered fully integrated global portfolios since then.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is tailored to
specific client objectives and focused upon both risk and return considerations
in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally
developed valuation systems and seasoned judgment. Our independent team
approach allows for rapid responses to market changes, while providing each
client with the benefit of our best talent and the flexibility to customize
portfolios to meet unique requirements.
------------------------------------------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LOGO
Shareholder Letter............................................................ 4
Global Economic and Market Highlights......................................... 5
Global Fund................................................................... 6
Schedule of Investments.....................................................10
Financial Statements........................................................18
Financial Highlights........................................................21
Global Equity Fund............................................................23
Schedule of Investments.....................................................27
Financial Statements........................................................33
Financial Highlights........................................................36
Global Bond Fund..............................................................38
Schedule of Investments.....................................................41
Financial Statements........................................................44
Financial Highlights........................................................47
The Brinson Funds--Notes to Financial Statements..............................49
-------------------------------------------------------------
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
LOGO
February 19, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the December 31, 1996 Semi-Annual Report for the Global Fund, Global
Equity Fund and Global Bond Fund. This Report presents our current global
economic and market outlook, as well as the Funds' recent investment strategies
and performance. To summarize this information:
Global Fund
For the period from August 31, 1992 (performance inception date) to December
31, 1996, the Fund provided an annualized total return of 11.37%. The Fund
returned 9.11% in the second half of 1996.
The strategy of underweighting the overpriced equity markets in favor of the
attractive bond markets remains in place. A portion of foreign currency
exposure is hedged into U.S. dollars.
Global Equity Fund
For the period from January 31, 1994 (performance inception date) to December
31, 1996, the Fund provided an annualized total return of 11.33%. The Fund
returned 7.67% in the second half of 1996.
Reflecting only modestly attractive equity markets, the Fund maintains its 15%
cash hedge. Primary underweights include the U.S. market, in light of its
overvaluation and increasing volatility. A portion of foreign currency exposure
is hedged into U.S. dollars.
Global Bond Fund
For the period from July 31, 1993 (performance inception date) to December 31,
1996, the Fund provided an annualized total return of 8.41%. The Fund returned
7.03% in the second half of 1996.
Bond markets are generally attractive. Yields in Japan are unsustainably low,
making that market very unattractive. It remains the largest underweight in the
portfolio. A portion of foreign currency exposure is hedged into U.S. dollars.
We look forward to the challenges ahead and, as always, welcome your comments
and suggestions.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson, CFA
President and Chief Investment Officer
Brinson Partners, Inc.
------------------------------------------------------------
4
<PAGE>
GLOBAL ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
LOGO
A weaker yen is helping Japan recover from its recent recession. Prices at the
consumer level appear to have stopped falling, and the economy has started
showing real growth, although the expansion has been neither strong nor
consistent. The weaker yen and incipient recovery may, however, reduce the
pressure to address structural reform. The lack of unequivocal public support
for reformist candidates in the most recent election also may delay
deregulation.
In pursuit of monetary union, the core European countries are trying to meet
the Maastricht criteria. This has produced restrictive fiscal policies at a
time of weak economic growth, thus exacerbating structural weaknesses in labor
markets. The peripheral European economies have benefited from the drive to
EMU, as bond yields and borrowing costs have dropped considerably. The U.S.
economy remains among the most productive of the developed countries, due in
large part to its flexible labor market.
Increases in oil prices to the $25 per barrel range have not flowed through to
higher consumer price inflation. Central banks have been acting more
responsibly since the last major bout of inflation around 1980. Increases in
the relative prices of inputs are no longer being accommodated and turned into
general price increases.
GLOBAL ENVIRONMENT
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
MAJOR MARKETS ended ended ended 08/31/92*
Total Return in U.S. Dollars 12/31/96 12/31/96 12/31/96 to 12/31/96
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Equity 9.92% 21.21% 18.24% 17.31%
Non-U.S. Equities (currency unhedged) 2.19 7.11 8.76 11.51
Non-U.S. Equities (currency hedged) 4.25 14.64 8.16 12.48
U.S. Bonds 4.94 3.63 6.07 6.82
Non-U.S. Bonds (currency unhedged) 5.45 4.10 9.67 8.64
Non-U.S. Bonds (currency hedged) 7.98 11.82 8.18 9.79
U.S. Cash Equivalents 2.56 5.16 4.87 4.26
- -----------------------------------------------------------------------------
<CAPTION>
MAJOR CURRENCIES 6 months 1 year 3 years Annualized
Percent Change Relative to U.S. ended ended ended 8/31/92*
Dollars 12/31/96 12/31/96 12/31/96 to 12/31/96
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yen -5.50% -11.13% -1.30% 1.39%
Pound 10.14 10.22 4.97 -3.33
Deutschemark -1.23 -7.12 4.06 -2.08
Canadian Dollar -0.36 -0.50 -1.15 -3.09
- -----------------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson Global Fund
------------------------------------------------------------
5
<PAGE>
GLOBAL FUND
- -------------------------------------------------------------------------------
LOGO
The Global Fund is diversified across the equity and fixed income markets of
the U.S. and a broad range of other countries. This Fund is actively managed
within an asset allocation framework, involving value-based market, currency
and individual security selection. Our senior asset allocation, equity and
fixed income professionals form the investment team for this portfolio,
supported by a globally integrated market analysis system. Security selection
within each market is based on the fundamental research of our analytical
teams in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore,
Sydney and Tokyo.
The Brinson Global Fund has provided an annualized return of 11.37% since its
inception on August 31, 1992. This compares with the corresponding 12.86%
return of its benchmark, the GSMI Mutual Fund Index. Fund performance over
this period was achieved with an annualized volatility of 4.70%, well below
the benchmark volatility of 6.03%. For the year ended December 31, 1996, the
Fund returned 14.10%, while the benchmark returned 12.53%. For the second half
of 1996, the Brinson Global Fund returned 9.11% compared to the 6.60% return
of the benchmark. Positive contributors to relative performance were security
selection, particularly in the U.S. and in the Japanese equity market, an
overweight in emerging markets debt, and the currency risk hedging. The
primary negative contributor was the underweight in most equity markets and
the overweight in bonds.
Apart from emerging markets debt, which provided a return in 1996 of
approximately 40%, bond markets turned in poor performance relative to
equities. The U.S. bond market lagged markets elsewhere, with a total return
that failed to exceed cash returns. Bond yields in the U.S. rose substantially
in the first half of the year on stronger than anticipated economic news. In
other developed markets, bond returns were generally quite good. The
peripheral European bond markets performed well, as spreads over German yields
declined substantially due to the market's anticipation of a single currency
in the coming years.
The U.S. equity market return of better than 20% was outdone by many of the
European markets which were driven by a combination of lower interest rates
and the anticipation of a profits recovery. The Japanese equity market stood
in stark contrast with a local currency loss of almost 5% for the year. This
was due in part to the failure of government spending programs and loose
monetary policy to produce sustained economic growth.
While the emerging debt markets were producing spectacular gains, emerging
equities were much more subdued with an aggregate dollar return of under 10%.
Returns in the high yield bond market, at over 12%, not surprisingly fell
between equity and bond returns.
Currency risk hedges were beneficial during the year, as the overpriced yen
and deutschemark-bloc currencies depreciated against the U.S. dollar. The risk
hedges also benefitted from interest rates in the U.S. exceeding rates in the
overpriced currencies.
Asset allocation strategy continues to underweight equity markets, as prices
remain in excess of fundamental value. Bond markets, apart from Japan, remain
overweight as they provide the most attractive relative value. Emerging
markets debt is also overweight, with small underweights in emerging equity
and high yield bonds. Currency strategy remains focused on controlling the
risks in overpriced core European currencies, and to a lesser extent the yen.
------------------------------------------------------------
6
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
ended ended ended 8/31/92* to
12/31/96 12/31/96 12/31/96 12/31/96
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BRINSON GLOBAL FUND 9.11% 14.10% 11.58% 11.37%
GSMI Mutual Fund Index (currency
unhedged)** 6.60 12.53 12.70 12.86
GSMI Mutual Fund Index (currency
hedged)** 7.29 14.94 12.60 13.18
- -------------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson Global Fund.
**An un-managed index compiled by the Advisor, constructed as follows: 40%
Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG
Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government
Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High
Yield Bond Index.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000
This chart shows the growth in the value of an investment in the Brinson Global
Fund and the GSMI Mutual Fund Index (currency unhedged and hedged) if you had
invested $100,000 on August 31, 1992, and had reinvested all your income
dividends and capital gain distributions through December 31, 1996. No
adjustment has been made for any income taxes payable by shareholders on income
dividends and capital gain distributions. Past performance is no guarantee of
future results. Share price and return will vary with market conditions;
investors may realize a gain or loss upon redemption.
BRINSON GLOBAL FUND
VS. GSMI MUTUAL FUND INDEX (CURRENCY UNHEDGED AND HEDGED)
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GSMI Mutual GSMI Mutual
Brinson Fund Index Fund Index
Global Fund (currency unhedged) (currency hedged)
----------- ------------------- -----------------
<S> <C> <C> <C>
08/31/92 $100,000 $100,000 $100,000
12/31/92 $103,293 $103,082 $105,615
06/30/93 $110,757 $111,937 $112,864
12/31/93 $114,805 $117,988 $119,787
06/30/94 $111,614 $116,488 $115,598
12/31/94 $112,637 $119,668 $118,694
06/30/95 $125,642 $136,475 $132,328
12/31/95 $139,824 $150,088 $148,772
06/30/96 $146,227 $158,424 $159,374
12/31/96 $159,542 $168,888 $170,992
</TABLE>
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
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
LOGO
ASSET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. EQUITY 40.0% 25.0%
Large Cap. Stocks 28.0 17.5
Small/Int. Cap. 12.0 7.5
NON-U.S. EQUITIES 22.0 17.0
Japan Equities 6.8 3.8
Other Equities 15.2 13.2
EMERGING MARKETS EQUITIES 3.0 2.0
DOLLAR BONDS 21.0 28.5
U.S. Bonds 19.0 26.5
International $ Bonds 2.0 2.0
HIGH YIELD BONDS 3.0 2.5
NON-U.S. BONDS 9.0 22.0
Japan Bonds 2.5 0.0
Other Bonds 6.5 22.0
EMERGING MARKETS DEBT 2.0 3.0
CASH EQUIVALENTS 0.0 0.0
- ---------------------------------------------------------------------------------------------
100.0% 100.0%
</TABLE>
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ------------------------------------------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 1.32%
2. Xerox Corp. 1.03
3. Lockheed Martin Corp. 1.02
4. Burlington Northern Santa Fe 1.01
5. Corning, Inc. 0.96
6. Citicorp 0.92
7. Philip Morris Companies, Inc. 0.91
8. Aon Corp. 0.85
9. Goodyear Tire & Rubber Co. 0.78
10. Enron Corp. 0.71
- ------------------------------------------------------------------------------
</TABLE>
CURRENCY ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------
<S> <C> <C>
U.S. 66.0% 86.5%
Japan 9.3 0.0
U.K. 4.8 4.8
Continental Europe 12.9 3.2
Canada 1.4 1.4
Emerging Markets 3.0 2.0
Other 2.6 2.1
- --------------------------------------
100.0% 100.0%
</TABLE>
TOP TEN NON-U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ------------------------------------------------------------------------------
<S> <C>
1. British Telecommunications PLC 0.22%
2. General Electric Co. PLC 0.22
3. Royal Dutch Petroleum Co. 0.21
4. Lloyds TSB Group PLC 0.21
5. Broken Hill Proprietary Co. Ltd. 0.21
6. Telecom Corp. of New Zealand Ltd. 0.20
7. Royal Dutch Petroleum Co. NY Shares 0.19
8. British Petroleum Co. PLC 0.19
9. Matsushita Electric Industrial Co. 0.18
10. Toray Industries, Inc. 0.17
- ------------------------------------------------------------------------------
</TABLE>
------------------------------------------------------------
8
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals............................................................... 0.18%
Housing/Paper........................................................... 1.12
Metals.................................................................. 0.14
-----
1.44
Capital Investment
Capital Goods........................................................... 2.48
Technology.............................................................. 1.60
-----
4.08
Consumer
Autos/Durables.......................................................... 0.07
Discretionary........................................................... 1.80
Health: Drugs........................................................... 2.23
Health: Non-Drugs....................................................... 1.10
Non-Durables............................................................ 3.10
Retail/Apparel.......................................................... 1.14
-----
9.44
Energy................................................................... 1.37
Financial
Banks................................................................... 2.78
Non-Banks............................................................... 2.54
-----
5.32
Post Venture............................................................. 1.26
Services................................................................. 1.76
Transportation........................................................... 1.71
Utilities................................................................ 0.85
Miscellaneous............................................................ 0.75
-----
Total U.S. Equities................................................... 27.98*
-----
NON-U.S. EQUITIES
Airlines................................................................. 0.04
Appliances & Household Durables.......................................... 0.36
Automobiles.............................................................. 0.51
Banking.................................................................. 2.04
Beverages & Tobacco...................................................... 0.42
Broadcasting & Publishing................................................ 0.28
Building Materials....................................................... 0.32
Business & Public Service................................................ 0.56
Chemicals................................................................ 0.72
Construction............................................................. 0.31
Data Processing.......................................................... 0.17
Electric Components...................................................... 0.21
Electronics.............................................................. 0.76
Energy................................................................... 1.54
Financial Services....................................................... 0.27
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Food & House Products................................................... 0.88%
Forest Products......................................................... 0.32
Gold Mining............................................................. 0.02
Health & Personal Care.................................................. 0.71
Industrial Components................................................... 0.36
Insurance............................................................... 0.77
Leisure & Tourism....................................................... 0.11
Machinery & Engineering................................................. 0.25
Merchandising........................................................... 0.73
Metals--Steel........................................................... 0.36
Miscellaneous Materials................................................. 0.12
Multi-Industry.......................................................... 0.80
Non-Ferrous Metals...................................................... 0.40
Real Estate............................................................. 0.14
Recreation.............................................................. 0.08
Shipping................................................................ 0.16
Telecommunications...................................................... 0.95
Textiles and Apparel.................................................... 0.05
Transportation.......................................................... 0.15
Utilities............................................................... 1.10
------
Total Non-U.S. Equities.............................................. 16.97*
------
EMERGING MARKETS EQUITIES............................................... 1.90
------
U.S. BONDS
Corporate Bonds
Asset-Backed........................................................... 1.18
CMO.................................................................... 0.10
Consumer............................................................... 0.82
Energy................................................................. 0.14
Financial.............................................................. 1.10
Industrial............................................................. 0.68
Telecommunications..................................................... 0.37
------
4.39
U.S. Government Agencies................................................ 7.73
U.S. Government Obligations............................................. 5.50
International Dollar Bonds.............................................. 3.64
------
Total U.S. Bonds..................................................... 21.26*
------
HIGH YIELD BONDS........................................................ 2.57
------
NON-U.S. BONDS
Foreign Government Bonds................................................ 21.73
------
EMERGING MARKETS DEBT................................................... 3.69
------
SHORT-TERM INVESTMENTS.................................................. 7.41*
------
TOTAL INVESTMENTS.................................................... 103.51
LIABILITIES, LESS CASH AND OTHER ASSETS................................. (3.51)
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
* The Fund held a long position in Topix futures on
December 31, 1996 which increased Japanese equity
exposure from 3.85% to 4.24%. The Fund held a long
position in U.S. Treasury futures which increased U.S.
bond exposure from 21.26% to 25.86%. The Fund also held a
short position in stock index futures which reduced U.S.
equity exposure from 27.98% to 24.55%. These three
adjustments result in a net decrease in the Fund's
exposure to Short-Term Investments from 7.41% to 5.85%.
------------------------------------------------------------
9
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------- ------------
<S> <C> <C>
Equities -- 46.85%
U.S. EQUITIES -- 27.98%
Aetna Life & Casualty Co............................. 32,200 $ 2,576,000
Allergan, Inc........................................ 53,700 1,913,062
Allstate Corp........................................ 29,600 1,713,100
Alza Corp. (b)....................................... 52,400 1,355,850
Aon Corp............................................. 70,200 4,361,175
Automatic Data Processing, Inc....................... 51,200 2,195,200
Avon Products, Inc................................... 38,100 2,176,463
Bard (C.R.), Inc..................................... 32,500 910,000
Beckman Instruments, Inc............................. 21,000 805,875
Birmingham Steel Corp................................ 21,000 399,000
Boston Technology, Inc. (b).......................... 20,900 600,875
Brinker International, Inc. (b)...................... 21,200 339,200
Brinson Post-Venture Fund (b)........................ 423,765 6,462,793
Burlington Northern Santa Fe......................... 59,900 5,173,862
Centerior Energy Co.................................. 44,100 474,075
Chase Manhattan Corp................................. 75,700 6,756,225
Choice Hotels International, Inc. (b)................ 34,250 603,656
CIGNA Corp........................................... 26,000 3,552,250
Circuit City Stores, Inc............................. 9,300 280,163
Citicorp............................................. 45,800 4,717,400
CMS Energy Corp...................................... 57,300 1,926,712
Coca-Cola Enterprises, Inc........................... 28,000 1,358,000
Comerica, Inc........................................ 14,400 754,200
Comverse Technology, Inc. (b)........................ 9,700 366,781
Corning, Inc......................................... 105,600 4,884,000
CPC International, Inc............................... 12,900 999,750
CVS Corp............................................. 41,500 1,717,063
Dial Corp............................................ 51,500 759,625
EMC Corp./Mass. (b).................................. 75,700 2,507,562
Enron Corp........................................... 83,700 3,609,563
Federal Express Corp. (b)............................ 77,900 3,466,550
Federated Department Stores (b)...................... 30,600 1,044,225
FileNet Corp. (b).................................... 12,500 400,000
First American Corp.-Tenn............................ 3,900 224,737
First Data Corp...................................... 44,678 1,630,747
First of America Bank Corp........................... 6,700 402,838
Footstar, Inc. (b)................................... 11,884 295,614
Ford Motor Co........................................ 30,800 981,750
Forest Laboratories, Inc. (b)........................ 35,600 1,165,900
Gannett Co., Inc..................................... 35,000 2,620,625
General Instrument Corp. (b)......................... 104,000 2,249,000
Genzyme Corp. (b).................................... 21,100 458,925
Geon Co.............................................. 7,700 151,113
Goodyear Tire & Rubber Co............................ 77,400 3,976,425
Harnischfeger Industries, Inc........................ 23,100 1,111,687
Health Care and Retirement Corp. (b)................. 38,700 1,107,788
Interpublic Group of Companies, Inc.................. 26,100 1,239,750
James River Corp. of Virginia........................ 30,100 997,062
Kimberly-Clark Corp.................................. 25,200 2,400,300
Kroger Co. (b)....................................... 22,100 1,027,650
Lockheed Martin Corp................................. 57,196 5,233,434
Lyondell Petrochemical Co............................ 57,300 1,260,600
Manor Care, Inc...................................... 34,250 924,750
Martin Marietta Materials, Inc....................... 15,338 356,609
Masco Corp........................................... 34,700 1,249,200
Mattel, Inc.......................................... 125,275 $ 3,476,381
Nabisco Holdings Corp. Class A....................... 38,000 1,477,250
National Semiconductor Corp. (b)..................... 21,200 516,750
Nextel Communications, Inc. Class A (b).............. 52,700 688,394
Old Republic International Corp...................... 26,150 699,512
Peco Energy Co....................................... 33,100 835,775
Pentair, Inc......................................... 27,700 893,325
Pharmacia & Upjohn, Inc.............................. 66,700 2,642,988
Philip Morris Companies, Inc......................... 41,300 4,651,413
Rhone-Poulenc Rorer, Inc............................. 17,800 1,390,625
RJR Nabisco Convertible Preferred "C"................ 170,600 1,151,550
Schering Plough Corp................................. 46,000 2,978,500
Seagate Technology, Inc. (b)......................... 14,400 568,800
Timken Co............................................ 22,000 1,009,250
Tyson Foods, Inc. Class A............................ 62,800 2,150,900
Ultramar Diamond Shamrock Corp....................... 59,554 1,883,395
US Bancorp........................................... 31,900 1,433,506
USF&G Corp........................................... 24,400 509,350
Vencor, Inc. (b)..................................... 27,400 866,525
Viad Corp............................................ 51,500 849,750
Westvaco Corp........................................ 12,550 360,813
Whitman Corp......................................... 2,400 54,900
WMX Technologies, Inc................................ 83,700 2,730,713
Xerox Corp........................................... 99,800 5,251,975
York International Corp.............................. 21,500 1,201,313
360 Communications Co. (b)........................... 18,266 422,401
------------
Total U.S. Equities.................................. 142,922,813
------------
NON-U.S. EQUITIES -- 16.97%
AUSTRALIA -- 0.91%
Amcor Ltd............................................ 34,400 221,045
Boral Ltd............................................ 46,100 131,087
Broken Hill Proprietary Co. Ltd...................... 73,780 1,050,149
CRA Ltd.............................................. 25,645 402,294
David Jones Ltd...................................... 115,100 159,988
Lend Lease Corp. Ltd................................. 8,056 156,129
M.I.M. Holdings Ltd.................................. 98,726 138,013
National Australia Bank Ltd.......................... 42,947 504,858
News Corp. Ltd....................................... 89,190 470,390
News Corp. Ltd. Preferred............................ 22,000 97,855
Pacific Dunlop Ltd................................... 59,600 151,485
Qantas Airways Ltd................................... 68,828 114,805
Santos Ltd........................................... 49,800 201,732
WMC Ltd.............................................. 39,100 246,277
Westpac Bank Corp. Ltd............................... 81,138 461,436
Woolworth's Ltd...................................... 60,000 144,400
------------
4,651,943
------------
BELGIUM -- 0.56%
Delhaize-Le Lion S.A................................. 2,900 172,095
Electrabel S.A....................................... 2,260 534,326
Fortis AG............................................ 2,099 336,348
Fortis AG Strip (b).................................. 42 21
Generale de Banque S.A............................... 300 107,431
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------- ------------
<S> <C> <C>
BELGIUM -- (CONTINUED)
Groupe Bruxelles Lambert S.A......................... 1,150 $ 147,893
Kredietbank NV....................................... 950 311,039
Petrofina S.A........................................ 1,195 379,968
Societe Generale de Belgique......................... 2,053 160,934
Solvay S.A. Class A.................................. 390 238,497
Tractebel............................................ 605 8,761
Tractebel Warrants "99" (b).......................... 605 281,411
Union Miniere Group S.A. (b)......................... 2,545 172,260
------------
2,850,984
------------
CANADA -- 0.52%
Alcan Aluminium Ltd.................................. 6,100 205,841
Bank of Montreal..................................... 1,200 38,173
Barrick Gold Corp.................................... 4,400 126,003
BCE, Inc............................................. 2,900 138,166
Canadian National Railway Co......................... 4,200 159,653
Canadian Pacific Ltd................................. 13,900 365,603
Hudson's Bay Co...................................... 4,100 68,503
Imperial Oil Ltd..................................... 5,000 235,298
Moore Corp. Ltd...................................... 3,900 80,811
Noranda, Inc......................................... 6,300 140,424
Northern Telecom Ltd................................. 2,400 149,190
NOVA Corp............................................ 10,400 92,193
Royal Bank of Canada................................. 6,200 217,584
Seagram Co. Ltd...................................... 5,300 209,780
Thomson Corp......................................... 13,600 300,160
TransCanada Pipelines Ltd............................ 8,300 145,338
------------
2,672,720
------------
FINLAND -- 0.26%
Merita Ltd. Class A (b).............................. 44,200 137,136
Nokia Ab Class A..................................... 12,100 700,429
Outokumpu OY Class A................................. 6,900 117,520
Pohjola Insurance Group Class B...................... 2,900 65,123
Sampo Insurance Co. Ltd. Class A..................... 1,000 78,759
UPM-Kymmene Corp. (b)................................ 11,900 249,154
------------
1,348,121
------------
FRANCE -- 1.81%
Accor S.A............................................ 2,392 302,296
Alcatel Alsthom...................................... 3,182 255,113
AXA S.A.............................................. 1,500 95,216
Banque Nationale de Paris............................ 12,230 472,384
CEP Communications................................... 984 69,370
CEP Communications Warrants "97" (b)................. 1,984 2,271
Cie Bancaire S.A..................................... 2,811 331,997
Cie de Saint Gobain.................................. 4,150 585,935
Cie de Suez.......................................... 5,445 231,051
Cie Generale des Eaux................................ 6,124 757,446
Colas................................................ 854 123,204
Credit Local de France............................... 5,359 465,937
Elf Aquitaine S.A.................................... 6,034 548,187
Groupe Danone........................................ 800 111,259
L'Oreal S.A.......................................... 100 37,586
Lafarge S.A.......................................... 2,600 $ 155,689
LVMH................................................. 2,649 738,339
Michelin Class B..................................... 7,020 378,229
Pechiney S.A. Class A................................ 5,684 237,694
Peugeot S.A.......................................... 5,970 670,645
Rhone-Poulenc Class A................................ 14,300 486,596
SEITA................................................ 5,500 229,577
Societe Generale..................................... 5,026 542,364
Total S.A. Class B................................... 8,796 714,008
UAP.................................................. 10,820 269,527
Usinor Sacilor....................................... 28,100 408,092
------------
9,220,012
------------
GERMANY -- 1.49%
Allianz AG Holding................................... 338 607,527
BASF AG.............................................. 10,360 396,626
Bayer AG............................................. 14,080 570,564
Bayerische Motoren Werke AG.......................... 520 358,341
Commerzbank AG....................................... 11,060 280,609
Daimler-Benz AG (b).................................. 5,880 402,531
Deutsche Bank AG..................................... 10,601 493,902
Deutsche Telekom AG (b).............................. 18,600 387,425
Henkel KGaA-Vorzug AG................................ 4,550 224,385
Hochtief AG.......................................... 2,500 98,144
Hoechst AG........................................... 4,890 226,239
M.A.N. AG............................................ 790 190,439
Mannesmann AG........................................ 957 411,216
Metro AG............................................. 3,200 250,211
Muenchener Rueckver AG............................... 171 414,434
Muenchener Rueckver AG Warrants "98" (b)............. 2 416
Preussag AG.......................................... 1,192 269,169
RWE AG............................................... 7,600 317,591
Schering AG.......................................... 4,885 411,759
Siemens AG........................................... 3,650 169,154
Thyssen AG........................................... 1,850 327,600
Veba AG.............................................. 8,839 507,593
Volkswagen AG........................................ 750 310,249
------------
7,626,124
------------
HONG KONG -- 0.25%
Cheung Kong Holdings Ltd............................. 15,000 133,324
China Light & Power Co. Ltd.......................... 28,000 124,527
Guoco Group Ltd...................................... 15,000 83,970
Hang Seng Bank Ltd................................... 10,200 123,958
Hong Kong Telecommunications Ltd..................... 43,200 69,534
Hutchison Whampoa Ltd................................ 27,000 212,058
Jardine Matheson Holdings ADR (c).................... 9,600 63,360
New World Development Co. Ltd........................ 17,000 114,837
Sun Hung Kai Properties Ltd.......................... 8,000 97,997
Swire Pacific Ltd. Class A........................... 14,000 133,486
Wharf (Holdings) Ltd................................. 22,000 109,788
------------
1,266,839
------------
</TABLE>
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11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------- ------------
<S> <C> <C>
ITALY -- 0.55%
Assicurazioni Generali............................... 15,080 $ 285,136
Danieli & Co. Savings (Risp)......................... 26,000 108,583
Edison Spa........................................... 17,200 108,596
ENI ADR (c).......................................... 8,000 413,000
ENI Spa.............................................. 24,000 122,881
Fiat Spa-Priv........................................ 103,000 169,691
INA-Istituto Nazionale delle Assicurazioni........... 47,000 61,080
Istituto Mobilaire Italiano Spa...................... 36,200 309,503
Italgas Spa.......................................... 22,300 92,911
La Rinascente........................................ 19,000 109,964
La Rinascente Savings (Risp)......................... 19,200 48,994
La Rinascente Warrants "99" (b)...................... 1,400 616
Mediobanca Spa....................................... 6,000 32,298
Montedison Spa (b)................................... 374,700 254,811
SAI-Savings (Risp)................................... 16,500 58,545
Telecom Italia Spa................................... 183,500 357,224
Telecom Italia Mobile Spa............................ 199,500 284,063
------------
2,817,896
------------
JAPAN -- 3.85%
Amada Co. Ltd........................................ 35,000 271,388
Asahi Glass Co. Ltd.................................. 42,000 394,417
Bank of Tokyo-Mitsubishi Ltd......................... 31,800 589,041
Canon, Inc........................................... 30,000 661,670
Canon Sales Co., Inc................................. 12,100 268,958
Citizen Watch Co. Ltd................................ 32,000 228,827
Dai Nippon Printing Co. Ltd.......................... 32,000 559,662
Daiichi Pharmaceutical Co. Ltd....................... 23,000 368,571
Daikin Industries Ltd................................ 34,000 301,714
Daiwa House Industry Co. Ltd......................... 17,000 218,230
Fanuc................................................ 13,900 444,292
Fujitsu.............................................. 21,000 195,399
Hitachi Ltd.......................................... 68,000 632,722
Honda Motor Co....................................... 9,000 256,655
Inax................................................. 44,000 325,252
Isetan............................................... 12,000 155,079
Ito Yokado Co. Ltd................................... 12,000 521,065
Kaneka Corp.......................................... 17,000 86,853
Keio Teito Electric Railway.......................... 39,000 190,178
Kinki Nippon Railway................................. 39,000 242,931
Kirin Brewery Co. Ltd................................ 37,000 363,402
Kokuyo............................................... 7,000 172,482
Kuraray Co. Ltd...................................... 30,000 276,557
Kyocera Corp......................................... 3,000 186,612
Maeda Road Construction.............................. 8,000 92,358
Matsushita Electric Industrial Co.................... 55,000 895,580
Mitsubishi Paper Mills............................... 43,000 167,821
NGK Insulators....................................... 56,000 530,714
Nintendo Corp. Ltd................................... 2,900 207,125
Nippon Denso Co. Ltd................................. 23,000 552,856
Nippon Meat Packers, Inc............................. 22,000 284,311
Nippon Steel Co...................................... 28,000 82,502
Okumura.............................................. 35,000 212,286
Osaka Gas Co......................................... 141,000 385,087
Sankyo Co. Ltd....................................... 25,000 706,470
Sanwa Bank Ltd....................................... 18,000 245,025
Secom................................................ 8,000 483,157
Seino Transportation................................. 12,000 $ 132,334
Sekisui House Ltd.................................... 66,000 670,975
Shinmaywa Industries Ltd............................. 31,000 227,820
Sony Corp............................................ 10,200 666,994
Sumitomo Bank........................................ 36,000 517,963
Sumitomo Electric Industries......................... 28,000 390,797
Takeda Chemical Industries........................... 26,000 544,327
TDK Corp............................................. 6,000 390,282
Tokio Marine & Fire Insurance Co..................... 31,000 291,118
Tokyo Electric Power................................. 14,900 326,062
Tokyo Steel Mfg...................................... 25,000 355,389
Tonen Corp........................................... 25,000 290,773
Toray Industries, Inc................................ 141,000 868,571
Toshiba Corp......................................... 81,000 508,038
Toyo Suisan Kaisha................................... 19,000 189,886
Toyota Motor Corp.................................... 9,000 258,206
Yamazaki Baking Co. Ltd.............................. 17,000 270,957
------------
19,657,741
------------
MALAYSIA -- 0.24%
Hume Industries (Malaysia) Bhd....................... 17,000 107,028
Kuala Lumpur Kepong Bhd.............................. 39,500 100,099
Land & General Holdings Bhd.......................... 39,000 93,427
Malayan Banking Bhd.................................. 8,000 88,695
Malaysia International Shipping Bhd (Frgn.).......... 34,000 100,970
Nestle (Malaysia) Bhd................................ 4,000 32,152
Public Bank Bhd (Frgn.).............................. 55,000 116,512
Resorts World Bhd.................................... 13,000 59,196
Sime Darby Bhd....................................... 40,000 157,593
Telekom Malaysia Bhd................................. 9,000 80,182
Tenaga Nasional Bhd.................................. 47,000 225,183
YTL Corp. Bhd........................................ 14,000 75,391
------------
1,236,428
------------
NETHERLANDS -- 1.17%
ABN AMRO Holdings NV................................. 7,689 499,649
Akzo Nobel NV........................................ 1,100 150,084
DSM NV............................................... 1,910 188,162
Hoogovens NV......................................... 2,900 120,715
ING Groep NV......................................... 20,723 745,199
KLM Royal Dutch Air Lines NV......................... 4,500 126,438
KPN NV............................................... 13,046 497,041
Philips Electronics NV............................... 6,480 262,242
Royal Dutch Petroleum Co............................. 6,100 1,068,214
Royal Dutch Petroleum Co. NY Shares (c).............. 5,800 990,350
Unilever NV.......................................... 4,550 803,885
Vendex International NV.............................. 7,551 322,610
VNU-Ver Ned Uitgevers................................ 10,600 221,229
------------
5,995,818
------------
NEW ZEALAND -- 0.57%
Brierley Investments Ltd............................. 535,200 495,380
Carter Holt Harvey Ltd............................... 191,400 434,109
Fletcher Challenge Building.......................... 60,525 186,027
</TABLE>
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12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------- ------------
<S> <C> <C>
NEW ZEALAND (CONTINUED)
Fletcher Challenge Energy............................ 60,525 $ 175,335
Fletcher Challenge Forest Ltd........................ 126,333 211,552
Fletcher Challenge Paper............................. 121,050 248,891
Telecom Corp. of New Zealand Ltd..................... 198,000 1,010,076
Telecom Corp. of New Zealand Ltd. ADS (c)............ 2,000 162,000
------------
2,923,370
------------
SPAIN -- 0.70%
Acerinox S.A......................................... 1,000 144,224
Banco Bilbao-Vizcaya S.A............................. 5,000 269,460
Banco Central Hispanoamericano....................... 5,010 128,452
Banco Intercontinental Espanol S.A................... 730 112,973
Banco Popular Espanol S.A............................ 1,190 233,288
Banco Santander S.A.................................. 3,800 242,768
Cia Sevillana de Electricidad........................ 7,106 80,579
Empresa Nacional de Electridad S.A................... 5,900 419,112
Fomento de Construcciones y Contratas S.A............ 1,450 134,884
Gas Natural SDG S.A.................................. 700 162,522
Iberdrola S.A........................................ 37,600 531,878
Mapfre Corp.......................................... 2,300 139,865
Repsol S.A........................................... 4,100 156,971
Repsol S.A. ADR (c).................................. 4,100 156,313
Telefonica de Espana................................. 20,300 470,532
Vallehermosa S.A..................................... 4,000 86,565
Viscofan Envolturas Celulosicas S.A.................. 6,400 93,485
------------
3,563,871
------------
SWITZERLAND -- 0.34%
ABB AG (Bearer)...................................... 80 99,203
CS Holdings AG (Reg.)................................ 1,073 109,881
Nestle S.A. (Reg.)................................... 463 495,517
Novartis AG (Reg.)................................... 378 431,574
Roche Holding AG (Gen.).............................. 36 279,243
Schweiz Bankgesellschaft (Bearer).................... 106 92,603
Societe Generale de Surveillance
Holding S.A. (Bearer)............................... 30 73,509
Zurich Versicherungs (Reg.).......................... 569 157,644
------------
1,739,174
------------
UNITED KINGDOM -- 3.75%
Abbey National PLC................................... 25,000 327,315
Bank of Scotland..................................... 40,000 211,193
Bass PLC............................................. 15,800 222,006
B.A.T. Industries PLC................................ 85,184 706,343
Booker PLC........................................... 19,100 130,591
British Energy PLC................................... 183,000 460,397
British Gas PLC...................................... 175,900 675,844
British Petroleum Co. PLC............................ 79,244 950,033
British Steel PLC.................................... 144,000 395,550
British Telecommunications PLC....................... 167,500 1,130,905
Charter PLC.......................................... 19,292 244,493
Coats Viyella PLC.................................... 103,300 235,135
FKI PLC.............................................. 80,700 278,990
General Electric Co. PLC............................. 169,700 $ 1,109,454
Glaxo Wellcome PLC................................... 25,000 405,614
Grand Metropolitan PLC............................... 110,200 865,682
Guinness PLC......................................... 84,900 664,757
Hanson PLC........................................... 180,900 252,325
Hillsdown Holdings PLC............................... 125,200 428,547
House of Fraser PLC.................................. 136,800 359,384
HSBC Holdings PLC.................................... 28,500 637,019
Imperial Chemicals Industries PLC.................... 9,000 118,372
Legal & General Group PLC............................ 60,750 386,770
Lloyds TSB Group PLC................................. 144,779 1,066,701
Marks & Spencer PLC.................................. 72,000 605,032
Millennium Chemicals, Inc. (b)....................... 1,327 23,554
Mirror Group PLC..................................... 57,800 213,176
National Power PLC................................... 37,900 317,185
National Westminster Bank PLC........................ 24,800 290,953
Northern Foods PLC................................... 76,000 265,993
Peninsular & Oriental Steam
Navigation Co....................................... 69,600 702,790
Reckitt & Colman PLC................................. 12,658 156,844
Redland PLC.......................................... 23,200 145,521
RJB Mining PLC....................................... 47,300 348,092
Royal & Sun Alliance Insurance Group PLC............. 40,199 305,810
RTZ Corp. PLC........................................ 26,100 418,324
Sainsbury (J.) PLC................................... 56,000 371,864
Scottish Hydro-Electric PLC.......................... 44,900 252,049
Sears PLC............................................ 160,700 261,278
Sedgwick Group PLC................................... 111,400 250,712
SmithKline Beecham PLC............................... 33,400 462,730
Smurfit (Jefferson) Group PLC........................ 57,000 169,254
Tesco PLC............................................ 44,800 271,806
Thames Water PLC..................................... 33,000 345,926
Unilever PLC......................................... 15,400 373,337
Vodafone Group PLC................................... 45,600 192,373
Yorkshire Water PLC.................................. 13,000 157,633
------------
19,165,656
------------
Total Non-U.S. Equities.............................. 86,736,697
------------
EMERGING MARKETS EQUITIES -- 1.90%
Brinson Emerging Markets Equity Fund (b)............. 952,086 9,698,142
------------
Total Equities (Cost $200,781,462)................... 239,357,652
------------
<CAPTION>
FACE AMOUNT VALUE
-------------- ------------
<S> <C> <C>
Bonds -- 49.25%
U.S. BONDS -- 21.26%
U.S. CORPORATE BONDS -- 4.39%
BellSouth Corp. 9.125%, due 07/01/03............... $ 199,759 $ 211,177
Capital One Bank 6.830%, due 05/17/99.............. 2,000,000 2,009,232
</TABLE>
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13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------------- ------------
<S> <C> <C>
U.S. CORPORATE BONDS (CONTINUED)
Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due
03/15/02.......................................... $ 1,265,000 $ 1,258,675
Chase Manhattan Credit Card Trust 96-4A 6.730%, due
02/15/03.......................................... 1,050,000 1,064,543
Chemical Master Credit Card Trust 95-2A 6.230%, due
06/15/03.......................................... 1,430,000 1,426,311
Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,014,050
Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,784
Coca-Cola Enterprises 6.700%, due 10/15/36......... 2,000,000 2,017,024
Edison Mission Energy Funding 7.330%, due 09/15/08. 720,000 723,600
Ford Credit Grantor Trust 95-B 5.900%, due
10/15/00.......................................... 125,550 125,688
Ford Motor Co. 7.250%, due 10/01/08................ 2,000,000 2,017,046
GMAC MTN 6.500%, due 04/19/99...................... 1,350,000 1,357,156
Green Tree Financial 94-2 8.300%, due 05/15/19..... 435,000 460,091
Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,500,000 1,509,084
News America Corp. 7.750%, due 01/20/24............ 1,755,000 1,677,597
Premier Auto Trust 4.220%, due 03/02/99............ 30,119 29,777
Premier Auto Trust 96-4A 6.400%, due 10/06/01...... 275,000 276,320
Salomon, Inc. 6.750%, due 02/15/03................. 550,000 537,073
Spiegel Master Trust 95-A 7.500%, due 09/15/04..... 300,000 310,359
Standard Credit Card Trust 95-1A 8.250%, due
01/07/05.......................................... 500,000 541,830
Thrift Financial Corp. 11.250%, due 01/01/16....... 36,739 39,876
Time Warner Entertainment, Inc. 8.375%, due
03/15/23.......................................... 1,100,000 1,118,125
Time Warner, Inc. 9.150%, due 02/01/23............. 980,000 1,062,004
WMX Technologies, Inc. 7.000%, due 10/15/06........ 1,500,000 1,497,482
------------
22,449,904
------------
INTERNATIONAL DOLLAR BONDS -- 3.64%
Abbey National PLC 7.350%, due 10/29/49............ 250,000 252,385
ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01.... 250,000 249,820
AT&T Corp. 8.250%, due 01/11/00.................... 675,000 710,001
BBV International 7.000%, due 12/01/25............. 2,200,000 2,058,331
City of Oslo 7.875%, due 02/03/97.................. 1,200,000 1,202,077
Deutsche Bank Financial 6.700%, due 12/13/06....... $ 210,000 $ 205,750
Hanson PLC Notes 6.750%, due 09/15/05.............. 790,000 773,681
International Telecom Satellite 8.125%, due
02/28/05.......................................... 335,000 361,533
Japanese Development Bank 8.375%, due 02/15/01..... 1,000,000 1,071,485
Korea Development Bank 6.625%, due 11/21/03........ 250,000 248,143
LKB 8.125%, due 01/27/00........................... 380,000 399,326
Petroliam Nasional 7.125%, due 08/15/05............ 450,000 453,834
Province of Quebec 7.500%, due 07/15/23............ 175,000 174,694
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A
8.294%, due 03/15/14.............................. 1,910,000 1,941,912
Republic of Columbia EMTN 8.660%, due 10/07/16..... 1,000,000 1,047,945
Republic of Italy 6.875%, due 09/27/23............. 150,000 141,800
Republic of South Africa 9.625%, due 12/15/99...... 1,000,000 1,063,750
Royal Bank of Scotland 7.375%, due 04/01/06........ 220,000 219,257
Quimica & Minera Chile 144-A 7.700%, due 09/15/06.. 1,500,000 1,533,612
Southern Investments UK 6.800%, due 12/01/06....... 1,625,000 1,590,595
Swedbank FRN
7.383%, due 10/29/49.............................. 300,000 306,750
7.500%, due 11/29/49.............................. 2,200,000 2,252,250
Telstra Corp. Ltd. 6.500%, due 11/28/05............ 350,000 341,577
------------
18,600,508
------------
U.S. GOVERNMENT AGENCIES -- 7.73%
Federal Home Loan Mortgage Corp.
9.200%, due 08/25/97.............................. 200,000 204,516
6.520%, due 01/02/02.............................. 3,000,000 3,008,853
9.000%, due 03/01/17.............................. 381,007 407,948
5.800%, due 08/15/19.............................. 2,025,000 1,891,512
6.500%, due 05/15/21.............................. 1,105,804 1,003,495
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.............................. 1,820,248 1,854,947
9.000%, due 05/01/24.............................. 1,142,277 1,219,221
Federal National Mortgage Association
7.600%, due 01/10/97.............................. 200,000 200,097
5.000%, due 06/01/01.............................. 1,596,985 1,535,596
6.500%, due 03/01/03 ............................. 3,775,000 3,734,909
6.220%, due 03/13/06.............................. 1,700,000 1,643,478
8.000%, due 02/25/07.............................. 1,200,000 1,231,188
9.000%, due 08/01/21.............................. 312,467 332,577
6.500%, due 08/25/21.............................. 1,500,000 1,434,315
8.200%, due 08/25/21.............................. 59,076 60,358
</TABLE>
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14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
--------------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (CONTINUED)
Federal National Mortgage Association (continued)
8.000%, due 05/01/22.............................. $ 154,570 $ 157,372
8.500%, due 07/01/22.............................. 776,184 815,638
7.500%, due 05/01/25.............................. 1,906,918 1,906,323
6.500%, due 03/01/26.............................. 9,483,616 9,047,967
Government National Mortgage
Association
11.000%, due 09/15/15............................. 245,070 273,712
8.500%, due 08/15/17.............................. 801,933 845,783
8.500%, due 05/15/21.............................. 66,619 68,992
8.000%, due 08/15/22.............................. 502,399 516,305
8.000%, due 11/15/22.............................. 497,932 511,715
8.000%, due 12/15/22.............................. 1,709,085 1,756,393
7.500%, due 11/15/24.............................. 2,761,369 2,771,586
6.500%, due 03/20/26.............................. 1,132,354 1,073,260
------------
39,508,056
------------
U.S. GOVERNMENT OBLIGATIONS-- 5.50%
U.S. Treasury Coupon Strips
0.000%, due 02/15/03
principal only................................... 225,000 154,024
0.000%, due 05/15/08
principal only................................... 5,855,000 2,786,453
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98.............................. 1,825,000 1,811,312
6.250%, due 10/31/01.............................. 420,000 420,263
7.000%, due 07/15/06.............................. 9,000,000 9,351,567
8.125%, due 05/15/21.............................. 11,695,000 13,566,200
------------
28,089,819
------------
Total U.S. Bonds................................... 108,648,287
------------
HIGH YIELD BONDS -- 2.57%
Brinson High Yield Fund (b)........................ 1,065,360 13,122,570
------------
NON-U.S. BONDS -- 21.73%
BELGIUM -- 0.97%
Kingdom of Belgium
8.750%, due 06/25/02.............................. BEF 32,000,000 1,189,454
9.000%, due 03/28/03.............................. 54,000,000 2,041,883
8.500%, due 10/01/07.............................. 46,000,000 1,728,376
------------
4,959,713
------------
CANADA -- 2.75%
Government of Canada
7.500%, due 09/01/00.............................. CAD 4,350,000 3,418,714
7.250%, due 06/01/03.............................. 4,600,000 3,585,992
4.250%, due 12/01/21 (d).......................... 5,500,000 4,428,909
9.000%, due 06/01/25.............................. 2,085,000 1,873,062
4.250%, due 12/01/26 (d).......................... 1,000,000 760,678
------------
14,067,355
------------
DENMARK -- 2.24%
Kingdom of Denmark
9.000%, due 11/15/98.............................. DKR 3,200,000 $ 590,754
9.000%, due 11/15/00.............................. 14,600,000 2,820,305
8.000%, due 05/15/03.............................. 2,600,000 488,230
7.000%, due 12/15/04.............................. 17,500,000 3,092,144
8.000%, due 03/15/06.............................. 17,000,000 3,170,083
7.000%, due 11/10/24.............................. 7,900,000 1,269,593
------------
11,431,109
------------
FRANCE -- 2.75%
Government of France (OAT)
8.500%, due 03/28/00.............................. FRF 3,400,000 740,666
9.500%, due 01/25/01.............................. 8,300,000 1,899,100
8.500%, due 04/25/03.............................. 2,400,000 545,675
8.250%, due 02/27/04.............................. 5,400,000 1,217,381
7.500%, due 04/25/05.............................. 29,000,000 6,270,029
8.500%, due 12/26/12.............................. 14,500,000 3,399,148
------------
14,071,999
------------
GERMANY -- 4.72%
Bundesrepublik Deutscheland
7.000%, due 09/20/99.............................. DEM 7,000,000 4,900,590
8.500%, due 08/21/00.............................. 2,600,000 1,917,397
8.375%, due 05/21/01.............................. 1,900,000 1,412,517
8.250%, due 09/21/01.............................. 4,650,000 3,454,536
8.000%, due 07/22/02.............................. 825,000 611,991
6.500%, due 07/15/03.............................. 4,800,000 3,312,128
6.750%, due 07/15/04.............................. 7,800,000 5,431,302
6.250%, due 01/04/24.............................. 2,900,000 1,785,991
Treuhandanstalt
6.250%, due 03/04/04.............................. 1,900,000 1,286,763
------------
24,113,215
------------
ITALY -- 2.52%
Republic of Italy (BTP)
9.500%, due 12/01/97..............................ITL 900,000,000 604,341
8.500%, due 01/01/99.............................. 3,100,000,000 2,122,394
8.500%, due 08/01/99.............................. 855,000,000 587,788
9.500%, due 12/01/99.............................. 4,500,000,000 3,184,775
11.500%, due 03/01/03............................. 3,500,000,000 2,796,777
9.000%, due 10/01/03.............................. 1,900,000,000 1,367,675
8.500%, due 04/01/04.............................. 3,100,000,000 2,188,655
------------
12,852,405
------------
NETHERLANDS -- 2.90%
Government of Nederlands
6.250%, due 07/15/98.............................. NLG 1,400,000 843,383
8.500%, due 03/15/01.............................. 1,000,000 664,566
8.750%, due 09/15/01.............................. 1,300,000 878,967
6.500%, due 04/15/03.............................. 3,100,000 1,919,466
8.500%, due 06/01/06.............................. 8,650,000 5,996,040
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
--------------- ------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
8.250%, due 02/15/07............................. NLG 4,500,000 $ 3,084,986
7.500%, due 04/15/10............................. 2,200,000 1,441,059
------------
14,828,467
------------
SWEDEN -- 0.67%
Government of Sweden
10.250%, due 05/05/03............................ SWK 12,300,000 2,192,275
6.000%, due 02/09/05............................. 8,500,000 1,206,382
------------
3,398,657
------------
UNITED KINGDOM -- 2.21%
UK Treasury
7.000%, due 11/06/01............................. GBP 810,000 1,373,278
8.000%, due 06/10/03............................. 1,400,000 2,476,895
8.500%, due 12/07/05............................. 2,870,000 5,232,666
8.500%, due 07/16/07............................. 1,200,000 2,198,785
------------
11,281,624
------------
Total Non-U.S. Bonds.............................. 111,004,544
------------
EMERGING MARKETS DEBT -- 3.69%
Brinson Emerging Markets Debt Fund (b)............ 1,118,170 18,876,502
------------
Total Bonds (Cost $239,824,367)................... 251,651,903
------------
Short-Term Investments -- 7.41%
U.S. GOVERNMENT OBLIGATIONS-- 0.32%
U.S. Treasury Bills 5.063%, due 05/01/97.......... 1,677,000 1,648,895
------------
COMMERCIAL PAPER -- 7.09%
Burlington Northern Santa Fe 5.650%, due 01/17/97. 2,000,000 1,994,978
Case Credit Corp.
5.510%, due 01/07/97............................. 1,500,000 1,498,622
5.600%, due 01/09/97............................. 2,000,000 1,997,511
Cincinnati Bell, Inc. 7.250%, due 01/02/97........ 477,000 476,904
CNA Financial Corp. 6.250%, due 01/23/97.......... 1,500,000 1,494,271
Crown Cork & Seal Co., Inc.
5.520%, due 01/10/97............................. 2,000,000 1,997,240
5.580%, due 01/29/97............................. 2,500,000 2,489,150
5.580%, due 01/31/97............................. 2,000,000 1,990,700
CSX Corp. 5.520%, due 01/15/97.................... 1,500,000 1,496,780
Lockheed Martin Corp. 7.250%, due 01/02/97........ 5,500,000 5,498,892
PanEnergy Corp. 6.050%, due 01/17/97.............. 2,000,000 1,994,622
Rite Aid Corp.
5.650%, due 01/06/97............................. 2,000,000 1,998,431
5.600%, due 01/21/97............................. 2,000,000 1,993,778
Tyson Foods, Inc. 5.750%, due 01/09/97............ 1,700,000 1,697,828
U.S. West Capital Funding, Inc. 5.600%, due
02/12/97......................................... 1,500,000 1,490,200
Vastar Resources, Inc.
6.020%, due 01/02/97.............................. $ 2,000,000 $ 1,999,666
6.850%, due 01/03/97.............................. 2,115,000 2,111,378
Whirlpool Financial Corp. 6.000%, due 01/03/97..... 2,000,000 1,999,333
------------
36,220,284
------------
Total Short-Term Investments (Cost $37,869,023).... 37,869,179
------------
Total Investments
(Cost $478,474,852)--103.51% (a) 528,878,734
------------
Liabilities, less cash and other
assets--(3.51%)................................... (17,938,839)
------------
Net Assets--100%................................... $510,939,895
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $478,474,852; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $57,680,749
Gross unrealized depreciation................................ (7,276,867)
-----------
Net unrealized appreciation............................... $50,403,882
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
(d) Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating rate note--The rate disclosed is that in effect at December 31,
1996.
MTN: Medium term note
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Fund had the following open forward foreign currency contracts as of
December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Danish Kroner............... 05/30/97 3,000,000 $ 512,591 $ 5,105
French Franc................ 05/30/97 4,000,000 776,385 8,188
Japanese Yen................ 05/30/97 50,000,000 439,864 1,460
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Belgian Franc............... 05/30/97 250,000,000 7,950,837 (113,847)
British Pound............... 05/30/97 3,100,000 5,284,397 (135,297)
Canadian Dollar............. 05/30/97 13,600,000 10,014,643 195,567
Danish Kroner............... 05/30/97 70,000,000 11,960,446 (168,986)
Dutch Guilder............... 05/30/97 35,000,000 20,436,274 (261,270)
French Franc................ 05/30/97 125,000,000 24,262,033 (410,257)
German Mark................. 05/30/97 48,000,000 31,447,014 (428,742)
Italian Lira................ 05/30/97 11,500,000,000 7,521,248 (78,123)
Japanese Yen................ 05/30/97 2,300,000,000 20,233,736 404,802
Swiss Franc................. 05/30/97 2,200,000 1,663,420 24,215
---------
Total...................... $(957,185)
=========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Fund had the following open futures contracts as of December
31,1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST/PROCEEDS VALUE GAIN/(LOSS)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes,
52 contracts................. March 1997 $ 5,592,078 $ 5,542,875 $ (49,203)
10 year U.S. Treasury Notes,
116 contracts................ March 1997 12,803,625 12,658,500 (145,125)
30 year U.S. Treasury Bonds,
47 contracts................. March 1997 5,384,375 5,293,375 (91,000)
INDEX FUTURES BUY CONTRACTS
Topix, 16 contracts........... March 1997 2,118,204 2,029,120 (89,084)
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 47 con-
tracts....................... March 1997 17,748,625 17,495,750 252,875
---------
$(121,537)
=========
</TABLE>
The segregated cash and market value of investments pledged to cover margin
requirements for the open futures positions at December 31, 1996 were $561,512
and $1,648,895, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $435,474,852)....................... $480,718,727
Affiliated issuers (Cost $43,000,000).......................... 48,160,007
Foreign currency, at value (Cost $268,768)...................... 273,987
Receivables:
Investment securities sold..................................... 36,201,820
Dividends...................................................... 495,147
Interest....................................................... 4,864,834
Fund shares sold............................................... 292,949
Variation margin (Note 5)...................................... 201,512
Other assets.................................................... 14,939
------------
TOTAL ASSETS................................................. 571,223,922
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 26,580,751
Fund shares redeemed........................................... 31,916,576
Due to custodian bank.......................................... 304,430
Investment advisory fees (Note 2).............................. 358,713
Net unrealized depreciation on forward foreign currency con-
tracts........................................................ 957,185
Accrued expenses............................................... 166,372
------------
TOTAL LIABILITIES............................................ 60,284,027
------------
NET ASSETS....................................................... $510,939,895
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)........................................ $459,324,649
Accumulated distributions in excess of net investment income.... (2,066,623)
Accumulated net realized gain................................... 4,399,273
Net unrealized appreciation..................................... 49,282,596
------------
NET ASSETS................................................... $510,939,895
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $493,628,321 and 40,916,008 shares is-
sued and outstanding) (Note 7)................................ $ 12.06
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $17,311,574 and 1,439,613 shares is-
sued and outstanding) (Note 7)................................ $ 12.03
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $ 8,220,543
Dividends (net of $121,144 for foreign taxes withheld)........... 2,124,459
-----------
TOTAL INCOME.................................................. 10,345,002
-----------
EXPENSES:
Advisory (Note 2)................................................ 2,019,630
Administration................................................... 158,049
Custodian........................................................ 70,489
Distribution (Note 6)............................................ 51,006
Other............................................................ 300,151
-----------
TOTAL EXPENSES................................................ 2,599,325
-----------
NET INVESTMENT INCOME ........................................ 7,745,677
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 17,819,350
Futures contracts............................................... (335,713)
Foreign currency transactions................................... 3,705,567
-----------
Net realized gain............................................. 21,189,204
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 16,277,908
Futures contracts............................................... (194,980)
Forward contracts............................................... (294,833)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 50,176
-----------
Change in net unrealized appreciation or depreciation......... 15,838,271
-----------
Net realized and unrealized gain................................. 37,027,475
-----------
Net increase in net assets resulting from operations............. $44,773,152
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................ $ 7,745,677 $ 15,718,942
Net realized gain............................ 21,189,204 33,576,934
Change in net unrealized appreciation or de-
preciation.................................. 15,838,271 13,188,606
------------- -------------
Net increase in net assets resulting from op-
erations.................................... 44,773,152 62,484,482
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income..... (17,593,746) (20,214,114)
Distributions in excess of net investment in-
come........................................ (7,066,588) (1,430,745)
Distributions from net realized gain......... (26,428,094) (10,937,826)
------------- -------------
Total distributions to shareholders*......... (51,088,428) (32,582,685)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................. 60,598,529 109,483,562
Shares issued on reinvestment of distribu-
tions....................................... 49,580,586 31,162,315
Shares redeemed.............................. (64,887,080) (64,262,463)
------------- -------------
Net increase in net assets resulting from
capital share transactions (Note 7)......... 45,292,035 76,383,414
------------- -------------
TOTAL INCREASE IN NET ASSETS.............. 38,976,759 106,285,211
------------- -------------
NET ASSETS:
Beginning of period.......................... 471,963,136 365,677,925
------------- -------------
End of period (including accumulated undis-
tributed net investment income of
($2,066,623) and $9,848,069 respectively)... $ 510,939,895 $471,963,136
============= =============
<CAPTION>
*DISTRIBUTIONS BY CLASS:
<S> <C> <C>
Distributions from and in excess of net in-
vestment income:
Brinson Fund Class........................... $ (23,918,105) $ (21,444,413)
SwissKey Fund Class.......................... (742,229) (200,446)
Distributions from net realized gain:
Brinson Fund Class........................... (25,579,684) (10,892,522)
SwissKey Fund Class.......................... (848,410) (45,304)
------------- -------------
Total distributions to shareholders.......... $ (51,088,428) $ (32,582,685)
============= =============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30 AUGUST 31, 1992*
DECEMBER 31, 1996 ---------------------------- THROUGH
BRINSON FUND CLASS (UNAUDITED) 1996 1995 1994 JUNE 30, 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00
-------- -------- -------- -------- --------
Income from investment
operations:
Net investment income. 0.48 0.44 0.43 0.33 0.26
Net realized and
unrealized gain
(loss)............... 0.62 1.37 0.86 (0.23) 0.81
-------- -------- -------- -------- --------
Total income from
investment
operations......... 1.10 1.81 1.29 0.10 1.07
-------- -------- -------- -------- --------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.61) (0.62) (0.27) (0.27) (0.20)
Distributions from and
in excess of net
realized gain........ (0.65) (0.32) (0.10) (0.27) --
-------- -------- -------- -------- --------
Total distributions. (1.26) (0.94) (0.37) (0.54) (0.20)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 12.06 $ 12.22 $ 11.35 $ 10.43 $ 10.87
======== ======== ======== ======== ========
Total return (non-
annualized)............ 9.11% 16.38% 12.57% 0.77% 10.76%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $493,628 $457,933 $365,678 $278,859 $191,389
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.01%** 1.04% 1.09% 1.14% 1.35%**
After expense reim-
bursement............ N/A N/A N/A 1.10% 1.05%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 3.08%** 3.69% 4.27% 3.21% 3.26%**
After expense reim-
bursement............ N/A N/A N/A 3.25% 3.56%**
Portfolio turnover
rate.................. 84% 142% 238% 231% 149%
Average commission rate
paid per share........ $ 0.0307 $ 0.0291 N/A N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 12.18 $ 11.60
------- -------
Income from investment operations:
Net investment income....................... 0.43 0.39
Net realized and unrealized gain............ 0.64 1.10
------- -------
Total income from investment operations... 1.07 1.49
------- -------
Less distributions:
Distributions from and in excess of net in-
vestment income............................ (0.57) (0.59)
Distributions from net realized gain........ (0.65) (0.32)
------- -------
Total distributions....................... (1.22) (0.91)
------- -------
Net asset value, end of period................ $ 12.03 $ 12.18
======= =======
Total return (non-annualized)................. 8.89% 13.24%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $17,312 $14,030
Ratio of expenses to average net assets...... 1.66%** 1.69%**
Ratio of net investment income to average net
assets...................................... 2.43%** 3.04%**
Portfolio turnover rate...................... 84% 142%
Average commission rate paid per share....... $0.0307 $0.0291
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
The Global Equity Fund is actively managed, providing a fully integrated
approach to the primary equity markets across the world. Market selection and
currency strategies are managed within a global asset allocation framework.
Industry strategies and individual security selections are based on the
fundamental research of our analytical teams in Chicago, Basel, Frankfurt,
London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The Brinson Global Equity Fund has provided an annualized return of 11.33%
since January 31, 1994 (performance inception date), compared to the 11.32%
return of its benchmark, the MSCI World Equity (Free) Index. For the year ended
December 31, 1996, the Fund returned 17.26%, while the benchmark returned
13.92%. For the second half of 1996, the Fund returned 7.67% compared to the
Index return of 6.18%.
Currency allocation and equity management strategies within markets contributed
positively to Fund performance during the year. Market allocation strategies,
notable for a U.S. equity market underweight and cash risk hedge, detracted
from performance.
Global equity markets were generally strong in 1996. Despite a return of 24.05%
for the MSCI U.S. component, the U.S. equity market was not the strongest
market during 1996. In the global equity index there were 11 markets that
outperformed the U.S. market, Spain being the strongest with a U.S. dollar
hedged return of 46.76%. The relatively low performance of the MSCI World
Equity (Free) Index, was due to the weak showing from Japan, the worst
performing market, which registered a meager U.S. dollar hedged return of
0.06%.
The U.S. market provided positive returns during each calendar quarter of 1996,
ending the year with a fourth quarter return of 8.28%. Japanese equities, on
the other hand, started the year with a strong first half gain of 10.23%. The
third and fourth quarters offset nearly all of the first half gains. In the
fourth quarter Japan generated a U.S. dollar hedged loss of -6.49%, the only
market to provide a negative return.
Currency movements contributed substantially to the performance of the Global
Equity Fund relative to the MSCI World Equity benchmark. During the year, the
Fund maintained a significant underweight to the Japanese yen and underweights
in the core European currencies. The aggregate European currency underweight
was similar in magnitude to the yen underweight. The U.S. dollar overweight
averaged nearly 35% during the year. The Japanese yen declined by 11.13%, and
the core European currency depreciations ranged from 14.31% for the Swiss franc
to 5.93% for the French franc. The Fund maintained neutral or overweight
positions to currencies that appreciated over the course of 1996.
Security selection derived most of its added value from equity management in
the U.S. and Japan.
------------------------------------------------------------
23
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
Annualized
6 months 1 year 1/31/94*
ended ended to
12/31/96 12/31/96 12/31/96
- ------------------------------------------------------
<S> <C> <C> <C>
BRINSON GLOBAL EQUITY
FUND 7.67% 17.26% 11.33%
MSCI World Equity (Free)
Index (currency
unhedged) 6.18 13.92 11.32
MSCI World Equity (Free)
Index (currency hedged) 7.39 18.53 11.09
- ------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson Global Equity Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000
This chart shows the growth in the value of an investment in the Brinson Global
Equity Fund and the MSCI World Equity (Free) Index (currency unhedged and
hedged) if you had invested $100,000 on January 31, 1994, and had reinvested
all your income dividends and capital gain distributions through December 31,
1996. No adjustment has been made for any income taxes payable by shareholders
on income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
BRINSON GLOBAL EQUITY FUND
VS. MSCI WORLD EQUITY (FREE) INDEX (CURRENCY UNHEDGED AND HEDGED)
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson MSCI World Equity MSCI World Equity
Global Equity (Free) Index (Free) Index
Fund (currency unhedged) (currency hedged)
------------- ------------------- -----------------
<S> <C> <C> <C>
01/31/94 $100,000 $100,000 $100,000
03/31/94 $ 93,500 $ 94,435 $ 92,315
06/30/94 $ 95,303 $ 97,410 $ 92,876
09/30/94 $ 98,114 $ 99,575 $ 94,331
12/31/94 $ 95,652 $ 98,955 $ 94,327
03/31/95 $ 96,565 $103,724 $ 93,528
06/30/95 $101,080 $108,285 $ 97,701
09/30/95 $109,443 $114,453 $107,608
12/31/95 $116,632 $120,024 $114,647
03/31/96 $122,748 $125,053 $121,423
06/30/96 $127,020 $128,777 $126,533
09/30/96 $129,326 $130,623 $129,049
12/31/96 $136,769 $136,729 $135,888
</TABLE>
1/31/94 = $100,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on the market returns without deduction for fees or transaction costs
for rebalancing.
------------------------------------------------------------
24
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
MARKET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------
<S> <C> <C>
U.S. 43.2% 33.2%
Japan 17.5 14.5
Australia 1.6 2.6
Belgium 0.6 1.7
Canada 2.6 1.5
France 3.8 5.1
Germany 4.4 4.4
Hong Kong 2.0 0.8
Italy 1.7 1.8
Malaysia 1.4 0.7
Netherlands 2.6 3.2
New Zealand 0.2 1.8
Spain 1.2 1.9
Sweden 1.4 0.0
Switzerland 3.0 0.8
U.K. 10.4 10.5
Other Markets 2.4 0.5
Cash Reserves 0.0 15.0
- ---------------------------------
100.0% 100.0%
</TABLE>
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ---------------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 1.86%
2. Xerox Corp. 1.46
3. Lockheed Martin Corp. 1.44
4. Burlington Northern Santa Fe 1.43
5. Corning, Inc. 1.35
6. Citicorp 1.31
7. Philip Morris Companies, Inc. 1.28
8. Aon Corp. 1.20
9. Goodyear Tire & Rubber Co. 1.10
10. Enron Corp. 1.00
- ---------------------------------------------------
</TABLE>
CURRENCY ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------
<S> <C> <C>
U.S. 43.2% 71.7%
Japan 17.5 7.5
Australia 1.6 1.6
Belgium 0.6 0.0
Canada 2.6 2.6
France 3.8 0.0
Germany 4.4 0.0
Hong Kong 2.0 0.0
Italy 1.7 1.8
Malaysia 1.4 0.6
Netherlands 2.6 0.0
New Zealand 0.2 1.8
Spain 1.2 1.2
Sweden 1.4 0.0
Switzerland 3.0 0.0
U.K. 10.4 10.4
Other Markets 2.4 0.8
- ---------------------------------
100.0% 100.0%
</TABLE>
TOP TEN NON-U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------------------
<S> <C>
1. Royal Dutch Petroleum Co. 0.82%
2. Matsushita Electric Industrial Co. 0.62
3. Broken Hill Proprietary Co. Ltd. 0.61
4. Toray Industries, Inc. 0.59
5. British Telecommunications PLC 0.58
6. General Electric Co. PLC 0.57
7. Lloyds TSB Group PLC 0.55
8. Telecom Corp of New Zealand Ltd. 0.55
9. British Petroleum Co. PLC 0.49
10. Sankyo Co. Ltd. 0.49
- ----------------------------------------------------------------
</TABLE>
------------------------------------------------------------
25
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals............................................................... 0.26%
Housing/Paper........................................................... 1.58
Metals.................................................................. 0.20
-----
2.04
Capital Investments
Capital Goods........................................................... 3.49
Technology.............................................................. 2.25
-----
5.74
Consumer
Autos/Durables.......................................................... 0.10
Discretionary........................................................... 2.53
Health: Drugs........................................................... 3.13
Health: Non-Drugs....................................................... 1.55
Non-Durables............................................................ 4.36
Retail/Apparel.......................................................... 1.60
-----
13.27
Energy................................................................... 1.93
Financial
Banks................................................................... 3.91
Non-Banks............................................................... 3.57
-----
7.48
Services................................................................. 2.47
Transportation........................................................... 2.41
Utilities................................................................ 1.20
Miscellaneous............................................................ 1.01
-----
Total U.S. Equities................................................... 37.55*
-----
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C>
NON-U.S. EQUITIES
Airlines................................................................ 0.12%
Appliances & Household Durables......................................... 1.24
Automobiles............................................................. 1.53
Banking................................................................. 5.63
Beverages & Tobacco..................................................... 1.20
Broadcasting & Publishing............................................... 0.72
Building Materials...................................................... 0.72
Business & Public Service............................................... 1.84
Chemicals............................................................... 2.10
Construction............................................................ 1.00
Data Processing......................................................... 0.60
Electric Components..................................................... 0.78
Electronics............................................................. 2.26
Energy.................................................................. 4.23
Financial Services...................................................... 0.75
Food & House Products................................................... 2.46
Forest Products......................................................... 1.06
Gold Mining............................................................. 0.06
Health & Personal Care.................................................. 2.29
Industrial Components................................................... 1.26
Insurance............................................................... 2.10
Leisure & Tourism....................................................... 0.28
Machinery & Engineering................................................. 0.76
Merchandising........................................................... 2.17
Metals-Steel............................................................ 0.95
Miscellaneous Materials................................................. 0.68
Multi-Industry.......................................................... 2.16
Non-Ferrous Metal....................................................... 1.18
Real Estate............................................................. 0.41
Recreation.............................................................. 0.30
Shipping................................................................ 0.40
Telecommunications...................................................... 2.12
Textiles & Apparel...................................................... 0.13
Transportation.......................................................... 0.49
Utilities............................................................... 3.02
------
Total Non-U.S. Equities.............................................. 49.00*
------
SHORT-TERM INVESTMENTS.................................................. 12.62*
------
TOTAL INVESTMENTS.................................................... 99.17
CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.83
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
* The Fund held a short position in stock index futures on December 31, 1996
which reduced U.S. equity exposure from 37.55% to 32.49%. The Fund held a
long position in Topix futures which increased Japanese equity exposure from
13.77% to 14.71%. These two adjustments result in a net increase in the
Fund's exposure to Short-Term Investments from 12.62% to 16.74%.
------------------------------------------------------------
26
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Equities -- 86.55%
U.S. EQUITIES -- 37.55%
Aetna Life & Casualty Co................................ 7,200 $ 576,000
Allergan, Inc........................................... 12,000 427,500
Allstate Corp........................................... 6,200 358,825
Alza Corp. (b).......................................... 11,700 302,738
Aon Corp................................................ 15,700 975,362
Automatic Data Processing, Inc.......................... 11,500 493,063
Avon Products, Inc...................................... 8,500 485,562
Bard (C.R.), Inc........................................ 7,300 204,400
Beckman Instruments, Inc................................ 4,700 180,363
Birmingham Steel Corp................................... 4,700 89,300
Boston Technology, Inc. (b)............................. 4,700 135,125
Brinker International, Inc. (b)......................... 3,200 51,200
Burlington Northern Santa Fe............................ 13,400 1,157,425
Centerior Energy Co..................................... 9,900 106,425
Chase Manhattan Corp.................................... 16,900 1,508,325
Choice Hotels International, Inc. (b)................... 7,700 135,712
CIGNA Corp.............................................. 5,800 792,425
Circuit City Stores, Inc................................ 1,700 51,213
Citicorp................................................ 10,300 1,060,900
CMS Energy Corp......................................... 12,800 430,400
Coca-Cola Enterprises, Inc.............................. 6,300 305,550
Comerica, Inc........................................... 3,200 167,600
Comverse Techonology, Inc. (b).......................... 2,200 83,187
Corning, Inc............................................ 23,600 1,091,500
CPC International, Inc.................................. 2,900 224,750
Dial Corp............................................... 11,500 169,625
EMC Corp./Mass (b)...................................... 16,900 559,813
Enron Corp.............................................. 18,800 810,750
Federal Express Corp. (b)............................... 17,400 774,300
Federated Department Stores (b)......................... 6,800 232,050
FileNet Corp. (b)....................................... 2,800 89,600
First American Corp.-Tenn............................... 800 46,100
First Data Corp......................................... 9,804 357,846
First of America Bank Corp.............................. 1,500 90,187
Footstar, Inc. (b)...................................... 3,598 89,500
Ford Motor Co........................................... 6,500 207,188
Forest Laboratories, Inc. (b)........................... 8,000 262,000
Gannett Co., Inc........................................ 7,800 584,025
General Instrument Corp. (b)............................ 23,300 503,862
Genzyme Corp. (b)....................................... 4,700 102,225
Geon Co................................................. 1,700 33,363
Goodyear Tire & Rubber Co............................... 17,300 888,788
Harnischfeger Industries, Inc........................... 5,200 250,250
Health Care and Retirement Corp. (b).................... 8,650 247,606
Interpublic Group of Companies, Inc..................... 5,800 275,500
James River Corp. of Virginia........................... 6,700 221,938
Kimberly-Clark Corp..................................... 5,700 542,925
Kroger Co. (b).......................................... 4,900 227,850
Lockheed Martin Corp.................................... 12,751 1,166,716
Lyondell Petrochemical Co............................... 12,800 281,600
Manor Care, Inc......................................... 7,700 207,900
Martin Marietta Materials, Inc.......................... 3,535 82,189
Masco Corp.............................................. 7,300 262,800
Mattel, Inc............................................. 28,050 778,388
Melville Corp........................................... 9,300 384,787
</TABLE>
<TABLE>
<S> <C> <C>
Nabisco Holdings Corp. Class A.......................... 8,500 $ 330,438
National Semiconductor Corp. (b)........................ 4,800 117,000
Nextel Communications, Inc. Class A (b)................. 11,800 154,137
Old Republic International Corp......................... 6,050 161,838
Peco Energy Co.......................................... 7,200 181,800
Pentair, Inc............................................ 5,500 177,375
Pharmacia & Upjohn, Inc................................. 14,900 590,413
Philip Morris Companies, Inc............................ 9,200 1,036,150
Rhone-Poulenc Rorer, Inc................................ 3,500 273,437
RJR Nabisco Convertible Preferred "C"................... 38,200 257,850
Schering Plough Corp.................................... 10,300 666,925
Seagate Technology, Inc. (b)............................ 3,200 126,400
Timken Co............................................... 4,900 224,788
Tyson Foods, Inc. Class A............................... 14,100 482,925
Ultramar Diamond Shamrock Corp.......................... 13,252 419,094
US Bancorp.............................................. 7,100 319,056
USF&G Corp.............................................. 5,500 114,813
Vencor, Inc. (b)........................................ 6,100 192,912
Viad Corp............................................... 11,500 189,750
Westvaco Corp........................................... 2,850 81,938
Whitman Corp............................................ 700 16,012
WMX Technologies, Inc................................... 19,100 623,137
Xerox Corp.............................................. 22,400 1,178,800
York International Corp................................. 4,800 268,200
360 Communications Co. (b).............................. 4,033 93,263
-----------
Total U.S. Equities..................................... 30,404,972
-----------
NON-U.S. EQUITIES -- 49.00%
AUSTRALIA -- 2.66%
Amcor Ltd............................................... 14,100 90,603
Boral Ltd............................................... 23,800 67,676
Broken Hill Proprietary Co. Ltd......................... 34,450 490,345
CRA Ltd................................................. 12,063 189,233
David Jones Ltd......................................... 57,000 79,230
Lend Lease Corp. Ltd.................................... 4,197 81,340
M.I.M. Holdings Ltd..................................... 49,446 69,122
National Australia Bank Ltd............................. 19,475 228,936
News Corp. Ltd.......................................... 40,536 213,788
News Corp. Ltd. Preferred............................... 9,000 40,032
Pacific Dunlop Ltd...................................... 33,600 85,401
Qantas Airways Ltd...................................... 23,982 40,001
Santos Ltd.............................................. 23,000 93,169
WMC Ltd................................................. 18,300 115,265
Westpac Bank Corp. Ltd.................................. 37,545 213,520
Woolworth's Ltd......................................... 25,000 60,167
-----------
2,157,828
-----------
BELGIUM -- 1.46%
Delhaize-Le Lion S.A.................................... 1,200 71,212
Electrabel S.A.......................................... 950 224,606
Fortis AG............................................... 894 143,256
Fortis AG Strip (b)..................................... 14 7
General de Banque S.A................................... 100 35,810
Groupe Bruxelles Lambert S.A............................ 530 68,160
Kredietbank NV.......................................... 365 119,504
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
BELGIUM (CONTINUED)
Petrofina S.A........................................... 510 $ 162,162
Societe Generale de Belgique............................ 840 65,847
Solvay S.A. Class A..................................... 165 100,903
Tractebel............................................... 200 93,028
Tractebel Warrants "99" (b)............................. 200 2,896
Union Miniere Group S.A. (b)............................ 1,420 96,114
-----------
1,183,505
-----------
CANADA -- 1.48%
Alcan Aluminium Ltd..................................... 2,500 84,361
Bank of Montreal........................................ 2,300 73,165
Barrick Gold Corp....................................... 1,600 45,819
BCE, Inc................................................ 1,100 52,408
Canadian National Railway Co............................ 2,000 76,025
Canadian Pacific Ltd.................................... 5,700 149,923
Hudson's Bay Co......................................... 3,400 56,807
Imperial Oil Ltd........................................ 2,000 94,119
Moore Corp. Ltd......................................... 2,200 45,586
Noranda, Inc............................................ 2,600 57,953
Northern Telecom Ltd.................................... 1,000 62,163
NOVA Corp............................................... 4,300 38,118
Royal Bank of Canada.................................... 2,500 87,735
Seagram Co. Ltd......................................... 2,200 87,079
Thomson Corp............................................ 5,600 123,596
TransCanada Pipelines Ltd............................... 3,400 59,536
-----------
1,194,393
-----------
FINLAND -- 0.69%
Merita Ltd. Class A (b)................................. 16,700 51,814
Nokia Ab Class A........................................ 5,000 289,434
Outokumpu Class A....................................... 2,600 44,283
Pohjola Insurance Group Class B......................... 1,200 26,947
Sampo Insurance Co. Ltd. Class A........................ 700 55,131
UPM-Kymmene Corp. (b)................................... 4,500 94,218
-----------
561,827
-----------
FRANCE -- 4.90%
Accor S.A............................................... 877 110,833
Alcatel Alsthom......................................... 1,461 117,134
AXA S.A................................................. 600 38,086
Banque Nationale de Paris............................... 5,380 207,803
CEP Communications...................................... 404 28,481
CEP Communications Warrants "97" (b).................... 704 806
Cie Bancaire S.A........................................ 1,192 140,783
Cie de Saint Gobain..................................... 1,757 248,069
Cie de Suez............................................. 2,317 98,319
Cie Generale des Eaux................................... 2,671 330,362
Colas................................................... 330 47,608
Credit Local de France.................................. 2,503 217,623
Elf Aquitaine S.A....................................... 2,650 240,752
Groupe Danone........................................... 300 41,722
L'Oreal S.A............................................. 200 75,173
Lafarge S.A............................................. 1,000 59,880
</TABLE>
<TABLE>
<S> <C> <C>
LVMH.................................................... 1,130 $ 314,958
Michelin Class B........................................ 3,234 174,244
Pechiney S.A. Class A................................... 3,013 125,998
Peugeot S.A............................................. 2,640 296,566
Rhone-Poulenc Class A................................... 6,600 224,583
SEITA................................................... 1,900 79,308
Societe Generale........................................ 2,061 222,406
Total S.A. Class B...................................... 3,459 280,781
UAP..................................................... 4,309 107,338
Usinor Sacilor.......................................... 9,400 136,515
-----------
3,966,131
-----------
GERMANY -- 3.91%
Allianz AG Holding...................................... 155 278,600
BASF AG................................................. 4,250 162,708
Bayer AG................................................ 5,750 233,007
Bayerische Motoren Werke AG............................. 230 158,497
Commerzbank AG.......................................... 4,550 115,440
Daimler-Benz AG (b)..................................... 2,400 164,298
Deutsche Bank AG........................................ 4,650 216,644
Deutsche Telekom AG (b)................................. 7,750 161,427
Henkel KGaA-Vorzug AG................................... 1,850 91,234
Hochtief AG............................................. 1,250 49,072
Hoechst AG.............................................. 2,000 92,531
M.A.N. AG............................................... 320 77,140
Mannesmann AG........................................... 380 163,283
Metro AG................................................ 1,220 95,393
Muenchener Rueckver AG.................................. 77 186,617
Muenchener Rueckver AG Warrants "98" (b)................ 3 625
Preussag AG............................................. 460 103,874
RWE AG.................................................. 3,100 129,544
Schering AG............................................. 2,000 168,581
Siemens AG.............................................. 1,400 64,881
Thyssen AG.............................................. 700 123,957
Veba AG................................................. 3,600 206,735
Volkswagen AG........................................... 300 124,100
-----------
3,168,188
-----------
HONG KONG -- 0.75%
Cheung Kong Holdings Ltd................................ 6,000 53,330
China Light & Power Co. Ltd............................. 11,000 48,921
Guoco Group Ltd......................................... 9,000 50,382
Hang Seng Bank Ltd...................................... 5,800 70,486
Hong Kong Telecommunications Ltd........................ 16,000 25,753
Hutchison Whampoa Ltd................................... 14,000 109,956
Jardine Matheson Holdings ADR (c)....................... 3,600 23,760
New World Development Co. Ltd........................... 9,000 60,796
Sun Hung Kai Properties Ltd............................. 5,000 61,248
Swire Pacific Ltd. Class A.............................. 7,000 66,743
Wharf (Holdings) Ltd.................................... 8,000 39,923
-----------
611,298
-----------
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
ITALY -- 1.45%
Assicurazioni Generali.................................. 5,940 $ 112,315
Danieli & Co. Savings (Risp)............................ 8,000 33,410
Edison Spa.............................................. 8,000 50,510
ENI ADR (c)............................................. 2,300 118,738
ENI Spa................................................. 22,000 112,641
Fiat Spa-Priv........................................... 44,000 72,489
INA-Istituto Nazionale de Assicurazioni................. 14,000 18,194
Istituto Mobilaire Italiano Spa......................... 15,000 128,247
Italgas Spa............................................. 9,000 37,498
La Rinascente........................................... 5,000 28,938
La Rinascente Savings (Risp)............................ 6,000 15,311
La Rinascente Warrants "99" (b)......................... 550 242
Mediobanca Spa.......................................... 2,800 15,073
Montedison Spa (b)...................................... 154,560 105,107
SAI-Savings (Risp)...................................... 7,000 24,837
Telecom Italia Spa...................................... 86,000 167,418
Telecom Italia Mobile Spa............................... 92,000 130,996
-----------
1,171,964
-----------
JAPAN -- 13.77%
Amada Co. Ltd........................................... 21,000 162,833
Asahi Glass Co. Ltd..................................... 24,000 225,381
Bank of Tokyo-Mitsubishi Ltd............................ 17,600 326,010
Canon, Inc.............................................. 17,000 374,946
Canon Sales Co., Inc.................................... 6,600 146,705
Citizen Watch Co. Ltd................................... 19,000 135,866
Dai Nippon Printing Co. Ltd............................. 18,000 314,810
Daiichi Pharmaceutical Co. Ltd.......................... 13,000 208,323
Daikin Industries Ltd................................... 20,000 177,478
Daiwa House Industry Co. Ltd............................ 9,000 115,534
Fanuc................................................... 7,900 252,511
Fujitsu................................................. 12,000 111,657
Hitachi Ltd............................................. 39,000 362,884
Honda Motor Co.......................................... 5,000 142,586
Inax.................................................... 25,000 184,802
Isetan.................................................. 6,000 77,539
Ito Yokado Co. Ltd...................................... 7,000 303,955
Kaneka Corp............................................. 9,000 45,981
Keio Teito Electric Railway............................. 23,000 112,156
Kinki Nippon Railway.................................... 23,000 143,267
Kirin Brewery Co. Ltd................................... 21,000 206,255
Kokuyo.................................................. 4,000 98,561
Kuraray Co. Ltd......................................... 17,000 156,716
Kyocera Corp. .......................................... 2,000 124,408
Maeda Road Construction................................. 3,000 34,634
Matsushita Electric Industrial Co....................... 31,000 504,782
Mitsubishi Paper Mills.................................. 21,000 81,959
NGK Insulators.......................................... 32,000 303,265
Nintendo Corp. Ltd...................................... 1,500 107,134
Nippon Denso Co. Ltd.................................... 13,000 312,484
Nippon Meat Packers, Inc................................ 13,000 168,002
Nippon Steel Co......................................... 14,000 41,251
Okumura................................................. 18,000 109,176
Osaka Gas Co............................................ 81,000 221,220
</TABLE>
<TABLE>
<S> <C> <C>
Sankyo Co. Ltd.......................................... 14,000 $ 395,623
Sanwa Bank Ltd. ........................................ 9,000 122,512
Secom................................................... 5,000 301,973
Seino Transportation.................................... 6,000 66,167
Sekisui House Ltd....................................... 38,000 386,319
Shinmaywa Industries Ltd................................ 18,000 132,282
Sony Corp............................................... 6,000 392,349
Sumitomo Bank........................................... 21,000 302,145
Sumitomo Electric Industries............................ 16,000 223,313
Takeda Chemical Industries.............................. 15,000 314,035
TDK Corp................................................ 4,000 260,188
Tokio Marine & Fire Insurance Co........................ 18,000 169,036
Tokyo Electric Power.................................... 8,300 181,632
Tokyo Steel Mfg......................................... 14,500 206,126
Tonen Corp.............................................. 13,000 151,202
Toray Industries, Inc................................... 78,000 480,486
Toshiba Corp............................................ 46,000 288,516
Toyo Suisan Kaisha...................................... 11,000 109,934
Toyota Motor Corp....................................... 5,000 143,448
Yamazaki Baking Co. Ltd................................. 8,000 127,509
-----------
11,149,866
-----------
MALAYSIA -- 0.54%
Hume Industries (Malaysia) Bhd.......................... 7,000 44,070
Kuala Lumpur Kepong Bhd................................. 15,000 38,012
Land & General Holdings Bhd............................. 15,000 35,933
Malayan Banking Bhd..................................... 2,600 28,826
Malaysia International Shipping Bhd (Frgn.)............. 10,000 29,697
Nestle (Malaysia) Bhd................................... 1,000 8,038
Public Bank Bhd (Frgn.)................................. 17,667 37,425
Resorts World Bhd....................................... 4,000 18,215
Sime Darby Bhd.......................................... 15,000 59,097
Telekom Malaysia Bhd.................................... 3,000 26,728
Tenaga Nasional Bhd..................................... 18,000 86,241
YTL Corp. Bhd........................................... 4,000 21,540
-----------
433,822
-----------
NETHERLANDS -- 3.10%
ABN AMRO Holdings NV.................................... 3,219 209,178
Akzo Nobel NV........................................... 500 68,220
DSM NV.................................................. 680 66,990
Hoogovens NV............................................ 900 37,463
ING Groep NV............................................ 8,956 322,058
KLM Royal Dutch Air Lines NV............................ 1,900 53,385
KPN NV.................................................. 5,565 212,021
Philips Electronics NV.................................. 2,850 115,338
Royal Dutch Petroleum Co................................ 3,800 665,445
Royal Dutch Petroleum Co. NY Shares (c)................. 1,200 204,900
Unilever NV............................................. 1,900 335,688
Vendex International NV................................. 3,119 133,257
VNU-Ver Ned Uitgevers................................... 4,000 83,483
-----------
2,507,426
-----------
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
NEW ZEALAND -- 1.62%
Brierley Investments Ltd................................ 231,000 $ 213,813
Carter Holt Harvey Ltd.................................. 79,500 180,312
Fletcher Challenge Building............................. 30,750 94,512
Fletcher Challenge Energy............................... 29,550 85,604
Fletcher Challenge Forest Ltd........................... 49,803 83,398
Fletcher Challenge Paper................................ 60,500 124,394
Telecom Corp. of New Zealand Ltd........................ 87,000 443,821
Telecom Corp. of New Zealand Ltd. ADS (c)............... 1,100 89,100
-----------
1,314,954
-----------
SPAIN -- 1.62%
Acerinox S.A. .......................................... 400 57,690
Banco Bilbao-Vizcaya S.A................................ 1,800 97,006
Banco Central Hispanoamericano.......................... 1,700 43,586
Banco Intercontinental Espanol S.A...................... 300 46,427
Banco Popular Espanol S.A............................... 400 78,416
Banco Santander S.A..................................... 1,600 102,218
Cia Sevillana de Electricidad........................... 2,113 23,961
Empresa Nacional de Electridad S.A...................... 2,050 145,624
Fomento de Construcciones y
Contratas S.A.......................................... 500 46,512
Gas Natural SDG S.A. ................................... 300 69,652
Iberdrola S.A........................................... 13,000 183,894
Mapfre Corp. ........................................... 900 54,730
Repsol S.A.............................................. 3,300 126,342
Telefonica de Espana.................................... 7,500 173,842
Vallehermosa S.A........................................ 1,200 25,969
Viscofan Envolturas Celulosicas S.A..................... 2,300 33,596
-----------
1,309,465
-----------
SWITZERLAND -- 0.90%
ABB AG (Bearer)......................................... 30 37,201
CS Holdings AG (Reg.)................................... 396 40,552
Nestle S.A. (Reg.)...................................... 213 227,959
Novartis AG (Reg.)...................................... 140 160,219
Roche Holding AG (Gen.)................................. 18 139,622
Schweiz Bankgesellschaft (Bearer)....................... 42 36,692
Societe Generale de Surveillance Holding S.A. (Bearer).. 11 26,953
Zurich Versicherungs (Reg.)............................. 203 56,242
-----------
725,440
-----------
UNITED KINGDOM -- 10.15%
Abbey National PLC...................................... 11,000 144,018
Bank of Scotland........................................ 16,000 84,477
Bass PLC................................................ 6,800 95,547
B.A.T. Industries PLC................................... 35,000 290,219
Booker PLC.............................................. 10,500 71,791
British Energy PLC...................................... 75,000 188,687
British Gas PLC......................................... 71,500 274,718
British Petroleum Co. PLC............................... 33,416 400,615
British Steel PLC....................................... 62,000 170,306
British Telecommunications PLC.......................... 69,700 470,591
Charter PLC............................................. 9,531 120,789
</TABLE>
<TABLE>
<S> <C> <C>
Coats Viyella PLC....................................... 45,000 $ 102,430
FKI PLC................................................. 38,875 134,396
General Electric Co. PLC................................ 71,100 464,833
Glaxo Wellcome PLC...................................... 11,500 186,582
Grand Metropolitan PLC.................................. 46,000 361,355
Guinness PLC............................................ 36,300 284,225
Hanson PLC.............................................. 72,000 100,428
Hillsdown Holdings PLC.................................. 53,000 181,414
House of Fraser PLC..................................... 59,000 154,997
HSBC Holdings PLC....................................... 12,000 268,218
Imperial Chemical Industries PLC........................ 5,000 65,762
Legal & General Group PLC............................... 28,000 178,265
Lloyds TSB Group PLC.................................... 60,630 446,709
Marks & Spencer PLC..................................... 29,500 247,895
Millennium Chemicals, Inc. (b).......................... 500 8,875
Mirror Group PLC........................................ 24,000 88,516
National Power PLC...................................... 19,000 159,011
National Westminster Bank PLC........................... 10,800 126,706
Northern Foods PLC...................................... 32,000 111,997
Peninsular & Oriental Steam Navigation Co............... 29,000 292,829
Reckitt & Colman PLC.................................... 6,175 76,514
Redland PLC............................................. 9,500 59,589
RJB Mining PLC.......................................... 21,000 154,544
Royal & Sun Alliance Insurance Group PLC................ 16,697 127,021
RTZ Corp. PLC........................................... 11,200 179,511
Sainsbury (J.) PLC...................................... 23,000 152,730
Scottish Hydro-Electric PLC............................. 17,200 96,553
Sears PLC............................................... 66,000 107,308
Sedgwick Group PLC...................................... 48,000 108,027
SmithKline Beecham PLC.................................. 13,900 192,573
Smurfit (Jefferson) Group PLC........................... 30,000 89,081
Tesco PLC............................................... 22,000 133,476
Thames Water PLC........................................ 16,000 167,722
Unilever PLC............................................ 6,500 157,578
Vodafone Group PLC...................................... 19,600 82,687
Yorkshire Water PLC..................................... 5,000 60,628
-----------
8,222,743
-----------
Total Non-U.S. Equities................................. 39,678,850
-----------
Total Equities (Cost $61,753,091)....................... 70,083,822
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Short-Term Investments --12.62%
U.S. GOVERNMENT OBLIGATIONS -- 0.39%
U.S. Treasury Bills 5.063%, due 05/01/97................ $ 325,000 $ 319,553
-----------
COMMERCIAL PAPER -- 12.23%
Burlington Northern Santa Fe
5.650%, due 01/17/97................................... 500,000 498,744
Case Credit Corp.
5.510%, due 01/07/97................................... 500,000 499,541
Cincinnati Bell, Inc.
7.250%, due 01/02/97................................... 2,441,000 2,440,508
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
COMMERCIAL PAPER (CONTINUED)
CNA Financial Corp.
6.250%, due 01/23/97................................... $ 500,000 $ 498,090
Crown Cork & Seal Co., Inc.
5.520%, due 01/10/97 500,000 499,310
5.580%, due 01/29/97................................... 500,000 497,830
PanEnergy Corp.
6.050%, due 01/17/97................................... 1,000,000 997,311
Rite Aid Corp.
5.650%, due 01/06/97................................... 500,000 499,608
5.600%, due 01/21/97................................... 700,000 697,822
Tyson Foods, Inc.
5.750%, due 01/09/07................................... 750,000 749,042
US West Capital Funding, Inc.
5.600%, due 02/12/97................................... 532,000 528,524
Vastar Resources, Inc.
6.020%, due 01/02/97................................... 500,000 499,916
6.850%, due 01/10/97................................... 1,000,000 998,288
-----------
9,904,534
-----------
Total Short-Term Investments
(Cost $10,224,050)..................................... 10,224,087
-----------
Total Investments
(Cost $71,977,141) -- 99.17% (a)....................... 80,307,909
-----------
Cash and other assets, less liabilities --0.83%......... 675,731
-----------
Net Assets -- 100%...................................... $80,983,640
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Aggregate cost for federal income tax purposes was $71,977,141; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $10,899,783
Gross unrealized depreciation................................ (2,569,015)
-----------
Net unrealized appreciation.............................. $ 8,330,768
===========
</TABLE>
(b)Non-income producing security
(c)Denominated in U.S. dollars
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Equity Fund had the following open forward foreign currency
contracts as of December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollar................ 06/04/97 1,100,000 $ 810,230 $(19,958)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar.............. 06/04/97 950,000 753,566 14,604
Belgian Franc.................. 06/04/97 36,800,000 1,170,765 12,324
Dutch Guilder.................. 06/04/97 3,800,000 2,219,550 28,040
French Franc................... 06/04/97 19,500,000 3,786,028 18,331
German Mark.................... 06/04/97 4,400,000 2,883,595 36,500
Hong Kong Dollars.............. 06/04/97 4,400,000 568,746 (130)
Japanese Yen................... 06/04/97 500,000,000 4,401,739 150,419
Spanish Peseta................. 06/04/97 48,000,000 368,164 4,397
Swiss Franc.................... 06/04/97 900,000 680,839 27,822
--------
Total...................... $272,349
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Equity Fund had the following open index futures contracts as of
December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST/PROCEEDS VALUE GAIN
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Topix, 6 contracts.............. March 1997 $ 791,419 $ 760,920 $(30,499)
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 11 con-
tracts......................... March 1997 4,128,600 4,094,750 33,850
--------
Total........................ $ 3,351
========
</TABLE>
The segregated cash and market value of investments pledged to cover margin
requirements for the open futures positions at December 31, 1996 was $211,098
and $319,553, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $71,977,141) (Note 1)................. $80,307,909
Cash.............................................................. 2,540,769
Foreign currency, at value (Cost $97,461)......................... 95,800
Receivables:
Investment securities sold....................................... 265,153
Dividends........................................................ 152,214
Fund shares sold................................................. 113,121
Variation margin (Note 5)........................................ 80,051
Due from advisor................................................. 13,080
Net unrealized appreciation on forward foreign currency contracts. 272,349
Other assets...................................................... 7,401
-----------
TOTAL ASSETS................................................... 83,847,847
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 2,624,845
Fund shares redeemed............................................. 8,461
Accrued expenses................................................. 230,901
-----------
TOTAL LIABILITIES.............................................. 2,864,207
-----------
NET ASSETS......................................................... $80,983,640
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 7).......................................... $72,056,258
Accumulated undistributed net investment income................... 204,604
Accumulated net realized gain..................................... 112,758
Net unrealized appreciation....................................... 8,610,020
-----------
NET ASSETS..................................................... $80,983,640
===========
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $38,631,262 and 3,393,011 shares issued
and outstanding) (Note 7)....................................... $ 11.39
===========
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $42,352,378 and 3,721,883 shares issued
and outstanding) (Note 7)....................................... $ 11.38
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $50,249 for foreign taxes withheld)............. $ 623,914
Interest.......................................................... 212,723
----------
TOTAL INCOME................................................... 836,637
----------
EXPENSES:
Advisory (Note 2)................................................. 276,132
Distribution (Note 6)............................................. 141,145
Accounting........................................................ 71,001
Custodian......................................................... 50,480
Professional...................................................... 38,272
Other............................................................. 126,012
----------
TOTAL EXPENSES................................................. 703,042
Expenses deferred by Advisor (Note 2).......................... (216,697)
----------
NET EXPENSES................................................... 486,345
----------
NET INVESTMENT INCOME ......................................... 350,292
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 2,476,667
Futures contracts................................................ (492,032)
Foreign currency transactions.................................... 273,229
----------
Net realized gain.............................................. 2,257,864
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 2,471,472
Futures contracts................................................ (23,546)
Forward contracts................................................ 268,593
Translation of other assets and liabilities denominated in for-
eign currency................................................... 3,943
----------
Change in net unrealized appreciation or depreciation.......... 2,720,462
----------
Net realized and unrealized gain................................... 4,978,326
----------
Net increase in net assets resulting from operations............... $5,328,618
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 350,292 $ 462,604
Net realized gain............................. 2,257,864 8,259,766
Change in net unrealized appreciation or
depreciation................................. 2,720,462 1,258,707
------------ -----------
Net increase in net assets resulting from op-
erations..................................... 5,328,618 9,981,077
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class............................ (176,096) (295,340)
SwissKey Fund Class........................... (53,287) (41,698)
Distributions from net realized gain:
Brinson Fund Class............................ (3,076,894) (1,399,995)
SwissKey Fund Class........................... (3,396,000) (1,621,590)
------------ -----------
Total distributions to shareholders........... $ (6,702,277) $(3,358,623)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 19,387,404 11,563,213
Shares issued in acquisition of SBC World
Growth Fund (Note 1)......................... -- 25,670,575
Shares issued on reinvestment of distribu-
tions........................................ 6,291,113 3,336,320
Shares redeemed............................... (3,459,300) (7,760,045)
------------ -----------
Net increase in net assets resulting from cap-
ital share
transactions (Note 7)........................ 22,219,217 32,810,063
------------ -----------
TOTAL INCREASE IN NET ASSETS............... 20,845,558 39,432,517
------------ -----------
NET ASSETS:
Beginning of period........................... 60,138,082 20,705,565
------------ -----------
End of period (including accumulated undis-
tributed net investment income of $204,604
and $90,547, respectively)................... $ 80,983,640 $60,138,082
============ ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR YEAR JANUARY 28, 1994*
DECEMBER 31, 1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 11.57 $ 9.93 $ 9.49 $ 10.00
------- ------- ------- -------
Income from investment
operations:
Net investment income. 0.03 0.18 0.18 0.07
Net realized and
unrealized gain
(loss)............... 0.84 2.29 0.39 (0.54)
------- ------- ------- -------
Total income (loss)
from investment op-
erations........... 0.87 2.47 0.57 (0.47)
------- ------- ------- -------
Less distributions:
Distributions from net
investment income.... (0.06) (0.14) (0.04) (0.04)
Distributions from and
in excess of net re-
alized gain.......... (0.99) (0.69) (0.09) --
------- ------- ------- -------
Total distributions. (1.05) (0.83) (0.13) (0.04)
------- ------- ------- -------
Net asset value, end of
period................. $ 11.39 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= =======
Total return (non-
annualized)............ 7.67% 25.66% 6.06% (4.70%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $38,631 $27,126 $20,706 $20,642
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.62%** 1.77% 2.06% 2.65%**
After expense reim-
bursement............ 1.00%** 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 0.80%** 0.57% 0.71% 0.24%**
After expense reim-
bursement............ 1.42%** 1.34% 1.77% 1.89%**
Portfolio turnover
rate.................. 17% 74% 36% 21%
Average commission rate
paid per share........ $0.0259 $0.0288 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 11.57 $ 10.35
------- -------
Income from investment operations:
Net investment gain (loss).................. 0.02 (0.01)
Net realized and unrealized gain............ 0.80 1.93
------- -------
Total income from investment operations... 0.82 1.92
------- -------
Less distributions:
Distributions from net investment income.... (0.02) (0.01)
Distributions from net realized gain........ (0.99) (0.69)
------- -------
Total distributions....................... (1.01) (0.70)
------- -------
Net asset value, end of period................ $ 11.38 $ 11.57
======= =======
Total return (non-annualized)................. 7.23% 19.25%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $42,353 $33,012
Ratio of expenses to average net assets:
Before expense reimbursement................ 2.38%** 2.53%**
After expense reimbursement................. 1.76%** 1.76%**
Ratio of net investment income (loss) to av-
erage net assets:
Before expense reimbursement................ 0.04%** (0.19%)**
After expense reimbursement................. 0.66%** 0.58%**
Portfolio turnover rate...................... 17% 74%
Average commission rate paid per share....... $0.0259 $0.0288
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------
LOGO
The Global Bond Fund is actively managed, providing a fully integrated
treatment of the U.S. and other major fixed income markets across the world.
This global approach takes full advantage of relationships both within and
across markets, based on consistent analysis of macroeconomic and market
conditions. Market and currency strategies are developed in a global asset
allocation framework, in conjunction with senior fixed income professionals in
Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and
Tokyo.
The Brinson Global Bond Fund has provided an annualized return of 8.41% since
July 31, 1993 (performance inception date). Its benchmark, the Salomon World
Government Bond Index, returned 8.35%. For the year ended December 31, 1996,
the Fund returned 9.30%, while the benchmark returned 3.63%. In the second half
of 1996, the Fund produced a return of 7.03% compared to the 5.18% return of
the benchmark.
Market/currency allocation and bond management strategies all contributed
positively to Fund performance in 1996. Market allocation contributions were
broadly derived from European and Canadian bond market overweights against the
U.S. The Japanese bond market underweight detracted from Fund performance. The
currency allocation strategy added value in nearly every currency. Bond
management was strong, particularly in the U.S. market.
Bond markets around the world began a period of strength in early 1995 that was
grounded on a foundation of poor performance in 1994. The strength the global
markets experienced in 1995 was protracted into 1996 for essentially every bond
market except for the U.S. In U.S. dollar-hedged terms, the Salomon Brothers
Index returned 8.68% in 1996. The U.S. market posted a lackluster return of
2.73% while the non-U.S. portion of the index (hedged) returned 11.82% during
the year.
The Fund benefited from a U.S. bond market underweight through the middle of
October, when the Fund shifted to a neutral stance. The Fund also benefited
from an overweight in core European markets during the year. Despite low yields
in Japan, the market generated a relatively strong return; consequently, the
Fund's underweight in Japan detracted from performance.
Currency allocation strategy contributed substantially to the performance of
the Global Bond Fund relative to the Salomon Brothers World Government Bond
Index. During the year, the Fund maintained significant underweights to the
Japanese yen and the core European currencies. The aggregate European currency
underweight was similar in magnitude to the yen underweight. The U.S. dollar
overweight averaged about 35% during the year. The Japanese yen declined by
11.13%, and the core European currency depreciations ranged from 14.31% for the
Swiss franc to 5.93% for the French franc. The Fund maintained neutral or
overweight positions to currencies that appreciated over the course of 1996.
Bond management was particularly strong in the U.S. due to issue selection in
the mortgage-backed and corporate sectors. Security selection contributions
were mixed outside the U.S.
------------------------------------------------------------
38
<PAGE>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
ended ended ended 7/31/93*
12/31/96 12/31/96 12/31/96 to 12/31/96
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BRINSON GLOBAL BOND FUND 7.03% 9.30% 8.27% 8.41%
Salomon World Government Bond Index
(currency unhedged) 5.18 3.63 8.08 8.35
Salomon World Government Bond Index
(currency hedged) 6.87 8.68 7.22 7.83
- ---------------------------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson Global Bond Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000
This chart shows the growth in the value of an investment in the Brinson Global
Bond Fund and the Salomon World Government Bond Index (currency unhedged and
hedged) if you had invested $100,000 on July 31, 1993, and had reinvested all
your income dividends and capital gain distributions through December 31,
1996. No adjustment has been made for any income taxes payable by shareholders
on income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
BRINSON GLOBAL BOND FUND
VS. SALOMON WORLD GOVERNMENT BOND INDEX (CURRENCY UNHEDGED AND HEDGED)
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson Global Salomon World Gov't Bond Salomon World Gov't Bond
Bond Fund Index (currency unhedged) Index (currency hedged)
-------------- ------------------------- ------------------------
7/31/93 $100,000 $100,000 $100,000
9/30/93 $102,201 $104,236 $102,650
12/31/93 $103,859 $104,193 $104,963
3/31/94 $100,762 $104,198 $101,652
6/30/94 $ 99,215 $104,883 $ 99,722
9/30/94 $100,150 $106,111 $ 99,850
12/31/94 $100,240 $106,618 $101,027
3/31/95 $104,412 $118,276 $105,636
6/30/95 $110,464 $124,592 $111,126
9/30/95 $114,823 $123,284 $114,256
12/31/95 $120,612 $126,918 $119,043
3/31/96 $120,491 $124,543 $118,866
6/30/96 $123,165 $125,050 $121,059
9/30/96 $127,459 $128,473 $125,071
12/31/96 $131,830 $131,529 $129,378
7/31/93 = $100,000 Data Through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
------------------------------------------------------------
39
<PAGE>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------
LOGO
ASSET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------
<S> <C> <C>
U.S. 33.0% 33.0%
Japan 18.7 5.2
Australia 1.1 0.0
Austria 0.9 0.0
Belgium 2.7 2.8
Canada 3.3 8.0
Denmark 1.7 6.3
Finland 0.5 0.0
France 7.5 7.9
Germany 9.6 13.4
Italy 6.7 7.0
Netherlands 3.4 8.2
Spain 2.8 0.0
Sweden 1.7 1.9
Switzerland 0.4 0.0
U.K. 6.0 6.3
- -------------------------------
100.0% 100.0%
</TABLE>
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Asset-Backed........................................................... 0.70%
CMO.................................................................... 0.41
Consumer............................................................... 0.69
Financial.............................................................. 1.66
Industrial............................................................. 0.81
Telecommunications..................................................... 0.64
------
4.91
International Dollar Bonds............................................. 1.83
U.S. Government Agencies............................................... 9.85
U.S. Government Obligations............................................ 11.92
------
Total U.S. Bonds..................................................... 28.51*
------
NON-U.S. BONDS
Foreign Financial Bonds................................................. 23.90
Foreign Government Bonds................................................ 41.78
------
Total Non-U.S. Bonds................................................. 65.68
------
SHORT-TERM INVESTMENTS.................................................. 6.01*
------
TOTAL INVESTMENTS.................................................... 100.20
LIABILITIES, LESS CASH AND OTHER ASSETS ................................ (0.20)
------
NET ASSETS........................................................... 100.00%
======
- --------------------------------------------------------------------------------
</TABLE>
*The Fund held a long position in U.S. Treasury futures on December 31, 1996
which increased U.S. bond exposure from 28.51% to 32.47% and decreased the
Fund's exposure to Short-Term Investments from 6.01% to 2.05%.
CURRENCY ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------
<S> <C> <C>
U.S. 33.0% 57.4%
Japan 18.7 8.7
Australia 1.1 1.1
Austria 0.9 0.0
Belgium 2.7 2.8
Canada 3.3 3.2
Denmark 1.7 1.7
Finland 0.5 0.0
France 7.5 1.5
Germany 9.6 5.6
Italy 6.7 7.0
Netherlands 3.4 0.0
Spain 2.8 2.8
Sweden 1.7 1.9
Switzerland 0.4 0.0
U.K. 6.0 6.3
- -------------------------------
100.0% 100.0%
</TABLE>
------------------------------------------------------------
40
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 94.19%
U.S. BONDS -- 28.51%
U.S. CORPORATE BONDS -- 4.91%
Asset Securitization Corp. 96-D3
7.210%, due 10/13/26.................................... $ 140,000 $ 142,805
Capital One Bank
6.830%, due 05/17/99 ................................... 200,000 200,923
Chase Manhattan Auto Owner Trust 96C-A4
6.150%, due 03/15/02.................................... 125,000 124,375
Chrysler Financial Corp. MTN
6.500%, due 08/21/97.................................... 165,000 165,784
Ford Credit Auto Lease Trust
6.350%, due 10/15/98.................................... 134,247 134,592
Ford Credit Grantor Trust 95-B
5.900%, due 10/15/00.................................... 65,914 65,986
Ford Motor Co.
7.250%, due 10/01/08.................................... 200,000 201,705
GMAC MTN
6.750%, due 06/10/02.................................... 200,000 200,754
Green Tree Financial 94-2
8.300%, due 05/15/19.................................... 25,000 26,442
Lockheed Martin Corp.
7.700%, due 06/15/08.................................... 125,000 130,854
News America Corp.
7.750%, due 01/20/24.................................... 275,000 262,871
The Money Store 94-A3
5.525%, due 09/15/18.................................... 86,249 84,622
Time Warner Entertainment, Inc.
8.375%, due 03/15/23.................................... 235,000 238,872
Time Warner, Inc.
9.150%, due 02/01/23.................................... 40,000 43,347
-----------
2,023,932
-----------
INTERNATIONAL DOLLAR BONDS -- 1.83%
Korea Development Bank
6.625%, due 11/21/03.................................... 90,000 89,331
Province of Quebec
7.500%, due 07/15/23.................................... 235,000 234,589
Republic of South Africa
9.625%, due 12/15/99.................................... 125,000 132,969
Royal Bank of Scotland
7.375%, due 04/01/06.................................... 300,000 298,987
-----------
755,876
-----------
U.S. GOVERNMENT AGENCIES -- 9.85%
Federal Home Loan Mortgage Corp.
6.520%, due 01/02/02.................................... 300,000 300,885
6.750%, due 05/30/06.................................... 65,000 65,479
7.000%, due 04/15/07.................................... 193,904 190,836
5.800%, due 08/15/19.................................... 90,000 84,067
6.500%, due 05/15/21.................................... 107,708 97,743
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................... 113,402 115,564
9.000%, due 05/01/24.................................... 324,175 346,012
9.500%, due 04/01/25.................................... 31,268 33,652
Federal National Mortgage Association
6.500%, due 03/01/03.................................... 455,000 450,168
6.220%, due 03/13/06.................................... 150,000 145,013
6.500%, due 04/25/08.................................... 110,333 105,251
9.000%, due 08/01/21.................................... 31,246 33,256
</TABLE>
<TABLE>
<S> <C> <C>
8.500%, due 07/01/22................................... $ 22,762 $ 23,919
7.500%, due 05/01/25................................... 385,767 385,647
6.500%, due 02/01/26................................... 78,160 74,569
6.500%, due 03/01/26................................... 820,000 782,331
7.000%, due 03/01/26................................... 180,000 176,119
7.500%, due 12/01/26................................... 299,101 299,119
Federal National Mortgage
Association Strips
8.000%, due 07/01/24 interest only..................... 116,861 36,012
0.000%, due 07/01/26 principal only.................... 103,393 69,564
Government National Mortgage Association
6.500%, due 03/20/26................................... 68,926 65,329
Independent National Mortgage Corp. 8.350%, due
06/25/25............................................... 175,000 179,209
-----------
4,059,744
-----------
U.S. GOVERNMENT OBLIGATIONS-- 11.92%
U.S. Treasury Coupon Strips
0.000%, due 05/15/08 principal only.................... 245,000 116,598
U.S. Treasury Notes and Bonds
6.250%, due 10/31/01................................... 1,660,000 1,661,038
7.000%, due 07/15/06................................... 940,000 976,719
8.125%, due 05/15/21................................... 1,860,000 2,157,600
-----------
4,911,955
-----------
Total U.S. Bonds........................................ 11,751,507
-----------
NON-U.S. BONDS -- 65.68%
BELGIUM -- 2.73%
Kingdom of Belgium
8.750%, due 06/25/02............................... BEF 14,000,000 520,386
9.000%, due 03/28/03................................... 4,000,000 151,251
7.500%, due 07/29/08................................... 13,000,000 453,298
-----------
1,124,935
-----------
CANADA -- 7.96%
British Columbia
7.750%, due 06/16/03............................... CAD 1,050,000 835,993
7.250%, due 09/21/05................................... 1,290,000 981,193
Government of Canada
4.250%, due 12/01/21(b)................................ 1,820,000 1,465,566
-----------
3,282,752
-----------
DENMARK -- 6.21%
City of Copenhagen
6.250%, due 03/15/01............................... DKR 2,400,000 424,147
Great Belt
7.000%, due 09/02/03................................... 10,650,000 1,895,692
Kingdom of Denmark
7.000%, due 11/10/24................................... 1,500,000 241,062
-----------
2,560,901
-----------
</TABLE>
- --------------------------------------------------------------------------------
41
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------- -----------
<S> <C> <C>
FRANCE -- 7.73%
Eurofima
8.625%, due 09/01/99............................ FRF 5,100,000 $ 1,096,897
Government of France (OAT)
8.500%, due 12/26/12................................ 3,100,000 726,714
8.500%, due 04/25/23................................ 2,400,000 563,218
KFW International Finance
7.750%, due 02/17/98................................ 2,600,000 523,568
Kingdom of Finland
9.000%, due 08/13/03................................ 1,200,000 278,147
-----------
3,188,544
-----------
GERMANY -- 13.23%
Bundesrepublik Deutscheland
6.250%, due 01/04/24............................ DEM 800,000 492,687
European Economic Community
6.500%, due 03/10/00................................ 2,650,000 1,833,901
Kingdom of Norway
6.125%, due 05/05/98................................ 1,040,000 698,125
LKB Baden-Wurt Finance
6.500%, due 09/15/08................................ 1,300,000 866,751
Republic of Ireland
7.250%, due 03/18/03................................ 2,200,000 1,562,455
-----------
5,453,919
-----------
ITALY -- 6.64%
Bayerische Landesbank
10.750%, due 03/01/03........................... ITL 1,000,000,000 771,950
European Investment Bank
12.750%, due 02/15/00............................... 150,000,000 115,546
Landesbank Rheinland
8.250%, due 06/02/98................................ 750,000,000 502,532
LKB Baden-Wurt Finance
10.750%, due 04/14/03............................... 950,000,000 734,915
Republic of Italy (BTP)
9.500%, due 02/01/01................................ 850,000,000 613,867
-----------
2,738,810
-----------
JAPAN -- 5.52%
Asian Development Bank
5.000%, 02/05/03................................ JPY 40,000,000 400,620
Government of Japan No.133
7.300%, due 09/20/00................................ 25,000,000 262,019
Government of Japan No.144
6.000%, due 12/20/01................................ 50,000,000 516,628
Republic of Austria
5.000%, due 01/22/01................................ 50,000,000 490,006
World Bank 5.250%, due 03/20/02...................... 60,000,000 604,484
-----------
2,273,757
-----------
</TABLE>
<TABLE>
<S> <C> <C>
NETHERLANDS -- 7.88%
Government of Nederlands
7.500%, due 11/15/99................................ NLG 1,355,000 $ 858,968
International Nederland Verzekeringen 6.250%, due
12/28/05................................................ 1,800,000 1,062,726
Rabobank
6.750%, due 06/25/03.................................... 1,400,000 873,149
Republic of Austria
6.250%, due 02/28/24.................................... 825,000 453,165
-----------
3,248,008
-----------
SWEDEN - 1.79%
Kingdom of Sweden
6.000%, due 02/09/05.................................SWK 5,200,000 738,022
-----------
UNITED KINGDOM -- 5.99%
Abbey National
8.750%, due 05/24/04.................................GBP 350,000 620,721
British Gas PLC
8.125%, due 03/31/03.................................... 545,000 940,901
UK Treasury
7.750%, due 09/08/06.................................... 45,000 78,291
9.000%, due 10/13/08.................................... 260,000 492,589
8.000%, due 09/27/13.................................... 190,000 335,439
-----------
2,467,941
-----------
Total Non-U.S. Bonds..................................... 27,077,589
-----------
Total Bonds (Cost $37,402,378)........................... 38,829,096
-----------
Short-Term Investments-- 6.01%
GOVERNMENT OBLIGATIONS -- 0.06%
U.S. Treasury Bills 5.063%, due 05/01/97................. 25,000 24,581
-----------
COMMERCIAL PAPER -- 5.95%
Cincinnati Bell, Inc.
7.250%, 01/02/97........................................ 207,000 206,958
CNA Financial Corp.
6.250%, due 01/23/97.................................... 500,000 498,090
Crown Cork & Seal Co.,
5.520%, due 01/10/97.................................... 500,000 499,310
PanEnergy Corp.
6.05%, due 01/17/97..................................... 500,000 498,656
Vastar Resources, Inc.
6.020%, due 01/02/97.................................... 500,000 499,916
Whirlpool Financial Corp.
6.000%, due 01/03/97.................................... 250,000 249,917
-----------
2,452,847
-----------
Total Short-Term Investments
(Cost $2,477,425)....................................... 2,477,428
-----------
Total Investments
(Cost $39,879,803) -- 100.20% (a)....................... 41,306,524
-----------
Liabilities, less cash and other assets -- (0.20%)....... (81,085)
-----------
Net Assets -- 100%....................................... $41,225,439
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
42
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Aggregate cost for federal income tax purposes was $39,879,803; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $1,660,144
Gross unrealized depreciation................................. (233,423)
----------
Net unrealized appreciation............................... $1,426,721
==========
</TABLE>
(b)Linked to Canada's retail price index. Reset semi-annually.
MTN: Medium term note
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Bond Fund had the following open forward foreign currency contracts
as of December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Australian Dollar.......... 05/30/97 500,000 $ 396,624 $(10,376)
Japanese Yen............... 05/05/97 165,000,000 1,451,551 (35,306)
Spanish Peseta............. 05/30/97 138,000,000 1,058,498 216
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Canadian Dollar............ 05/30/97 2,900,000 2,135,475 32,084
Danish Kroner.............. 05/30/97 11,300,000 1,930,758 536
Dutch Guilder.............. 05/30/97 5,800,000 3,386,583 7,215
French Franc............... 05/30/97 14,000,000 2,717,348 (14,645)
German Mark ............... 05/30/97 5,200,000 3,406,760 842
--------
Total.................. $(19,734)
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Bond Fund had the following open futures contracts as of December
31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE LOSS
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes, 6 con-
tracts................................ March 1997 $645,375 $639,563 $ (5,812)
10 year U.S. Treasury Notes, 5 con-
tracts................................ March 1997 554,063 545,625 (8,438)
30 year U.S. Treasury Bonds, 4 con-
tracts................................ March 1997 460,000 450,500 (9,500)
--------
Total.............................. $(23,750)
========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at December 31, 1996 was $24,581.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $39,879,803) (Note 1)................ $41,306,524
Cash............................................................. 1,186,716
Foreign currency, at value (Cost $79,558)........................ 77,444
Receivables:
Investment securities sold...................................... 1,106,341
Interest........................................................ 1,142,553
Fund shares sold................................................ 6,533
Due from advisor................................................ 20,580
Other assets..................................................... 5,655
-----------
TOTAL ASSETS.................................................. 44,852,346
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 2,821,281
Fund shares redeemed............................................ 645,334
Variation margin (Note 5)....................................... 12,312
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 19,734
Accrued expenses................................................ 128,246
-----------
TOTAL LIABILITIES............................................. 3,626,907
-----------
NET ASSETS........................................................ $41,225,439
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $41,356,690
Accumulated distributions in excess of net investment income..... (1,448,556)
Accumulated distributions in excess of net realized gain......... (63,232)
Net unrealized appreciation...................................... 1,380,537
-----------
NET ASSETS.................................................... $41,225,439
===========
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $37,704,006 and 3,937,187 shares issued
and outstanding) (Note 7)....................................... $ 9.58
===========
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $3,521,433 and 368,181 shares issued and
outstanding) (Note 7)........................................... $ 9.56
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.......................................................... $1,352,589
----------
TOTAL INCOME................................................... 1,352,589
----------
EXPENSES:
Advisory (Note 2)................................................. 159,408
Accounting........................................................ 62,618
Professional...................................................... 31,464
Transfer agent.................................................... 24,856
Custodian......................................................... 21,192
Registration...................................................... 20,504
Administration.................................................... 18,520
Distribution (Note 6)............................................. 9,380
Other............................................................. 21,839
----------
TOTAL EXPENSES................................................. 369,781
Expenses deferred and reimbursed by Advisor (Note 2)........... (168,938)
----------
NET EXPENSES................................................... 200,843
----------
NET INVESTMENT INCOME.......................................... 1,151,746
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 723,433
Futures contracts................................................ 77,372
Foreign currency transactions.................................... (126,037)
----------
Net realized gain............................................... 674,768
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 935,964
Futures contracts................................................ (21,891)
Forward contracts................................................ 123,239
Translation of other assets and liabilities denominated in for-
eign currency................................................... 12,863
----------
Change in net unrealized appreciation or depreciation........... 1,050,175
----------
Net realized and unrealized gain.................................. 1,724,943
----------
Net increase in net assets resulting from operations.............. $2,876,689
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1996 JUNE
(UNAUDITED) 30, 1996
----------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income.......................... $ 1,151,746 $ 2,351,810
Net realized gain.............................. 674,768 4,022,906
Change in net unrealized appreciation or depre-
ciation ...................................... 1,050,175 (1,992,544)
----------- -----------
Net increase in net assets resulting from oper-
ations........................................ 2,876,689 4,382,172
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income....... (2,204,689) (3,447,154)
Distributions in excess of net investment in-
come.......................................... (1,615,023) (1,534,232)
Distributions from net realized gain........... (769,789) (355,057)
----------- -----------
Total distributions to shareholders*........... (4,589,501) (5,336,443)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................... 4,488,660 14,584,928
Shares issued on reinvestment of distributions. 3,667,961 3,954,345
Shares redeemed................................ (9,937,375) (24,728,515)
----------- -----------
Net (decrease) in net assets resulting from
capital share transactions (Note 7)........... (1,780,754) (6,189,242)
----------- -----------
TOTAL (DECREASE) IN NET ASSETS.............. (3,493,566) (7,143,513)
----------- -----------
NET ASSETS:
Beginning of period............................ 44,719,005 51,862,518
----------- -----------
End of period (including accumulated undistrib-
uted net investment income of ($1,448,556) and
$1,052,943, respectively)..................... $41,225,439 $44,719,005
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net invest-
ment income
Brinson Fund Class............................ (3,503,032) (4,734,956)
SwissKey Fund Class........................... (316,680) (246,430)
Distributions from net realized gain
Brinson Fund Class............................ (704,236) (338,786)
SwissKey Fund Class........................... (65,553) (16,271)
----------- -----------
Total distributions to shareholders............ (4,589,501) (5,336,443)
----------- -----------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
46
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR YEAR JULY 30, 1993*
DECEMBER 31, 1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- -------
Income (loss) from in-
vestment operations:
Net investment income
..................... 0.93 0.84 0.50 0.45
Net realized and
unrealized gain
(loss)............... (0.24) 0.31 0.58 (0.52)
------- ------- ------- -------
Total income (loss)
from investment op-
erations........... 0.69 1.15 1.08 (0.07)
------- ------- ------- -------
Less distributions:
Distributions from and
in excess of net in-
vestment income...... (0.96) (1.40) (0.24) (0.28)
Distributions from and
in excess of net re-
alized gain.......... (0.19) (0.10) -- (0.10)
------- ------- ------- -------
Total distributions. (1.15) (1.50) (0.24) (0.38)
------- ------- ------- -------
Net asset value, end of
period................. $ 9.58 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= =======
Total return (non-
annualized)............ 7.03% 11.50% 11.34% (0.79%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $37,704 $41,066 $51,863 $36,849
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.69%** 1.65% 1.43% 1.78%**
After expense reim-
bursement............ 0.90%** 0.90% 0.90% 0.90%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 4.66%** 4.98% 5.53% 4.03%**
After expense reim-
bursement............ 5.45%** 5.73% 6.06% 4.91%**
Portfolio turnover
rate.................. 107% 184% 199% 189%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
47
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $10.02 $10.56
------ ------
Income from investment operations:
Net investment income....................... 0.91 0.78
Net realized and unrealized gain (loss)..... (0.24) 0.15
------ ------
Total income from investment operations... 0.67 0.93
------ ------
Less distributions:
Distributions from and in excess of net in-
vestment income............................ (0.94) (1.37)
Distributions from net realized gain........ (0.19) (0.10)
------ ------
Total distributions....................... (1.13) (1.47)
------ ------
Net asset value, end of period................ $ 9.56 $10.02
====== ======
Total return (non-annualized)................. 6.76% 9.17%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $3,521 $3,653
Ratio of expenses to average net assets:
Before expense reimbursement................ 2.18%** 2.14%**
After expense reimbursement................. 1.39%** 1.39%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 4.17%** 4.49%**
After expense reimbursement................. 4.96%** 5.24%**
Portfolio turnover rate...................... 107% 184%
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding,
Brinson Fund Class and SwissKey Fund Class. There are an unlimited number of
shares of each class with par value of $0.001 authorized. Each share represents
an identical interest in the investments of the Funds and has the same rights.
The Trust entered into an Agreement and Plan of Reorganization dated June 16,
1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995,
pursuant to the Plan of Reorganization, the Trust acquired all of the net
assets of the SBC World Growth Fund of the SwissKey Funds, which totalled
$25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange
solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund.
The SwissKey Fund shares were then distributed to shareholders of the SBC World
Growth Fund according to their respective interests, and the SBC World Growth
Fund was dissolved. The total net assets of the Global Equity Fund were
$47,088,147 immediately after the acquisition.
The following is a summary of significant accounting policies consistently
followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a
"Fund," collectively the "Funds") in the preparation of their financial
statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Investments in affiliated
investment companies are valued each day based on the closing net asset value
of the fund. U.S. equity securities traded over the counter are priced at the
most recent bid price. Fixed income/debt securities are valued by using market
quotations or independent services that use prices provided by market makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics. Futures contracts are valued at the
settlement price established each day on the exchange on which they are traded.
Forward foreign currency contracts are valued daily using the mean between the
bid and the asked forward points added to the current exchange rate. Short-term
obligations with a maturity of 60 days or less are valued at amortized cost,
which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts, income receipts and expense accruals are translated at the
prevailing exchange rate on the date of each transaction. Realized and
unrealized foreign exchange gains or losses on investments are included as a
component of net realized and unrealized gain or loss in the statement of
operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 1996. Therefore, no federal income tax provision was required.
- --------------------------------------------------------------------------------
49
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per
share between the classes are due to distribution expenses.
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Fund Class shares will not incur any of the distribution expenses.
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, the Funds pay the Advisor a monthly fee based on each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates, for the six
months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
FEES
ADVISORY BRINSON CLASS SWISSKEY CLASS ADVISORY DEFERRED AND/OR
FEE EXPENSE CAP EXPENSE CAP FEES REIMBURSED
-------- ------------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.75% $2,019,630 $ --
Global Equity Fund...... 0.80 1.00 1.76 276,132 216,697
Global Bond Fund........ 0.75 0.90 1.39 159,408 168,938
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees were $5,888, $2,208 and $2,208 for the Global
Fund, Global Equity Fund and Global Bond Fund, respectively.
At December 31, 1996, the Global Fund was invested in shares of certain
affiliated investment companies also sponsored by Brinson Partners, Inc. These
investments are listed in the schedule of investments and represent 9.43% of
the Fund's total net assets. At December 31, 1996, net unrealized appreciation
on these investments was $5,160,007.
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1996, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $408,770,372 $397,827,575
Global Equity Fund.................................... 21,925,975 10,301,042
Global Bond Fund...................................... 41,276,806 44,423,362
</TABLE>
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation
- --------------------------------------------------------------------------------
50
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
strategies. A forward foreign currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. Risks
associated with such contracts include movement in the value of the foreign
currency relative to the U.S. dollar and the ability of the counterparty to
perform. The unrealized gain, if any, represents the credit risk to the Fund on
a forward foreign currency contract. Fluctuations in the value of forward
foreign currency contracts are recorded daily as net unrealized gains or
losses. The Funds realize a gain or loss upon settlement of the contracts. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts. The counterparty to all forward foreign currency
contracts, at and for the six months ended December 31, 1996, was the Funds'
custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan governs payments made for
the expenses incurred in the promotion and distribution of the SwissKey Fund
Class of shares. Annual fees under the Plan, which include a 0.25% service fee,
total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey
Fund Class of the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
7.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ----------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class................ 4,583,763 $57,951,937 7,972,013 $ 95,544,500
SwissKey Fund Class............... 211,635 2,646,592 1,155,619 13,939,062
--------- ----------- --------- ------------
Total Sales.................... 4,795,398 $60,598,529 9,127,632 $109,483,562
========= =========== ========= ============
Dividend Reinvestment:
Brinson Fund Class................ 4,022,259 $48,025,771 2,632,284 $ 30,918,724
SwissKey Fund Class............... 130,547 1,554,814 20,488 243,591
--------- ----------- --------- ------------
Total Dividend Reinvestment.... 4,152,806 $49,580,585 2,652,772 $ 31,162,315
========= =========== ========= ============
Redemptions:
Brinson Fund Class................ 5,171,939 $64,203,767 5,330,521 $ 63,966,318
SwissKey Fund Class............... 54,093 683,312 24,583 296,145
--------- ----------- --------- ------------
Total Redemptions.............. 5,226,032 $64,887,079 5,355,104 $ 64,262,463
========= =========== ========= ============
</TABLE>
- --------------------------------------------------------------------------------
51
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
-------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............... 837,664 $ 9,913,092 285,419 $ 3,205,567
SwissKey Fund Class.............. 808,570 9,474,311 746,285 8,357,646
--------- ----------- --------- -----------
Total Sales................... 1,646,234 $19,387,403 1,031,704 $11,563,213
========= =========== ========= ===========
Shares issued in acquisition of
SBC World Growth Fund:
Brinson Fund Class............... -- -- -- --
SwissKey Fund Class.............. -- $ -- 2,474,177 $25,670,575
--------- ----------- --------- -----------
Total......................... -- $ -- 2,474,177 $25,670,575
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Fund Class............... 288,818 $ 3,237,655 160,063 $ 1,694,631
SwissKey Fund Class.............. 272,630 3,053,458 155,720 1,641,689
--------- ----------- --------- -----------
Total Dividend Reinvestment... 561,448 $ 6,291,113 315,783 $ 3,336,320
========= =========== ========= ===========
Redemptions:
Brinson Fund Class............... 77,459 $ 944,496 186,600 $ 2,055,092
SwissKey Fund Class.............. 212,095 2,514,803 523,404 5,704,953
--------- ----------- --------- -----------
Total Redemptions............. 289,554 $ 3,459,299 710,004 $ 7,760,045
========= =========== ========= ===========
<CAPTION>
GLOBAL BOND FUND
-------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............... 402,651 $ 4,150,385 1,094,889 $10,985,420
SwissKey Fund Class.............. 32,865 338,275 345,211 3,599,508
--------- ----------- --------- -----------
Total Sales................... 435,516 $ 4,488,660 1,440,100 $14,584,928
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Fund Class............... 348,609 $ 3,318,757 374,786 $ 3,722,031
SwissKey Fund Class.............. 36,719 349,204 23,414 232,314
--------- ----------- --------- -----------
Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345
========= =========== ========= ===========
Redemptions:
Brinson Fund Class............... 905,614 $ 9,248,017 2,369,683 $24,686,522
SwissKey Fund Class.............. 65,831 689,358 4,197 41,993
--------- ----------- --------- -----------
Total Redemptions............. 971,445 $ 9,937,375 2,373,880 $24,728,515
========= =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
52
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
THE BRINSON FUNDS
---------------------------------------------------------------------
Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New
York . Paris
Singapore . Sydney . Tokyo . Zurich
LOGO
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800)
448-2430
<PAGE>
----------------------------
THE BRINSON FUNDS
BRINSON U.S. BALANCED FUND
BRINSON U.S. EQUITY FUND
BRINSON U.S. BOND FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
LOGO
GLOBAL INSTITUTIONAL ASSET MANAGEMENT
----------------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
LOGO
TRUSTEES
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
OFFICERS
Frank K. Reilly, CFA Carolyn M. Burke, CPA
Chairman of the Board Assistant Secretary
E. Thomas McFarlan Catherine E. Macrae
President and Treasurer Assistant Secretary
Thomas J. Digenan, CFA, CPA Debra L. Nichols
Assistant Treasurer Assistant Secretary
Bruce G. Leto
Secretary
------------------------------------------------------------
1
<PAGE>
THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
LOGO
In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their
institutional investment management organizations into a single investment
management business operating as Brinson Partners, Inc. in North America and
SBC Brinson in its other world-wide locations. We are a global investment
management organization with over $72 billion in institutional assets under
discretionary active management. We are also the investment advisor for SBC
Private Banking mutual fund assets which total $47 billion. The firm manages
investment portfolios for corporations, public funds, endowments, foundations,
central banks and other institutional investors located throughout the world.
Our organization employs over 590 people in offices in Chicago, Basel,
Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo
and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients and has offered fully integrated global portfolios since then.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is tailored to
specific client objectives and focused upon both risk and return considerations
in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally
developed valuation systems and seasoned judgment. Our independent team
approach allows for rapid responses to market changes, while providing each
client with the benefit of our best talent and the flexibility to customize
portfolios to meet unique requirements.
------------------------------------------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LOGO
Shareholder Letter............................................................ 4
U.S. Economic and Market Highlights........................................... 5
U.S. Balanced Fund............................................................ 6
Schedule of Investments..................................................... 9
Financial Statements........................................................12
Financial Highlights........................................................15
U.S. Equity Fund..............................................................17
Schedule of Investments.....................................................20
Financial Statements........................................................22
Financial Highlights........................................................25
U.S. Bond Fund................................................................27
Schedule of Investments.....................................................30
Financial Statements........................................................31
Financial Highlights........................................................34
The Brinson Funds--Notes to Financial Statements..............................36
------------------------------------------------------------
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
LOGO
February 19, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the December 31, 1996 Semi-Annual Report for the U.S. Balanced Fund,
U.S. Equity Fund and U.S. Bond Fund. This Report presents our current U.S.
economic and market outlook, as well as the Funds' recent investment strategies
and performance. To summarize this information:
U.S. Balanced Fund
For the period from December 31, 1994 (performance inception date) to December
31, 1996, the Fund provided an annualized total return of 18.16%. For the
second half of 1996, the Fund returned 8.02%.
The Fund's market allocation has been characterized by an underweight in the
U.S. equity market and an overweight to the U.S. bond market where return and
risk characteristics are presently more attractive.
U.S. Equity Fund
For the period from February 28, 1994 (performance inception date) to December
31, 1996, the Fund provided an annualized total return of 21.47%. The Fund
returned 12.96% in the second half of 1996.
Fund strategy presently maintains a modest overweight in stocks with high book-
to-price, earnings variability and financial leverage characteristics. In
addition, the Fund is underweighted the foreign earnings exposure embedded in
U.S. corporate earnings, particularly relative to the S&P 500. Current industry
positions include relative overweights in capital goods, banks, transportation,
insurance, healthcare and consumer non-durables issues. The Fund remains
underweighted in energy, technology, utility, chemicals and retail/apparel
stocks.
U.S. Bond Fund
For the period from August 31, 1995 (performance inception date) to December
31, 1996, the Fund provided an annualized total return of 6.84%. For the second
half of 1996, the Fund returned 5.42%.
Fund strategy currently maintains a duration target of 1.3 times that of the
benchmark.
We look forward to the challenges ahead and, as always, welcome your comments
and suggestions.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson, CFA
President and Chief Investment Officer
Brinson Partners, Inc.
------------------------------------------------------------
4
<PAGE>
U.S. ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
LOGO
Real GDP grew 2.5% in 1996, consisting of quarterly growth rates alternating
between strong and modest. This was consistent with our view that the economy
will continue to produce moderate growth, although with typical fluctuations
from period to period. Overall, growth is at a level approximating the
economy's long-run potential.
While the bond market has been adjusting yields, often by substantial amounts,
on the slightest bit of news, inflation has remained consistently moderate.
Even though oil prices rose to $25 per barrel last year, there was little
impact discernible on intermediate or final goods prices. While consumer price
inflation has been running between 2.25% and 3.25% since 1991, other measures
of inflation, such as the personal consumption deflator and the core CPI, have
shown even less price pressure. The Federal Reserve continues to act as though
operating with a de facto inflation target, rather than attempting to satisfy
non-inflation aims.
With November's election leaving the balance of power generally unchanged,
fiscal policy is reasonably likely to remain geared toward deficit control.
While any future economic weakness would offset the relatively strong tax
revenues at present, lawmakers realize that many voters are increasingly
reluctant to pay for programs with benefits which do not clearly exceed the
costs.
U.S. ENVIRONMENT
MAJOR MARKETS
One Year Ended December 31, 1996
[BAR GRAPH APPEARS HERE]
Total Return
U.S. Cash Equivalents 5.16
U.S. Bonds 3.63
U.S. Equities 21.21
SALOMON U.S. TREASURY BENCHMARK RETURNS
One Year Ended December 31, 1996
[BAR GRAPH APPEARS HERE]
Total Return
Maturity (Years)
----------------
1 5.68
2 4.80
3 4.21
5 2.43
10 0.07
30 -4.44
TOP TEN INDUSTRY RETURNS
RELATIVE TO S&P 500
One Year Ended December 31, 1996
[BAR GRAPH APPEARS HERE]
Oil Service 42.7
Cosmetics 25.93
Misc. Finance 16.11
Miscellaneous 14.82
Aerospace 13.96
Business Machines 11.35
Domestic Petroleum Reserves 11.15
Apparel, Textiles 10.77
Thrift Institutions 9.57
Banks 9.28
Source: BARRA
BOTTOM TEN INDUSTRY RETURNS RELATIVE TO S&P 500
One Year Ended December 31, 1996
Media -13.57
Water Transport -13.76
Pollution Control -16.31
Forest Products -16.63
Precious Metals -17.46
Electric Utilities -19.17
Telephone, Telegraph -19.9
Iron & Steel -24.98
Trucking, Freight -34.51
Coal & Uranium -40.81
Source: BARRA
------------------------------------------------------------
5
<PAGE>
U.S. BALANCED FUND
- --------------------------------------------------------------------------------
LOGO
The U.S. Balanced Fund is an actively managed portfolio that applies our value-
based asset allocation process to U.S. stocks, bonds and cash. This Fund's
investment strategy is developed in the context of our global asset allocation
process and is based on analysis of long-term economic and market conditions.
The Brinson U.S. Balanced Fund has provided an annualized return of 18.16%
since its inception on December 31, 1994. This compares with the corresponding
21.96% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the
year ended December 31, 1996, the Fund produced a total return of 11.32%
compared to the benchmark return of 14.90%. In the second half of 1996, the
Fund returned 8.02% while the benchmark returned 8.25%. Security selection
within all the asset classes contributed positively to relative performance,
while the equity underweight and bond overweight adversely affected relative
performance.
Although inflation was relatively stable throughout 1996, the bond market
experienced a year of rising yields. Coming out of 1995, yields were relatively
low, but they climbed rather strongly through June. The moderately strong
economy in the first half of the year, coupled with higher oil prices, caused
concern that both real rates and inflation may rise. These fears diminished
somewhat in the second half, allowing rates to decline. However, yields failed
to drop to levels seen at the start of the year, resulting in aggregate bond
market performance that was positive but inferior to cash returns.
The equity market turned in another banner year, with broad market indices
showing returns of more than 20%. However, there were large divergences in
relative performance. Small stock performance was outpaced by the returns to
large capitalization stocks by approximately 500 basis points.
After a few weeks of strength in January and early February, the equity market
was flat until mid-September. However, as interest rates fell from that point
to the start of December, equities again produced extremely good returns. The
S&P 500 Index rose roughly 100 points in these two and a half months, from
about 660 to 760. The equity market appears increasingly willing to extrapolate
recent strong earnings growth and low volatility indefinitely into the future.
At year-end, equity price gains had driven the market to an overpricing of
around 25%.
Looking forward, return expectations in stocks appear insufficient compensation
for the risks. Therefore, we have maintained a reduced exposure in the
allocation to equities, with an offsetting increase in the allocation to bonds.
------------------------------------------------------------
6
<PAGE>
U.S. BALANCED FUND
- --------------------------------------------------------------------------------
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 12/31/94*
12/31/96 12/31/96 to 12/31/96
- ----------------------------------------------------------------
<S> <C> <C> <C>
BRINSON U.S. BALANCED FUND 8.02% 11.32% 18.16%
- ----------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 8.25 14.90 21.96
- ----------------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson U.S. Balanced Fund.
**An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000
This chart shows the growth income taxes payable by
in the value of an shareholders on income
investment in the Brinson dividends and capital gain
U.S. Balanced Fund and the distributions. Past
U.S. Balanced Mutual Fund performance is no guarantee
Index if you had invested of future results. Share
$100,000 on December 31, price and return will vary
1994, and had reinvested all with market conditions;
your income dividends and investors may realize a gain
capital gain distributions or loss upon redemption.
through December 31, 1996.
No adjustment has been made
for any
BRINSON U.S. BALANCED FUND
VS. U.S. BALANCED MUTUAL FUND INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
U.S. Balanced
Brinson Mutual Fund
U.S. Balanced Index
------------- -------------
12/31/94 $100,000 $100,000
3/31/95 106,400 107,439
6/30/95 113,909 116,004
9/30/95 119,285 123,636
12/31/95 125,481 129,452
3/31/96 127,662 133,344
6/30/96 129,312 137,403
9/30/96 132,405 140,915
12/31/96 139,686 148,740
12/31/94 = $100,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
LOGO
------------------------------------------------------------
7
<PAGE>
U.S. BALANCED FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals.............................................................. 0.29%
Housing/Paper.......................................................... 1.77
Metals................................................................. 0.23
-----
2.29
Capital Investment
Capital Goods.......................................................... 3.91
Technology............................................................. 2.53
-----
6.44
Consumer
Autos/Durables......................................................... 0.11
Discretionary.......................................................... 2.84
Health: Drugs.......................................................... 3.51
Health: Non-Drugs...................................................... 1.74
Non-Durables........................................................... 4.90
Retail/Apparel......................................................... 1.79
-----
14.89
Energy.................................................................. 2.16
Financial
Banks.................................................................. 4.39
Non-Banks.............................................................. 4.01
-----
8.40
Services................................................................ 2.78%
Transportation.......................................................... 2.70
Utilities............................................................... 1.34
Miscellaneous........................................................... 1.13
------
Total U.S. Equities.................................................. 42.13*
------
U.S. BONDS
Corporate Bonds
Asset-Backed........................................................... 3.16
CMO.................................................................... 0.54
Consumer............................................................... 1.51
Financial.............................................................. 1.65
Industrial............................................................. 0.86
Telecommunications..................................................... 1.62
------
9.34
International Dollar Bonds.............................................. 6.04
U.S. Government Agencies................................................ 16.96
U.S. Government Obligations............................................. 21.03
------
Total U.S. Bonds..................................................... 53.37*
------
SHORT-TERM INVESTMENTS.................................................. 10.20*
------
TOTAL INVESTMENTS.................................................... 105.70
LIABILITIES, LESS
CASH AND OTHER ASSETS.................................................. (5.70)
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
*The Fund held a long position in U.S. Treasury futures on
December 31, 1996 which increased U.S. bond exposure from
53.37% to 61.65%. The Fund also held a short position in
stock index futures which reduced U.S. equity exposure from
42.13% to 33.99%. These two adjustments result in a net
decrease in the Fund's exposure to Short-Term Investments
from 10.20% to 10.06%.
ASSET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
CURRENT
BENCHMARK STRATEGY
- ------------------------------------
<S> <C> <C>
U.S. Equity 65% 35%
U.S. Bonds 35 65
Cash Equivalents 0 0
- ------------------------------------
100% 100%
</TABLE>
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
- ---------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 2.09%
2. Xerox Corp. 1.63
3. Lockheed Martin Corp. 1.62
4. Burlington Northern Santa Fe 1.61
5. Corning, Inc. 1.52
6. Citicorp 1.46
7. Philip Morris Companies, Inc. 1.45
8. Aon Corp. 1.36
9. Goodyear Tire & Rubber Co. 1.24
10. Enron Corp. 1.12
- ---------------------------------------------
</TABLE>
------------------------------------------------------------
8
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
U.S. Equities -- 42.13%
Aetna Life & Casualty Co................................... 24,900 $ 1,992,000
Allergan, Inc.............................................. 40,400 1,439,250
Allstate Corp.............................................. 22,300 1,290,613
Alza Corp. (b)............................................. 39,400 1,019,475
Aon Corp................................................... 52,900 3,286,412
Automatic Data Processing, Inc............................. 39,700 1,702,138
Avon Products, Inc......................................... 26,700 1,525,237
Bard (C.R.), Inc........................................... 24,400 683,200
Beckman Instruments, Inc................................... 15,800 606,325
Birmingham Steel Corp...................................... 15,900 302,100
Boston Technology, Inc. (b)................................ 15,800 454,250
Brinker International, Inc. (b)............................ 14,200 227,200
Burlington Northern Santa Fe............................... 45,100 3,895,513
Centerior Energy Co........................................ 33,200 356,900
Chase Manhattan Corp....................................... 56,900 5,078,325
Choice Hotels International, Inc. (b)...................... 25,800 454,725
CIGNA Corp................................................. 19,600 2,677,850
Circuit City Stores, Inc................................... 6,900 207,862
Citicorp................................................... 34,400 3,543,200
CMS Energy Corp............................................ 43,100 1,449,238
Coca-Cola Enterprises, Inc................................. 16,100 780,850
Comerica, Inc.............................................. 10,800 565,650
Comverse Technology, Inc. (b).............................. 7,300 276,031
Corning, Inc............................................... 79,500 3,676,875
CPC International, Inc..................................... 9,700 751,750
CVS Corp................................................... 31,300 1,295,037
Dial Corp.................................................. 38,700 570,825
EMC Corp./Mass. (b)........................................ 53,800 1,782,125
Enron Corp................................................. 62,800 2,708,250
Federal Express Corp. (b).................................. 58,800 2,616,600
Federated Department Stores (b)............................ 23,000 784,875
FileNet Corp. (b).......................................... 6,100 195,200
First American Corp.-Tenn.................................. 2,600 149,825
First Data Corp............................................ 33,258 1,213,917
First of America Bank Corp................................. 5,100 306,638
Foodstar, Inc. (b)......................................... 12,379 307,928
Ford Motor Co.............................................. 23,000 733,125
Forest Laboratories, Inc. (b).............................. 26,800 877,700
Gannett Co., Inc........................................... 26,300 1,969,212
General Instrument Corp. (b)............................... 78,300 1,693,238
Genzyme Corp. (b).......................................... 15,900 345,825
Geon Co.................................................... 5,800 113,825
Goodyear Tire & Rubber Co.................................. 58,400 3,000,300
Harnischfeger Industries, Inc.............................. 17,200 827,750
Health Care and Retirement Corp. (b)....................... 29,150 834,419
Interpublic Group of Companies, Inc........................ 19,600 931,000
James River Corp. of Virginia.............................. 22,700 751,937
Kimberly-Clark Corp........................................ 18,900 1,800,225
Kroger Co. (b)............................................. 16,600 771,900
Lockheed Martin Corp....................................... 42,971 3,931,847
Lyondell Petrochemical Co.................................. 43,100 948,200
Manor Care, Inc............................................ 25,800 696,600
Martin Marietta Materials, Inc............................. 11,936 277,512
Masco Corp................................................. 25,400 914,400
Mattel, Inc................................................ 93,950 2,607,112
Nabisco Holdings Corp. Class A............................. 28,600 1,111,825
National Semiconductor Corp. (b)........................... 15,900 387,563
Nextel Communications, Inc. Class A (b).................... 39,700 518,581
Old Republic International Corp............................ 18,750 501,562
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Peco Energy Co.......................................... 24,500 $ 618,625
Pentair, Inc............................................ 18,500 596,625
Pharmacia & Upjohn, Inc................................. 50,300 1,993,138
Philip Morris Companies, Inc............................ 31,200 3,513,900
Rhone-Poulenc Rorer, Inc................................ 13,400 1,046,875
RJR Nabisco Convertible Preferred "C"................... 128,300 866,025
Schering Plough Corp.................................... 34,600 2,240,350
Seagate Technology, Inc. (b)............................ 10,600 418,700
Timken Co............................................... 16,600 761,525
Tyson Foods, Inc. Class A............................... 47,300 1,620,025
Ultramar Diamond Shamrock Corp.......................... 44,790 1,416,484
US Bancorp.............................................. 24,000 1,078,500
USF&G Corp.............................................. 18,300 382,012
Vencor, Inc. (b)........................................ 20,700 654,637
Viad Corp............................................... 38,700 638,550
Westvaco Corp........................................... 9,450 271,688
Whitman Corp............................................ 1,700 38,887
WMX Technologies, Inc................................... 64,000 2,088,000
Xerox Corp.............................................. 74,900 3,941,613
York International Corp................................. 16,200 905,175
360 Communications Co. (b).............................. 13,700 316,812
-----------
Total U.S. Equities (Cost $80,838,984).................. 102,127,993
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 53.37%
U.S. CORPORATE BONDS -- 9.34%
AirTouch Communications 7.500%, due 07/15/06............ $2,000,000 $ 2,059,328
American Express Credit Account Master Trust 96-1A
6.800%, due 12/15/03................................... 1,280,000 1,300,250
BellSouth Corp. 0.000%, due 12/15/15.................... 3,175,000 704,844
Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,009,232
Chase Manhattan Auto Owner Trust
96C-4A 6.150%, due 03/15/02............................ 1,360,000 1,353,200
Chase Manhattan Credit Card Master Trust 96-4A 6.730%,
due 02/15/03........................................... 2,000,000 2,027,700
Chrysler Financial Corp. MTN 6.500%, due 08/21/97....... 1,000,000 1,004,753
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
09/25/98............................................... 2,000,000 2,005,380
Ford Motor Credit Corp. MTN 5.370%, due 09/08/98........ 945,000 933,695
GE Capital Mtg. Services, Inc. 94-9A 6.500%, due
02/25/24............................................... 1,560,557 1,309,432
GMAC MTN 6.750%, due 06/10/02........................... 1,000,000 1,003,768
Lockheed Martin Corp. 7.700%, due 06/15/08.............. 2,000,000 2,093,670
News America Corp. 7.750%, due 01/20/24................. 1,000,000 955,896
Telecommunications, Inc. 9.800%, due 02/01/12........... 2,100,000 2,274,647
Time Warner Entertainment, Inc. 8.375%,
due 03/15/23........................................... 1,125,000 1,143,537
Time Warner, Inc. 9.150%, due 02/01/23.................. 425,000 460,563
-----------
22,639,895
-----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
INTERNATIONAL DOLLAR BONDS--6.04%
BCH Cayman Islands Ltd. 7.700%, due 07/15/06........... $ 2,100,000 $ 2,161,226
International Bank for Reconstruction & Development
6.375%, due 07/21/05.................................. 1,500,000 1,479,513
LKB 8.125%, due 01/27/00............................... 1,780,000 1,870,527
Petroliam Nasional 7.125%, due 08/15/05................ 1,500,000 1,512,779
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%,
due 03/15/14.......................................... 1,735,000 1,763,988
Republic of Italy 6.875%, due 09/27/23................. 1,500,000 1,426,980
S.E. Banken 144-A 6.625%, due 03/29/49................. 2,000,000 1,970,000
Southern Investments UK 6.800%, due 12/01/06........... 930,000 910,310
Swedbank FRN 7.500%, due 11/29/49...................... 1,500,000 1,535,625
-----------
14,630,948
-----------
U.S. GOVERNMENT AGENCIES--16.96%
Federal Home Loan Mortgage Corp. 6.520%, due 01/02/02.. 3,500,000 3,510,329
6.500%, due 05/15/21.................................. 1,192,691 1,082,343
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................. 872,323 888,952
9.000%, due 03/01/24.................................. 423,904 452,458
9.500%, due 04/01/25.................................. 1,375,782 1,480,685
Federal National Mortgage Association
6.500%, due 03/01/03.................................. 2,560,000 2,532,813
8.000%, due 12/18/11.................................. 1,000,000 1,033,750
7.500%, due 05/01/25.................................. 1,477,313 1,476,852
6.500%, due 03/01/26.................................. 9,864,563 9,411,414
7.000%, due 03/01/26.................................. 1,000,000 978,438
7.500%, due 12/01/26.................................. 2,632,083 2,632,241
Federal National Mortgage Association Strip
8.000%, due 07/01/24 interest only.................... 1,096,078 337,767
0.000%, due 07/01/26 principal only................... 994,546 669,141
Government National Mortgage Association
11.000%, due 09/15/15................................. 345,360 385,723
8.000%, due 08/15/22.................................. 1,004,798 1,032,610
7.000%, due 06/15/23.................................. 419,966 410,911
7.000%, due 07/15/23.................................. 415,773 406,808
7.000%, due 09/15/23.................................. 95,784 93,718
9.000%, due 07/15/24.................................. 164,420 173,258
8.500%, due 11/15/24.................................. 180,521 186,952
8.500%, due 01/15/25.................................. 374,518 387,860
9.000%, due 05/15/25.................................. 478,039 503,734
7.500%, due 06/15/25.................................. 2,097,195 2,099,607
8.000%, due 02/15/26.................................. 2,329,109 2,393,579
6.500%, due 03/20/26.................................. 1,486,831 1,409,237
8.000%, due 09/15/26.................................. 4,231,054 4,315,675
Independent National Mortgage Corp. 8.350%, due
06/25/25.............................................. 800,000 819,240
-----------
41,106,095
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- ------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--21.03%
U.S. Treasury Coupon Strip 0.000%, due 05/15/08
principal only...................................... $ 9,305,000 $ 4,428,343
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98................................ 2,105,000 2,089,213
6.250%, due 10/31/01................................ 10,115,000 10,121,322
7.000%, due 07/15/06................................ 15,230,000 15,824,929
8.125%, due 05/15/21................................ 15,965,000 18,519,400
------------
50,983,207
------------
Total U.S. Bonds (Cost $129,757,543)................. 129,360,145
------------
SHORT-TERM INVESTMENTS--10.20%
U.S. GOVERNMENT OBLIGATIONS--0.44%
U.S. Treasury Bills 5.063%, due 05/01/97............. 1,085,000 1,066,816
------------
COMMERCIAL PAPER--9.76%
Burlington Northern Santa Fe 5.650%, due 01/17/97.... 1,000,000 997,489
Case Credit Corp.
5.510%, due 01/07/97................................ 1,000,000 999,082
5.600%, due 01/09/97................................ 1,000,000 998,755
Cincinnati Bell, Inc. 7.250%, due 01/02/97........... 5,922,000 5,920,807
CNA Financial Corp. 6.250%, due 01/23/97............. 1,000,000 996,181
Crown Cork & Seal Co., Inc.
5.580%, due 01/29/97................................ 2,500,000 2,489,150
5.580%, due 01/31/97................................ 2,000,000 1,990,700
PanEnergy Corp. 6.050%, due 01/17/97................. 1,500,000 1,495,967
Rite Aid Corp.
5.650%, due 01/06/97................................ 1,000,000 999,215
5.600%, due 01/21/97................................ 2,300,000 2,292,844
Tyson Foods, Inc. 5.750%, due 01/09/97............... 989,000 987,736
US West Capital Funding Inc. 5.600%, due 02/12/97.... 1,500,000 1,490,200
Vastar Resources, Inc. 6.020%, due 01/02/97.......... 1,000,000 999,833
Whirlpool Financial Corp. 6.000%, due 01/03/97....... 1,000,000 999,667
------------
23,657,626
------------
Total Short-Term Investments (Cost $24,724,389)...... 24,724,442
------------
Total Investments
(Cost $235,320,916)--105.70% (a).................... 256,212,580
------------
Liabilities, less cash and other assets--(5.70%)..... (13,806,437)
------------
Net Assets--100%..................................... $242,406,143
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $235,320,916; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $23,263,277
Gross unrealized depreciation................................ (2,371,613)
-----------
Net unrealized appreciation................................ $20,891,664
===========
</TABLE>
(b) Non-income producing security
MTN: Medium term note
FUTURES CONTRACTS (NOTE 4)
The U.S. Balanced Fund had the following open futures contracts as of December
31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST/PROCEEDS VALUE LOSS
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST RATE FUTURES BUY
CONTRACTS
5 Year U.S. Treasury
Note, 55 contracts...... March 1997 $ 5,916,531 $ 5,862,656 $ (53,875)
10 Year U.S. Treasury
Note, 89 contracts...... March 1997 9,861,375 9,712,125 (149,250)
30 Year U.S. Treasury
Bond, 40 contracts...... March 1997 4,599,531 4,505,000 (94,531)
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500, 53
contracts............... March 1997 19,689,500 19,729,250 (39,750)
---------
Total.................. $(337,406)
=========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1996 was $1,066,816.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $235,320,916) (Note 1).............. $256,212,580
Cash............................................................ 5,756,041
Receivables:
Investment securities sold..................................... 415,655
Dividends...................................................... 181,703
Interest....................................................... 1,700,017
Fund shares sold............................................... 191,981
Variation margin (Note 4)...................................... 380,337
Other assets.................................................... 28,745
------------
TOTAL ASSETS................................................. 264,867,059
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 22,156,538
Fund shares redeemed........................................... 36,974
Investment advisory fees (Note 2).............................. 74,069
Accrued expenses............................................... 193,335
------------
TOTAL LIABILITIES............................................ 22,460,916
------------
NET ASSETS....................................................... $242,406,143
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)........................................ $218,436,635
Accumulated distributions in excess of net investment income.... (187)
Accumulated net realized gain................................... 3,415,437
Net unrealized appreciation..................................... 20,554,258
------------
NET ASSETS................................................... $242,406,143
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $240,953,839 and 20,423,505 shares is-
sued and outstanding) (Note 6)................................ $ 11.80
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $1,452,304 and 123,608 shares issued
and outstanding) (Note 6)..................................... $ 11.75
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $ 4,451,939
Dividends......................................................... 897,064
-----------
TOTAL INCOME................................................... 5,349,003
-----------
EXPENSES:
Advisory (Note 2)................................................. 814,540
Administration.................................................... 80,184
Custodian......................................................... 68,520
Distribution (Note 5)............................................. 2,858
Other............................................................. 214,159
-----------
TOTAL EXPENSES................................................. 1,180,261
Expenses deferred by Advisor (Note 2).......................... (246,439)
-----------
NET EXPENSES................................................... 933,822
-----------
NET INVESTMENT INCOME ......................................... 4,415,181
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 9,666,826
Futures contracts................................................ (461,484)
-----------
Net realized gain.............................................. 9,205,342
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 4,616,972
Futures contracts................................................ (401,550)
-----------
Change in net unrealized appreciation or depreciation.......... 4,215,422
-----------
Net realized and unrealized gain.................................. 13,420,764
-----------
Net increase in net assets resulting from operations.............. $17,835,945
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 4,415,181 $ 8,308,870
Net realized gain............................. 9,205,342 8,233,205
Change in net unrealized appreciation or de-
preciation................................... 4,215,422 8,676,412
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 17,835,945 25,218,487
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class........................... (5,812,532) (7,711,341)
SwissKey Fund Class.......................... (34,116) (9,781)
Distributions from net realized gain:
Brinson Fund Class........................... (10,324,916) (9,885,505)
SwissKey Fund Class.......................... (65,779) (992)
------------ ------------
Total distributions to shareholders........... (16,237,343) (17,607,619)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 19,283,736 81,710,433
Shares issued on reinvestment of distribu-
tions........................................ 16,166,850 17,593,608
Shares redeemed............................... (23,251,338) (36,030,444)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions
(Note 6)..................................... 12,199,248 63,273,597
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 13,797,850 70,884,465
------------ ------------
NET ASSETS:
Beginning of period........................... 228,608,293 157,723,828
------------ ------------
End of period (including accumulated undis-
tributed net investment income of ($187) and
$1,459,205, respectively).................... $242,406,143 $228,608,293
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR DECEMBER 30, 1994*
DECEMBER 31, 1996 ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning
of period.................. $ 11.71 $ 11.23 $ 10.00
-------- -------- --------
Income from investment op-
erations:
Net investment income..... 0.23 0.44 .23
Net realized and
unrealized gain.......... 0.71 1.04 1.16
-------- -------- --------
Total income from in-
vestment operations.... 0.94 1.48 1.39
-------- -------- --------
Less distributions:
Distributions from net in-
vestment income.......... (0.31) (0.43) (0.16)
Distributions from net re-
alized gain.............. (0.54) (0.57) --
-------- -------- --------
Total distributions..... (0.85) (1.00) (0.16)
-------- -------- --------
Net asset value, end of pe-
riod....................... $ 11.80 $ 11.71 $ 11.23
======== ======== ========
Total return (non-
annualized)................ 8.02% 13.52% 13.91%
Ratios/Supplemental data
Net assets, end of period
(in 000s)................. $240,954 $227,829 $157,724
Ratio of expenses to aver-
age net assets:
Before expense reimburse-
ment..................... 1.01%** 1.01% 1.06%
After expense reimburse-
ment..................... 0.80%** 0.80% 0.80%
Ratio of net investment in-
come to average net as-
sets:
Before expense reimburse-
ment..................... 3.58%** 3.76% 4.36%
After expense reimburse-
ment..................... 3.79%** 3.97% 4.63%
Portfolio turnover rate.... 172% 240% 196%
Average commission rate
paid per share............ $0.0492 $ 0.0481 N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 11.67 $ 11.38
------- -------
Income from investment operations:
Net investment income....................... 0.20 0.42
Net realized and unrealized gain............ 0.70 0.86
------- -------
Total income from investment operations... 0.90 1.28
------- -------
Less distributions:
Distributions from net investment income.... (0.28) (0.42)
Distributions from net realized gain........ (0.54) (0.57)
------- -------
Total distributions....................... (0.82) (0.99)
------- -------
Net asset value, end of period................ $ 11.75 $ 11.67
======= =======
Total return (non-annualized)................. 7.75% 11.54%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $ 1,452 $ 779
Ratio of expenses to average net assets:
Before expense reimbursement................ 1.51%** 1.51%**
After expense reimbursement................. 1.30%** 1.30%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 3.08%** 3.26%**
After expense reimbursement................. 3.29%** 3.47%**
Portfolio turnover rate...................... 172% 240%
Average commission rate paid per share....... $0.0492 $0.0481
</TABLE>
*Commencement of SwissKey Fund Class distribution
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
The U.S. Equity Fund is an actively managed portfolio that invests in common
stocks of U.S. corporations. The Fund is diversified by issue and industry; it
is typically 70% invested in large capitalization stocks, with the remaining
30% in intermediate and small capitalization stocks. Investment strategies
emphasize stock selection with attention to the management of factor and
industry exposures.
For the period February 28, 1994 (performance inception date) to December 31,
1996, the Brinson U.S. Equity Fund provided an annualized return of 21.47%
compared to its benchmark, the Wilshire 5000 Index, return of 19.06%. For the
year ended December 31, 1996, the Fund returned 25.65%, while the benchmark
returned 21.21%. The total return of the Brinson U.S. Equity Fund was 12.96%
for the second six months of 1996, compared to the 9.92% return for the
Wilshire 5000 Index. The following paragraphs review the sources of excess
returns in the second half of 1996.
The strong excess return of the U.S. Equity Fund in 1996 was attributable to a
number of favorable industry and individual stock positions. Foremost among
these was the sizeable overweighting in commercial banks where lower interest
rates, sound credit quality and consolidation combined to produce strong
industry performance. In addition, bank stock selection over and above the
industry effect added meaningfully to Fund results. In the large capitalization
sector, Citicorp and Chase Manhattan both posted total returns in excess of
50%. A package of smaller regional banks also performed well. These included
U.S. Bancorp, Comerica, State Street Boston, First of America, Magna Group and
First American of Tennessee.
Another important industry position last year was the significant Fund
underweighting in both telephone and electric utility stocks. In the area of
traditional telephone utilities, we believe new technology, intensifying
competition and regulatory adjustments will narrow the gap between telephone
pricing and cost of service in many regional markets. Electric utilities are
also likely to suffer a breakdown in regulatory protection due to the advent of
independent power producers, the wheeling of electric power and difficulty
earning an adequate return on stranded investments.
Insurance and retail are two groups where industry performance was market-like
in 1996 but where our collective issue selections added meaningfully to
results. The strategy in insurance has been to concentrate on those companies
where managements are restructuring and reorienting operations toward core
lines of business. Such companies included Cigna, Aon, Allstate, Aetna, USF&G
and Old Republic International. Similarly, the emphasis in retail was on those
issues where managements were altering the business model with a clear focus on
raising bottom line profitability. Our stock holdings here were CVS (formerly
Melville), Federated Department Stores and Food Lion.
Technology was an industry where an underweight detracted from Fund excess
return in 1996. Nevertheless, stock selections such as EMC Corp., Seagate
Technology and National Semiconductor more than compensated for the shortfall.
In addition, a number of our telecommunications equipment related holdings
performed well including Corning, Comverse Technology, Boston Technology and
Octel Communications. Other noteworthy individual stock contributors to Fund
results last year were Avon Products, Philip Morris, Coca Cola Enterprises and
Tyson Foods.
------------------------------------------------------------
17
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
Annualized
6 months 1 year 2/28/94*
ended ended to
12/31/96 12/31/96 12/31/96
- ------------------------------------------------------
<S> <C> <C> <C>
BRINSON U.S. EQUITY FUND 12.96% 25.65% 21.47%
- ------------------------------------------------------
Wilshire 5000 Index 9.92 21.21 19.06
- ------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson U.S. Equity Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000
This chart shows the growth any income taxes payable by
in the value of an shareholders on income divi-
investment in the Brinson dends and capital gain dis-
U.S. Equity Fund and the tributions. Past perfor-
Wilshire 5000 Index if you mance is no guarantee of fu-
had invested $100,000 on ture results. Share price
February 28, 1994, and had and return will vary with
reinvested all your income market conditions; investors
dividends and capital gain may realize a gain or loss
distributions through upon redemption.
December 31, 1996. No
adjustment has been made for
BRINSON U.S. EQUITY FUND
VS. WILSHIRE 5000 INDEX
Wealth Value with Dividends Reinvested
<TABLE>
[CHART APPEARS HERE]
<CAPTION>
Brinson U.S. Wilshire
Equity Fund 500 INDEX
---------- ---------
<S> <C> <C>
02/28/94 $100,000 $100,000
03/31/94 $ 94,294 $ 95,472
06/30/94 $ 97,000 $ 94,729
09/30/94 $101,926 $ 99,877
12/31/94 $ 98,368 $ 99,109
03/31/95 $107,625 $108,058
06/30/95 $117,802 $118,147
09/30/95 $128,939 $128,945
12/31/95 $138,288 $135,235
03/31/96 $148,998 $142,832
06/30/96 $153,820 $149,125
09/30/96 $158,881 $153,345
12/31/96 $173,586 $163,921
</TABLE>
2/28/94 = $100,000 Data Through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
------------------------------------------------------------
18
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals.............................................................. 0.65%
Housing/Paper.......................................................... 4.04
Metals................................................................. 0.52
-----
5.21
Capital Investments
Capital Goods.......................................................... 8.94
Technology............................................................. 5.77
-----
14.71
Consumer
Autos/Durables......................................................... 0.25
Discretionary.......................................................... 6.49
Health: Drugs.......................................................... 8.02
Health: Non-Drugs...................................................... 3.96
Non-Durables........................................................... 11.18
Retail/Apparel......................................................... 4.09
-----
33.99
Energy.................................................................. 4.94%
Financial
Banks.................................................................. 10.03
Non-Banks.............................................................. 9.15
------
19.18
Services................................................................ 6.34
Transportation.......................................................... 6.17
Utilities............................................................... 3.07
Miscellaneous........................................................... 2.61
------
Total U.S. Equities.................................................. 96.22*
------
SHORT-TERM INVESTMENTS.................................................. 3.51*
------
TOTAL INVESTMENTS.................................................... 99.73
CASH AND OTHER ASSETS,
LESS LIABILITIES ...................................................... 0.27
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
*The Fund held a net long position in stock index futures on December 31, 1996
which increased U.S. equity exposure from 96.22% to 100% and reduced exposure to
Short-Term investments from 3.51% to -0.27%.
- --------------------------------------------------------------------------------
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ---------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 4.77%
2. Xerox Corp. 3.71
3. Lockheed Martin Corp. 3.70
4. Burlington Northern Santa Fe 3.65
5. Corning, Inc. 3.45
6. Citicorp 3.33
7. Philip Morris Companies, Inc. 3.29
8. Aon Corp. 3.08
9. Goodyear Tire & Rubber Co. 2.81
10. Enron Corp. 2.55
- ---------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
U.S. Equities -- 96.22%
Aetna Life & Casualty Co................................... 40,300 $ 3,224,000
Allergan, Inc.............................................. 67,300 2,397,563
Allstate Corp.............................................. 37,400 2,164,525
Alza Corp. (b)............................................. 65,600 1,697,400
Aon Corp................................................... 87,900 5,460,787
Automatic Data Processing, Inc............................. 64,100 2,748,288
Avon Products, Inc......................................... 47,700 2,724,862
Bard (C.R.), Inc........................................... 40,700 1,139,600
Beckman Instruments, Inc................................... 26,300 1,009,263
Birmingham Steel Corp...................................... 26,400 501,600
Boston Technology, Inc. (b)................................ 26,200 753,250
Brinker International, Inc. (b)............................ 26,600 425,600
Burlington Northern Santa Fe............................... 75,000 6,478,125
Centerior Energy Co........................................ 55,300 594,475
Chase Manhattan Corp....................................... 94,700 8,451,975
Choice Hotels International, Inc. (b)...................... 42,900 756,113
CIGNA Corp................................................. 32,500 4,440,312
Circuit City Stores, Inc. (b).............................. 11,200 337,400
Citicorp................................................... 57,400 5,912,200
CMS Energy Corp............................................ 71,700 2,410,913
Coca-Cola Enterprises, Inc................................. 35,100 1,702,350
Comerica, Inc.............................................. 18,100 947,987
Comverse Technology, Inc. (b).............................. 12,200 461,313
Corning, Inc............................................... 132,200 6,114,250
CPC International, Inc. ................................... 16,200 1,255,500
CVS Corp. ................................................. 51,900 2,147,363
Dial Corp.................................................. 64,400 949,900
EMC Corp./Mass. (b)........................................ 94,500 3,130,312
Enron Corp................................................. 104,800 4,519,500
Federal Express Corp. (b).................................. 97,600 4,343,200
Federated Department Stores (b)............................ 38,300 1,306,988
FileNet Corp. (b).......................................... 15,600 499,200
First American Corp.-Tenn. ................................ 4,700 270,836
First Data Corp............................................ 56,230 2,052,395
First of America Bank Corp................................. 8,400 505,050
Footstar, Inc. (b)......................................... 14,925 371,259
Ford Motor Co.............................................. 34,800 1,109,250
Forest Laboratories, Inc. (b).............................. 44,600 1,460,650
Gannett Co., Inc........................................... 43,800 3,279,525
General Instrument Corp. (b)............................... 130,200 2,815,575
Genzyme Corp. (b).......................................... 26,500 576,375
Geon Co. .................................................. 9,700 190,363
Goodyear Tire & Rubber Co.................................. 96,900 4,978,237
Harnischfeger Industries, Inc. ............................ 28,900 1,390,813
Health Care and Retirement Corp. (b)....................... 48,550 1,389,744
Interpublic Group of Companies, Inc........................ 32,600 1,548,500
James River Corp. of Virginia.............................. 37,700 1,248,812
Kimberly-Clark Corp........................................ 31,600 3,009,900
Kroger Co. (b)............................................. 27,600 1,283,400
Lockheed Martin Corp....................................... 71,627 6,553,871
Lyondell Petrochemical Co.................................. 71,700 1,577,400
Manor Care, Inc. .......................................... 42,900 1,158,300
Martin Marietta Materials, Inc. ........................... 19,157 445,400
Masco Corp. ............................................... 41,400 1,490,400
Mattel, Inc................................................ 156,875 4,353,281
Nabisco Holdings Corp. Class A............................. 47,500 1,846,562
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
National Semiconductor Corp. (b)........................ 25,900 $ 631,313
Nextel Communications, Inc. Class A (b)................. 66,000 862,125
Old Republic International Corp......................... 30,850 825,237
Peco Energy Co. ........................................ 41,900 1,057,975
Pentair, Inc............................................ 34,700 1,119,075
Pharmacia & Upjohn, Inc. ............................... 83,500 3,308,688
Philip Morris Companies, Inc............................ 51,800 5,833,975
Rhone-Poulene Rorer, Inc. .............................. 22,100 1,726,562
RJR Nabisco Convertible Preferred "C"................... 213,600 1,441,800
Schering Plough Corp.................................... 57,500 3,723,125
Seagate Technology, Inc. (b)............................ 17,600 695,200
Timken Co............................................... 27,600 1,266,150
Tyson Foods, Inc. Class A............................... 78,600 2,692,050
Ultramar Diamond Shamrock Corp. ........................ 74,718 2,362,957
US Bancorp.............................................. 39,900 1,793,006
USF&G Corp.............................................. 30,500 636,688
Vencor, Inc. (b)........................................ 34,300 1,084,737
Viad Corp. ............................................. 64,400 1,062,600
Westvaco Corp........................................... 15,700 451,375
Whitman Corp............................................ 3,300 75,488
WMX Technologies, Inc................................... 107,000 3,490,875
Xerox Corp. ............................................ 125,000 6,578,125
York International Corp................................. 27,000 1,508,625
360 Communications Co. (b).............................. 22,733 525,701
------------
Total U.S. Equities (Cost $144,329,405)................. 170,665,464
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Short-Term Investments -- 3.51%
U.S. GOVERNMENT OBLIGATIONS -- 0.17%
U.S. Treasury Bills 5.063%, due 05/01/97................ $ 300,000 $ 294,972
------------
COMMERCIAL PAPER -- 3.34%
Cincinnati Bell, Inc. 7.250%, due 01/02/97.............. 2,430,000 2,429,511
CNA Financial Corp. 6.250%, due 01/23/97................ 500,000 498,090
Crown Cork & Seal Co., Inc. 5.580%, due 01/29/97........ 500,000 497,830
Tyson Foods, Inc. 5.750%, due 01/09/97.................. 261,000 260,667
Vastar Resources, Inc. 6.850%, due 01/10/97............. 1,500,000 1,497,431
Whirlpool Financial Corp. 6.000%, due 01/03/97.......... 750,000 749,750
------------
5,933,279
------------
Total Short-Term Investments
(Cost $6,228,216)...................................... 6,228,251
------------
Total Investments
(Cost $150,557,621) -- 99.73% (a)...................... 176,893,715
------------
Cash and other assets, less liabilities -- 0.27%........ 472,135
------------
Net Assets -- 100%...................................... $177,365,850
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
20
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $150,557,621; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $28,243,273
Gross unrealized depreciation................................ (1,907,179)
-----------
Net unrealized appreciation................................ $26,336,094
===========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS (NOTE 4)
The U.S. Equity Fund had the following open index futures contracts as of
December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN/(LOSS)
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Standard & Poors 500, 18
contracts.................. March 1997 $6,785,075 $6,700,500 $(84,575)
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 1
contract................... March 1997 377,600 377,250 5,350
--------
$(79,225)
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at
December 31, 1996 was $294,972.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $150,557,621) (Note 1) .............. $176,893,715
Cash............................................................. 3,238,167
Receivables:
Investment securities sold...................................... 711,094
Dividends....................................................... 306,932
Fund shares sold................................................ 309,665
Other assets..................................................... 24,831
------------
TOTAL ASSETS.................................................. 181,484,404
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 2,707,175
Fund shares redeemed............................................ 1,074,412
Variation margin (Note 4)....................................... 175,550
Investment advisory fees (Note 2)............................... 36,162
Accrued expenses................................................ 125,255
------------
TOTAL LIABILITIES............................................. 4,118,554
------------
NET ASSETS........................................................ $177,365,850
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $147,729,146
Accumulated undistributed net investment income.................. 4,145
Accumulated net realized gain.................................... 3,375,690
Net unrealized appreciation...................................... 26,256,869
------------
NET ASSETS.................................................... $177,365,850
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $166,642,358 and 11,008,767 shares is-
sued and outstanding) (Note 6)................................. $ 15.14
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $10,723,492 and 709,464 shares issued
and outstanding) (Note 6)...................................... $ 15.11
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 1,360,510
Interest.......................................................... 153,130
-----------
TOTAL INCOME................................................... 1,513,640
-----------
EXPENSES:
Advisory (Note 2)................................................. 530,359
Administration.................................................... 48,142
Custodian......................................................... 47,719
Accounting........................................................ 41,800
Registration...................................................... 40,734
Distribution (Note 5)............................................. 19,756
Other............................................................. 83,749
-----------
TOTAL EXPENSES................................................. 812,259
Expenses deferred by Advisor (Note 2).......................... (186,334)
-----------
NET EXPENSES................................................... 625,925
-----------
NET INVESTMENT INCOME.......................................... 887,715
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments...................................................... 9,682,760
Futures contracts................................................ 377,715
-----------
Net realized gain ............................................. 10,060,475
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 8,716,058
Futures contracts ............................................... (76,450)
-----------
Change in net unrealized appreciation or depreciation.......... 8,639,608
-----------
Net realized and unrealized gain ................................. 18,700,083
-----------
Net increase in net assets resulting from operations.............. $19,587,798
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 887,715 $ 1,333,171
Net realized gain ............................ 10,060,475 7,826,393
Change in net unrealized appreciation or de-
preciation .................................. 8,639,608 13,357,238
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 19,587,798 22,516,802
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class.......................... (1,048,487) (1,233,245)
SwissKey Fund Class......................... (51,089) (17,809)
Distributions from net realized gain:
Brinson Fund Class.......................... (12,393,320) (1,764,213)
SwissKey Fund Class......................... (838,501) (2,611)
------------ ------------
Total distributions to shareholders........... (14,331,397) (3,017,878)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 36,689,740 71,976,805
Shares issued on reinvestment of distribu-
tions........................................ 13,560,021 2,944,272
Shares redeemed............................... (9,869,057) (5,264,717)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 6)............. 40,380,704 69,656,360
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 45,637,105 89,155,284
------------ ------------
NET ASSETS:
Beginning of period........................... 131,728,745 42,573,461
------------ ------------
End of period (including accumulated undis-
tributed net investment income of $4,145 and
$216,006, respectively)...................... $177,365,850 $131,728,745
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR FEBRUARY 22, 1994*
DECEMBER 31, 1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 14.59 $ 11.53 $ 9.65 $10.00
-------- -------- ------- ------
Income from investment
operations:
Net investment income. 0.08 0.17 0.16 0.05
Net realized and
unrealized gain
(loss)............... 1.80 3.31 1.89 (0.36)
-------- -------- ------- ------
Total income (loss)
from investment
operations......... 1.88 3.48 2.05 (0.31)
-------- -------- ------- ------
Less distributions:
Distributions from net
investment income.... (0.10) (0.17) (0.14) (0.04)
Distributions from net
realized gain........ (1.23) (0.25) (0.03) --
-------- -------- ------- ------
Total distributions. (1.33) (0.42) (0.17) (0.04)
-------- -------- ------- ------
Net asset value, end of
period................. 15.14 $ 14.59 $ 11.53 $ 9.65
======== ======== ======= ======
Total return (non-
annualized)............ 12.96% 30.57% 21.45% (3.10%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $166,642 $126,342 $42,573 $8,200
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.04%** 1.14% 1.70% 5.40% **
After expense reim-
bursement............ 0.80%** 0.80% 0.80% 0.80% **
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 0.95%** 1.13% 1.09% (2.82%)**
After expense reim-
bursement............ 1.19%** 1.47% 1.99% 1.78% **
Portfolio turnover
rate.................. 25% 36% 33% 9%
Average commission rate
paid per share........ $ 0.0445 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 14.58 $ 11.94
------- -------
Income from investment operations:
Net investment income....................... 0.04 0.10
Net realized and unrealized gain............ 1.79 2.92
------- -------
Total income from investment operations... 1.83 3.02
------- -------
Less distributions:
Distributions from net investment income.... (0.07) (0.13)
Distributions from net realized gain........ (1.23) (0.25)
------- -------
Total distributions....................... (1.30) (0.38)
------- -------
Net asset value, end of period................ $ 15.11 $ 14.58
======= =======
Total return (non-annualized)................. 12.63% 25.70%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $10,724 $ 5,387
Ratio of expenses to average net assets:
Before expense reimbursement................ 1.56%** 1.66%**
After expense reimbursement................. 1.32%** 1.32%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 0.43%** 0.61%**
After expense reimbursement................. 0.67%** 0.95%**
Portfolio turnover rate...................... 25% 36%
Average commission rate paid per share....... $0.0445 $0.0457
</TABLE>
*Commencement of SwissKey Fund Class distribution
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
U.S. BOND FUND
- --------------------------------------------------------------------------------
LOGO
The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar-
denominated investment-grade fixed income securities. Our goal for the Fund is
to achieve a total return superior to that of an unmanaged market index.
Macroeconomic and monetary analysis are the key elements in our strategy. We
develop expectations about the returns on U.S. bonds based on the divergence of
current market yields from our estimates of equilibrium yields. Relative value
analysis serves as the basis of both our sector and individual security
selection.
The Brinson U.S. Bond Fund produced an annualized return of 6.84% since its
inception on August 31, 1995 compared to the Salomon Brothers Broad Investment
Grade (BIG) Bond Index return of 6.78%. In 1996, U.S. fixed income markets
proved disappointing to investors by underperforming both cash and most riskier
asset classes. For the year ended December 31, 1996, the Fund produced a total
return of 3.53% compared to the Benchmark return of 3.63%. In the second half of
1996, the Fund returned 5.42% compared to the Benchmark return of 4.94%.
The underlying economic fundamentals that influence bond prices and yields were
unusually well behaved in 1996. The pace of real economic activity fluctuated
around a stable path with alternating periods of above- and below-trend growth.
Inflation rates were stable. Treasury deficits continued to decline. Federal
Reserve interest rate policies were steady. The overnight funds target rate was
cut from 5.50% to 5.25% at the end of January 1996 and remained unchanged at
the 5.25% level through the balance of the year.
In 1996, U.S. interest rates were more volatile than the underlying economic
fundamentals. Investor expectations shifted in reaction to fluctuations in
economic data that were often statistical noise. During 1996, sentiment shifted
from optimism that a slow-growth economy would prompt further Federal Reserve
easing, to pessimism that an economy near full employment would overheat,
resulting in either an up-tick in inflation or Fed tightening or both.
Interest rates, which were at their lows for the year at the beginning of 1996,
rose fairly steadily in the first half of 1996 and moved irregularly lower in
the second half. Year over year, Treasury yields rose 35 basis points for one-
year maturities, while yields in the three-to-ten year range were up
approximately 80 basis points. Thirty-year Treasury bond yields, which were
below 6.00% at the beginning of 1996, rose to a high of 7.20% by mid-year and
fell to 6.65% by year-end. As a result of these shifts, the yield curve
steepened from cash to intermediate maturities while modestly flattening from
intermediate to long maturities.
Our investment strategies in early 1997 involve overweights in the ten-year and
longer segments of the yield curve and corresponding underweights in
intermediate maturities. This results in a Fund duration that is 1.3 times the
duration of the benchmark. Intermediate and long-term U.S. interest rates are
well above our equilibrium estimates. If market forces bring yields back in
line with our estimates of value, U.S. bonds will deliver total returns well in
excess of current yield levels as bond prices appreciate.
------------------------------------------------------------
27
<PAGE>
U.S. BOND FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
Annualized
6 months 1 year 8/31/95*
ended ended to
12/31/96 12/31/96 12/31/96
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
BRINSON U.S. BOND FUND 5.42% 3.53% 6.84%
- ---------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade (BIG)
Bond Index 4.94 3.63 6.78
- ---------------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson U.S. Bond Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000
This chart shows the growth made for any income taxes
in the value of an payable by shareholders on
investment in the Brinson income dividends and capital
U.S. Bond Fund and the gain distributions. Past
Salomon Brothers Broad performance is no guarantee
Investment Grade (BIG) Bond of future results. Share
Index if you had invested price and return will vary
$100,000 on August 31, 1995, with market conditions;
and had reinvested all your investors may realize a gain
income dividends and capital or loss upon redemption.
gain distributions through
December 31, 1996. No
adjustment has been
BRINSON U.S. BOND FUND
VS. SALOMON BROTHERS BIG BOND INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Bond Fund Salomon Brothers Big Bond Index
---------------------- -------------------------------
<S> <C> <C>
8/31/95 $100,000 $100,000
9/30/95 $100,900 $100,940
12/31/95 $105,493 $105,322
3/31/96 $103,140 $103,496
6/30/96 $103,600 $104,003
9/30/96 $105,478 $105,939
12/31/96 $109,217 $109,141
</TABLE>
8/31/95 = 100,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
------------------------------------------------------------
28
<PAGE>
U.S. BOND FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percentage of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Asset-backed........................................................... 4.18%
CMO.................................................................... 2.61
Financial.............................................................. 12.76
Industrial............................................................. 1.67
Telecommunications..................................................... 2.55
------
Total U.S. Corporate Bonds........................................... 23.77
U.S. Government Agencies................................................ 27.83
U.S. Government Obligations............................................. 39.67
International Dollar Bonds.............................................. 4.43
------
Total U.S. Bonds..................................................... 95.70
------
SHORT-TERM INVESTMENTS.................................................. 7.10
------
TOTAL INVESTMENTS.................................................... 102.80
LIABILITIES, LESS
CASH AND OTHER ASSETS.................................................. (2.80)
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
------------------------------------------------------------
29
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Bonds -- 95.70%
U.S. CORPORATE BONDS -- 23.77%
American Express Credit Account Master Trust 96-1A
6.800%, due 12/15/03.................................... $ 100,000 $ 101,582
Capital One Bank 6.830%, due 05/17/99.................... 185,000 185,854
Citicorp Mortgage Securities 5.750%, due 06/25/09........ 89,877 76,116
Countrywide Funding FRN 6.650%, due 12/01/03............. 250,000 239,688
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
02/25/02................................................ 100,000 100,269
GMAC MTN 7.450%, due 06/05/97............................ 250,000 251,980
Green Tree Financial 94-2 8.300%, due 05/15/19........... 160,000 169,229
Lehman Brothers Holdings 7.250%, due 04/15/03............ 225,000 226,363
Lockheed Martin Corp. 7.700%, due 06/15/08............... 150,000 157,025
News America Corp. 7.750%, due 01/20/24.................. 250,000 238,974
Premier Auto Trust 96-4A, 6.400%, due 10/06/01........... 190,000 190,912
Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 292,949
----------
2,230,941
----------
INTERNATIONAL DOLLAR BONDS -- 4.43%
Hanson PLC Notes 6.750%, due 09/15/05.................... 100,000 97,934
Republic of Italy 6.875%, due 09/27/23................... 250,000 237,830
Royal Bank of Scotland 7.375%, due 04/01/06.............. 80,000 79,730
----------
415,494
----------
U.S. GOVERNMENT AGENCIES -- 27.83%
Federal Home Loan Mortgage Corp.
6.750%, due 05/30/06.................................... 150,000 151,106
5.800%, due 08/15/19.................................... 330,000 308,246
6.500%, due 05/15/21.................................... 86,167 78,194
Federal Home Loan Mortgage Corp. Gold
6.000%, due 06/01/03.................................... 111,475 108,828
8.000%, due 11/01/22.................................... 72,660 74,627
Federal National Mortgage Association
6.500%, due 03/01/03.................................... 250,000 247,345
8.000%, due 12/18/11.................................... 100,000 103,375
7.500%, due 05/01/25.................................... 210,419 210,353
6.500%, due 02/01/26.................................... 131,483 125,494
6.500%, due 03/01/26.................................... 59,456 56,725
Federal National Mortgage Association Strip
8.000%, due 07/01/24 interest only...................... 104,772 32,287
0.000%, due 07/01/26 principal only..................... 93,546 62,938
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Government National Mortgage Association
9.000%, due 12/15/17................................... $ 68,304 $ 73,159
7.500%, due 12/15/22................................... 409,733 411,979
7.500%, due 06/15/25................................... 132,176 132,328
6.500%, due 03/20/26................................... 118,159 111,992
6.000%, due 11/20/26................................... 199,775 199,935
Independent National Mortgage Corp. 8.350%, due
06/25/25............................................... 120,000 122,886
----------
2,611,797
----------
U.S. GOVERNMENT OBLIGATIONS -- 39.67%
U.S. Treasury Coupon Strip 0.000%,
due 05/15/08 principal only............................ 285,000 135,634
U.S. Treasury Notes and Bonds
6.250%, due 10/31/01................................... 595,000 595,372
6.500%, due 05/15/05................................... 530,000 533,810
7.000%, due 07/15/06................................... 535,000 555,899
8.125%, due 05/15/21................................... 1,640,000 1,902,400
----------
3,723,115
----------
Total U.S. Bonds (Cost $9,003,871)...................... 8,981,347
----------
Short-Term Investments -- 7.10%
COMMERCIAL PAPER -- 7.10%
Cincinnati Bell, 7.250%, due 01/02/97................... 491,000 490,901
Duracell, Inc. 6.750%, due 01/02/97..................... 176,000 175,967
----------
Total Short-Term Investments
(Cost $666,868)........................................ 666,868
----------
Total Investments
(Cost $9,670,739) -- 102.80%(a)........................ 9,648,215
----------
Liabilities, less cash and other assets --(2.80%) (a)... (263,154)
----------
Net Assets -- 100%...................................... $9,385,061
==========
</TABLE>
(a) Aggregate cost for federal income tax purposes was $9,670,739; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation.......... $ 59,916
Gross unrealized de-
preciation.......... (82,440)
--------
Net unrealized de-
preciation......... $(22,524)
========
</TABLE>
FRN: Floating rate note--The rate disclosed is that in effect at December 31,
1996.
MTN: Medium Term Note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $9,670,739) (Note 1)................. $ 9,648,215
Cash............................................................. 272,993
Receivables:
Investment securities sold...................................... 351,190
Interest........................................................ 99,507
Fund shares sold................................................ 52,466
Due from Advisor (Note 2)....................................... 14,375
Other assets..................................................... 10,208
-----------
TOTAL ASSETS.................................................. 10,448,954
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 968,564
Accrued expenses................................................ 95,329
-----------
TOTAL LIABILITIES............................................. 1,063,893
-----------
NET ASSETS........................................................ $ 9,385,061
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $ 9,330,105
Accumulated undistributed net investment income.................. 19,834
Accumulated net realized gain.................................... 57,646
Net unrealized depreciation ..................................... (22,524)
-----------
NET ASSETS.................................................... $ 9,385,061
===========
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $8,891,698 and 882,581 shares issued
and outstanding) (Note 6)...................................... $ 10.07
===========
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $493,363 and 49,046 shares issued and
outstanding) (Note 6).......................................... $ 10.06
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................ $ 312,360
---------
TOTAL INCOME..................................................... 312,360
---------
EXPENSES:
Registration........................................................ 26,797
Professional........................................................ 24,656
Advisory (Note 2)................................................... 23,187
Accounting.......................................................... 22,986
Transfer Agent...................................................... 20,802
Printing............................................................ 17,664
Custodian........................................................... 10,086
Distribution (Note 5)............................................... 1,089
Other............................................................... 9,634
---------
TOTAL EXPENSES................................................... 156,901
Expenses deferred and reimbursed by Advisor (Note 2)............. (128,202)
---------
NET EXPENSES..................................................... 28,699
---------
NET INVESTMENT INCOME ........................................... 283,661
---------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain................................................... 89,999
Change in net unrealized appreciation or depreciation............... 123,739
---------
Net realized and unrealized gain.................................... 213,738
---------
Net increase in net assets resulting from operations................ $ 497,399
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1996 THROUGH
(UNAUDITED) JUNE 30, 1996
OPERATIONS: ----------------- ----------------
<S> <C> <C>
Net investment income...................... $ 283,661 $ 456,231
Net realized gain/(loss)................... 89,999 (11,035)
Change in net unrealized appreciation or
depreciation.............................. 123,739 (146,263)
---------- -----------
Net increase in net assets resulting from
operations................................ 497,399 298,933
---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income... (353,857) (363,467)
Distributions from net realized gain....... (713) --
Distributions in excess of net realized
gain...................................... -- (23,339)
---------- -----------
Total distributions to shareholders**...... (354,570) (386,806)
---------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................ 864,572 10,200,031
Shares issued on reinvestment of distribu-
tions..................................... 344,994 386,807
Shares redeemed............................ (1,649,868) (867,431)
---------- -----------
Net increase (decrease) in net assets re-
sulting from capital share transactions
(Note 6).................................. (440,302) 9,719,407
---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS. (297,473) 9,631,534
---------- -----------
NET ASSETS:
Beginning of period........................ 9,682,534 51,000
---------- -----------
End of period (including accumulated undis-
tributed net investment
income of $19,834 and $90,190, respective-
ly)....................................... $9,385,061 $ 9,682,534
========== ===========
* Commencement of investment operations
**Distributions By Class:
Distributions from net investment income:
Brinson Fund Class........................ (335,801) (350,335)
SwissKey Fund Class....................... (18,056) (13,132)
Distributions from and in excess of net re-
alized gain:
Brinson Fund Class........................ (675) (23,071)
SwissKey Fund Class....................... (38) (268)
---------- -----------
Total distributions to shareholders........ (354,570) (386,806)
---------- -----------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1996 THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........ $ 9.93 $10.00
------ ------
Income from investment operations:
Net investment income..................... 0.32 0.50
Net realized and unrealized gain (loss)... 0.22 (0.14)
------ ------
Total income from investment operations. 0.54 0.36
------ ------
Less distributions:
Distributions from net investment income.. (0.40) (0.40)
Distributions in excess of net realized
gain..................................... -- (0.03)
------ ------
Total distributions..................... (0.40) (0.43)
------ ------
Net asset value, end of period.............. $10.07 $ 9.93
====== ======
Total return (non-annualized)............... 5.42% 3.60%
Ratios/Supplemental data
Net assets, end of period (in 000s)........ $8,892 $9,047
Ratio of expenses to average net assets:
Before expense reimbursement.............. 3.35%** 3.63%**
After expense reimbursement............... 0.60%** 0.60%**
Ratio of net investment income to average
net assets:
Before expense reimbursement.............. 3.37%** 3.00%**
After expense reimbursement............... 6.12%** 6.03%**
Portfolio turnover rate.................... 265% 363%
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1996 THROUGH JUNE 30,
SWISSKEY FUND CLASS (UNAUDITED) 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........ $ 9.92 $10.00
------ ------
Income from investment operations:
Net investment income..................... 0.30 0.46
Net realized and unrealized gain (loss)... 0.22 (0.13)
------ ------
Total income from investment operations. 0.52 0.33
------ ------
Less distributions:
Distributions from net investment income.. (0.38) (0.38)
Distributions in excess of net realized
gain..................................... -- (0.03)
------ ------
Total distributions..................... (0.38) (0.41)
------ ------
Net asset value, end of period.............. $10.06 $ 9.92
====== ======
Total return (non-annualized)............... 5.19% 3.24%
Ratios/Supplemental data
Net assets, end of period (in 000s)........ $ 493 $ 636
Ratio of expenses to average net assets:
Before expense reimbursement.............. 3.82%** 4.10%**
After expense reimbursement............... 1.07%** 1.07%**
Ratio of net investment income to average
net assets:
Before expense reimbursement.............. 2.90%** 2.53%**
After expense reimbursement............... 5.65%** 5.56%**
Portfolio turnover rate.................... 265% 363%
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund, and Non-U.S. Equity Fund. Each Fund has two classes of shares
outstanding, Brinson Fund Class and SwissKey Fund Class. There are an unlimited
number of shares of each class with par value of $0.001 authorized. Each share
represents an identical interest in the investments of the Funds and has the
same rights. The following is a summary of significant accounting policies
consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond
Fund (each a "Fund," collectively the "Funds") in the preparation of their
financial statements.
A. INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which the most recent bid price or market
quotations are not readily available, including restricted securities which are
subject to limitations on their sale, are valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees. U.S.
equity securities, traded over-the-counter, are valued at the most recent bid
price. Debt securities are valued at the most recent bid price by using market
quotations or independent services. Futures contracts are valued at the
settlement price established each day on the exchange on which they are traded.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a
trade date basis. Gains and losses on securities sold are determined on an
identified cost basis.
C. INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
D. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 1996, therefore, no federal income tax provision was required.
E. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses.
F. INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Fund Class will not incur any of the distribution expenses.
G. USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
36
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on the Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the six
months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
BRINSON SWISSKEY
CLASS CLASS
ADVISORY EXPENSE EXPENSE ADVISORY FEES DEFERRED
FEE CAP CAP FEES AND/OR REIMBURSED
-------- ------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
U.S. Balanced Fund......... 0.70% 0.80% 1.30% $814,540 $246,439
U.S. Equity Fund........... 0.70 0.80 1.32 530,359 186,334
U.S. Bond Fund............. 0.50 0.60 1.07 23,187 128,202
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees were $3,680, $2,576 and $1,656 for the U.S. Balanced
Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively.
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1996, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund.................................... $383,484,882 $384,396,868
U.S. Equity Fund...................................... 63,102,416 37,150,734
U.S. Bond Fund........................................ 23,975,970 24,362,303
</TABLE>
4. FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
5. DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan governs payments made for
the expenses incurred in the promotion and distribution of the SwissKey Fund
Class of shares. Annual fees under the Plan, which include a 0.25% service fee,
total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey
Fund Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund,
respectively.
- --------------------------------------------------------------------------------
37
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. BALANCED FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............... 1,510,640 $ 18,264,307 6,944,846 $80,934,038
SwissKey Fund Class.............. 83,085 1,019,429 67,290 776,395
--------- ------------ --------- -----------
Total Sales.................... 1,593,725 $ 19,283,736 7,012,136 $81,710,433
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Fund Class............... 1,371,436 $ 16,128,084 1,540,774 $17,588,758
SwissKey Fund Class.............. 3,308 38,766 422 4,850
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 1,374,744 $ 16,166,850 1,541,196 $17,593,608
========= ============ ========= ===========
Redemptions:
Brinson Fund Class............... 1,910,824 $ 22,882,958 3,073,501 $36,019,481
SwissKey Fund Class.............. 29,540 368,380 957 10,963
--------- ------------ --------- -----------
Total Redemptions.............. 1,940,364 $ 23,251,338 3,074,458 $36,030,444
========= ============ ========= ===========
<CAPTION>
U.S. EQUITY FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............... 2,041,391 $ 30,854,921 5,125,613 $66,685,850
SwissKey Fund Class.............. 381,237 5,834,819 375,655 5,290,955
--------- ------------ --------- -----------
Total Sales.................... 2,422,628 $ 36,689,740 5,501,268 $71,976,805
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Fund Class............... 876,492 $ 13,191,199 222,497 $ 2,935,334
SwissKey Fund Class.............. 24,539 368,822 644 8,938
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 901,031 $ 13,560,021 223,141 $ 2,944,272
========= ============ ========= ===========
Redemptions:
Brinson Fund Class............... 568,938 $ 8,826,760 380,602 $ 5,174,675
SwissKey Fund Class.............. 65,737 1,042,297 6,874 90,042
--------- ------------ --------- -----------
Total Redemptions.............. 634,675 $ 9,869,057 387,476 $ 5,264,717
========= ============ ========= ===========
<CAPTION>
U.S. BOND FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............... 69,080 $ 707,725 953,454 $ 9,550,552
SwissKey Fund Class.............. 15,038 156,847 63,717 649,479
--------- ------------ --------- -----------
Total Sales.................... 84,118 $ 864,572 1,017,171 $10,200,031
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Fund Class............... 33,381 $ 336,476 37,309 $ 373,407
SwissKey Fund Class.............. 846 8,518 1,362 13,400
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 34,227 $ 344,994 38,671 $ 386,807
========= ============ ========= ===========
Redemptions:
Brinson Fund Class............... 131,050 $ 1,335,859 84,593 $ 856,547
SwissKey Fund Class.............. 30,962 314,009 1,055 10,884
--------- ------------ --------- -----------
Total Redemptions.............. 162,012 $ 1,649,868 85,648 $ 867,431
========= ============ ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
38
<PAGE>
DISTRIBUTED BY:
FUNDS DISTRIBUTOR, INC.
60 STATE STREET
BOSTON, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
- --------------------------------------------------------------------------------
39
<PAGE>
THE BRINSON FUNDS
---------------------------------------------------------------------
Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New
York . Paris
Singapore . Sydney . Tokyo . Zurich
LOGO
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800)
448-2430
<PAGE>
LOGO
----------------------------
THE BRINSON FUNDS
BRINSON NON-U.S. EQUITY FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
GLOBAL INSTITUTIONAL ASSET MANAGEMENT
----------------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
LOGO
TRUSTEES
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
OFFICERS
Frank K. Reilly, CFA Carolyn M. Burke, CPA
Chairman of the Board Assistant Secretary
E. Thomas McFarlan Catherine E. Macrae
President and Treasurer Assistant Secretary
Thomas J. Digenan, CFA, CPA Debra L. Nichols
Assistant Treasurer Assistant Secretary
Bruce G. Leto
Secretary
------------------------------------------------------------
1
<PAGE>
THE FUND'S ADVISOR -- BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
LOGO
In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their
institutional investment management organizations into a single investment
management business operating as Brinson Partners, Inc. in North America and
SBC Brinson in its other world-wide locations. We are a global investment
management organization with over $72 billion in institutional assets under
discretionary active management. We are also the investment advisor for SBC
Private Banking mutual fund assets which total $47 billion. The firm manages
investment portfolios for corporations, public funds, endowments, foundations,
central banks and other institutional investors located throughout the world.
Our organization employs over 590 people in offices in Chicago, Basel,
Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo
and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients and has offered fully integrated global portfolios since then.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is tailored to
specific client objectives and focused upon both risk and return considerations
in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally
developed valuation systems and seasoned judgment. Our independent team
approach allows for rapid responses to market changes, while providing each
client with the benefit of our best talent and the flexibility to customize
portfolios to meet unique requirements.
------------------------------------------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LOGO
Shareholder Letter............................................................ 4
Global Economic and Market Highlights......................................... 5
Non-U.S. Equity Fund.......................................................... 6
Schedule of Investments....................................................... 9
Financial Statements..........................................................14
Financial Highlights..........................................................17
Notes to Financial Statements.................................................19
------------------------------------------------------------
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
LOGO
February 19, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the December 31, 1996 Semi-Annual Report for the Non-U.S. Equity Fund.
This Report presents our current global economic and market outlook, as well
as the Fund's recent investment strategies and performance. To summarize this
information:
For the period from August 31, 1993 (inception date of the Fund) to December
31, 1996, the Fund provided an annualized total return of 7.42%. In the second
half of 1996, the Fund returned 5.37%.
Market Strategy
The Fund continues to hold a 5.00% strategic cash position reflecting our view
that, with very few exceptions, non-U.S. equity markets are modestly
attractive. The Japanese equity market, which is the largest component of the
index, is notably more overpriced than most of the other non-U.S. markets.
Given our valuation analyses and fundamental considerations, we are underweight
in Japan by 6.50%.
Currency Strategy
Currency strategy continues to emphasize those currencies that offer the
highest expected cash returns in U.S. dollar terms. We continue to have limited
exposure to the overvalued DM-bloc currencies and maintain an underweight in
the yen. Offsetting these underweights is an overweight in the U.S. dollar. Our
position is near neutral in the British pound, and in the Australian and
Canadian dollars.
We look forward to the challenges ahead and, as always, welcome your thoughts
and comments.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson, CFA
President and Chief Investment Officer
Brinson Partners, Inc.
------------------------------------------------------------
4
<PAGE>
GLOBAL ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
LOGO
A weaker yen is helping Japan recover from its recent recession. Prices at the
consumer level appear to have stopped falling, and the economy has started
showing real growth, although the expansion has been neither strong nor consis-
tent. The weaker yen and incipient recovery may, however, reduce the pressure
to address structural reform. The lack of unequivocal public support for re-
formist candidates in the most recent election also may delay deregulation.
In pursuit of monetary union, the core European countries are trying to meet
the Maastricht criteria. This has produced restrictive fiscal policies at a
time of weak economic growth, thus exacerbating structural weaknesses in labor
markets. The peripheral European economies have benefited from the drive to
EMU, as bond yields and borrowing costs have dropped considerably. The U.S.
economy remains among the most productive of the developed countries, due in
large part to its flexible labor market.
Increases in oil prices to the $25 per barrel range have not flowed through to
higher consumer price inflation. Central banks have been acting more responsi-
bly since the last major bout of inflation around 1980. Increases in the rela-
tive prices of inputs are no longer being accommodated and turned into general
price increases.
NON-U.S. EQUITY ENVIRONMENT
MAJOR MARKETS
<TABLE>
<CAPTION>
Total Return in 6 months 1 year 3 years Annualized
U.S. Dollar ended ended ended 8/31/93*
Hedged Terms 12/31/96 12/31/96 12/31/96 to 12/31/96
- --------------------------------------------------------
<S> <C> <C> <C> <C>
Japan -9.23% 0.06% 6.52% 1.57%
U.K. 12.70 15.18 8.92 11.38
Germany 11.32 25.10 8.00 11.40
France 11.21 30.73 4.72 5.58
Canada 18.79 30.20 14.93 15.34
Netherlands 17.64 41.40 18.93 20.49
Australia 7.71 7.71 4.31 7.23
- --------------------------------------------------------
MAJOR CURRENCIES
Percent Change 6 months 1 year 3 years Annualized
Relative to ended ended ended 8/31/93*
U.S. Dollars 12/31/96 12/31/96 12/31/96 to 12/31/96
- -------------------------------------------------------
Yen -5.50% -11.13% -1.30% -3.05%
Pound 10.14 -10.22 4.97 4.29
Deutschemark -1.23 -7.12 4.06 2.59
Canadian Dollar -0.36 -0.50 -1.15 -1.10
- -------------------------------------------------------
</TABLE>
*Inception date of the Non-U.S. Equity Fund
------------------------------------------------------------
5
<PAGE>
NON-U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
The Non-U.S. Equity Fund invests in the common stocks of companies
headquartered outside the U.S. We believe that in a non-U.S. investment program
the country allocation decision is the most important. Country assessments are
developed by the non-U.S. strategy team in Chicago working with our investment
teams in Basel, Frankfurt, London, Paris, Singapore, Sydney and Tokyo. Currency
strategies are separately developed and coordinated with market allocations.
Our industry strategies and individual security selections are determined by
fundamental research.
Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund has
earned an annualized return of 7.42% versus 7.48% for the benchmark, the Morgan
Stanley Capital International Non-U.S. Equity (Free) Index. For the year ended
December 31, 1996, the Fund returned 12.75% while the benchmark returned 7.11%.
For the second half of 1996, the Brinson Non-U.S. Equity Fund returned 5.37%
compared to the 2.19% return of the benchmark.
During 1996 the majority of the developed markets earned double-digit returns,
continuing 1995's strong performance. The best performing markets in dollar-
hedged terms were Spain, rising 46.76%; Finland, gaining 44.95%; the
Netherlands, increasing 41.39%; Sweden, up 39.86% and Hong Kong, adding 33.02%.
The majority of other markets also earned double-digit returns. In sharp
contrast, Japan was the weakest market, gaining 0.06% in dollar-hedged terms,
followed by Singapore, growing 1.42%. The only other markets with single digit
returns were Italy, rising 4.23%; New Zealand, adding 5.08%; and Australia, up
7.71%.
Since inception, market allocation has added to returns, but detracted somewhat
from 1996 performance. Strategic cash, overweights in several Anglo-Saxon
markets and underweights of Sweden, Switzerland and Hong Kong combined to
reduce returns. Value was added from the strategy of underweighting Japan and
Singapore, while overweighting Finland, the Netherlands, Spain and France.
Currency management has added solidly to returns since inception and was the
greatest positive contributor to 1996 performance, helped by both the strength
of the U.S. dollar and other dollar-bloc currencies and the weakness of the yen
and the DM-bloc currencies. The current U.S. dollar overweight is driven by an
underweighted exposure to the Japanese yen and minimal positions in the DM-bloc
currencies.
During 1996, stock selection was strongly positive, largely due to excellent
Japan stock selection, combined with good results in Canada, Germany and Italy.
Positive stock selection from Japan resulted from the portfolio's exposure to
high-quality defensive issues and exporters, and underexposure to financials
and real estate. A negative contribution came from France and Malaysia, where
outperforming momentum and small stocks were avoided.
------------------------------------------------------------
6
<PAGE>
NON-U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
ended ended ended 8/31/93*
12/31/96 12/31/96 12/31/96 to 12/31/96
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BRINSON NON-U.S. EQUITY FUND 5.37% 12.75% 9.55% 7.42%
MSCI Non-U.S. Equity (Free) Index
(currency unhedged)** 2.19 7.11 8.76 7.48
MSCI Non-U.S. Equity (Free) Index
(currency hedged)** 4.25 14.64 8.16 7.94
- -------------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson Non-U.S. Equity Fund
**Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000
This chart shows the growth No adjustment has been made
in the value of an for any income taxes payable
investment in the Brinson by shareholders on income
Non-U.S. Equity Fund and the dividends and capital gain
MSCI Non-U.S. Equity (Free) distributions. Past
Index (currency unhedged and performance is no guarantee
hedged) if you had invested of future results. Share
$100,000 on August 31, 1993, price and return will vary
and had reinvested all your with market conditions;
income dividends and capital investors may realize a gain
gain distributions through or loss upon redemption.
December 31, 1996.
BRINSON NON-U.S. EQUITY FUND
VS. MSCI NON-U.S. EQUITY (FREE) INDEX (CURRENCY UNHEDGED AND HEDGED)
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
MSCI Non-U.S. Equity MSCI Non-U.S. Equity
Brinson Non-U.S. (Free) Index (Free) Index
Equity Fund (currency unhedged) (currency unhedged)
---------------- -------------------- --------------------
8/31/93 $100,000 $100,000 $100,000
12/31/93 96,550 98,875 101,957
3/31/94 95,749 101,980 100,085
6/30/94 97,555 106,879 100,900
9/30/94 99,065 107,516 100,475
12/31/94 97,454 106,277 100,278
3/31/95 95,239 108,396 93,398
6/30/95 97,454 109,552 94,494
9/30/95 106,616 114,063 105,245
12/31/95 112,610 118,746 112,544
3/31/96 115,932 122,431 119,285
6/30/96 120,489 124,467 123,756
9/30/96 121,244 124,631 125,100
12/31/96 126,964 127,189 129,020
8/31/93 = $100,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
-------------------------------------------------------------
7
<PAGE>
NON-U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
NON-U.S. EQUITIES
Airlines................................................................. 0.26%
Appliances & Household Durables.......................................... 2.12
Automobiles.............................................................. 2.83
Banking.................................................................. 10.80
Beverages & Tobacco...................................................... 2.28
Broadcasting & Publishing................................................ 1.37
Building Materials....................................................... 1.14
Business & Public Service................................................ 3.21
Chemicals................................................................ 3.88
Construction............................................................. 1.88
Data Processing.......................................................... 1.00
Electric Components...................................................... 1.23
Electronics.............................................................. 4.09
Energy................................................................... 8.08
Financial Services....................................................... 1.44
Food & House Products.................................................... 4.61
Forest Products.......................................................... 1.77
Gold Mining.............................................................. 0.10
Health & Personal Care................................................... 3.99
Industrial Components.................................................... 2.15
Insurance................................................................ 4.09
Leisure & Tourism........................................................ 0.61
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Machinery & Engineering................................................ 1.38%
Merchandising.......................................................... 4.16
Metals-Steel........................................................... 1.94
Miscellaneous Materials................................................ 1.15
Multi-Industry......................................................... 4.28
Non-Ferrous Metals..................................................... 2.16
Real Estate............................................................ 0.76
Recreation............................................................. 0.54
Shipping............................................................... 0.77
Telecommunications..................................................... 4.99
Textiles & Apparel..................................................... 0.23
Transportation......................................................... 0.83
Utilities.............................................................. 5.89
------
Total Non-U.S. Equities.............................................. 92.01*
------
SHORT-TERM INVESTMENTS................................................. 6.43*
------
TOTAL INVESTMENTS.................................................... 98.44
CASH AND OTHER ASSETS,
LESS LIABILITIES...................................................... 1.56
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
MARKET AND CURRENCY STRATEGY
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Portfolio
-----------------
Market Currency
Strategy Strategy Index
- ---------------------------------------
<S> <C> <C> <C>
U.S. Dollar 0.0% 35.5% 0.0%
Japan 24.2 20.7 30.7
Australia 4.9 2.9 2.8
Belgium 3.2 1.2 1.1
Canada 2.9 3.9 4.5
Finland 1.5 1.5 0.6
France 9.6 1.1 6.6
Germany 8.3 3.8 7.8
Hong Kong 1.4 0.4 3.6
Italy 3.3 3.3 2.9
Malaysia 1.3 1.3 2.5
Netherlands 6.1 0.6 4.5
New Zealand 3.3 3.3 0.4
Spain 3.6 2.1 2.2
Sweden 0.0 0.0 2.4
Switzerland 1.6 0.1 5.4
U.K. 19.8 18.3 18.2
Cash Reserves 5.0 0.0 0.0
Other Markets 0.0 0.0 3.8
- ---------------------------------------
100.0% 100.0% 100.0%
</TABLE>
TOP TEN NON-U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of Net Assets
- -----------------------
<S> <C>
1. Royal Dutch Petroleum Co. 1.73%
2. British Telecommunications PLC 1.13
3. General Electric Co. PLC 1.12
4. Broken Hill Proprietary Co. Ltd. 1.07
5. Lloyds TSB Group PLC 1.07
6. Matsushita Electric Industrial Co. 1.05
7. British Petroleum Co. PLC 1.05
8. Toray Industries, Inc. 1.03
9. Telecom Corp. of New Zealand Ltd. 0.95
10. Grand Metropolitan PLC 0.87
- ---------------------------------------------
</TABLE>
*The Fund held a long position in Topix futures on December 31, 1996 which
increased Japanese equity exposure from 23.34% to 25.03% and decreased the
Fund's exposure to Short-Term Investments from 6.43% to 4.74%
------------------------------------------------------------
8
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Non-U.S. Equities -- 92.01%
AUSTRALIA -- 4.76%
Amcor Ltd................................................. 85,700 $ 550,685
Boral Ltd. ............................................... 120,000 341,223
Broken Hill Proprietary Co. Ltd. ......................... 192,270 2,736,679
CRA Ltd. ................................................. 66,210 1,038,640
David Jones Ltd. ......................................... 316,600 440,071
Lend Lease Corp. Ltd. .................................... 21,578 418,192
M.I.M. Holdings Ltd. ..................................... 271,976 380,205
National Australia Bank Ltd. ............................. 110,448 1,298,356
News Corp. Ltd. .......................................... 231,257 1,219,656
News Corp. Ltd. Preferred................................. 60,000 266,878
Pacific Dunlop Ltd. ...................................... 152,700 388,118
Qantas Airways Ltd. ...................................... 203,161 338,871
Santos Ltd................................................ 128,900 522,152
WMC Ltd. ................................................. 100,700 634,274
Westpac Bank Corp. Ltd. .................................. 209,851 1,193,434
Woolworth's Ltd. ......................................... 163,000 392,287
------------
12,159,721
------------
BELGIUM -- 3.18%
Delhaize-Le Lion S.A. .................................... 8,100 480,678
Electrabel S.A. .......................................... 6,265 1,481,218
Fortis AG................................................. 5,700 913,378
Fortis AG Strip (b)....................................... 90 45
General de Banque S.A..................................... 1,300 465,536
Groupe Bruxelles Lambert S.A. ............................ 3,530 453,968
Kredietbank NV............................................ 2,410 789,057
Petrofina S.A. ........................................... 3,275 1,041,336
Societe Generale de Belgique.............................. 5,828 456,853
Solvay S.A. Class A....................................... 1,235 755,242
Tractebel................................................. 1,650 767,484
Tractebel Warrants "99" (b)............................... 1,350 19,550
Union Miniere Group S.A. (b).............................. 7,080 479,214
------------
8,103,559
------------
CANADA -- 2.66%
Alcan Aluminium Ltd. ..................................... 14,500 489,293
Bank of Montreal.......................................... 13,100 416,723
Barrick Gold Corp. ....................................... 8,800 252,006
BCE, Inc. ................................................ 8,200 390,676
Canadian National Railway Co. ............................ 10,000 380,125
Canadian Pacific Ltd. .................................... 33,100 870,608
Hudson's Bay Co. ......................................... 13,500 225,558
Imperial Oil Ltd. ........................................ 11,900 560,010
Moore Corp. Ltd. ......................................... 13,000 269,371
Noranda, Inc. ............................................ 15,100 336,572
Northern Telecom Ltd. .................................... 5,000 310,813
NOVA Corp. ............................................... 22,700 201,229
Royal Bank of Canada...................................... 15,000 526,412
Seagram Co. Ltd. ......................................... 12,700 502,681
Thomson Corp. ............................................ 32,400 715,088
TransCanada Pipelines Ltd. ............................... 19,700 344,959
------------
6,792,124
------------
FINLAND -- 1.44%
Merita Ltd. Class A (b)................................... 127,400 395,275
Nokia Ab Class A.......................................... 30,200 1,748,180
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
Outokumpu OY Class A........................................ 20,800 $ 354,263
Pohjola Insurance Group Class B............................. 8,100 181,894
Sampo Insurance Co. Ltd. Class A............................ 3,500 275,656
UPM-Kymmene Corp. (b)....................................... 34,000 711,868
----------
3,667,136
----------
FRANCE -- 9.43%
Accor S.A. ................................................. 6,395 808,186
Alcatel Alsthom............................................. 8,725 699,517
AXA S.A. ................................................... 3,900 247,562
Banque Nationale de Paris................................... 31,930 1,233,298
CEP Communications.......................................... 2,300 162,146
CEP Communications Warrants "97" (b)........................ 4,400 5,036
Cie Bancaire S.A. .......................................... 7,588 896,192
Cie de Saint Gobain......................................... 10,913 1,540,797
Cie de Suez................................................. 13,844 587,452
Cie Generale des Eaux....................................... 15,864 1,962,135
Colas....................................................... 1,977 285,216
Credit Local de France...................................... 14,550 1,265,047
Elf Aquitaine S.A. ......................................... 15,634 1,420,343
GAN-Groupe des Assurances Nationales (b).................... 880 17,774
Groupe Danone............................................... 2,200 305,961
L'Oreal S.A. ............................................... 400 150,345
Lafarge S.A. ............................................... 7,600 455,091
LVMH........................................................ 6,915 1,927,373
Michelin Class B............................................ 18,350 988,677
Pechiney S.A. Class A (b)................................... 15,993 668,798
Peugeot S.A. ............................................... 15,580 1,750,191
Rhone-Poulenc Class A....................................... 36,500 1,242,012
Sanofi...................................................... 1 99
SEITA....................................................... 12,500 521,765
Societe Generale............................................ 12,640 1,364,003
Total S.A. Class B.......................................... 22,895 1,858,482
UAP-Union des Assurances de Paris........................... 26,884 669,682
Usinor Sacilor.............................................. 71,900 1,044,194
----------
24,077,374
----------
GERMANY -- 7.53%
Allianz AG Holding.......................................... 908 1,632,055
BASF AG..................................................... 25,780 986,970
Bayer AG.................................................... 34,990 1,417,900
Bayerische Motoren Werke AG................................. 1,300 895,854
Commerzbank AG.............................................. 27,540 698,731
Daimler-Benz AG (b)......................................... 14,650 1,002,904
Deutsche Bank AG............................................ 26,367 1,228,441
Deutsche Telekom AG (b)..................................... 43,600 908,157
Henkel KGaA-Vorzug AG....................................... 11,550 569,593
Hochtief AG................................................. 7,400 290,507
Hoechst AG.................................................. 11,680 540,383
M.A.N. AG................................................... 1,840 443,553
Mannesmann AG............................................... 2,457 1,055,756
Metro AG.................................................... 7,958 622,243
Muenchener Rueckver AG...................................... 462 1,119,700
Muenchener Rueckver AG Warrants "98" (b).................... 12 2,500
Preussag AG................................................. 2,969 670,438
RWE AG...................................................... 19,000 793,978
Schering AG................................................. 12,192 1,027,669
Siemens AG.................................................. 9,200 426,360
Thyssen AG.................................................. 4,700 832,282
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
Veba AG................................................. 21,988 $ 1,262,694
Volkswagen AG........................................... 1,900 785,965
------------
19,214,633
------------
HONG KONG -- 1.52%
Cheung Kong Holdings Ltd. .............................. 38,000 337,755
China Light & Power Co. Ltd. ........................... 78,000 346,895
Guoco Group Ltd. ....................................... 48,000 268,704
Hang Seng Bank Ltd. .................................... 31,500 382,811
Hong Kong Telecommunications Ltd. ...................... 135,200 217,616
Hutchison Whampoa Ltd. ................................. 85,000 667,591
Jardine Matheson Holdings ADR (c)....................... 31,200 205,920
New World Development Co. Ltd. ......................... 53,000 358,020
Sun Hung Kai Properties Ltd. ........................... 28,000 342,991
Swire Pacific Ltd. Class A ............................. 44,000 419,527
Wharf (Holdings) Ltd. .................................. 68,000 339,345
------------
3,887,175
------------
ITALY -- 2.98%
Assicurazioni Generali.................................. 41,250 779,965
Danieli & Co. Savings (Risp)............................ 73,000 304,867
Edison Spa.............................................. 46,000 290,431
Eni Spa................................................. 40,000 204,801
Eni ADR (c)............................................. 22,100 1,140,913
Fiat Spa-Priv........................................... 324,000 533,785
INA-Istituto Nazionale de Assicurazioni................. 136,000 176,742
Istituto Mobilaire Italiano Spa......................... 99,000 846,432
Italgas Spa............................................. 61,000 254,150
La Rinascente........................................... 35,000 202,565
La Rinascente Savings (Risp)............................ 46,000 117,382
La Rinascente Warrants "99" (b)......................... 2,800 1,232
Mediobanca Spa.......................................... 21,000 113,045
Montedison Spa (b)...................................... 1,060,380 721,100
SAI-Savings (Risp)...................................... 47,000 166,764
Telecom Italia Spa...................................... 502,000 977,258
Telecom Italia Mobile Spa............................... 538,000 766,044
------------
7,597,476
------------
JAPAN -- 23.34%
Amada Co. Ltd. ......................................... 106,000 821,918
Asahi Glass Co. Ltd. ................................... 125,000 1,173,861
Bank of Tokyo-Mitsubishi Ltd. .......................... 95,000 1,759,714
Canon, Inc.............................................. 90,000 1,985,009
Canon Sales Co., Inc. .................................. 35,200 782,424
Citizen Watch Co. Ltd. ................................. 96,000 686,482
Dai Nippon Printing Co. Ltd. ........................... 95,000 1,661,497
Daiichi Pharmaceutical Co. Ltd.......................... 68,000 1,089,687
Daikin Industries Ltd................................... 104,000 922,891
Daiwa House Industry Co. Ltd............................ 52,000 667,528
Fanuc................................................... 42,100 1,345,662
Fujitsu................................................. 61,000 567,589
Hitachi Ltd............................................. 204,000 1,898,165
Honda Motor Co.......................................... 27,000 769,966
Inax.................................................... 132,000 975,756
Isetan.................................................. 36,000 465,237
Ito-Yokado Co. Ltd...................................... 38,000 1,650,039
Kaneka Corp............................................. 52,000 265,667
Keio Teito Electric Railway............................. 118,000 575,411
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Kinki Nippon Railway...................................... 119,000 $ 741,251
Kirin Brewery Co. Ltd..................................... 113,000 1,109,848
Kokuyo.................................................... 22,000 542,087
Kuraray Co. Ltd........................................... 92,000 848,109
Kyocera Corp. ............................................ 9,000 559,835
Maeda Road Construction................................... 24,000 277,074
Matsushita Electric Industrial Co. ....................... 165,000 2,686,741
Mitsubishi Paper Mills.................................... 129,000 503,463
NGK Insulators............................................ 169,000 1,601,620
Nintendo Corp. Ltd........................................ 9,500 678,513
Nippon Denso Co. Ltd...................................... 71,000 1,706,643
Nippon Meat Packers, Inc.................................. 67,000 865,857
Nippon Steel Co........................................... 83,000 244,559
Okumura................................................... 109,000 661,118
Orix Corp................................................. 2,000 83,053
Osaka Gas Co.............................................. 426,000 1,163,453
Sankyo Co. Ltd. .......................................... 76,000 2,147,670
Sanwa Bank Ltd. .......................................... 51,000 694,236
Secom..................................................... 24,000 1,449,470
Seino Transportation ..................................... 37,000 408,030
Sekisui House Ltd. ....................................... 200,000 2,033,256
Shinmaywa Industries Ltd. ................................ 96,000 705,505
Sony Corp................................................. 31,600 2,066,374
Sumitomo Bank............................................. 110,000 1,582,666
Sumitomo Electric Industries.............................. 85,000 1,186,353
Takeda Chemical Industries................................ 77,000 1,612,044
TDK Corp.................................................. 19,000 1,235,892
Tokio Marine & Fire Insurance Co.......................... 94,000 882,743
Tokyo Electric Power...................................... 45,500 995,692
Tokyo Steel Mfg........................................... 76,700 1,090,333
Tonen Corp................................................ 75,000 872,319
Toray Industries, Inc..................................... 425,000 2,618,032
Toshiba Corp.............................................. 243,000 1,524,115
Toyo Suisan Kaisha........................................ 57,000 569,656
Toyota Motor Corp......................................... 27,000 774,619
Yamazaki Baking Co. Ltd. ................................. 50,000 796,933
------------
59,583,665
------------
MALAYSIA -- 1.25%
Hume Industries (Malaysia) Bhd............................ 48,000 302,198
Kuala Lumpur Kepong Bhd................................... 109,000 276,222
Land & General Holdings Bhd............................... 108,500 259,919
Malayan Banking Bhd....................................... 21,000 232,825
Malaysia International Shipping Bhd (Frgn.)............... 63,000 187,092
Nestle (Malaysia) Bhd..................................... 9,000 72,342
Public Bank Bhd (Frgn.)................................... 102,000 216,076
Resorts World Bhd......................................... 39,000 177,589
Sime Darby Bhd............................................ 101,000 397,921
Telekom Malaysia Bhd...................................... 34,000 302,910
Tenaga Nasional Bhd....................................... 120,000 574,936
YTL Corp. Bhd............................................. 34,000 183,092
------------
3,183,122
------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
NETHERLANDS -- 5.99%
ABN AMRO Holdings NV.................................... 19,560 $ 1,271,055
Akzo Nobel NV........................................... 2,500 341,100
DSM NV.................................................. 4,850 477,794
Hoogovens NV............................................ 7,100 295,542
ING Groep NV............................................ 52,834 1,899,910
KLM Royal Dutch Air Lines NV............................ 11,400 320,310
KPN NV.................................................. 33,797 1,287,635
Philips Electronics NV.................................. 16,700 675,840
Royal Dutch Petroleum Co................................ 25,230 4,418,204
Royal Dutch Petroleum Co. NY Shares (c)................. 5,200 887,900
Unilever NV............................................. 11,440 2,021,197
Vendex International NV................................. 19,450 830,985
VNU-Ver Ned Uitgevers................................... 27,100 565,595
------------
15,293,067
------------
NEW ZEALAND -- 3.04%
Brierley Investments Ltd................................ 1,395,600 1,291,766
Carter Holt Harvey Ltd.................................. 481,600 1,092,303
Fletcher Challenge Building............................. 156,550 481,165
Fletcher Challenge Energy............................... 156,550 453,512
Fletcher Challenge Forest Ltd........................... 317,445 531,580
Fletcher Challenge Paper................................ 313,100 643,765
Telecom Corp. of New Zealand Ltd........................ 474,200 2,419,079
Telecom Corp. of New Zealand Ltd. ADS (c)............... 10,500 850,500
------------
7,763,670
------------
SPAIN -- 3.50%
Acerinox S.A. .......................................... 2,500 360,561
Banco Bilbao-Vizcaya S. A............................... 12,500 673,650
Banco Central Hispanoamericano.......................... 11,430 293,054
Banco Intercontinental Espanol S.A...................... 2,091 323,597
Banco Popular Espanol S.A............................... 2,880 564,597
Banco Santander S.A..................................... 11,500 734,692
Cia Sevillana de Electricidad........................... 20,403 231,362
Empresa Nacional de Electridad S.A...................... 15,200 1,079,746
Fomento de Construcciones y Contratas S.A............... 4,300 400,000
Gas Natural SDG S.A. ................................... 1,500 348,261
Iberdrola S.A........................................... 80,600 1,140,142
Mapfre Corp. ........................................... 5,800 352,704
Repsol S.A.............................................. 6,200 237,371
Repsol S.A. ADR (c)..................................... 15,500 590,937
Telefonica de Espana.................................... 52,700 1,221,530
Vallehermosa S.A........................................ 7,700 166,638
Viscofan Envolturas Celulosicas S.A..................... 15,300 223,487
------------
8,942,329
------------
SWITZERLAND -- 1.79%
ABB AG (Bearer)......................................... 210 260,408
CS Holdings AG (Reg.)................................... 2,678 274,242
Nestle S.A. (Reg.)...................................... 1,251 1,338,860
Novartis AG (Reg.)...................................... 957 1,092,635
Roche Holding AG (Gen.)................................. 99 767,919
Schweiz Bankgesellschaft (Bearer)....................... 270 235,875
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Societe Generale de Surveillance Holding S.A. (Bearer)..... 75 $ 183,772
Zurich Versicherungs (Reg.)................................ 1,491 413,087
------------
4,566,798
------------
UNITED KINGDOM -- 19.60%
Abbey National PLC......................................... 63,000 824,833
Bank of Scotland........................................... 104,000 549,101
Bass PLC................................................... 39,500 555,015
B.A.T. Industries PLC...................................... 222,000 1,840,818
Booker PLC................................................. 50,500 345,281
British Energy PLC......................................... 479,000 1,205,083
British Gas PLC............................................ 451,300 1,733,987
British Petroleum Co. PLC.................................. 223,252 2,676,502
British Steel PLC.......................................... 379,000 1,041,066
British Telecommunications PLC............................. 428,200 2,891,065
Charter PLC................................................ 57,171 724,544
Coats Viyella PLC.......................................... 261,100 594,323
FKI PLC.................................................... 213,625 738,529
General Electric Co. PLC................................... 436,700 2,855,030
Glaxo Wellcome PLC......................................... 67,500 1,095,157
Grand Metropolitan PLC..................................... 282,700 2,220,765
Guinness PLC............................................... 224,200 1,755,460
Hanson PLC................................................. 451,500 629,766
Hillsdown Holdings PLC..................................... 321,900 1,101,831
House of Fraser PLC........................................ 360,800 947,849
HSBC Holdings PLC.......................................... 72,000 1,609,310
Imperial Chemical Industries PLC........................... 24,000 315,660
Legal & General Group PLC.................................. 159,000 1,012,288
Lloyds TSB Group PLC....................................... 370,185 2,727,446
Marks & Spencer PLC........................................ 184,900 1,553,755
Millennium Chemicals, Inc. (b)............................. 3,707 65,799
Mirror Group PLC........................................... 153,600 566,504
National Power PLC......................................... 106,500 891,297
National Westminster Bank PLC.............................. 64,500 756,713
Northern Foods PLC......................................... 144,000 503,988
Peninsular & Oriental Steam Navigation Co.................. 177,700 1,794,335
Reckitt & Colman PLC....................................... 34,746 430,534
Redland PLC................................................ 57,600 361,294
RJB Mining PLC............................................. 131,000 964,060
Royal & Sun Alliance Insurance Group PLC................... 106,149 807,517
RTZ Corp. PLC.............................................. 70,800 1,134,763
Sainsbury (J.) PLC......................................... 147,000 976,142
Scottish Hydro-Electric PLC................................ 116,800 655,663
Sears PLC.................................................. 437,700 711,646
Sedgwick Group PLC......................................... 294,000 661,664
SmithKline Beecham PLC..................................... 84,800 1,174,835
Smurfit (Jefferson) Group PLC.............................. 156,000 463,221
Tesco PLC.................................................. 126,900 769,913
Thames Water PLC........................................... 84,600 886,830
Unilever PLC............................................... 40,200 974,556
Vodafone Group PLC......................................... 118,500 499,919
Yorkshire Water PLC........................................ 36,000 436,522
------------
50,032,179
------------
Total Non-U.S. Equities
(Cost $215,959,551)....................................... 234,864,028
------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
Short-Term Investments -- 6.43%
<S> <C> <C>
COMMERCIAL PAPER -- 6.43%
Burlington Northern Santa Fe
5.650%, due 01/17/97................................ $ 1,500,000 $ 1,496,233
Case Credit Corp.
5.510%, due 01/07/97................................ 1,000,000 999,082
Cincinnati Bell, Inc.
7.250%, due 01/02/97................................ 3,032,000 3,031,389
Crown Cork & Seal Co., Inc.
5.520%, due 01/10/97................................ 2,000,000 1,997,240
5.580%, due 01/29/97................................ 1,000,000 995,660
5.580%, due 01/31/97................................ 1,000,000 995,350
CSX Corp. 5.520%, due 01/15/97....................... 1,500,000 1,496,780
Rite Aid Corp.
5.650%, due 01/06/97................................ 1,500,000 1,498,823
5.600%, due 01/21/97................................ 1,000,000 996,889
Tyson Foods, Inc.
5.750%, due 01/09/97................................ 900,000 898,850
Vastar Resources, Inc.
6.020%, due 01/02/97................................ 1,000,000 999,833
Whirlpool Financial Corp.
6.000%, due 01/03/97................................ 1,000,000 999,667
------------
Total Short-Term Investments
(Cost $16,405,796).................................. 16,405,796
------------
Total Investments
(Cost $232,365,347) -- 98.44% (a)................... 251,269,824
------------
Cash and other assets,
less liabilities -- 1.56%........................... 3,994,983
------------
Net Assets -- 100%................................... $255,264,807
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $232,365,347; net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 31,057,745
Gross unrealized depreciation............................... (12,153,268)
------------
Net unrealized appreciation............................... $ 18,904,477
============
</TABLE>
(b) Non-income producing security
(c) Denominated in U.S. dollars
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Non-U.S. Equity Fund had the following open forward foreign currency
contracts as of December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Canadian Dollar......... 02/20/97 3,200,000 $ 2,342,279 $ (60,845)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar....... 02/20/97 5,750,000 4,564,330 (122,570)
Belgian Franc........... 02/20/97 135,000,000 4,264,267 202,899
British Pound........... 02/20/97 2,150,000 3,675,500 (363,834)
Dutch Guilder........... 02/20/97 23,500,000 13,629,905 584,762
French Franc............ 02/20/97 113,000,000 21,799,221 576,855
German Mark............. 02/20/97 16,400,000 10,675,842 439,372
Hong Kong Dollars....... 02/20/97 17,600,000 2,275,681 (6)
Japanese Yen............ 02/20/97 505,000,000 4,381,039 294,604
Spanish Peseta.......... 02/20/97 420,000,000 3,224,988 72,233
Swiss Franc............. 02/20/97 5,700,000 4,266,553 387,268
----------
Total................. $2,010,738
==========
FUTURES CONTRACTS (NOTE 5)
The Non-U.S. Equity Fund had the following open index futures contracts as of
December 31, 1996:
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE LOSS
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Topix, 34 contracts..... March 1997 $ 4,484,708 $ 4,311,881 $ (172,827)
==========
</TABLE>
The segregated cash pledged to cover margin requirements for the open positions
at December 31, 1996 was $1,068,007.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $232,365,347) (Note 1)............... $251,269,824
Cash............................................................. 6,576,841
Foreign currency, at value (Cost $796,042)....................... 805,150
Receivables:
Investment securities sold...................................... 528,733
Dividends....................................................... 640,537
Fund shares sold................................................ 120,851
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 2,010,738
Other assets..................................................... 50,759
------------
TOTAL ASSETS.................................................. 262,003,433
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 5,090,839
Fund shares redeemed............................................ 1,093,192
Variation margin (Note 5)....................................... 172,827
Investment advisory fees (Note 2)............................... 160,210
Accrued expenses................................................ 221,558
------------
TOTAL LIABILITIES............................................. 6,738,626
------------
NET ASSETS........................................................ $255,264,807
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $233,253,507
Accumulated undistributed net investment income.................. 199,582
Accumulated net realized gain.................................... 1,042,476
Net unrealized appreciation...................................... 20,769,242
------------
NET ASSETS.................................................... $255,264,807
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $253,355,869 and 22,855,725 shares is-
sued and outstanding) (Note 7)................................. $ 11.09
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $1,908,938 and 173,185 shares issued
and outstanding) (Note 7)...................................... $ 11.02
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $295,617 for foreign taxes withheld)........... $ 2,331,420
Interest......................................................... 507,549
-----------
TOTAL INCOME.................................................. 2,838,969
-----------
EXPENSES:
Advisory (Note 2)................................................ 933,582
Administration................................................... 72,871
Accounting....................................................... 70,594
Custodian........................................................ 45,674
Distribution (Note 6)............................................ 6,504
Other............................................................ 147,475
-----------
TOTAL EXPENSES................................................ 1,276,700
Expenses deferred by Advisor (Note 2)......................... (103,191)
-----------
NET EXPENSES.................................................. 1,173,509
-----------
NET INVESTMENT INCOME ........................................ 1,665,460
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 5,365,490
Futures contracts............................................... (541,034)
Foreign currency transactions................................... 878,088
-----------
Net realized gain............................................. 5,702,544
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency ............................... 5,665,728
Futures contracts .............................................. (192,976)
Forward contracts............................................... (54,807)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 15,312
-----------
Change in net unrealized appreciation or depreciation......... 5,433,257
-----------
Net realized and unrealized gain.................................. 11,135,801
-----------
Net increase in net assets resulting from operations.............. $12,801,261
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 1,665,460 $ 3,265,964
Net realized gain............................. 5,702,544 22,260,813
Change in net unrealized appreciation or de-
preciation .................................. 5,433,257 10,918,989
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 12,801,261 36,445,766
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class........................... (2,168,905) (3,057,609)
SwissKey Fund Class.......................... (10,222) (8,629)
Distributions from net realized gain:
Brinson Fund Class........................... (12,209,010) (8,632,717)
SwissKey Fund Class.......................... (94,152) (14,731)
------------ ------------
Total distributions to shareholders.......... (14,482,289) (11,713,686)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 49,366,958 86,752,018
Shares issued on reinvestment of distribu-
tions........................................ 14,118,771 10,473,903
Shares redeemed............................... (20,168,223) (56,648,208)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 7)............. 43,317,506 40,577,713
------------ ------------
TOTAL INCREASE IN NET ASSETS................ 41,636,478 65,309,793
------------ ------------
NET ASSETS:
Beginning of period........................... 213,628,329 148,318,536
------------ ------------
End of period (including accumulated undis-
tributed net investment income of $199,582
and $785,599, respectively).................. $255,264,807 $213,628,329
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR YEAR AUGUST 31, 1993*
1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------
Income from investment
operations:
Net investment income. 0.07 0.18 0.15 0.10
Net realized and
unrealized gain
(loss)............... 0.51 2.05 (0.16) (0.34)
-------- -------- -------- -------
Total income (loss)
from investment
operations......... 0.58 2.23 (0.01) (0.24)
-------- -------- -------- -------
Less distributions:
Distributions from net
investment income.... (0.10) (0.18) -- (0.07)
Distributions from net
realized gain........ (0.56) (0.56) -- --
-------- -------- -------- -------
Total distributions. (0.66) (0.74) -- (0.07)
-------- -------- -------- -------
Net asset value, end of
period................. $ 11.09 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== =======
Total return (non-
annualized)............ 5.37% 23.64% (0.10%) (2.45%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $253,356 $212,366 $148,319 $71,544
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.08%** 1.20% 1.23% 1.60%**
After expense reim-
bursement............ 1.00%** 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 1.35%** 1.67% 1.93% 1.28%**
After expense reim-
bursement............ 1.43%** 1.87% 2.16% 1.88%**
Portfolio turnover
rate.................. 12% 20% 14% 12%
Average commission rate
paid per share........ $ 0.0224 $ 0.0219 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 11.12 $ 10.26
------- -------
Income from investment operations:
Net investment income....................... 0.02 0.12
Net realized and unrealized gain............ 0.50 1.45
------- -------
Total income from investment operations... 0.52 1.57
------- -------
Less distributions:
Distributions from net investment income.... (0.06) (0.15)
Distributions from net realized gain........ (0.56) (0.56)
------- -------
Total distributions....................... (0.62) (0.71)
------- -------
Net asset value, end of period................ $ 11.02 $ 11.12
======= =======
Total return (non-annualized)................. 4.85% 15.78%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $ 1,909 $ 1,262
Ratio of expenses to average net assets:
Before expense reimbursement................ 1.92%** 2.04%**
After expense reimbursement................. 1.84%** 1.84%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 0.51%** 0.83%**
After expense reimbursement................. 0.59%** 1.03%**
Portfolio turnover rate...................... 12% 20%
Average commission rate paid per share....... $0.0224 $0.0219
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund and Non-U.S. Equity Fund. The Fund has two classes of shares outstanding,
Brinson Fund Class and SwissKey Fund Class. There are an unlimited number of
shares of each class with par value of $0.001 authorized. Each share of the
Fund represents an identical interest in the investments of the Fund and has
the same rights. The following is a summary of significant accounting policies
consistently followed by the Non-U.S. Equity Fund (the "Fund") in the
preparation of its financial statements.
A. INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward contracts are valued daily using quoted forward exchange rates.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B. FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts, income receipts and expense accruals are translated at the
prevailing exchange rate on the date of each transaction. Realized and
unrealized foreign exchange gains or losses on investments are included as a
component of net realized and unrealized gain or loss on investments in the
statement of operations.
C. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a
trade date basis. Gains and losses on securities sold are determined on an
identified cost basis.
D. INVESTMENT INCOME: Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E. FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the six months ended December 31, 1996,
therefore, no federal income tax provision was required.
F. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute
its net investment income on a semi-annual basis and net capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. Differences in dividends per share between the classes are due to
distribution expenses.
G. INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by
the Fund will be borne on a pro rata basis by each of the classes, except that
the Brinson Fund Class shares will not incur any of the distribution expenses of
the SwissKey Fund Class.
H. USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
19
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. As compensation for
these services, the Fund pays the Advisor a monthly fee based on the Fund's
average daily net assets. The Advisor has agreed to waive its fees and
reimburse the Fund to the extent total annualized expenses exceed a specified
percentage of the Fund's average daily net assets. The expense cap is 1.00% and
1.84% of the average daily net assets of the Brinson Fund Class and SwissKey
Fund Class, respectively. Investment advisory fees and other transactions with
affiliates for the six months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY FEES
FEE FEES DEFERRED
-------- -------- --------
<S> <C> <C> <C>
Non-U.S. Equity Fund................................. 0.80% $933,582 $103,191
</TABLE>
Certain officers of the Fund are also officers of the Advisor. All officers
serve without direct compensation from the Fund. Trustees' fees paid to
unaffiliated trustees were $3,496.
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1996, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
Non-U.S. Equity Fund.................................... $54,054,840 $24,504,265
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Fund realizes a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the six months ended December
31, 1996, was the Fund's custodian.
5. FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such contracts to hedge a portion of
its portfolio. Risks of entering into futures contracts include the possibility
that there may be an illiquid market or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Fund, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6. DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended. The Plan governs payments
made for the expenses incurred in the promotion and distribution of the
SwissKey Fund Class of shares. Annual fees under the Plan, which include a
0.25% service fee, shall not exceed 0.84% of the average daily net assets of
the SwissKey Fund Class.
- --------------------------------------------------------------------------------
20
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............ 4,323,938 $48,513,082 8,044,119 $85,398,213
SwissKey Fund Class........... 77,339 853,876 125,829 1,353,805
--------- ----------- --------- -----------
Total Sales................ 4,401,277 $49,366,958 8,169,948 $86,752,018
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Fund Class............ 1,296,079 $14,049,499 998,992 $10,452,496
SwissKey Fund Class........... 6,426 69,272 2,042 21,407
--------- ----------- --------- -----------
Total Dividend Reinvest-
ment...................... 1,302,505 $14,118,771 1,001,034 $10,473,903
========= =========== ========= ===========
Redemptions:
Brinson Fund Class............ 1,774,371 $19,898,922 5,347,882 $56,492,091
SwissKey Fund Class........... 24,099 269,301 14,352 156,117
--------- ----------- --------- -----------
Total Redemptions.......... 1,798,470 $20,168,223 5,362,234 $56,648,208
========= =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE>
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.
- --------------------------------------------------------------------------------
<PAGE>
THE BRINSON FUNDS
---------------------------------------------------------
Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New
York . Paris
Singapore . Sydney . Tokyo . Zurich
LOGO
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800)
448-2430
<PAGE>
LOGO
SWISSKEY FUNDS
SWISSKEY GLOBAL FUND
SWISSKEY GLOBAL EQUITY FUND
SWISSKEY GLOBAL BOND FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
Your Key to Performance
-----------------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
LOGO
TRUSTEES
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
OFFICERS
Frank K. Reilly, CFA Carolyn M. Burke, CPA
Chairman of the Board Assistant Secretary
E. Thomas McFarlan Catherine E. Macrae
President and Treasurer Assistant Secretary
Thomas J. Digenan, CFA, CPA Debra L. Nichols
Assistant Treasurer Assistant Secretary
Bruce G. Leto
Secretary
------------------------------------------------------------
1
<PAGE>
THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
LOGO
In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their
institutional investment management organizations into a single investment
management business operating as Brinson Partners, Inc. in North America and
SBC Brinson in its other world-wide locations. We are a global investment
management organization with over $72 billion in institutional assets under
discretionary active management. We are also the investment advisor for SBC
Private Banking mutual fund assets which total $47 billion. The firm manages
investment portfolios for corporations, public funds, endowments, foundations,
central banks and other institutional investors located throughout the world.
Our organization employs over 590 people in offices in Chicago, Basel,
Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo
and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients and has offered fully integrated global portfolios since then.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is tailored to
specific client objectives and focused upon both risk and return considerations
in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally
developed valuation systems and seasoned judgment. Our independent team
approach allows for rapid responses to market changes, while providing each
client with the benefit of our best talent and the flexibility to customize
portfolios to meet unique requirements.
------------------------------------------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LOGO
Shareholder Letter............................................................ 4
Global Economic and Market Highlights......................................... 5
Global Fund................................................................... 6
Schedule of Investments...................................................10
Financial Statements......................................................18
Financial Highlights......................................................21
Global Equity Fund............................................................23
Schedule of Investments...................................................27
Financial Statements......................................................33
Financial Highlights......................................................36
Global Bond Fund..............................................................38
Schedule of Investments...................................................41
Financial Statements......................................................44
Financial Highlights......................................................47
The SwissKey Funds--Notes to Financial Statements.............................49
------------------------------------------------------------
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
LOGO
February 19, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the December 31, 1996 Semi-Annual Report for the Global Fund, Global
Equity Fund and Global Bond Fund. This Report presents our current global
economic and market outlook, as well as the Funds' recent investment strategies
and performance. To summarize this information:
Global Fund
For the period from July 31, 1995 to December 31, 1996, the Fund provided an
annualized total return of 15.93%. The Fund returned 8.89% in the second half
of 1996.
The strategy of underweighting the overpriced equity markets in favor of the
attractive bond markets remains in place. A portion of foreign currency
exposure is hedged into U.S. dollars.
Global Equity Fund
For the period from July 31, 1995 to December 31, 1996, the Fund provided an
annualized total return of 18.93%. The Fund returned 7.23% in the second half
of 1996.
Reflecting only modestly attractive equity markets, the Fund maintains its 15%
cash hedge. Primary underweights include the U.S. market, in light of its
overvaluation and increasing volatility. A portion of foreign currency exposure
is hedged into U.S. dollars.
Global Bond Fund
For the period from July 31, 1995 to December 31, 1996, the Fund provided an
annualized total return of 11.40%. The Fund returned 6.76% in the second half
of 1996.
Bond markets are generally attractive. Yields in Japan are unsustainably low,
making that market very unattractive. It remains the largest underweight in the
portfolio. A portion of foreign currency exposure is hedged into U.S. dollars.
We look forward to the challenges ahead and, as always, welcome your comments
and suggestions. Please visit our website at http://networth.galt.com/swisskey
Sincerely,
/s/ Raoul Weil /s/ Raymond Simon
Raoul Weil Raymond Simon
Managing Director Executive Director
PRIVATE [LOGO] BANKING PRIVATE [LOGO] BANKING
------------------------------------------------------------
4
<PAGE>
GLOBAL ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
LOGO
A weaker yen is helping Japan recover from its recent recession. Prices at the
consumer level appear to have stopped falling, and the economy has started
showing real growth, although the expansion has been neither strong nor
consistent. The weaker yen and incipient recovery may, however, reduce the
pressure to address structural reform. The lack of unequivocal public support
for reformist candidates in the most recent election also may delay
deregulation.
In pursuit of monetary union, the core European countries are trying to meet
the Maastricht criteria. This has produced restrictive fiscal policies at a
time of weak economic growth, thus exacerbating structural weaknesses in labor
markets. The peripheral European economies have benefited from the drive to
EMU, as bond yields and borrowing costs have dropped considerably. The U.S.
economy remains among the most productive of the developed countries, due in
large part to its flexible labor market.
Increases in oil prices to the $25 per barrel range have not flowed through to
higher consumer price inflation. Central banks have been acting more
responsibly since the last major bout of inflation around 1980. Increases in
the relative prices of inputs are no longer being accommodated and turned into
general price increases.
GLOBAL ENVIRONMENT
<TABLE>
<CAPTION>
6 months 1 year
MAJOR MARKETS ended ended
Total Return in U.S. Dollars 12/31/96 12/31/96
- --------------------------------------------------------
<S> <C> <C>
U.S. Equity 9.92% 21.21%
Non-U.S. Equities (currency unhedged) 2.19 7.11
Non-U.S. Equities (currency hedged) 4.25 14.64
U.S. Bonds 4.94 3.63
Non-U.S. Bonds (currency unhedged) 5.45 4.10
Non-U.S. Bonds (currency hedged) 7.98 11.82
U.S. Cash Equivalents 2.56 5.16
- --------------------------------------------------------
<CAPTION>
MAJOR CURRENCIES 6 months 1 year
Percent Change Relative to U.S. ended ended
Dollars 12/31/96 12/31/96
- --------------------------------------------------------
<S> <C> <C>
Yen -5.50% -11.13%
Pound 10.14 10.22
Deutschemark -1.23 -7.12
Canadian Dollar -0.36 -0.50
- --------------------------------------------------------
</TABLE>
------------------------------------------------------------
5
<PAGE>
GLOBAL FUND
- -------------------------------------------------------------------------------
LOGO
The Global Fund is diversified across the equity and fixed income markets of
the U.S. and a broad range of other countries. This Fund is actively managed
within an asset allocation framework, involving value-based market, currency
and individual security selection. Our senior asset allocation, equity and
fixed income professionals form the investment team for this portfolio,
supported by a globally integrated market analysis system. Security selection
within each market is based on the fundamental research of our analytical
teams in Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore,
Sydney and Tokyo.
The SwissKey Global Fund has provided an annualized return of 15.93% since its
inception on July 31, 1995. This compares with the corresponding 13.74%
return of its benchmark, the GSMI Mutual Fund Index. For the year ended
December 31, 1996, the Fund returned 13.54%, while the benchmark returned
12.53%. For the second half of 1996, the SwissKey Global Fund returned 8.89%
compared to the 6.60% return of the benchmark. Positive contributors to
relative performance were security selection, particularly in the U.S. and in
the Japanese equity market, an overweight in emerging markets debt, and the
currency risk hedging. The primary negative contributor was the underweight in
most equity markets and the overweight in bonds.
Apart from emerging markets debt, which provided a return in 1996 of
approximately 40%, bond markets turned in poor performance relative to
equities. The U.S. bond market lagged markets elsewhere, with a total return
that failed to exceed cash returns. Bond yields in the U.S. rose substantially
in the first half of the year on stronger than anticipated economic news. In
other developed markets, bond returns were generally quite good. The
peripheral European bond markets performed well, as spreads over German yields
declined substantially due to the market's anticipation of a single currency
in the coming years.
The U.S. equity market return of better than 20% was outdone by many of the
European markets which were driven by a combination of lower interest rates
and the anticipation of a profits recovery. The Japanese equity market stood
in stark contrast with a local currency loss of almost 5% for the year. This
was due in part to the failure of government spending programs and loose
monetary policy to produce sustained economic growth.
While the emerging debt markets were producing spectacular gains, emerging
equities were much more subdued with an aggregate dollar return of under 10%.
Returns in the high yield bond market, at over 12%, not surprisingly fell
between equity and bond returns.
Currency risk hedges were beneficial during the year, as the overpriced yen
and deutschemark-bloc currencies depreciated against the U.S. dollar. The risk
hedges also benefitted from interest rates in the U.S. exceeding rates in the
overpriced currencies.
Asset allocation strategy continues to underweight equity markets, as prices
remain in excess of fundamental value. Bond markets, apart from Japan, remain
overweight as they provide the most attractive relative value. Emerging
markets debt is also overweight, with small underweights in emerging equity
and high yield bonds. Currency strategy remains focused on controlling the
risks in overpriced core European currencies, and to a lesser extent the yen.
------------------------------------------------------------
6
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 7/31/95* to
12/31/96 12/31/96 12/31/96
- --------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY GLOBAL FUND 8.89% 13.54% 15.93%
GSMI Mutual Fund Index** 6.60 12.53 13.74
- --------------------------------------------------------
</TABLE>
*Inception date of the SwissKey Global Fund.
**An un-managed index compiled by the Advisor, constructed as follows: 40%
Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG
Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government
Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High
Yield Bond Index.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey
Global Fund and the GSMI Mutual Fund Index if you had invested $10,000 on July
31, 1995, and had reinvested all your income dividends and capital gain
distributions through December 31, 1996. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
SWISSKEY GLOBAL FUND
VS. GSMI MUTUAL FUND INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
SwissKey GSMI Mutual
Global Fund Fund Index
----------- -----------
7/31/95 $10,000 $10,000
9/30/95 10,293 10,232
12/31/95 10,861 10,665
3/31/96 11,091 10,963
6/30/96 11,324 11,258
9/30/96 11,687 11,505
12/31/96 12,332 12,001
7/31/95 = $10,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction forfees or transaction costs for
rebalancing.
------------------------------------------------------------
7
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
LOGO
ASSET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ------------------------------------------------------------
<S> <C> <C>
U.S. EQUITY 40.0% 25.0%
Large Cap. Stocks 28.0 17.5
Small/Int. Cap. 12.0 7.5
NON-U.S. EQUITIES 22.0 17.0
Japan Equities 6.8 3.8
Other Equities 15.2 13.2
EMERGING MARKETS EQUITIES 3.0 2.0
DOLLAR BONDS 21.0 28.5
U.S. Bonds 19.0 26.5
International $ Bonds 2.0 2.0
HIGH YIELD BONDS 3.0 2.5
NON-U.S. BONDS 9.0 22.0
Japan Bonds 2.5 0.0
Other Bonds 6.5 22.0
EMERGING MARKETS DEBT 2.0 3.0
CASH EQUIVALENTS 0.0 0.0
- ------------------------------------------------------------
100.0% 100.0%
</TABLE>
CURRENCY ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------
<S> <C> <C>
U.S. 66.0% 86.5%
Japan 9.3 0.0
U.K. 4.8 4.8
Continental Europe 12.9 3.2
Canada 1.4 1.4
Emerging Markets 3.0 2.0
Other 2.6 2.1
- --------------------------------------
100.0% 100.0%
</TABLE>
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ------------------------------------------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 1.32%
2. Xerox Corp. 1.03
3. Lockheed Martin Corp. 1.02
4. Burlington Northern Santa Fe 1.01
5. Corning, Inc. 0.96
6. Citicorp 0.92
7. Philip Morris Companies, Inc. 0.91
8. Aon Corp. 0.85
9. Goodyear Tire & Rubber Co. 0.78
10. Enron Corp. 0.71
- ------------------------------------------------------------------------------
</TABLE>
TOP TEN NON-U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ------------------------------------------------------------------------------
<S> <C>
1. British Telecommunications PLC 0.22%
2. General Electric Co. PLC 0.22
3. Royal Dutch Petroleum Co. 0.21
4. Lloyds TSB Group PLC 0.21
5. Broken Hill Proprietary Co. Ltd. 0.21
6. Telecom Corp. of New Zealand Ltd. 0.20
7. Royal Dutch Petroleum Co. NY Shares 0.19
8. British Petroleum Co. PLC 0.19
9. Matsushita Electric Industrial Co. 0.18
10. Toray Industries, Inc. 0.17
- ------------------------------------------------------------------------------
</TABLE>
------------------------------------------------------------
8
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals............................................................... 0.18%
Housing/Paper........................................................... 1.12
Metals.................................................................. 0.14
-----
1.44
Capital Investment
Capital Goods........................................................... 2.48
Technology.............................................................. 1.60
-----
4.08
Consumer
Autos/Durables.......................................................... 0.07
Discretionary........................................................... 1.80
Health: Drugs........................................................... 2.23
Health: Non-Drugs....................................................... 1.10
Non-Durables............................................................ 3.10
Retail/Apparel.......................................................... 1.14
-----
9.44
Energy................................................................... 1.37
Financial
Banks................................................................... 2.78
Non-Banks............................................................... 2.54
-----
5.32
Post Venture............................................................. 1.26
Services................................................................. 1.76
Transportation........................................................... 1.71
Utilities................................................................ 0.85
Miscellaneous............................................................ 0.75
-----
Total U.S. Equities................................................... 27.98*
-----
NON-U.S. EQUITIES
Airlines................................................................. 0.04
Appliances & Household Durables.......................................... 0.36
Automobiles.............................................................. 0.51
Banking.................................................................. 2.04
Beverages & Tobacco...................................................... 0.42
Broadcasting & Publishing................................................ 0.28
Building Materials....................................................... 0.32
Business & Public Service................................................ 0.56
Chemicals................................................................ 0.72
Construction............................................................. 0.31
Data Processing.......................................................... 0.17
Electric Components...................................................... 0.21
Electronics.............................................................. 0.76
Energy................................................................... 1.54
Financial Services....................................................... 0.27
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Food & House Products................................................... 0.88%
Forest Products......................................................... 0.32
Gold Mining............................................................. 0.02
Health & Personal Care.................................................. 0.71
Industrial Components................................................... 0.36
Insurance............................................................... 0.77
Leisure & Tourism....................................................... 0.11
Machinery & Engineering................................................. 0.25
Merchandising........................................................... 0.73
Metals--Steel........................................................... 0.36
Miscellaneous Materials................................................. 0.12
Multi-Industry.......................................................... 0.80
Non-Ferrous Metals...................................................... 0.40
Real Estate............................................................. 0.14
Recreation.............................................................. 0.08
Shipping................................................................ 0.16
Telecommunications...................................................... 0.95
Textiles and Apparel.................................................... 0.05
Transportation.......................................................... 0.15
Utilities............................................................... 1.10
------
Total Non-U.S. Equities.............................................. 16.97*
------
EMERGING MARKETS EQUITIES............................................... 1.90
------
U.S. BONDS
Corporate Bonds
Asset-Backed........................................................... 1.18
CMO.................................................................... 0.10
Consumer............................................................... 0.82
Energy................................................................. 0.14
Financial.............................................................. 1.10
Industrial............................................................. 0.68
Telecommunications..................................................... 0.37
------
4.39
U.S. Government Agencies................................................ 7.73
U.S. Government Obligations............................................. 5.50
International Dollar Bonds.............................................. 3.64
------
Total U.S. Bonds..................................................... 21.26*
------
HIGH YIELD BONDS........................................................ 2.57
------
NON-U.S. BONDS
Foreign Government Bonds................................................ 21.73
------
EMERGING MARKETS DEBT................................................... 3.69
------
SHORT-TERM INVESTMENTS.................................................. 7.41*
------
TOTAL INVESTMENTS.................................................... 103.51
LIABILITIES, LESS CASH AND OTHER ASSETS................................. (3.51)
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
* The Fund held a long position in Topix futures on
December 31, 1996 which increased Japanese equity
exposure from 3.85% to 4.24%. The Fund held a long
position in U.S. Treasury futures which increased U.S.
bond exposure from 21.26% to 25.86%. The Fund also held a
short position in stock index futures which reduced U.S.
equity exposure from 27.98% to 24.55%. These three
adjustments result in a net decrease in the Fund's
exposure to Short-Term Investments from 7.41% to 5.85%.
------------------------------------------------------------
9
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
Equities -- 46.85%
U.S. EQUITIES -- 27.98%
Aetna Life & Casualty Co............................. 32,200 $ 2,576,000
Allergan, Inc........................................ 53,700 1,913,062
Allstate Corp........................................ 29,600 1,713,100
Alza Corp. (b)....................................... 52,400 1,355,850
Aon Corp............................................. 70,200 4,361,175
Automatic Data Processing, Inc....................... 51,200 2,195,200
Avon Products, Inc................................... 38,100 2,176,463
Bard (C.R.), Inc..................................... 32,500 910,000
Beckman Instruments, Inc............................. 21,000 805,875
Birmingham Steel Corp................................ 21,000 399,000
Boston Technology, Inc. (b).......................... 20,900 600,875
Brinker International, Inc. (b)...................... 21,200 339,200
Brinson Post-Venture Fund (b)........................ 423,765 6,462,793
Burlington Northern Santa Fe......................... 59,900 5,173,862
Centerior Energy Co.................................. 44,100 474,075
Chase Manhattan Corp................................. 75,700 6,756,225
Choice Hotels International, Inc. (b)................ 34,250 603,656
CIGNA Corp........................................... 26,000 3,552,250
Circuit City Stores, Inc............................. 9,300 280,163
Citicorp............................................. 45,800 4,717,400
CMS Energy Corp...................................... 57,300 1,926,712
Coca-Cola Enterprises, Inc........................... 28,000 1,358,000
Comerica, Inc........................................ 14,400 754,200
Comverse Technology, Inc. (b)........................ 9,700 366,781
Corning, Inc......................................... 105,600 4,884,000
CPC International, Inc............................... 12,900 999,750
CVS Corp............................................. 41,500 1,717,063
Dial Corp............................................ 51,500 759,625
EMC Corp./Mass. (b).................................. 75,700 2,507,562
Enron Corp........................................... 83,700 3,609,563
Federal Express Corp. (b)............................ 77,900 3,466,550
Federated Department Stores (b)...................... 30,600 1,044,225
FileNet Corp. (b).................................... 12,500 400,000
First American Corp.-Tenn............................ 3,900 224,737
First Data Corp...................................... 44,678 1,630,747
First of America Bank Corp........................... 6,700 402,838
Footstar, Inc. (b)................................... 11,884 295,614
Ford Motor Co........................................ 30,800 981,750
Forest Laboratories, Inc. (b)........................ 35,600 1,165,900
Gannett Co., Inc..................................... 35,000 2,620,625
General Instrument Corp. (b)......................... 104,000 2,249,000
Genzyme Corp. (b).................................... 21,100 458,925
Geon Co.............................................. 7,700 151,113
Goodyear Tire & Rubber Co............................ 77,400 3,976,425
Harnischfeger Industries, Inc........................ 23,100 1,111,687
Health Care and Retirement Corp. (b)................. 38,700 1,107,788
Interpublic Group of Companies, Inc.................. 26,100 1,239,750
James River Corp. of Virginia........................ 30,100 997,062
Kimberly-Clark Corp.................................. 25,200 2,400,300
Kroger Co. (b)....................................... 22,100 1,027,650
Lockheed Martin Corp................................. 57,196 5,233,434
Lyondell Petrochemical Co............................ 57,300 1,260,600
Manor Care, Inc...................................... 34,250 924,750
Martin Marietta Materials, Inc....................... 15,338 356,609
Masco Corp........................................... 34,700 1,249,200
Mattel, Inc.......................................... 125,275 3,476,381
Nabisco Holdings Corp. Class A....................... 38,000 1,477,250
National Semiconductor Corp. (b)..................... 21,200 516,750
Nextel Communications, Inc. Class A (b).............. 52,700 688,394
Old Republic International Corp...................... 26,150 699,512
Peco Energy Co....................................... 33,100 835,775
Pentair, Inc......................................... 27,700 893,325
Pharmacia & Upjohn, Inc.............................. 66,700 2,642,988
Philip Morris Companies, Inc......................... 41,300 4,651,413
Rhone-Poulenc Rorer, Inc............................. 17,800 1,390,625
RJR Nabisco Convertible Preferred "C"................ 170,600 1,151,550
Schering Plough Corp................................. 46,000 2,978,500
Seagate Technology, Inc. (b)......................... 14,400 568,800
Timken Co............................................ 22,000 1,009,250
Tyson Foods, Inc. Class A............................ 62,800 2,150,900
Ultramar Diamond Shamrock Corp....................... 59,554 1,883,395
US Bancorp........................................... 31,900 1,433,506
USF&G Corp........................................... 24,400 509,350
Vencor, Inc. (b)..................................... 27,400 866,525
Viad Corp............................................ 51,500 849,750
Westvaco Corp........................................ 12,550 360,813
Whitman Corp......................................... 2,400 54,900
WMX Technologies, Inc................................ 83,700 2,730,713
Xerox Corp........................................... 99,800 5,251,975
York International Corp.............................. 21,500 1,201,313
360 Communications Co. (b)........................... 18,266 422,401
------------
Total U.S. Equities.................................. 142,922,813
------------
NON-U.S. EQUITIES -- 16.97%
AUSTRALIA -- 0.91%
Amcor Ltd............................................ 34,400 221,045
Boral Ltd............................................ 46,100 131,087
Broken Hill Proprietary Co. Ltd...................... 73,780 1,050,149
CRA Ltd.............................................. 25,645 402,294
David Jones Ltd...................................... 115,100 159,988
Lend Lease Corp. Ltd................................. 8,056 156,129
M.I.M. Holdings Ltd.................................. 98,726 138,013
National Australia Bank Ltd.......................... 42,947 504,858
News Corp. Ltd....................................... 89,190 470,390
News Corp. Ltd. Preferred............................ 22,000 97,855
Pacific Dunlop Ltd................................... 59,600 151,485
Qantas Airways Ltd................................... 68,828 114,805
Santos Ltd........................................... 49,800 201,732
WMC Ltd.............................................. 39,100 246,277
Westpac Bank Corp. Ltd............................... 81,138 461,436
Woolworth's Ltd...................................... 60,000 144,400
------------
4,651,943
------------
BELGIUM -- 0.56%
Delhaize-Le Lion S.A................................. 2,900 172,095
Electrabel S.A....................................... 2,260 534,326
Fortis AG............................................ 2,099 336,348
Fortis AG Strip (b).................................. 42 21
Generale de Banque S.A............................... 300 107,431
</TABLE>
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10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
BELGIUM -- (CONTINUED)
Groupe Bruxelles Lambert S.A......................... 1,150 $ 147,893
Kredietbank NV....................................... 950 311,039
Petrofina S.A........................................ 1,195 379,968
Societe Generale de Belgique......................... 2,053 160,934
Solvay S.A. Class A.................................. 390 238,497
Tractebel............................................ 605 8,761
Tractebel Warrants "99" (b).......................... 605 281,411
Union Miniere Group S.A. (b)......................... 2,545 172,260
------------
2,850,984
------------
CANADA -- 0.52%
Alcan Aluminium Ltd.................................. 6,100 205,841
Bank of Montreal..................................... 1,200 38,173
Barrick Gold Corp.................................... 4,400 126,003
BCE, Inc............................................. 2,900 138,166
Canadian National Railway Co......................... 4,200 159,653
Canadian Pacific Ltd................................. 13,900 365,603
Hudson's Bay Co...................................... 4,100 68,503
Imperial Oil Ltd..................................... 5,000 235,298
Moore Corp. Ltd...................................... 3,900 80,811
Noranda, Inc......................................... 6,300 140,424
Northern Telecom Ltd................................. 2,400 149,190
NOVA Corp............................................ 10,400 92,193
Royal Bank of Canada................................. 6,200 217,584
Seagram Co. Ltd...................................... 5,300 209,780
Thomson Corp......................................... 13,600 300,160
TransCanada Pipelines Ltd............................ 8,300 145,338
------------
2,672,720
------------
FINLAND -- 0.26%
Merita Ltd. Class A (b).............................. 44,200 137,136
Nokia Ab Class A..................................... 12,100 700,429
Outokumpu OY Class A................................. 6,900 117,520
Pohjola Insurance Group Class B...................... 2,900 65,123
Sampo Insurance Co. Ltd. Class A..................... 1,000 78,759
UPM-Kymmene Corp. (b)................................ 11,900 249,154
------------
1,348,121
------------
FRANCE -- 1.81%
Accor S.A............................................ 2,392 302,296
Alcatel Alsthom...................................... 3,182 255,113
AXA S.A.............................................. 1,500 95,216
Banque Nationale de Paris............................ 12,230 472,384
CEP Communications................................... 984 69,370
CEP Communications Warrants "97" (b)................. 1,984 2,271
Cie Bancaire S.A..................................... 2,811 331,997
Cie de Saint Gobain.................................. 4,150 585,935
Cie de Suez.......................................... 5,445 231,051
Cie Generale des Eaux................................ 6,124 757,446
Colas................................................ 854 123,204
Credit Local de France............................... 5,359 465,937
Elf Aquitaine S.A.................................... 6,034 548,187
Groupe Danone........................................ 800 111,259
L'Oreal S.A.......................................... 100 37,586
Lafarge S.A.......................................... 2,600 155,689
LVMH................................................. 2,649 738,339
Michelin Class B..................................... 7,020 378,229
Pechiney S.A. Class A................................ 5,684 237,694
Peugeot S.A.......................................... 5,970 670,645
Rhone-Poulenc Class A................................ 14,300 486,596
SEITA................................................ 5,500 229,577
Societe Generale..................................... 5,026 542,364
Total S.A. Class B................................... 8,796 714,008
UAP.................................................. 10,820 269,527
Usinor Sacilor....................................... 28,100 408,092
------------
9,220,012
------------
GERMANY -- 1.49%
Allianz AG Holding................................... 338 607,527
BASF AG.............................................. 10,360 396,626
Bayer AG............................................. 14,080 570,564
Bayerische Motoren Werke AG.......................... 520 358,341
Commerzbank AG....................................... 11,060 280,609
Daimler-Benz AG (b).................................. 5,880 402,531
Deutsche Bank AG..................................... 10,601 493,902
Deutsche Telekom AG (b).............................. 18,600 387,425
Henkel KGaA-Vorzug AG................................ 4,550 224,385
Hochtief AG.......................................... 2,500 98,144
Hoechst AG........................................... 4,890 226,239
M.A.N. AG............................................ 790 190,439
Mannesmann AG........................................ 957 411,216
Metro AG............................................. 3,200 250,211
Muenchener Rueckver AG............................... 171 414,434
Muenchener Rueckver AG Warrants "98" (b)............. 2 416
Preussag AG.......................................... 1,192 269,169
RWE AG............................................... 7,600 317,591
Schering AG.......................................... 4,885 411,759
Siemens AG........................................... 3,650 169,154
Thyssen AG........................................... 1,850 327,600
Veba AG.............................................. 8,839 507,593
Volkswagen AG........................................ 750 310,249
------------
7,626,124
------------
HONG KONG -- 0.25%
Cheung Kong Holdings Ltd............................. 15,000 133,324
China Light & Power Co. Ltd.......................... 28,000 124,527
Guoco Group Ltd...................................... 15,000 83,970
Hang Seng Bank Ltd................................... 10,200 123,958
Hong Kong Telecommunications Ltd..................... 43,200 69,534
Hutchison Whampoa Ltd................................ 27,000 212,058
Jardine Matheson Holdings ADR (c).................... 9,600 63,360
New World Development Co. Ltd........................ 17,000 114,837
Sun Hung Kai Properties Ltd.......................... 8,000 97,997
Swire Pacific Ltd. Class A........................... 14,000 133,486
Wharf (Holdings) Ltd................................. 22,000 109,788
------------
1,266,839
------------
</TABLE>
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11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
ITALY -- 0.55%
Assicurazioni Generali............................... 15,080 $ 285,136
Danieli & Co. Savings (Risp)......................... 26,000 108,583
Edison Spa........................................... 17,200 108,596
ENI ADR (c).......................................... 8,000 413,000
ENI Spa.............................................. 24,000 122,881
Fiat Spa-Priv........................................ 103,000 169,691
INA-Istituto Nazionale delle Assicurazioni........... 47,000 61,080
Istituto Mobilaire Italiano Spa...................... 36,200 309,503
Italgas Spa.......................................... 22,300 92,911
La Rinascente........................................ 19,000 109,964
La Rinascente Savings (Risp)......................... 19,200 48,994
La Rinascente Warrants "99" (b)...................... 1,400 616
Mediobanca Spa....................................... 6,000 32,298
Montedison Spa (b)................................... 374,700 254,811
SAI-Savings (Risp)................................... 16,500 58,545
Telecom Italia Spa................................... 183,500 357,224
Telecom Italia Mobile Spa............................ 199,500 284,063
------------
2,817,896
------------
JAPAN -- 3.85%
Amada Co. Ltd........................................ 35,000 271,388
Asahi Glass Co. Ltd.................................. 42,000 394,417
Bank of Tokyo-Mitsubishi Ltd......................... 31,800 589,041
Canon, Inc........................................... 30,000 661,670
Canon Sales Co., Inc................................. 12,100 268,958
Citizen Watch Co. Ltd................................ 32,000 228,827
Dai Nippon Printing Co. Ltd.......................... 32,000 559,662
Daiichi Pharmaceutical Co. Ltd....................... 23,000 368,571
Daikin Industries Ltd................................ 34,000 301,714
Daiwa House Industry Co. Ltd......................... 17,000 218,230
Fanuc................................................ 13,900 444,292
Fujitsu.............................................. 21,000 195,399
Hitachi Ltd.......................................... 68,000 632,722
Honda Motor Co....................................... 9,000 256,655
Inax................................................. 44,000 325,252
Isetan............................................... 12,000 155,079
Ito Yokado Co. Ltd................................... 12,000 521,065
Kaneka Corp.......................................... 17,000 86,853
Keio Teito Electric Railway.......................... 39,000 190,178
Kinki Nippon Railway................................. 39,000 242,931
Kirin Brewery Co. Ltd................................ 37,000 363,402
Kokuyo............................................... 7,000 172,482
Kuraray Co. Ltd...................................... 30,000 276,557
Kyocera Corp......................................... 3,000 186,612
Maeda Road Construction.............................. 8,000 92,358
Matsushita Electric Industrial Co.................... 55,000 895,580
Mitsubishi Paper Mills............................... 43,000 167,821
NGK Insulators....................................... 56,000 530,714
Nintendo Corp. Ltd................................... 2,900 207,125
Nippon Denso Co. Ltd................................. 23,000 552,856
Nippon Meat Packers, Inc............................. 22,000 284,311
Nippon Steel Co...................................... 28,000 82,502
Okumura.............................................. 35,000 212,286
Osaka Gas Co......................................... 141,000 385,087
Sankyo Co. Ltd....................................... 25,000 706,470
Sanwa Bank Ltd....................................... 18,000 245,025
Secom................................................ 8,000 483,157
Seino Transportation................................. 12,000 132,334
Sekisui House Ltd.................................... 66,000 670,975
Shinmaywa Industries Ltd............................. 31,000 227,820
Sony Corp............................................ 10,200 666,994
Sumitomo Bank........................................ 36,000 517,963
Sumitomo Electric Industries......................... 28,000 390,797
Takeda Chemical Industries........................... 26,000 544,327
TDK Corp............................................. 6,000 390,282
Tokio Marine & Fire Insurance Co..................... 31,000 291,118
Tokyo Electric Power................................. 14,900 326,062
Tokyo Steel Mfg...................................... 25,000 355,389
Tonen Corp........................................... 25,000 290,773
Toray Industries, Inc................................ 141,000 868,571
Toshiba Corp......................................... 81,000 508,038
Toyo Suisan Kaisha................................... 19,000 189,886
Toyota Motor Corp.................................... 9,000 258,206
Yamazaki Baking Co. Ltd.............................. 17,000 270,957
------------
19,657,741
------------
MALAYSIA -- 0.24%
Hume Industries (Malaysia) Bhd....................... 17,000 107,028
Kuala Lumpur Kepong Bhd.............................. 39,500 100,099
Land & General Holdings Bhd.......................... 39,000 93,427
Malayan Banking Bhd.................................. 8,000 88,695
Malaysia International Shipping Bhd (Frgn.).......... 34,000 100,970
Nestle (Malaysia) Bhd................................ 4,000 32,152
Public Bank Bhd (Frgn.).............................. 55,000 116,512
Resorts World Bhd.................................... 13,000 59,196
Sime Darby Bhd....................................... 40,000 157,593
Telekom Malaysia Bhd................................. 9,000 80,182
Tenaga Nasional Bhd.................................. 47,000 225,183
YTL Corp. Bhd........................................ 14,000 75,391
------------
1,236,428
------------
NETHERLANDS -- 1.17%
ABN AMRO Holdings NV................................. 7,689 499,649
Akzo Nobel NV........................................ 1,100 150,084
DSM NV............................................... 1,910 188,162
Hoogovens NV......................................... 2,900 120,715
ING Groep NV......................................... 20,723 745,199
KLM Royal Dutch Air Lines NV......................... 4,500 126,438
KPN NV............................................... 13,046 497,041
Philips Electronics NV............................... 6,480 262,242
Royal Dutch Petroleum Co............................. 6,100 1,068,214
Royal Dutch Petroleum Co. NY Shares (c).............. 5,800 990,350
Unilever NV.......................................... 4,550 803,885
Vendex International NV.............................. 7,551 322,610
VNU-Ver Ned Uitgevers................................ 10,600 221,229
------------
5,995,818
------------
NEW ZEALAND -- 0.57%
Brierley Investments Ltd............................. 535,200 495,380
Carter Holt Harvey Ltd............................... 191,400 434,109
Fletcher Challenge Building.......................... 60,525 186,027
</TABLE>
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12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
NEW ZEALAND (CONTINUED)
Fletcher Challenge Energy............................ 60,525 $ 175,335
Fletcher Challenge Forest Ltd........................ 126,333 211,552
Fletcher Challenge Paper............................. 121,050 248,891
Telecom Corp. of New Zealand Ltd..................... 198,000 1,010,076
Telecom Corp. of New Zealand Ltd. ADS (c)............ 2,000 162,000
------------
2,923,370
------------
SPAIN -- 0.70%
Acerinox S.A......................................... 1,000 144,224
Banco Bilbao-Vizcaya S.A............................. 5,000 269,460
Banco Central Hispanoamericano....................... 5,010 128,452
Banco Intercontinental Espanol S.A................... 730 112,973
Banco Popular Espanol S.A............................ 1,190 233,288
Banco Santander S.A.................................. 3,800 242,768
Cia Sevillana de Electricidad........................ 7,106 80,579
Empresa Nacional de Electridad S.A................... 5,900 419,112
Fomento de Construcciones y Contratas S.A............ 1,450 134,884
Gas Natural SDG S.A.................................. 700 162,522
Iberdrola S.A........................................ 37,600 531,878
Mapfre Corp.......................................... 2,300 139,865
Repsol S.A........................................... 4,100 156,971
Repsol S.A. ADR (c).................................. 4,100 156,313
Telefonica de Espana................................. 20,300 470,532
Vallehermosa S.A..................................... 4,000 86,565
Viscofan Envolturas Celulosicas S.A.................. 6,400 93,485
------------
3,563,871
------------
SWITZERLAND -- 0.34%
ABB AG (Bearer)...................................... 80 99,203
CS Holdings AG (Reg.)................................ 1,073 109,881
Nestle S.A. (Reg.)................................... 463 495,517
Novartis AG (Reg.)................................... 378 431,574
Roche Holding AG (Gen.).............................. 36 279,243
Schweiz Bankgesellschaft (Bearer).................... 106 92,603
Societe Generale de Surveillance
Holding S.A. (Bearer)............................... 30 73,509
Zurich Versicherungs (Reg.).......................... 569 157,644
------------
1,739,174
------------
UNITED KINGDOM -- 3.75%
Abbey National PLC................................... 25,000 327,315
Bank of Scotland..................................... 40,000 211,193
Bass PLC............................................. 15,800 222,006
B.A.T. Industries PLC................................ 85,184 706,343
Booker PLC........................................... 19,100 130,591
British Energy PLC................................... 183,000 460,397
British Gas PLC...................................... 175,900 675,844
British Petroleum Co. PLC............................ 79,244 950,033
British Steel PLC.................................... 144,000 395,550
British Telecommunications PLC....................... 167,500 1,130,905
Charter PLC.......................................... 19,292 244,493
Coats Viyella PLC.................................... 103,300 235,135
FKI PLC.............................................. 80,700 278,990
General Electric Co. PLC............................. 169,700 1,109,454
Glaxo Wellcome PLC................................... 25,000 405,614
Grand Metropolitan PLC............................... 110,200 865,682
Guinness PLC......................................... 84,900 664,757
Hanson PLC........................................... 180,900 252,325
Hillsdown Holdings PLC............................... 125,200 428,547
House of Fraser PLC.................................. 136,800 359,384
HSBC Holdings PLC.................................... 28,500 637,019
Imperial Chemicals Industries PLC.................... 9,000 118,372
Legal & General Group PLC............................ 60,750 386,770
Lloyds TSB Group PLC................................. 144,779 1,066,701
Marks & Spencer PLC.................................. 72,000 605,032
Millennium Chemicals, Inc. (b)....................... 1,327 23,554
Mirror Group PLC..................................... 57,800 213,176
National Power PLC................................... 37,900 317,185
National Westminster Bank PLC........................ 24,800 290,953
Northern Foods PLC................................... 76,000 265,993
Peninsular & Oriental Steam
Navigation Co....................................... 69,600 702,790
Reckitt & Colman PLC................................. 12,658 156,844
Redland PLC.......................................... 23,200 145,521
RJB Mining PLC....................................... 47,300 348,092
Royal & Sun Alliance Insurance Group PLC............. 40,199 305,810
RTZ Corp. PLC........................................ 26,100 418,324
Sainsbury (J.) PLC................................... 56,000 371,864
Scottish Hydro-Electric PLC.......................... 44,900 252,049
Sears PLC............................................ 160,700 261,278
Sedgwick Group PLC................................... 111,400 250,712
SmithKline Beecham PLC............................... 33,400 462,730
Smurfit (Jefferson) Group PLC........................ 57,000 169,254
Tesco PLC............................................ 44,800 271,806
Thames Water PLC..................................... 33,000 345,926
Unilever PLC......................................... 15,400 373,337
Vodafone Group PLC................................... 45,600 192,373
Yorkshire Water PLC.................................. 13,000 157,633
------------
19,165,656
------------
Total Non-U.S. Equities.............................. 86,736,697
------------
EMERGING MARKETS EQUITIES -- 1.90%
Brinson Emerging Markets Equity Fund (b)............. 952,086 9,698,142
------------
Total Equities (Cost $200,781,462)................... 239,357,652
------------
<CAPTION>
FACE AMOUNT VALUE
-------------- ------------
<S> <C> <C>
Bonds -- 49.25%
U.S. BONDS -- 21.26%
U.S. CORPORATE BONDS -- 4.39%
BellSouth Corp. 9.125%, due 07/01/03............... $ 199,759 $ 211,177
Capital One Bank 6.830%, due 05/17/99.............. 2,000,000 2,009,232
</TABLE>
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13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT VALUE
-------------- ------------
<S> <C> <C>
U.S. CORPORATE BONDS (CONTINUED)
Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due
03/15/02.......................................... $ 1,265,000 $ 1,258,675
Chase Manhattan Credit Card Trust 96-4A 6.730%, due
02/15/03.......................................... 1,050,000 1,064,543
Chemical Master Credit Card Trust 95-2A 6.230%, due
06/15/03.......................................... 1,430,000 1,426,311
Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,014,050
Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,784
Coca-Cola Enterprises 6.700%, due 10/15/36......... 2,000,000 2,017,024
Edison Mission Energy Funding 7.330%, due 09/15/08. 720,000 723,600
Ford Credit Grantor Trust 95-B 5.900%, due
10/15/00.......................................... 125,550 125,688
Ford Motor Co. 7.250%, due 10/01/08................ 2,000,000 2,017,046
GMAC MTN 6.500%, due 04/19/99...................... 1,350,000 1,357,156
Green Tree Financial 94-2 8.300%, due 05/15/19..... 435,000 460,091
Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,500,000 1,509,084
News America Corp. 7.750%, due 01/20/24............ 1,755,000 1,677,597
Premier Auto Trust 4.220%, due 03/02/99............ 30,119 29,777
Premier Auto Trust 96-4A 6.400%, due 10/06/01...... 275,000 276,320
Salomon, Inc. 6.750%, due 02/15/03................. 550,000 537,073
Spiegel Master Trust 95-A 7.500%, due 09/15/04..... 300,000 310,359
Standard Credit Card Trust 95-1A 8.250%, due
01/07/05.......................................... 500,000 541,830
Thrift Financial Corp. 11.250%, due 01/01/16....... 36,739 39,876
Time Warner Entertainment, Inc. 8.375%, due
03/15/23.......................................... 1,100,000 1,118,125
Time Warner, Inc. 9.150%, due 02/01/23............. 980,000 1,062,004
WMX Technologies, Inc. 7.000%, due 10/15/06........ 1,500,000 1,497,482
------------
22,449,904
------------
INTERNATIONAL DOLLAR BONDS -- 3.64%
Abbey National PLC 7.350%, due 10/29/49............ 250,000 252,385
ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01.... 250,000 249,820
AT&T Corp. 8.250%, due 01/11/00.................... 675,000 710,001
BBV International 7.000%, due 12/01/25............. 2,200,000 2,058,331
City of Oslo 7.875%, due 02/03/97.................. 1,200,000 1,202,077
Deutsche Bank Financial 6.700%, due 12/13/06....... 210,000 205,750
Hanson PLC Notes 6.750%, due 09/15/05.............. 790,000 773,681
International Telecom Satellite 8.125%, due
02/28/05.......................................... 335,000 361,533
Japanese Development Bank 8.375%, due 02/15/01..... 1,000,000 1,071,485
Korea Development Bank 6.625%, due 11/21/03........ 250,000 248,143
LKB 8.125%, due 01/27/00........................... 380,000 399,326
Petroliam Nasional 7.125%, due 08/15/05............ 450,000 453,834
Province of Quebec 7.500%, due 07/15/23............ 175,000 174,694
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A
8.294%, due 03/15/14.............................. 1,910,000 1,941,912
Republic of Columbia EMTN 8.660%, due 10/07/16..... 1,000,000 1,047,945
Republic of Italy 6.875%, due 09/27/23............. 150,000 141,800
Republic of South Africa 9.625%, due 12/15/99...... 1,000,000 1,063,750
Royal Bank of Scotland 7.375%, due 04/01/06........ 220,000 219,257
Quimica & Minera Chile 144-A 7.700%, due 09/15/06.. 1,500,000 1,533,612
Southern Investments UK 6.800%, due 12/01/06....... 1,625,000 1,590,595
Swedbank FRN
7.383%, due 10/29/49.............................. 300,000 306,750
7.500%, due 11/29/49.............................. 2,200,000 2,252,250
Telstra Corp. Ltd. 6.500%, due 11/28/05............ 350,000 341,577
------------
18,600,508
------------
U.S. GOVERNMENT AGENCIES -- 7.73%
Federal Home Loan Mortgage Corp.
9.200%, due 08/25/97.............................. 200,000 204,516
6.520%, due 01/02/02.............................. 3,000,000 3,008,853
9.000%, due 03/01/17.............................. 381,007 407,948
5.800%, due 08/15/19.............................. 2,025,000 1,891,512
6.500%, due 05/15/21.............................. 1,105,804 1,003,495
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.............................. 1,820,248 1,854,947
9.000%, due 05/01/24.............................. 1,142,277 1,219,221
Federal National Mortgage Association
7.600%, due 01/10/97.............................. 200,000 200,097
5.000%, due 06/01/01.............................. 1,596,985 1,535,596
6.500%, due 03/01/03 ............................. 3,775,000 3,734,909
6.220%, due 03/13/06.............................. 1,700,000 1,643,478
8.000%, due 02/25/07.............................. 1,200,000 1,231,188
9.000%, due 08/01/21.............................. 312,467 332,577
6.500%, due 08/25/21.............................. 1,500,000 1,434,315
8.200%, due 08/25/21.............................. 59,076 60,358
</TABLE>
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14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT VALUE
-------------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (CONTINUED)
Federal National Mortgage Association (continued)
8.000%, due 05/01/22.............................. $ 154,570 $ 157,372
8.500%, due 07/01/22.............................. 776,184 815,638
7.500%, due 05/01/25.............................. 1,906,918 1,906,323
6.500%, due 03/01/26.............................. 9,483,616 9,047,967
Government National Mortgage
Association
11.000%, due 09/15/15............................. 245,070 273,712
8.500%, due 08/15/17.............................. 801,933 845,783
8.500%, due 05/15/21.............................. 66,619 68,992
8.000%, due 08/15/22.............................. 502,399 516,305
8.000%, due 11/15/22.............................. 497,932 511,715
8.000%, due 12/15/22.............................. 1,709,085 1,756,393
7.500%, due 11/15/24.............................. 2,761,369 2,771,586
6.500%, due 03/20/26.............................. 1,132,354 1,073,260
------------
39,508,056
------------
U.S. GOVERNMENT OBLIGATIONS-- 5.50%
U.S. Treasury Coupon Strips
0.000%, due 02/15/03
principal only................................... 225,000 154,024
0.000%, due 05/15/08
principal only................................... 5,855,000 2,786,453
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98.............................. 1,825,000 1,811,312
6.250%, due 10/31/01.............................. 420,000 420,263
7.000%, due 07/15/06.............................. 9,000,000 9,351,567
8.125%, due 05/15/21.............................. 11,695,000 13,566,200
------------
28,089,819
------------
Total U.S. Bonds................................... 108,648,287
------------
HIGH YIELD BONDS -- 2.57%
Brinson High Yield Fund (b)........................ 1,065,360 13,122,570
------------
NON-U.S. BONDS -- 21.73%
BELGIUM -- 0.97%
Kingdom of Belgium
8.750%, due 06/25/02.............................. BEF 32,000,000 1,189,454
9.000%, due 03/28/03.............................. 54,000,000 2,041,883
8.500%, due 10/01/07.............................. 46,000,000 1,728,376
------------
4,959,713
------------
CANADA -- 2.75%
Government of Canada
7.500%, due 09/01/00.............................. CAD 4,350,000 3,418,714
7.250%, due 06/01/03.............................. 4,600,000 3,585,992
4.250%, due 12/01/21 (d).......................... 5,500,000 4,428,909
9.000%, due 06/01/25.............................. 2,085,000 1,873,062
4.250%, due 12/01/26 (d).......................... 1,000,000 760,678
------------
14,067,355
------------
DENMARK -- 2.24%
Kingdom of Denmark
9.000%, due 11/15/98............................ DKR 3,200,000 $ 590,754
9.000%, due 11/15/00............................ 14,600,000 2,820,305
8.000%, due 05/15/03............................ 2,600,000 488,230
7.000%, due 12/15/04............................ 17,500,000 3,092,144
8.000%, due 03/15/06............................ 17,000,000 3,170,083
7.000%, due 11/10/24............................ 7,900,000 1,269,593
------------
11,431,109
------------
FRANCE -- 2.75%
Government of France (OAT)
8.500%, due 03/28/00............................ FRF 3,400,000 740,666
9.500%, due 01/25/01............................ 8,300,000 1,899,100
8.500%, due 04/25/03............................ 2,400,000 545,675
8.250%, due 02/27/04............................ 5,400,000 1,217,381
7.500%, due 04/25/05............................ 29,000,000 6,270,029
8.500%, due 12/26/12............................ 14,500,000 3,399,148
------------
14,071,999
------------
GERMANY -- 4.72%
Bundesrepublik Deutscheland
7.000%, due 09/20/99............................ DEM 7,000,000 4,900,590
8.500%, due 08/21/00............................ 2,600,000 1,917,397
8.375%, due 05/21/01............................ 1,900,000 1,412,517
8.250%, due 09/21/01............................ 4,650,000 3,454,536
8.000%, due 07/22/02............................ 825,000 611,991
6.500%, due 07/15/03............................ 4,800,000 3,312,128
6.750%, due 07/15/04............................ 7,800,000 5,431,302
6.250%, due 01/04/24............................ 2,900,000 1,785,991
Treuhandanstalt
6.250%, due 03/04/04............................ 1,900,000 1,286,763
------------
24,113,215
------------
ITALY -- 2.52%
Republic of Italy (BTP)
9.500%, due 12/01/97............................ ITL 900,000,000 604,341
8.500%, due 01/01/99............................ 3,100,000,000 2,122,394
8.500%, due 08/01/99............................ 855,000,000 587,788
9.500%, due 12/01/99............................ 4,500,000,000 3,184,775
11.500%, due 03/01/03........................... 3,500,000,000 2,796,777
9.000%, due 10/01/03............................ 1,900,000,000 1,367,675
8.500%, due 04/01/04............................ 3,100,000,000 2,188,655
------------
12,852,405
------------
NETHERLANDS -- 2.90%
Government of Nederlands
6.250%, due 07/15/98............................ NLG 1,400,000 843,383
8.500%, due 03/15/01............................ 1,000,000 664,566
8.750%, due 09/15/01............................ 1,300,000 878,967
6.500%, due 04/15/03............................ 3,100,000 1,919,466
8.500%, due 06/01/06............................ 8,650,000 5,996,040
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT VALUE
--------------- ------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
8.250%, due 02/15/07.............................. NLG 4,500,000 $ 3,084,986
7.500%, due 04/15/10.............................. 2,200,000 1,441,059
------------
14,828,467
------------
SWEDEN -- 0.67%
Government of Sweden
10.250%, due 05/05/03............................. SWK 12,300,000 2,192,275
6.000%, due 02/09/05.............................. 8,500,000 1,206,382
------------
3,398,657
------------
UNITED KINGDOM -- 2.21%
UK Treasury
7.000%, due 11/06/01.............................. GBP 810,000 1,373,278
8.000%, due 06/10/03.............................. 1,400,000 2,476,895
8.500%, due 12/07/05.............................. 2,870,000 5,232,666
8.500%, due 07/16/07.............................. 1,200,000 2,198,785
------------
11,281,624
------------
Total Non-U.S. Bonds............................... 111,004,544
------------
EMERGING MARKETS DEBT -- 3.69%
Brinson Emerging Markets Debt Fund (b)............. 1,118,170 18,876,502
------------
Total Bonds (Cost $239,824,367).................... 251,651,903
------------
Short-Term Investments -- 7.41%
U.S. GOVERNMENT OBLIGATIONS-- 0.32%
U.S. Treasury Bills 5.063%, due 05/01/97........... 1,677,000 1,648,895
------------
COMMERCIAL PAPER -- 7.09%
Burlington Northern Santa Fe 5.650%, due 01/17/97.. 2,000,000 1,994,978
Case Credit Corp.
5.510%, due 01/07/97.............................. 1,500,000 1,498,622
5.600%, due 01/09/97.............................. 2,000,000 1,997,511
Cincinnati Bell, Inc. 7.250%, due 01/02/97......... 477,000 476,904
CNA Financial Corp. 6.250%, due 01/23/97........... 1,500,000 1,494,271
Crown Cork & Seal Co., Inc.
5.520%, due 01/10/97.............................. 2,000,000 1,997,240
5.580%, due 01/29/97.............................. 2,500,000 2,489,150
5.580%, due 01/31/97.............................. 2,000,000 1,990,700
CSX Corp. 5.520%, due 01/15/97..................... 1,500,000 1,496,780
Lockheed Martin Corp. 7.250%, due 01/02/97......... 5,500,000 5,498,892
PanEnergy Corp. 6.050%, due 01/17/97............... 2,000,000 1,994,622
Rite Aid Corp.
5.650%, due 01/06/97.............................. 2,000,000 1,998,431
5.600%, due 01/21/97.............................. 2,000,000 1,993,778
Tyson Foods, Inc. 5.750%, due 01/09/97............. 1,700,000 1,697,828
U.S. West Capital Funding, Inc. 5.600%, due
02/12/97.......................................... 1,500,000 1,490,200
Vastar Resources, Inc.
6.020%, due 01/02/97.............................. 2,000,000 1,999,666
6.850%, due 01/03/97.............................. 2,115,000 2,111,378
Whirlpool Financial Corp. 6.000%, due 01/03/97..... 2,000,000 1,999,333
------------
36,220,284
------------
Total Short-Term Investments (Cost $37,869,023).... 37,869,179
------------
Total Investments
(Cost $478,474,852)--103.51% (a).................. 528,878,734
------------
Liabilities, less cash and other
assets--(3.51%)................................... (17,938,839)
------------
Net Assets--100%................................... $510,939,895
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Aggregate cost for federal income tax purposes was $478,474,852; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $57,680,749
Gross unrealized depreciation................................ (7,276,867)
-----------
Net unrealized appreciation.............................. $50,403,882
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
(d) Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating rate note--The rate disclosed is that in effect at December 31,
1996.
MTN: Medium term note
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Fund had the following open forward foreign currency contracts as of
December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Danish Kroner............... 05/30/97 3,000,000 $ 512,591 $ 5,105
French Franc................ 05/30/97 4,000,000 776,385 8,188
Japanese Yen................ 05/30/97 50,000,000 439,864 1,460
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Belgian Franc............... 05/30/97 250,000,000 7,950,837 (113,847)
British Pound............... 05/30/97 3,100,000 5,284,397 (135,297)
Canadian Dollar............. 05/30/97 13,600,000 10,014,643 195,567
Danish Kroner............... 05/30/97 70,000,000 11,960,446 (168,986)
Dutch Guilder............... 05/30/97 35,000,000 20,436,274 (261,270)
French Franc................ 05/30/97 125,000,000 24,262,033 (410,257)
German Mark................. 05/30/97 48,000,000 31,447,014 (428,742)
Italian Lira................ 05/30/97 11,500,000,000 7,521,248 (78,123)
Japanese Yen................ 05/30/97 2,300,000,000 20,233,736 404,802
Swiss Franc................. 05/30/97 2,200,000 1,663,420 24,215
---------
Total..................... $(957,185)
=========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Fund had the following open futures contracts as of December 31,
1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST/PROCEEDS VALUE GAIN/(LOSS)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes,
52 contracts................. March 1997 $ 5,592,078 $ 5,542,875 $ (49,203)
10 year U.S. Treasury Notes,
116 contracts................ March 1997 12,803,625 12,658,500 (145,125)
30 year U.S. Treasury Bonds,
47 contracts................. March 1997 5,384,375 5,293,375 (91,000)
INDEX FUTURES BUY CONTRACTS
Topix, 16 contracts........... March 1997 2,118,204 2,029,120 (89,084)
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 47 con-
tracts....................... March 1997 17,748,625 17,495,750 252,875
---------
$(121,537)
=========
</TABLE>
The segregated cash and market value of investments pledged to cover margin
requirements for the open futures positions at December 31, 1996 were $561,512
and $1,648,895, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $435,474,852)....................... $480,718,727
Affiliated issuers (Cost $43,000,000).......................... 48,160,007
Foreign currency, at value (Cost $268,768)...................... 273,987
Receivables:
Investment securities sold..................................... 36,201,820
Dividends...................................................... 495,147
Interest....................................................... 4,864,834
Fund shares sold............................................... 292,949
Variation margin (Note 5)...................................... 201,512
Other assets.................................................... 14,939
------------
TOTAL ASSETS................................................. 571,223,922
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 26,580,751
Fund shares redeemed........................................... 31,916,576
Due to custodian bank.......................................... 304,430
Investment advisory fees (Note 2).............................. 358,713
Net unrealized depreciation on forward foreign currency con-
tracts........................................................ 957,185
Accrued expenses............................................... 166,372
------------
TOTAL LIABILITIES............................................ 60,284,027
------------
NET ASSETS....................................................... $510,939,895
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)........................................ $459,324,649
Accumulated distributions in excess of net investment income.... (2,066,623)
Accumulated net realized gain................................... 4,399,273
Net unrealized appreciation..................................... 49,282,596
------------
NET ASSETS................................................... $510,939,895
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $493,628,321 and 40,916,008 shares is-
sued and outstanding) (Note 7)................................ $ 12.06
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $17,311,574 and 1,439,613 shares is-
sued and outstanding) (Note 7)................................ $ 12.03
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $ 8,220,543
Dividends (net of $121,144 for foreign taxes withheld)........... 2,124,459
-----------
TOTAL INCOME.................................................. 10,345,002
-----------
EXPENSES:
Advisory (Note 2)................................................ 2,019,630
Administration................................................... 158,049
Custodian........................................................ 70,489
Distribution (Note 6)............................................ 51,006
Other............................................................ 300,151
-----------
TOTAL EXPENSES................................................ 2,599,325
-----------
NET INVESTMENT INCOME ........................................ 7,745,677
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 17,819,350
Futures contracts............................................... (335,713)
Foreign currency transactions................................... 3,705,567
-----------
Net realized gain............................................. 21,189,204
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 16,277,908
Futures contracts............................................... (194,980)
Forward contracts............................................... (294,833)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 50,176
-----------
Change in net unrealized appreciation or depreciation......... 15,838,271
-----------
Net realized and unrealized gain................................. 37,027,475
-----------
Net increase in net assets resulting from operations............. $44,773,152
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................ $ 7,745,677 $ 15,718,942
Net realized gain............................ 21,189,204 33,576,934
Change in net unrealized appreciation or de-
preciation.................................. 15,838,271 13,188,606
------------- -------------
Net increase in net assets resulting from op-
erations.................................... 44,773,152 62,484,482
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income..... (17,593,746) (20,214,114)
Distributions in excess of net investment in-
come........................................ (7,066,588) (1,430,745)
Distributions from net realized gain......... (26,428,094) (10,937,826)
------------- -------------
Total distributions to shareholders*......... (51,088,428) (32,582,685)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................. 60,598,529 109,483,562
Shares issued on reinvestment of distribu-
tions....................................... 49,580,586 31,162,315
Shares redeemed.............................. (64,887,080) (64,262,463)
------------- -------------
Net increase in net assets resulting from
capital share transactions (Note 7)......... 45,292,035 76,383,414
------------- -------------
TOTAL INCREASE IN NET ASSETS.............. 38,976,759 106,285,211
------------- -------------
NET ASSETS:
Beginning of period.......................... 471,963,136 365,677,925
------------- -------------
End of period (including accumulated undis-
tributed net investment income of
($2,066,623) and $9,848,069 respectively)... $ 510,939,895 $471,963,136
============= =============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net in-
vestment income:
Brinson Fund Class........................... $ (23,918,105) $ (21,444,413)
SwissKey Fund Class.......................... (742,229) (200,446)
Distributions from net realized gain:
Brinson Fund Class........................... (25,579,684) (10,892,522)
SwissKey Fund Class.......................... (848,410) (45,304)
------------- -------------
Total distributions to shareholders.......... $ (51,088,428) $ (32,582,685)
============= =============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30 AUGUST 31, 1992*
DECEMBER 31, 1996 ---------------------------- THROUGH
BRINSON FUND CLASS (UNAUDITED) 1996 1995 1994 JUNE 30, 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00
-------- -------- -------- -------- --------
Income from investment
operations:
Net investment income. 0.48 0.44 0.43 0.33 0.26
Net realized and
unrealized gain
(loss)............... 0.62 1.37 0.86 (0.23) 0.81
-------- -------- -------- -------- --------
Total income from
investment
operations......... 1.10 1.81 1.29 0.10 1.07
-------- -------- -------- -------- --------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.61) (0.62) (0.27) (0.27) (0.20)
Distributions from and
in excess of net
realized gain........ (0.65) (0.32) (0.10) (0.27) --
-------- -------- -------- -------- --------
Total distributions. (1.26) (0.94) (0.37) (0.54) (0.20)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 12.06 $ 12.22 $ 11.35 $ 10.43 $ 10.87
======== ======== ======== ======== ========
Total return (non-
annualized)............ 9.11% 16.38% 12.57% 0.77% 10.76%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $493,628 $457,933 $365,678 $278,859 $191,389
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.01%** 1.04% 1.09% 1.14% 1.35%**
After expense reim-
bursement............ N/A N/A N/A 1.10% 1.05%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 3.08%** 3.69% 4.27% 3.21% 3.26%**
After expense reim-
bursement............ N/A N/A N/A 3.25% 3.56%**
Portfolio turnover
rate.................. 84% 142% 238% 231% 149%
Average commission rate
paid per share........ $ 0.0307 $ 0.0291 N/A N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 12.18 $ 11.60
------- -------
Income from investment operations:
Net investment income....................... 0.43 0.39
Net realized and unrealized gain............ 0.64 1.10
------- -------
Total income from investment operations... 1.07 1.49
------- -------
Less distributions:
Distributions from and in excess of net in-
vestment income............................ (0.57) (0.59)
Distributions from net realized gain........ (0.65) (0.32)
------- -------
Total distributions....................... (1.22) (0.91)
------- -------
Net asset value, end of period................ $ 12.03 $ 12.18
======= =======
Total return (non-annualized)................. 8.89% 13.24%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $17,312 $14,030
Ratio of expenses to average net assets...... 1.66%** 1.69%**
Ratio of net investment income to average net
assets...................................... 2.43%** 3.04%**
Portfolio turnover rate...................... 84% 142%
Average commission rate paid per share....... $0.0307 $0.0291
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
The Global Equity Fund is actively managed, providing a fully integrated
approach to the primary equity markets across the world. Market selection and
currency strategies are managed within a global asset allocation framework.
Industry strategies and individual security selections are based on the
fundamental research of our analytical teams in Chicago, Basel, Frankfurt,
London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The SwissKey Global Equity Fund has provided an annualized return of 18.93%
since its inception on July 31, 1995, compared to the 13.90% return of its
benchmark, the MSCI World Equity (Free) Index. For the year ended December 31,
1996, the Fund returned 16.31%, while the benchmark returned 13.92%. For the
second half of 1996, the Fund returned 7.23% compared to the Index return of
6.18%.
Currency allocation and equity management strategies within markets contributed
positively to Fund performance during the year. Market allocation strategies,
notable for a U.S. equity market underweight and cash risk hedge, detracted
from performance.
Global equity markets were generally strong in 1996. Despite a return of 24.05%
for the MSCI U.S. component, the U.S. equity market was not the strongest
market during 1996. In the global equity index there were 11 markets that
outperformed the U.S. market, Spain being the strongest with a U.S. dollar
hedged return of 46.76%. The relatively low performance of the MSCI World
Equity (Free) Index, was due to the weak showing from Japan, the worst
performing market, which registered a meager U.S. dollar hedged return of
0.06%.
The U.S. market provided positive returns during each calendar quarter of 1996,
ending the year with a fourth quarter return of 8.28%. Japanese equities, on
the other hand, started the year with a strong first half gain of 10.23%. The
third and fourth quarters offset nearly all of the first half gains. In the
fourth quarter Japan generated a U.S. dollar hedged loss of -6.49%, the only
market to provide a negative return.
Currency movements contributed substantially to the performance of the Global
Equity Fund relative to the MSCI World Equity benchmark. During the year, the
Fund maintained a significant underweight to the Japanese yen and underweights
in the core European currencies. The aggregate European currency underweight
was similar in magnitude to the yen underweight. The U.S. dollar overweight
averaged nearly 35% during the year. The Japanese yen declined by 11.13%, and
the core European currency depreciations ranged from 14.31% for the Swiss franc
to 5.93% for the French franc. The Fund maintained neutral or overweight
positions to currencies that appreciated over the course of 1996.
Security selection derived most of its added value from equity management in
the U.S. and Japan.
------------------------------------------------------------
23
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
Annualized
6 months 1 year 7/31/95*
ended ended to
12/31/96 12/31/96 12/31/96
- ------------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY GLOBAL EQUITY FUND 7.23% 16.31% 18.93%
MSCI World Equity (Free) Index 6.18 13.92 13.90
- ------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey Global Equity Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey
Global Equity Fund and the MSCI World Equity (Free) Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 1996. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors
may realize a gain or loss upon redemption.
SWISSKEY GLOBAL EQUITY FUND
VS. MSCI WORLD EQUITY (FREE) INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
SwissKey Global MSCI World
Equity Fund Equity (Free) Index
--------------- -------------------
7/31/95 $10,000 $10,000
9/30/95 10,329 10,066
12/31/95 10,993 10,556
3/31/96 11,539 10,998
6/30/96 11,925 11,325
9/30/96 12,110 11,488
12/31/96 12,787 12,025
7/31/95 = $10,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on the market returns without deduction for fees or transaction costs
for rebalancing.
------------------------------------------------------------
24
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
MARKET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------
<S> <C> <C>
U.S. 43.2% 33.2%
Japan 17.5 14.5
Australia 1.6 2.6
Belgium 0.6 1.7
Canada 2.6 1.5
France 3.8 5.1
Germany 4.4 4.4
Hong Kong 2.0 0.8
Italy 1.7 1.8
Malaysia 1.4 0.7
Netherlands 2.6 3.2
New Zealand 0.2 1.8
Spain 1.2 1.9
Sweden 1.4 0.0
Switzerland 3.0 0.8
U.K. 10.4 10.5
Other Markets 2.4 0.5
Cash Reserves 0.0 15.0
- ---------------------------------
100.0% 100.0%
</TABLE>
CURRENCY ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------
<S> <C> <C>
U.S. 43.2% 71.7%
Japan 17.5 7.5
Australia 1.6 1.6
Belgium 0.6 0.0
Canada 2.6 2.6
France 3.8 0.0
Germany 4.4 0.0
Hong Kong 2.0 0.0
Italy 1.7 1.8
Malaysia 1.4 0.6
Netherlands 2.6 0.0
New Zealand 0.2 1.8
Spain 1.2 1.2
Sweden 1.4 0.0
Switzerland 3.0 0.0
U.K. 10.4 10.4
Other Markets 2.4 0.8
- ---------------------------------
100.0% 100.0%
</TABLE>
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 1.86%
2. Xerox Corp. 1.46
3. Lockheed Martin Corp. 1.44
4. Burlington Northern Santa Fe 1.43
5. Corning, Inc. 1.35
6. Citicorp 1.31
7. Philip Morris Companies, Inc. 1.28
8. Aon Corp. 1.20
9. Goodyear Tire & Rubber Co. 1.10
10. Enron Corp. 1.00
- -----------------------------------------------
</TABLE>
TOP TEN NON-U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------
<S> <C>
1. Royal Dutch Petroleum Co. 0.82%
2. Matsushita Electric Industrial Co. 0.62
3. Broken Hill Proprietary Co. Ltd. 0.61
4. Toray Industries, Inc. 0.59
5. British Telecommunications PLC 0.58
6. General Electric Co. PLC 0.57
7. Lloyds TSB Group PLC 0.55
8. Telecom Corp of New Zealand Ltd. 0.55
9. British Petroleum Co. PLC 0.49
10. Sankyo Co. Ltd. 0.49
- -----------------------------------------------
</TABLE>
------------------------------------------------------------
25
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals............................................................... 0.26%
Housing/Paper........................................................... 1.58
Metals.................................................................. 0.20
-----
2.04
Capital Investments
Capital Goods........................................................... 3.49
Technology.............................................................. 2.25
-----
5.74
Consumer
Autos/Durables.......................................................... 0.10
Discretionary........................................................... 2.53
Health: Drugs........................................................... 3.13
Health: Non-Drugs....................................................... 1.55
Non-Durables............................................................ 4.36
Retail/Apparel.......................................................... 1.60
-----
13.27
Energy................................................................... 1.93
Financial
Banks................................................................... 3.91
Non-Banks............................................................... 3.57
-----
7.48
Services................................................................. 2.47
Transportation........................................................... 2.41
Utilities................................................................ 1.20
Miscellaneous............................................................ 1.01
-----
Total U.S. Equities................................................... 37.55*
-----
</TABLE>
- ------------------------------------------------------------
<TABLE>
<S> <C>
NON-U.S. EQUITIES
Airlines................................................................ 0.12%
Appliances & Household Durables......................................... 1.24
Automobiles............................................................. 1.53
Banking................................................................. 5.63
Beverages & Tobacco..................................................... 1.20
Broadcasting & Publishing............................................... 0.72
Building Materials...................................................... 0.72
Business & Public Service............................................... 1.84
Chemicals............................................................... 2.10
Construction............................................................ 1.00
Data Processing......................................................... 0.60
Electric Components..................................................... 0.78
Electronics............................................................. 2.26
Energy.................................................................. 4.23
Financial Services...................................................... 0.75
Food & House Products................................................... 2.46
Forest Products......................................................... 1.06
Gold Mining............................................................. 0.06
Health & Personal Care.................................................. 2.29
Industrial Components................................................... 1.26
Insurance............................................................... 2.10
Leisure & Tourism....................................................... 0.28
Machinery & Engineering................................................. 0.76
Merchandising........................................................... 2.17
Metals-Steel............................................................ 0.95
Miscellaneous Materials................................................. 0.68
Multi-Industry.......................................................... 2.16
Non-Ferrous Metal....................................................... 1.18
Real Estate............................................................. 0.41
Recreation.............................................................. 0.30
Shipping................................................................ 0.40
Telecommunications...................................................... 2.12
Textiles & Apparel...................................................... 0.13
Transportation.......................................................... 0.49
Utilities............................................................... 3.02
------
Total Non-U.S. Equities.............................................. 49.00*
------
SHORT-TERM INVESTMENTS.................................................. 12.62*
------
TOTAL INVESTMENTS.................................................... 99.17
CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.83
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
* The Fund held a short position in stock index futures on December 31, 1996
which reduced U.S. equity exposure from 37.55% to 32.49%. The Fund held a
long position in Topix futures which increased Japanese equity exposure from
13.77% to 14.71%. These two adjustments result in a net increase in the
Fund's exposure to Short-Term Investments from 12.62% to 16.74%.
------------------------------------------------------------
26
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Equities -- 86.55%
U.S. EQUITIES -- 37.55%
Aetna Life & Casualty Co................................ 7,200 $ 576,000
Allergan, Inc........................................... 12,000 427,500
Allstate Corp........................................... 6,200 358,825
Alza Corp. (b).......................................... 11,700 302,738
Aon Corp................................................ 15,700 975,362
Automatic Data Processing, Inc.......................... 11,500 493,063
Avon Products, Inc...................................... 8,500 485,562
Bard (C.R.), Inc........................................ 7,300 204,400
Beckman Instruments, Inc................................ 4,700 180,363
Birmingham Steel Corp................................... 4,700 89,300
Boston Technology, Inc. (b)............................. 4,700 135,125
Brinker International, Inc. (b)......................... 3,200 51,200
Burlington Northern Santa Fe............................ 13,400 1,157,425
Centerior Energy Co..................................... 9,900 106,425
Chase Manhattan Corp.................................... 16,900 1,508,325
Choice Hotels International, Inc. (b)................... 7,700 135,712
CIGNA Corp.............................................. 5,800 792,425
Circuit City Stores, Inc................................ 1,700 51,213
Citicorp................................................ 10,300 1,060,900
CMS Energy Corp......................................... 12,800 430,400
Coca-Cola Enterprises, Inc.............................. 6,300 305,550
Comerica, Inc........................................... 3,200 167,600
Comverse Techonology, Inc. (b).......................... 2,200 83,187
Corning, Inc............................................ 23,600 1,091,500
CPC International, Inc.................................. 2,900 224,750
Dial Corp............................................... 11,500 169,625
EMC Corp./Mass (b)...................................... 16,900 559,813
Enron Corp.............................................. 18,800 810,750
Federal Express Corp. (b)............................... 17,400 774,300
Federated Department Stores (b)......................... 6,800 232,050
FileNet Corp. (b)....................................... 2,800 89,600
First American Corp.-Tenn............................... 800 46,100
First Data Corp......................................... 9,804 357,846
First of America Bank Corp.............................. 1,500 90,187
Footstar, Inc. (b)...................................... 3,598 89,500
Ford Motor Co........................................... 6,500 207,188
Forest Laboratories, Inc. (b)........................... 8,000 262,000
Gannett Co., Inc........................................ 7,800 584,025
General Instrument Corp. (b)............................ 23,300 503,862
Genzyme Corp. (b)....................................... 4,700 102,225
Geon Co................................................. 1,700 33,363
Goodyear Tire & Rubber Co............................... 17,300 888,788
Harnischfeger Industries, Inc........................... 5,200 250,250
Health Care and Retirement Corp. (b).................... 8,650 247,606
Interpublic Group of Companies, Inc..................... 5,800 275,500
James River Corp. of Virginia........................... 6,700 221,938
Kimberly-Clark Corp..................................... 5,700 542,925
Kroger Co. (b).......................................... 4,900 227,850
Lockheed Martin Corp.................................... 12,751 1,166,716
Lyondell Petrochemical Co............................... 12,800 281,600
Manor Care, Inc......................................... 7,700 207,900
Martin Marietta Materials, Inc.......................... 3,535 82,189
Masco Corp.............................................. 7,300 262,800
Mattel, Inc............................................. 28,050 778,388
Melville Corp........................................... 9,300 384,787
Nabisco Holdings Corp. Class A.......................... 8,500 330,438
National Semiconductor Corp. (b)........................ 4,800 117,000
Nextel Communications, Inc. Class A (b)................. 11,800 154,137
Old Republic International Corp......................... 6,050 161,838
Peco Energy Co.......................................... 7,200 181,800
Pentair, Inc............................................ 5,500 177,375
Pharmacia & Upjohn, Inc................................. 14,900 590,413
Philip Morris Companies, Inc............................ 9,200 1,036,150
Rhone-Poulenc Rorer, Inc................................ 3,500 273,437
RJR Nabisco Convertible Preferred "C"................... 38,200 257,850
Schering Plough Corp.................................... 10,300 666,925
Seagate Technology, Inc. (b)............................ 3,200 126,400
Timken Co............................................... 4,900 224,788
Tyson Foods, Inc. Class A............................... 14,100 482,925
Ultramar Diamond Shamrock Corp.......................... 13,252 419,094
US Bancorp.............................................. 7,100 319,056
USF&G Corp.............................................. 5,500 114,813
Vencor, Inc. (b)........................................ 6,100 192,912
Viad Corp............................................... 11,500 189,750
Westvaco Corp........................................... 2,850 81,938
Whitman Corp............................................ 700 16,012
WMX Technologies, Inc................................... 19,100 623,137
Xerox Corp.............................................. 22,400 1,178,800
York International Corp................................. 4,800 268,200
360 Communications Co. (b).............................. 4,033 93,263
-----------
Total U.S. Equities..................................... 30,404,972
-----------
NON-U.S. EQUITIES -- 49.00%
AUSTRALIA -- 2.66%
Amcor Ltd............................................... 14,100 90,603
Boral Ltd............................................... 23,800 67,676
Broken Hill Proprietary Co. Ltd......................... 34,450 490,345
CRA Ltd................................................. 12,063 189,233
David Jones Ltd......................................... 57,000 79,230
Lend Lease Corp. Ltd.................................... 4,197 81,340
M.I.M. Holdings Ltd..................................... 49,446 69,122
National Australia Bank Ltd............................. 19,475 228,936
News Corp. Ltd.......................................... 40,536 213,788
News Corp. Ltd. Preferred............................... 9,000 40,032
Pacific Dunlop Ltd...................................... 33,600 85,401
Qantas Airways Ltd...................................... 23,982 40,001
Santos Ltd.............................................. 23,000 93,169
WMC Ltd................................................. 18,300 115,265
Westpac Bank Corp. Ltd.................................. 37,545 213,520
Woolworth's Ltd......................................... 25,000 60,167
-----------
2,157,828
-----------
BELGIUM -- 1.46%
Delhaize-Le Lion S.A.................................... 1,200 71,212
Electrabel S.A.......................................... 950 224,606
Fortis AG............................................... 894 143,256
Fortis AG Strip (b)..................................... 14 7
General de Banque S.A................................... 100 35,810
Groupe Bruxelles Lambert S.A............................ 530 68,160
Kredietbank NV.......................................... 365 119,504
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
BELGIUM (CONTINUED)
Petrofina S.A........................................... 510 $ 162,162
Societe Generale de Belgique............................ 840 65,847
Solvay S.A. Class A..................................... 165 100,903
Tractebel............................................... 200 93,028
Tractebel Warrants "99" (b)............................. 200 2,896
Union Miniere Group S.A. (b)............................ 1,420 96,114
-----------
1,183,505
-----------
CANADA -- 1.48%
Alcan Aluminium Ltd..................................... 2,500 84,361
Bank of Montreal........................................ 2,300 73,165
Barrick Gold Corp....................................... 1,600 45,819
BCE, Inc................................................ 1,100 52,408
Canadian National Railway Co............................ 2,000 76,025
Canadian Pacific Ltd.................................... 5,700 149,923
Hudson's Bay Co......................................... 3,400 56,807
Imperial Oil Ltd........................................ 2,000 94,119
Moore Corp. Ltd......................................... 2,200 45,586
Noranda, Inc............................................ 2,600 57,953
Northern Telecom Ltd.................................... 1,000 62,163
NOVA Corp............................................... 4,300 38,118
Royal Bank of Canada.................................... 2,500 87,735
Seagram Co. Ltd......................................... 2,200 87,079
Thomson Corp............................................ 5,600 123,596
TransCanada Pipelines Ltd............................... 3,400 59,536
-----------
1,194,393
-----------
FINLAND -- 0.69%
Merita Ltd. Class A (b)................................. 16,700 51,814
Nokia Ab Class A........................................ 5,000 289,434
Outokumpu Class A....................................... 2,600 44,283
Pohjola Insurance Group Class B......................... 1,200 26,947
Sampo Insurance Co. Ltd. Class A........................ 700 55,131
UPM-Kymmene Corp. (b)................................... 4,500 94,218
-----------
561,827
-----------
FRANCE -- 4.90%
Accor S.A............................................... 877 110,833
Alcatel Alsthom......................................... 1,461 117,134
AXA S.A................................................. 600 38,086
Banque Nationale de Paris............................... 5,380 207,803
CEP Communications...................................... 404 28,481
CEP Communications Warrants "97" (b).................... 704 806
Cie Bancaire S.A........................................ 1,192 140,783
Cie de Saint Gobain..................................... 1,757 248,069
Cie de Suez............................................. 2,317 98,319
Cie Generale des Eaux................................... 2,671 330,362
Colas................................................... 330 47,608
Credit Local de France.................................. 2,503 217,623
Elf Aquitaine S.A....................................... 2,650 240,752
Groupe Danone........................................... 300 41,722
L'Oreal S.A............................................. 200 75,173
Lafarge S.A............................................. 1,000 59,880
LVMH.................................................... 1,130 314,958
Michelin Class B........................................ 3,234 174,244
Pechiney S.A. Class A................................... 3,013 125,998
Peugeot S.A............................................. 2,640 296,566
Rhone-Poulenc Class A................................... 6,600 224,583
SEITA................................................... 1,900 79,308
Societe Generale........................................ 2,061 222,406
Total S.A. Class B...................................... 3,459 280,781
UAP..................................................... 4,309 107,338
Usinor Sacilor.......................................... 9,400 136,515
-----------
3,966,131
-----------
GERMANY -- 3.91%
Allianz AG Holding...................................... 155 278,600
BASF AG................................................. 4,250 162,708
Bayer AG................................................ 5,750 233,007
Bayerische Motoren Werke AG............................. 230 158,497
Commerzbank AG.......................................... 4,550 115,440
Daimler-Benz AG (b)..................................... 2,400 164,298
Deutsche Bank AG........................................ 4,650 216,644
Deutsche Telekom AG (b)................................. 7,750 161,427
Henkel KGaA-Vorzug AG................................... 1,850 91,234
Hochtief AG............................................. 1,250 49,072
Hoechst AG.............................................. 2,000 92,531
M.A.N. AG............................................... 320 77,140
Mannesmann AG........................................... 380 163,283
Metro AG................................................ 1,220 95,393
Muenchener Rueckver AG.................................. 77 186,617
Muenchener Rueckver AG Warrants "98" (b)................ 3 625
Preussag AG............................................. 460 103,874
RWE AG.................................................. 3,100 129,544
Schering AG............................................. 2,000 168,581
Siemens AG.............................................. 1,400 64,881
Thyssen AG.............................................. 700 123,957
Veba AG................................................. 3,600 206,735
Volkswagen AG........................................... 300 124,100
-----------
3,168,188
-----------
HONG KONG -- 0.75%
Cheung Kong Holdings Ltd................................ 6,000 53,330
China Light & Power Co. Ltd............................. 11,000 48,921
Guoco Group Ltd......................................... 9,000 50,382
Hang Seng Bank Ltd...................................... 5,800 70,486
Hong Kong Telecommunications Ltd........................ 16,000 25,753
Hutchison Whampoa Ltd................................... 14,000 109,956
Jardine Matheson Holdings ADR (c)....................... 3,600 23,760
New World Development Co. Ltd........................... 9,000 60,796
Sun Hung Kai Properties Ltd............................. 5,000 61,248
Swire Pacific Ltd. Class A.............................. 7,000 66,743
Wharf (Holdings) Ltd.................................... 8,000 39,923
-----------
611,298
-----------
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
ITALY -- 1.45%
Assicurazioni Generali.................................. 5,940 $ 112,315
Danieli & Co. Savings (Risp)............................ 8,000 33,410
Edison Spa.............................................. 8,000 50,510
ENI ADR (c)............................................. 2,300 118,738
ENI Spa................................................. 22,000 112,641
Fiat Spa-Priv........................................... 44,000 72,489
INA-Istituto Nazionale de Assicurazioni................. 14,000 18,194
Istituto Mobilaire Italiano Spa......................... 15,000 128,247
Italgas Spa............................................. 9,000 37,498
La Rinascente........................................... 5,000 28,938
La Rinascente Savings (Risp)............................ 6,000 15,311
La Rinascente Warrants "99" (b)......................... 550 242
Mediobanca Spa.......................................... 2,800 15,073
Montedison Spa (b)...................................... 154,560 105,107
SAI-Savings (Risp)...................................... 7,000 24,837
Telecom Italia Spa...................................... 86,000 167,418
Telecom Italia Mobile Spa............................... 92,000 130,996
-----------
1,171,964
-----------
JAPAN -- 13.77%
Amada Co. Ltd........................................... 21,000 162,833
Asahi Glass Co. Ltd..................................... 24,000 225,381
Bank of Tokyo-Mitsubishi Ltd............................ 17,600 326,010
Canon, Inc.............................................. 17,000 374,946
Canon Sales Co., Inc.................................... 6,600 146,705
Citizen Watch Co. Ltd................................... 19,000 135,866
Dai Nippon Printing Co. Ltd............................. 18,000 314,810
Daiichi Pharmaceutical Co. Ltd.......................... 13,000 208,323
Daikin Industries Ltd................................... 20,000 177,478
Daiwa House Industry Co. Ltd............................ 9,000 115,534
Fanuc................................................... 7,900 252,511
Fujitsu................................................. 12,000 111,657
Hitachi Ltd............................................. 39,000 362,884
Honda Motor Co.......................................... 5,000 142,586
Inax.................................................... 25,000 184,802
Isetan.................................................. 6,000 77,539
Ito Yokado Co. Ltd...................................... 7,000 303,955
Kaneka Corp............................................. 9,000 45,981
Keio Teito Electric Railway............................. 23,000 112,156
Kinki Nippon Railway.................................... 23,000 143,267
Kirin Brewery Co. Ltd................................... 21,000 206,255
Kokuyo.................................................. 4,000 98,561
Kuraray Co. Ltd......................................... 17,000 156,716
Kyocera Corp. .......................................... 2,000 124,408
Maeda Road Construction................................. 3,000 34,634
Matsushita Electric Industrial Co....................... 31,000 504,782
Mitsubishi Paper Mills.................................. 21,000 81,959
NGK Insulators.......................................... 32,000 303,265
Nintendo Corp. Ltd...................................... 1,500 107,134
Nippon Denso Co. Ltd.................................... 13,000 312,484
Nippon Meat Packers, Inc................................ 13,000 168,002
Nippon Steel Co......................................... 14,000 41,251
Okumura................................................. 18,000 109,176
Osaka Gas Co............................................ 81,000 221,220
Sankyo Co. Ltd.......................................... 14,000 395,623
Sanwa Bank Ltd. ........................................ 9,000 122,512
Secom................................................... 5,000 301,973
Seino Transportation.................................... 6,000 66,167
Sekisui House Ltd....................................... 38,000 386,319
Shinmaywa Industries Ltd................................ 18,000 132,282
Sony Corp............................................... 6,000 392,349
Sumitomo Bank........................................... 21,000 302,145
Sumitomo Electric Industries............................ 16,000 223,313
Takeda Chemical Industries.............................. 15,000 314,035
TDK Corp................................................ 4,000 260,188
Tokio Marine & Fire Insurance Co........................ 18,000 169,036
Tokyo Electric Power.................................... 8,300 181,632
Tokyo Steel Mfg......................................... 14,500 206,126
Tonen Corp.............................................. 13,000 151,202
Toray Industries, Inc................................... 78,000 480,486
Toshiba Corp............................................ 46,000 288,516
Toyo Suisan Kaisha...................................... 11,000 109,934
Toyota Motor Corp....................................... 5,000 143,448
Yamazaki Baking Co. Ltd................................. 8,000 127,509
-----------
11,149,866
-----------
MALAYSIA -- 0.54%
Hume Industries (Malaysia) Bhd.......................... 7,000 44,070
Kuala Lumpur Kepong Bhd................................. 15,000 38,012
Land & General Holdings Bhd............................. 15,000 35,933
Malayan Banking Bhd..................................... 2,600 28,826
Malaysia International Shipping Bhd (Frgn.)............. 10,000 29,697
Nestle (Malaysia) Bhd................................... 1,000 8,038
Public Bank Bhd (Frgn.)................................. 17,667 37,425
Resorts World Bhd....................................... 4,000 18,215
Sime Darby Bhd.......................................... 15,000 59,097
Telekom Malaysia Bhd.................................... 3,000 26,728
Tenaga Nasional Bhd..................................... 18,000 86,241
YTL Corp. Bhd........................................... 4,000 21,540
-----------
433,822
-----------
NETHERLANDS -- 3.10%
ABN AMRO Holdings NV.................................... 3,219 209,178
Akzo Nobel NV........................................... 500 68,220
DSM NV.................................................. 680 66,990
Hoogovens NV............................................ 900 37,463
ING Groep NV............................................ 8,956 322,058
KLM Royal Dutch Air Lines NV............................ 1,900 53,385
KPN NV.................................................. 5,565 212,021
Philips Electronics NV.................................. 2,850 115,338
Royal Dutch Petroleum Co................................ 3,800 665,445
Royal Dutch Petroleum Co. NY Shares (c)................. 1,200 204,900
Unilever NV............................................. 1,900 335,688
Vendex International NV................................. 3,119 133,257
VNU-Ver Ned Uitgevers................................... 4,000 83,483
-----------
2,507,426
-----------
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
NEW ZEALAND -- 1.62%
Brierley Investments Ltd................................ 231,000 $ 213,813
Carter Holt Harvey Ltd.................................. 79,500 180,312
Fletcher Challenge Building............................. 30,750 94,512
Fletcher Challenge Energy............................... 29,550 85,604
Fletcher Challenge Forest Ltd........................... 49,803 83,398
Fletcher Challenge Paper................................ 60,500 124,394
Telecom Corp. of New Zealand Ltd........................ 87,000 443,821
Telecom Corp. of New Zealand Ltd. ADS (c)............... 1,100 89,100
-----------
1,314,954
-----------
SPAIN -- 1.62%
Acerinox S.A. .......................................... 400 57,690
Banco Bilbao-Vizcaya S.A................................ 1,800 97,006
Banco Central Hispanoamericano.......................... 1,700 43,586
Banco Intercontinental Espanol S.A...................... 300 46,427
Banco Popular Espanol S.A............................... 400 78,416
Banco Santander S.A..................................... 1,600 102,218
Cia Sevillana de Electricidad........................... 2,113 23,961
Empresa Nacional de Electridad S.A...................... 2,050 145,624
Fomento de Construcciones y
Contratas S.A.......................................... 500 46,512
Gas Natural SDG S.A. ................................... 300 69,652
Iberdrola S.A........................................... 13,000 183,894
Mapfre Corp. ........................................... 900 54,730
Repsol S.A.............................................. 3,300 126,342
Telefonica de Espana.................................... 7,500 173,842
Vallehermosa S.A........................................ 1,200 25,969
Viscofan Envolturas Celulosicas S.A..................... 2,300 33,596
-----------
1,309,465
-----------
SWITZERLAND -- 0.90%
ABB AG (Bearer)......................................... 30 37,201
CS Holdings AG (Reg.)................................... 396 40,552
Nestle S.A. (Reg.)...................................... 213 227,959
Novartis AG (Reg.)...................................... 140 160,219
Roche Holding AG (Gen.)................................. 18 139,622
Schweiz Bankgesellschaft (Bearer)....................... 42 36,692
Societe Generale de Surveillance Holding S.A. (Bearer).. 11 26,953
Zurich Versicherungs (Reg.)............................. 203 56,242
-----------
725,440
-----------
UNITED KINGDOM -- 10.15%
Abbey National PLC...................................... 11,000 144,018
Bank of Scotland........................................ 16,000 84,477
Bass PLC................................................ 6,800 95,547
B.A.T. Industries PLC................................... 35,000 290,219
Booker PLC.............................................. 10,500 71,791
British Energy PLC...................................... 75,000 188,687
British Gas PLC......................................... 71,500 274,718
British Petroleum Co. PLC............................... 33,416 400,615
British Steel PLC....................................... 62,000 170,306
British Telecommunications PLC.......................... 69,700 470,591
Charter PLC............................................. 9,531 120,789
Coats Viyella PLC....................................... 45,000 102,430
FKI PLC................................................. 38,875 134,396
General Electric Co. PLC................................ 71,100 464,833
Glaxo Wellcome PLC...................................... 11,500 186,582
Grand Metropolitan PLC.................................. 46,000 361,355
Guinness PLC............................................ 36,300 284,225
Hanson PLC.............................................. 72,000 100,428
Hillsdown Holdings PLC.................................. 53,000 181,414
House of Fraser PLC..................................... 59,000 154,997
HSBC Holdings PLC....................................... 12,000 268,218
Imperial Chemical Industries PLC........................ 5,000 65,762
Legal & General Group PLC............................... 28,000 178,265
Lloyds TSB Group PLC.................................... 60,630 446,709
Marks & Spencer PLC..................................... 29,500 247,895
Millennium Chemicals, Inc. (b).......................... 500 8,875
Mirror Group PLC........................................ 24,000 88,516
National Power PLC...................................... 19,000 159,011
National Westminster Bank PLC........................... 10,800 126,706
Northern Foods PLC...................................... 32,000 111,997
Peninsular & Oriental Steam Navigation Co............... 29,000 292,829
Reckitt & Colman PLC.................................... 6,175 76,514
Redland PLC............................................. 9,500 59,589
RJB Mining PLC.......................................... 21,000 154,544
Royal & Sun Alliance Insurance Group PLC................ 16,697 127,021
RTZ Corp. PLC........................................... 11,200 179,511
Sainsbury (J.) PLC...................................... 23,000 152,730
Scottish Hydro-Electric PLC............................. 17,200 96,553
Sears PLC............................................... 66,000 107,308
Sedgwick Group PLC...................................... 48,000 108,027
SmithKline Beecham PLC.................................. 13,900 192,573
Smurfit (Jefferson) Group PLC........................... 30,000 89,081
Tesco PLC............................................... 22,000 133,476
Thames Water PLC........................................ 16,000 167,722
Unilever PLC............................................ 6,500 157,578
Vodafone Group PLC...................................... 19,600 82,687
Yorkshire Water PLC..................................... 5,000 60,628
-----------
8,222,743
-----------
Total Non-U.S. Equities................................. 39,678,850
-----------
Total Equities (Cost $61,753,091)....................... 70,083,822
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Short-Term Investments --12.62%
U.S. GOVERNMENT OBLIGATIONS -- 0.39%
U.S. Treasury Bills 5.063%, due 05/01/97................ $ 325,000 $ 319,553
-----------
COMMERCIAL PAPER -- 12.23%
Burlington Northern Santa Fe
5.650%, due 01/17/97................................... 500,000 498,744
Case Credit Corp.
5.510%, due 01/07/97................................... 500,000 499,541
Cincinnati Bell, Inc.
7.250%, due 01/02/97................................... 2,441,000 2,440,508
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
COMMERCIAL PAPER (CONTINUED)
CNA Financial Corp.
6.250%, due 01/23/97................................... $ 500,000 $ 498,090
Crown Cork & Seal Co., Inc.
5.520%, due 01/10/97 500,000 499,310
5.580%, due 01/29/97................................... 500,000 497,830
PanEnergy Corp.
6.050%, due 01/17/97................................... 1,000,000 997,311
Rite Aid Corp.
5.650%, due 01/06/97................................... 500,000 499,608
5.600%, due 01/21/97................................... 700,000 697,822
Tyson Foods, Inc.
5.750%, due 01/09/07................................... 750,000 749,042
US West Capital Funding, Inc.
5.600%, due 02/12/97................................... 532,000 528,524
Vastar Resources, Inc.
6.020%, due 01/02/97................................... 500,000 499,916
6.850%, due 01/10/97................................... 1,000,000 998,288
-----------
9,904,534
-----------
Total Short-Term Investments
(Cost $10,224,050)..................................... 10,224,087
-----------
Total Investments
(Cost $71,977,141) -- 99.17% (a)....................... 80,307,909
-----------
Cash and other assets, less liabilities --0.83%......... 675,731
-----------
Net Assets -- 100%...................................... $80,983,640
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $71,977,141; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $10,899,783
Gross unrealized depreciation................................ (2,569,015)
-----------
Net unrealized appreciation.............................. $ 8,330,768
===========
</TABLE>
(b) Non-income producing security
(c) Denominated in U.S. dollars
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Equity Fund had the following open forward foreign currency
contracts as of December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollar................ 06/04/97 1,100,000 $ 810,230 $(19,958)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar.............. 06/04/97 950,000 753,566 14,604
Belgian Franc.................. 06/04/97 36,800,000 1,170,765 12,324
Dutch Guilder.................. 06/04/97 3,800,000 2,219,550 28,040
French Franc................... 06/04/97 19,500,000 3,786,028 18,331
German Mark.................... 06/04/97 4,400,000 2,883,595 36,500
Hong Kong Dollars.............. 06/04/97 4,400,000 568,746 (130)
Japanese Yen................... 06/04/97 500,000,000 4,401,739 150,419
Spanish Peseta................. 06/04/97 48,000,000 368,164 4,397
Swiss Franc.................... 06/04/97 900,000 680,839 27,822
--------
Total...................... $272,349
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Equity Fund had the following open index futures contracts as of
December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST/PROCEEDS VALUE GAIN
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Topix, 6 contracts.............. March 1997 $ 791,419 $ 760,920 $(30,499)
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 11 con-
tracts......................... March 1997 4,128,600 4,094,750 33,850
--------
Total........................ $ 3,351
========
</TABLE>
The segregated cash and market value of investments pledged to cover margin
requirements for the open futures positions at December 31, 1996 was $211,098
and $319,553, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $71,977,141) (Note 1)................. $80,307,909
Cash.............................................................. 2,540,769
Foreign currency, at value (Cost $97,461)......................... 95,800
Receivables:
Investment securities sold....................................... 265,153
Dividends........................................................ 152,214
Fund shares sold................................................. 113,121
Variation margin (Note 5)........................................ 80,051
Due from advisor................................................. 13,080
Net unrealized appreciation on forward foreign currency contracts. 272,349
Other assets...................................................... 7,401
-----------
TOTAL ASSETS................................................... 83,847,847
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 2,624,845
Fund shares redeemed............................................. 8,461
Accrued expenses................................................. 230,901
-----------
TOTAL LIABILITIES.............................................. 2,864,207
-----------
NET ASSETS......................................................... $80,983,640
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 7).......................................... $72,056,258
Accumulated undistributed net investment income................... 204,604
Accumulated net realized gain..................................... 112,758
Net unrealized appreciation....................................... 8,610,020
-----------
NET ASSETS..................................................... $80,983,640
===========
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $38,631,262 and 3,393,011 shares issued
and outstanding) (Note 7)....................................... $ 11.39
===========
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $42,352,378 and 3,721,883 shares issued
and outstanding) (Note 7)....................................... $ 11.38
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $50,249 for foreign taxes withheld)............. $ 623,914
Interest.......................................................... 212,723
----------
TOTAL INCOME................................................... 836,637
----------
EXPENSES:
Advisory (Note 2)................................................. 276,132
Distribution (Note 6)............................................. 141,145
Accounting........................................................ 71,001
Custodian......................................................... 50,480
Professional...................................................... 38,272
Other............................................................. 126,012
----------
TOTAL EXPENSES................................................. 703,042
Expenses deferred by Advisor (Note 2).......................... (216,697)
----------
NET EXPENSES................................................... 486,345
----------
NET INVESTMENT INCOME ......................................... 350,292
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 2,476,667
Futures contracts................................................ (492,032)
Foreign currency transactions.................................... 273,229
----------
Net realized gain.............................................. 2,257,864
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 2,471,472
Futures contracts................................................ (23,546)
Forward contracts................................................ 268,593
Translation of other assets and liabilities denominated in for-
eign currency................................................... 3,943
----------
Change in net unrealized appreciation or depreciation.......... 2,720,462
----------
Net realized and unrealized gain................................... 4,978,326
----------
Net increase in net assets resulting from operations............... $5,328,618
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 350,292 $ 462,604
Net realized gain............................. 2,257,864 8,259,766
Change in net unrealized appreciation or
depreciation................................. 2,720,462 1,258,707
------------ -----------
Net increase in net assets resulting from op-
erations..................................... 5,328,618 9,981,077
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class............................ (176,096) (295,340)
SwissKey Fund Class........................... (53,287) (41,698)
Distributions from net realized gain:
Brinson Fund Class............................ (3,076,894) (1,399,995)
SwissKey Fund Class........................... (3,396,000) (1,621,590)
------------ -----------
Total distributions to shareholders........... $ (6,702,277) $(3,358,623)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 19,387,404 11,563,213
Shares issued in acquisition of SBC World
Growth Fund (Note 1)......................... -- 25,670,575
Shares issued on reinvestment of distribu-
tions........................................ 6,291,113 3,336,320
Shares redeemed............................... (3,459,300) (7,760,045)
------------ -----------
Net increase in net assets resulting from cap-
ital share transactions (Note 7)............. 22,219,217 32,810,063
------------ -----------
TOTAL INCREASE IN NET ASSETS............... 20,845,558 39,432,517
------------ -----------
NET ASSETS:
Beginning of period........................... 60,138,082 20,705,565
------------ -----------
End of period (including accumulated undis-
tributed net investment income of $204,604
and $90,547, respectively)................... $ 80,983,640 $60,138,082
============ ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR YEAR JANUARY 28, 1994*
DECEMBER 31, 1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 11.57 $ 9.93 $ 9.49 $ 10.00
------- ------- ------- -------
Income from investment
operations:
Net investment income. 0.03 0.18 0.18 0.07
Net realized and
unrealized gain
(loss)............... 0.84 2.29 0.39 (0.54)
------- ------- ------- -------
Total income (loss)
from investment op-
erations........... 0.87 2.47 0.57 (0.47)
------- ------- ------- -------
Less distributions:
Distributions from net
investment income.... (0.06) (0.14) (0.04) (0.04)
Distributions from and
in excess of net re-
alized gain.......... (0.99) (0.69) (0.09) --
------- ------- ------- -------
Total distributions. (1.05) (0.83) (0.13) (0.04)
------- ------- ------- -------
Net asset value, end of
period................. $ 11.39 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= =======
Total return (non-
annualized)............ 7.67% 25.66% 6.06% (4.70%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $38,631 $27,126 $20,706 $20,642
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.62%** 1.77% 2.06% 2.65%**
After expense reim-
bursement............ 1.00%** 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 0.80%** 0.57% 0.71% 0.24%**
After expense reim-
bursement............ 1.42%** 1.34% 1.77% 1.89%**
Portfolio turnover
rate.................. 17% 74% 36% 21%
Average commission rate
paid per share........ $0.0259 $0.0288 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 11.57 $ 10.35
------- -------
Income from investment operations:
Net investment gain (loss).................. 0.02 (0.01)
Net realized and unrealized gain............ 0.80 1.93
------- -------
Total income from investment operations... 0.82 1.92
------- -------
Less distributions:
Distributions from net investment income.... (0.02) (0.01)
Distributions from net realized gain........ (0.99) (0.69)
------- -------
Total distributions....................... (1.01) (0.70)
------- -------
Net asset value, end of period................ $ 11.38 $ 11.57
======= =======
Total return (non-annualized)................. 7.23% 19.25%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $42,353 $33,012
Ratio of expenses to average net assets:
Before expense reimbursement................ 2.38%** 2.53%**
After expense reimbursement................. 1.76%** 1.76%**
Ratio of net investment income (loss) to av-
erage net assets:
Before expense reimbursement................ 0.04%** (0.19%)**
After expense reimbursement................. 0.66%** 0.58%**
Portfolio turnover rate...................... 17% 74%
Average commission rate paid per share....... $0.0259 $0.0288
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------
LOGO
The Global Bond Fund is actively managed, providing a fully integrated
treatment of the U.S. and other major fixed income markets across the world.
This global approach takes full advantage of relationships both within and
across markets, based on consistent analysis of macroeconomic and market
conditions. Market and currency strategies are developed in a global asset
allocation framework, in conjunction with senior fixed income professionals in
Chicago, Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and
Tokyo.
The SwissKey Global Bond Fund has provided an annualized return of 11.40% since
July 31, 1995 (performance inception date). Its benchmark, the Salomon World
Government Bond Index, returned 3.72%. For the year ended December 31, 1996,
the Fund returned 8.70%, while the benchmark returned 3.63%. In the second half
of 1996, the Fund produced a return of 6.76% compared to the 5.18% return of
the benchmark.
Market/currency allocation and bond management strategies all contributed
positively to Fund performance in 1996. Market allocation contributions were
broadly derived from European and Canadian bond market overweights against the
U.S. The Japanese bond market underweight detracted from Fund performance. The
currency allocation strategy added value in nearly every currency. Bond
management was strong, particularly in the U.S. market.
Bond markets around the world began a period of strength in early 1995 that was
grounded on a foundation of poor performance in 1994. The strength the global
markets experienced in 1995 was protracted into 1996 for essentially every bond
market except for the U.S. In U.S. dollar-hedged terms, the Salomon Brothers
Index returned 8.68% in 1996. The U.S. market posted a lackluster return of
2.73% while the non-U.S. portion of the index (hedged) returned 11.82% during
the year.
The Fund benefited from a U.S. bond market underweight through the middle of
October, when the Fund shifted to a neutral stance. The Fund also benefited
from an overweight in core European markets during the year. Despite low yields
in Japan, the market generated a relatively strong return; consequently, the
Fund's underweight in Japan detracted from performance.
Currency allocation strategy contributed substantially to the performance of
the Global Bond Fund relative to the Salomon Brothers World Government Bond
Index. During the year, the Fund maintained significant underweights to the
Japanese yen and the core European currencies. The aggregate European currency
underweight was similar in magnitude to the yen underweight. The U.S. dollar
overweight averaged about 35% during the year. The Japanese yen declined by
11.13%, and the core European currency depreciations ranged from 14.31% for the
Swiss franc to 5.93% for the French franc. The Fund maintained neutral or
overweight positions to currencies that appreciated over the course of 1996.
Bond management was particularly strong in the U.S. due to issue selection in
the mortgage-backed and corporate sectors. Security selection contributions
were mixed outside the U.S.
------------------------------------------------------------
38
<PAGE>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 7/31/95*
12/31/96 12/31/96 to 12/31/96
- ------------------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY GLOBAL BOND FUND 6.76% 8.70% 11.40%
Salomon World Government Bond Index 5.18 3.63 3.72
- ------------------------------------------------------------------
</TABLE>
*Performance inception date of the SwissKey Global Bond Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey
Global Bond Fund and the Salomon World Government Bond Index if you had
invested $10,000 on July 31, 1995, and had reinvested all your income dividends
and capital gain distributions through December 31, 1996. No adjustment has
been made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors
may realize a gain or loss upon redemption.
SWISSKEY GLOBAL BOND FUND
VS. SALOMON WORLD GOVERNMENT BOND INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Salomon World
SwissKey Global Government
Bond Fund Bond Index
--------------- -------------
7/31/95 $10,000 $10,000
9/30/95 10,218 9,871
12/31/95 10,722 10,162
3/31/96 10,701 9,972
6/30/96 10,917 10,013
9/30/96 11,287 10,287
12/31/96 11,654 10,531
7/31/95 = $10,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
------------------------------------------------------------
39
<PAGE>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------
LOGO
ASSET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------
<S> <C> <C>
U.S. 33.0% 33.0%
Japan 18.7 5.2
Australia 1.1 0.0
Austria 0.9 0.0
Belgium 2.7 2.8
Canada 3.3 8.0
Denmark 1.7 6.3
Finland 0.5 0.0
France 7.5 7.9
Germany 9.6 13.4
Italy 6.7 7.0
Netherlands 3.4 8.2
Spain 2.8 0.0
Sweden 1.7 1.9
Switzerland 0.4 0.0
U.K. 6.0 6.3
- -------------------------------
100.0% 100.0%
</TABLE>
CURRENCY ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------
<S> <C> <C>
U.S. 33.0% 57.4%
Japan 18.7 8.7
Australia 1.1 1.1
Austria 0.9 0.0
Belgium 2.7 2.8
Canada 3.3 3.2
Denmark 1.7 1.7
Finland 0.5 0.0
France 7.5 1.5
Germany 9.6 5.6
Italy 6.7 7.0
Netherlands 3.4 0.0
Spain 2.8 2.8
Sweden 1.7 1.9
Switzerland 0.4 0.0
U.K. 6.0 6.3
- -------------------------------
100.0% 100.0%
</TABLE>
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Asset-Backed........................................................... 0.70%
CMO.................................................................... 0.41
Consumer............................................................... 0.69
Financial.............................................................. 1.66
Industrial............................................................. 0.81
Telecommunications..................................................... 0.64
------
4.91
International Dollar Bonds............................................. 1.83
U.S. Government Agencies............................................... 9.85
U.S. Government Obligations............................................ 11.92
------
Total U.S. Bonds..................................................... 28.51*
------
NON-U.S. BONDS
Foreign Financial Bonds................................................. 23.90
Foreign Government Bonds................................................ 41.78
------
Total Non-U.S. Bonds................................................. 65.68
------
SHORT-TERM INVESTMENTS.................................................. 6.01*
------
TOTAL INVESTMENTS.................................................... 100.20
LIABILITIES, LESS CASH AND OTHER ASSETS ................................ (0.20)
------
NET ASSETS........................................................... 100.00%
======
- --------------------------------------------------------------------------------
</TABLE>
*The Fund held a long position in U.S. Treasury futures on December 31, 1996
which increased U.S. bond exposure from 28.51% to 32.47% and decreased the
Fund's exposure to Short-Term Investments from 6.01% to 2.05%.
------------------------------------------------------------
40
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Bonds -- 94.19%
U.S. BONDS -- 28.51%
U.S. CORPORATE BONDS -- 4.91%
Asset Securitization Corp. 96-D3
7.210%, due 10/13/26.................................... $ 140,000 $ 142,805
Capital One Bank
6.830%, due 05/17/99 ................................... 200,000 200,923
Chase Manhattan Auto Owner Trust 96C-A4
6.150%, due 03/15/02.................................... 125,000 124,375
Chrysler Financial Corp. MTN
6.500%, due 08/21/97.................................... 165,000 165,784
Ford Credit Auto Lease Trust
6.350%, due 10/15/98.................................... 134,247 134,592
Ford Credit Grantor Trust 95-B
5.900%, due 10/15/00.................................... 65,914 65,986
Ford Motor Co.
7.250%, due 10/01/08.................................... 200,000 201,705
GMAC MTN
6.750%, due 06/10/02.................................... 200,000 200,754
Green Tree Financial 94-2
8.300%, due 05/15/19.................................... 25,000 26,442
Lockheed Martin Corp.
7.700%, due 06/15/08.................................... 125,000 130,854
News America Corp.
7.750%, due 01/20/24.................................... 275,000 262,871
The Money Store 94-A3
5.525%, due 09/15/18.................................... 86,249 84,622
Time Warner Entertainment, Inc.
8.375%, due 03/15/23.................................... 235,000 238,872
Time Warner, Inc.
9.150%, due 02/01/23.................................... 40,000 43,347
-----------
2,023,932
-----------
INTERNATIONAL DOLLAR BONDS -- 1.83%
Korea Development Bank
6.625%, due 11/21/03.................................... 90,000 89,331
Province of Quebec
7.500%, due 07/15/23.................................... 235,000 234,589
Republic of South Africa
9.625%, due 12/15/99.................................... 125,000 132,969
Royal Bank of Scotland
7.375%, due 04/01/06.................................... 300,000 298,987
-----------
755,876
-----------
U.S. GOVERNMENT AGENCIES -- 9.85%
Federal Home Loan Mortgage Corp.
6.520%, due 01/02/02.................................... 300,000 300,885
6.750%, due 05/30/06.................................... 65,000 65,479
7.000%, due 04/15/07.................................... 193,904 190,836
5.800%, due 08/15/19.................................... 90,000 84,067
6.500%, due 05/15/21.................................... 107,708 97,743
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................... 113,402 115,564
9.000%, due 05/01/24.................................... 324,175 346,012
9.500%, due 04/01/25.................................... 31,268 33,652
Federal National Mortgage Association
6.500%, due 03/01/03.................................... 455,000 450,168
6.220%, due 03/13/06.................................... 150,000 145,013
6.500%, due 04/25/08.................................... 110,333 105,251
9.000%, due 08/01/21.................................... 31,246 33,256
8.500%, due 07/01/22.................................... 22,762 23,919
7.500%, due 05/01/25.................................... 385,767 385,647
6.500%, due 02/01/26.................................... 78,160 74,569
6.500%, due 03/01/26.................................... 820,000 782,331
7.000%, due 03/01/26.................................... 180,000 176,119
7.500%, due 12/01/26.................................... 299,101 299,119
Federal National Mortgage
Association Strips
8.000%, due 07/01/24 interest only...................... 116,861 36,012
0.000%, due 07/01/26 principal only..................... 103,393 69,564
Government National Mortgage Association
6.500%, due 03/20/26.................................... 68,926 65,329
Independent National Mortgage Corp. 8.350%, due
06/25/25................................................ 175,000 179,209
-----------
4,059,744
-----------
U.S. GOVERNMENT OBLIGATIONS-- 11.92%
U.S. Treasury Coupon Strips
0.000%, due 05/15/08 principal only..................... 245,000 116,598
U.S. Treasury Notes and Bonds
6.250%, due 10/31/01.................................... 1,660,000 1,661,038
7.000%, due 07/15/06.................................... 940,000 976,719
8.125%, due 05/15/21.................................... 1,860,000 2,157,600
-----------
4,911,955
-----------
Total U.S. Bonds......................................... 11,751,507
-----------
NON-U.S. BONDS -- 65.68%
BELGIUM -- 2.73%
Kingdom of Belgium
8.750%, due 06/25/02.............................. BEF 14,000,000 520,386
9.000%, due 03/28/03.................................... 4,000,000 151,251
7.500%, due 07/29/08.................................... 13,000,000 453,298
-----------
1,124,935
-----------
CANADA -- 7.96%
British Columbia
7.750%, due 06/16/03.............................. CAD 1,050,000 835,993
7.250%, due 09/21/05.................................... 1,290,000 981,193
Government of Canada
4.250%, due 12/01/21(b)................................. 1,820,000 1,465,566
-----------
3,282,752
-----------
DENMARK -- 6.21%
City of Copenhagen
6.250%, due 03/15/01.............................. DKR 2,400,000 424,147
Great Belt
7.000%, due 09/02/03.................................... 10,650,000 1,895,692
Kingdom of Denmark
7.000%, due 11/10/24.................................... 1,500,000 241,062
-----------
2,560,901
-----------
</TABLE>
- --------------------------------------------------------------------------------
41
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
FRANCE -- 7.73%
Eurofima
8.625%, due 09/01/99............................ FRF 5,100,000 $ 1,096,897
Government of France (OAT)
8.500%, due 12/26/12................................ 3,100,000 726,714
8.500%, due 04/25/23................................ 2,400,000 563,218
KFW International Finance
7.750%, due 02/17/98................................ 2,600,000 523,568
Kingdom of Finland
9.000%, due 08/13/03................................ 1,200,000 278,147
-----------
3,188,544
-----------
GERMANY -- 13.23%
Bundesrepublik Deutscheland
6.250%, due 01/04/24............................ DEM 800,000 492,687
European Economic Community
6.500%, due 03/10/00................................ 2,650,000 1,833,901
Kingdom of Norway
6.125%, due 05/05/98................................ 1,040,000 698,125
LKB Baden-Wurt Finance
6.500%, due 09/15/08................................ 1,300,000 866,751
Republic of Ireland
7.250%, due 03/18/03................................ 2,200,000 1,562,455
-----------
5,453,919
-----------
ITALY -- 6.64%
Bayerische Landesbank
10.750%, due 03/01/03........................... ITL 1,000,000,000 771,950
European Investment Bank
12.750%, due 02/15/00............................... 150,000,000 115,546
Landesbank Rheinland
8.250%, due 06/02/98................................ 750,000,000 502,532
LKB Baden-Wurt Finance
10.750%, due 04/14/03............................... 950,000,000 734,915
Republic of Italy (BTP)
9.500%, due 02/01/01................................ 850,000,000 613,867
-----------
2,738,810
-----------
JAPAN -- 5.52%
Asian Development Bank
5.000%, 02/05/03................................ JPY 40,000,000 400,620
Government of Japan No.133
7.300%, due 09/20/00................................ 25,000,000 262,019
Government of Japan No.144
6.000%, due 12/20/01................................ 50,000,000 516,628
Republic of Austria
5.000%, due 01/22/01................................ 50,000,000 490,006
World Bank 5.250%, due 03/20/02...................... 60,000,000 604,484
-----------
2,273,757
-----------
NETHERLANDS -- 7.88%
Government of Nederlands
7.500%, due 11/15/99............................... NLG 1,355,000 $ 858,968
International Nederland Verzekeringen 6.250%, due
12/28/05............................................... 1,800,000 1,062,726
Rabobank
6.750%, due 06/25/03................................... 1,400,000 873,149
Republic of Austria
6.250%, due 02/28/24................................... 825,000 453,165
-----------
3,248,008
-----------
SWEDEN - 1.79%
Kingdom of Sweden
6.000%, due 02/09/05................................SWK 5,200,000 738,022
-----------
UNITED KINGDOM -- 5.99%
Abbey National
8.750%, due 05/24/04................................GBP 350,000 620,721
British Gas PLC
8.125%, due 03/31/03................................... 545,000 940,901
UK Treasury
7.750%, due 09/08/06................................... 45,000 78,291
9.000%, due 10/13/08................................... 260,000 492,589
8.000%, due 09/27/13................................... 190,000 335,439
-----------
2,467,941
-----------
Total Non-U.S. Bonds.................................... 27,077,589
-----------
Total Bonds (Cost $37,402,378).......................... 38,829,096
-----------
Short-Term Investments-- 6.01%
GOVERNMENT OBLIGATIONS -- 0.06%
U.S. Treasury Bills 5.063%, due 05/01/97................ 25,000 24,581
-----------
COMMERCIAL PAPER -- 5.95%
Cincinnati Bell, Inc.
7.250%, 01/02/97....................................... 207,000 206,958
CNA Financial Corp.
6.250%, due 01/23/97................................... 500,000 498,090
Crown Cork & Seal Co.,
5.520%, due 01/10/97................................... 500,000 499,310
PanEnergy Corp.
6.05%, due 01/17/97.................................... 500,000 498,656
Vastar Resources, Inc.
6.020%, due 01/02/97................................... 500,000 499,916
Whirlpool Financial Corp.
6.000%, due 01/03/97................................... 250,000 249,917
-----------
2,452,847
-----------
Total Short-Term Investments
(Cost $2,477,425)...................................... 2,477,428
-----------
Total Investments
(Cost $39,879,803) -- 100.20% (a)...................... 41,306,524
-----------
Liabilities, less cash and other assets -- (0.20%)...... (81,085)
-----------
Net Assets -- 100%...................................... $41,225,439
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
42
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $39,879,803; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $1,660,144
Gross unrealized depreciation................................. (233,423)
----------
Net unrealized appreciation............................... $1,426,721
==========
</TABLE>
(b) Linked to Canada's retail price index. Reset semi-annually.
MTN: Medium term note
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Bond Fund had the following open forward foreign currency contracts
as of December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Australian Dollar.......... 05/30/97 500,000 $ 396,624 $(10,376)
Japanese Yen............... 05/05/97 165,000,000 1,451,551 (35,306)
Spanish Peseta............. 05/30/97 138,000,000 1,058,498 216
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Canadian Dollar............ 05/30/97 2,900,000 2,135,475 32,084
Danish Kroner.............. 05/30/97 11,300,000 1,930,758 536
Dutch Guilder.............. 05/30/97 5,800,000 3,386,583 7,215
French Franc............... 05/30/97 14,000,000 2,717,348 (14,645)
German Mark ............... 05/30/97 5,200,000 3,406,760 842
--------
Total.................. $(19,734)
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Bond Fund had the following open futures contracts as of December
31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE LOSS
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes, 6 con-
tracts................................ March 1997 $645,375 $639,563 $ (5,812)
10 year U.S. Treasury Notes, 5 con-
tracts................................ March 1997 554,063 545,625 (8,438)
30 year U.S. Treasury Bonds, 4 con-
tracts................................ March 1997 460,000 450,500 (9,500)
--------
Total.............................. $(23,750)
========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at December 31, 1996 was $24,581.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $39,879,803) (Note 1)................ $41,306,524
Cash............................................................. 1,186,716
Foreign currency, at value (Cost $79,558)........................ 77,444
Receivables:
Investment securities sold...................................... 1,106,341
Interest........................................................ 1,142,553
Fund shares sold................................................ 6,533
Due from advisor................................................ 20,580
Other assets..................................................... 5,655
-----------
TOTAL ASSETS.................................................. 44,852,346
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 2,821,281
Fund shares redeemed............................................ 645,334
Variation margin (Note 5)....................................... 12,312
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 19,734
Accrued expenses................................................ 128,246
-----------
TOTAL LIABILITIES............................................. 3,626,907
-----------
NET ASSETS........................................................ $41,225,439
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $41,356,690
Accumulated distributions in excess of net investment income..... (1,448,556)
Accumulated distributions in excess of net realized gain......... (63,232)
Net unrealized appreciation...................................... 1,380,537
-----------
NET ASSETS.................................................... $41,225,439
===========
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $37,704,006 and 3,937,187 shares issued
and outstanding) (Note 7)....................................... $ 9.58
===========
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $3,521,433 and 368,181 shares issued and
outstanding) (Note 7)........................................... $ 9.56
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.......................................................... $1,352,589
----------
TOTAL INCOME................................................... 1,352,589
----------
EXPENSES:
Advisory (Note 2)................................................. 159,408
Accounting........................................................ 62,618
Professional...................................................... 31,464
Transfer agent.................................................... 24,856
Custodian......................................................... 21,192
Registration...................................................... 20,504
Administration.................................................... 18,520
Distribution (Note 6)............................................. 9,380
Other............................................................. 21,839
----------
TOTAL EXPENSES................................................. 369,781
Expenses deferred and reimbursed by Advisor (Note 2)........... (168,938)
----------
NET EXPENSES................................................... 200,843
----------
NET INVESTMENT INCOME.......................................... 1,151,746
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 723,433
Futures contracts................................................ 77,372
Foreign currency transactions.................................... (126,037)
----------
Net realized gain............................................... 674,768
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 935,964
Futures contracts................................................ (21,891)
Forward contracts................................................ 123,239
Translation of other assets and liabilities denominated in for-
eign currency................................................... 12,863
----------
Change in net unrealized appreciation or depreciation........... 1,050,175
----------
Net realized and unrealized gain.................................. 1,724,943
----------
Net increase in net assets resulting from operations.............. $2,876,689
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1996 JUNE
(UNAUDITED) 30, 1996
----------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income.......................... $ 1,151,746 $ 2,351,810
Net realized gain.............................. 674,768 4,022,906
Change in net unrealized appreciation or depre-
ciation ...................................... 1,050,175 (1,992,544)
----------- -----------
Net increase in net assets resulting from oper-
ations........................................ 2,876,689 4,382,172
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income....... (2,204,689) (3,447,154)
Distributions in excess of net investment in-
come.......................................... (1,615,023) (1,534,232)
Distributions from net realized gain........... (769,789) (355,057)
----------- -----------
Total distributions to shareholders*........... (4,589,501) (5,336,443)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................... 4,488,660 14,584,928
Shares issued on reinvestment of distributions. 3,667,961 3,954,345
Shares redeemed................................ (9,937,375) (24,728,515)
----------- -----------
Net (decrease) in net assets resulting from
capital share transactions (Note 7)........... (1,780,754) (6,189,242)
----------- -----------
TOTAL (DECREASE) IN NET ASSETS.............. (3,493,566) (7,143,513)
----------- -----------
NET ASSETS:
Beginning of period............................ 44,719,005 51,862,518
----------- -----------
End of period (including accumulated undistrib-
uted net investment income of ($1,448,556) and
$1,052,943, respectively)..................... $41,225,439 $44,719,005
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net invest-
ment income
Brinson Fund Class............................ (3,503,032) (4,734,956)
SwissKey Fund Class........................... (316,680) (246,430)
Distributions from net realized gain
Brinson Fund Class............................ (704,236) (338,786)
SwissKey Fund Class........................... (65,553) (16,271)
----------- -----------
Total distributions to shareholders............ (4,589,501) (5,336,443)
----------- -----------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
46
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR YEAR JULY 30, 1993*
DECEMBER 31, 1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- -------
Income (loss) from in-
vestment operations:
Net investment income
..................... 0.93 0.84 0.50 0.45
Net realized and
unrealized gain
(loss)............... (0.24) 0.31 0.58 (0.52)
------- ------- ------- -------
Total income (loss)
from investment op-
erations........... 0.69 1.15 1.08 (0.07)
------- ------- ------- -------
Less distributions:
Distributions from and
in excess of net in-
vestment income...... (0.96) (1.40) (0.24) (0.28)
Distributions from and
in excess of net re-
alized gain.......... (0.19) (0.10) -- (0.10)
------- ------- ------- -------
Total distributions. (1.15) (1.50) (0.24) (0.38)
------- ------- ------- -------
Net asset value, end of
period................. $ 9.58 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= =======
Total return (non-
annualized)............ 7.03% 11.50% 11.34% (0.79%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $37,704 $41,066 $51,863 $36,849
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.69%** 1.65% 1.43% 1.78%**
After expense reim-
bursement............ 0.90%** 0.90% 0.90% 0.90%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 4.66%** 4.98% 5.53% 4.03%**
After expense reim-
bursement............ 5.45%** 5.73% 6.06% 4.91%**
Portfolio turnover
rate.................. 107% 184% 199% 189%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
47
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $10.02 $10.56
------ ------
Income from investment operations:
Net investment income....................... 0.91 0.78
Net realized and unrealized gain (loss)..... (0.24) 0.15
------ ------
Total income from investment operations... 0.67 0.93
------ ------
Less distributions:
Distributions from and in excess of net in-
vestment income............................ (0.94) (1.37)
Distributions from net realized gain........ (0.19) (0.10)
------ ------
Total distributions....................... (1.13) (1.47)
------ ------
Net asset value, end of period................ $ 9.56 $10.02
====== ======
Total return (non-annualized)................. 6.76% 9.17%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $3,521 $3,653
Ratio of expenses to average net assets:
Before expense reimbursement................ 2.18%** 2.14%**
After expense reimbursement................. 1.39%** 1.39%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 4.17%** 4.49%**
After expense reimbursement................. 4.96%** 5.24%**
Portfolio turnover rate...................... 107% 184%
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding,
Brinson Fund Class and SwissKey Fund Class. There are an unlimited number of
shares of each class with par value of $0.001 authorized. Each share represents
an identical interest in the investments of the Funds and has the same rights.
The Trust entered into an Agreement and Plan of Reorganization dated June 16,
1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995,
pursuant to the Plan of Reorganization, the Trust acquired all of the net
assets of the SBC World Growth Fund of the SwissKey Funds, which totalled
$25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange
solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund.
The SwissKey Fund shares were then distributed to shareholders of the SBC World
Growth Fund according to their respective interests, and the SBC World Growth
Fund was dissolved. The total net assets of the Global Equity Fund were
$47,088,147 immediately after the acquisition.
The following is a summary of significant accounting policies consistently
followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a
"Fund," collectively the "Funds") in the preparation of their financial
statements.
A. INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Investments in affiliated
investment companies are valued each day based on the closing net asset value
of the fund. U.S. equity securities traded over the counter are priced at the
most recent bid price. Fixed income/debt securities are valued by using market
quotations or independent services that use prices provided by market makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics. Futures contracts are valued at the
settlement price established each day on the exchange on which they are traded.
Forward foreign currency contracts are valued daily using the mean between the
bid and the asked forward points added to the current exchange rate. Short-term
obligations with a maturity of 60 days or less are valued at amortized cost,
which approximates market value.
B. FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts, income receipts and expense accruals are translated at the
prevailing exchange rate on the date of each transaction. Realized and
unrealized foreign exchange gains or losses on investments are included as a
component of net realized and unrealized gain or loss in the statement of
operations.
C. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a
trade date basis. Gains and losses on securities sold are determined on an
identified cost basis.
D. INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 1996. Therefore, no federal income tax provision was required.
- --------------------------------------------------------------------------------
49
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
F. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per
share between the classes are due to distribution expenses.
G. INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by
the Fund will be borne on a pro rata basis by each of the classes, except that
the Brinson Fund Class shares will not incur any of the distribution expenses.
H. USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, the Funds pay the Advisor a monthly fee based on each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates, for the six
months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
FEES
ADVISORY BRINSON CLASS SWISSKEY CLASS ADVISORY DEFERRED AND/OR
FEE EXPENSE CAP EXPENSE CAP FEES REIMBURSED
-------- ------------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.75% $2,019,630 $ --
Global Equity Fund...... 0.80 1.00 1.76 276,132 216,697
Global Bond Fund........ 0.75 0.90 1.39 159,408 168,938
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees were $5,888, $2,208 and $2,208 for the Global
Fund, Global Equity Fund and Global Bond Fund, respectively.
At December 31, 1996, the Global Fund was invested in shares of certain
affiliated investment companies also sponsored by Brinson Partners, Inc. These
investments are listed in the schedule of investments and represent 9.43% of
the Fund's total net assets. At December 31, 1996, net unrealized appreciation
on these investments was $5,160,007.
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1996, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $408,770,372 $397,827,575
Global Equity Fund.................................... 21,925,975 10,301,042
Global Bond Fund...................................... 41,276,806 44,423,362
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation
- --------------------------------------------------------------------------------
50
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
strategies. A forward foreign currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. Risks
associated with such contracts include movement in the value of the foreign
currency relative to the U.S. dollar and the ability of the counterparty to
perform. The unrealized gain, if any, represents the credit risk to the Fund on
a forward foreign currency contract. Fluctuations in the value of forward
foreign currency contracts are recorded daily as net unrealized gains or
losses. The Funds realize a gain or loss upon settlement of the contracts. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts. The counterparty to all forward foreign currency
contracts, at and for the six months ended December 31, 1996, was the Funds'
custodian.
5. FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6. DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan governs payments made for
the expenses incurred in the promotion and distribution of the SwissKey Fund
Class of shares. Annual fees under the Plan, which include a 0.25% service fee,
total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey
Fund Class of the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ----------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class................ 4,583,763 $57,951,937 7,972,013 $ 95,544,500
SwissKey Fund Class............... 211,635 2,646,592 1,155,619 13,939,062
--------- ----------- --------- ------------
Total Sales.................... 4,795,398 $60,598,529 9,127,632 $109,483,562
========= =========== ========= ============
Dividend Reinvestment:
Brinson Fund Class................ 4,022,259 $48,025,771 2,632,284 $ 30,918,724
SwissKey Fund Class............... 130,547 1,554,814 20,488 243,591
--------- ----------- --------- ------------
Total Dividend Reinvestment.... 4,152,806 $49,580,585 2,652,772 $ 31,162,315
========= =========== ========= ============
Redemptions:
Brinson Fund Class................ 5,171,939 $64,203,767 5,330,521 $ 63,966,318
SwissKey Fund Class............... 54,093 683,312 24,583 296,145
--------- ----------- --------- ------------
Total Redemptions.............. 5,226,032 $64,887,079 5,355,104 $ 64,262,463
========= =========== ========= ============
</TABLE>
- --------------------------------------------------------------------------------
51
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
-------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............... 837,664 $ 9,913,092 285,419 $ 3,205,567
SwissKey Fund Class.............. 808,570 9,474,311 746,285 8,357,646
--------- ----------- --------- -----------
Total Sales................... 1,646,234 $19,387,403 1,031,704 $11,563,213
========= =========== ========= ===========
Shares issued in acquisition of
SBC World Growth Fund:
Brinson Fund Class............... -- -- -- --
SwissKey Fund Class.............. -- $ -- 2,474,177 $25,670,575
--------- ----------- --------- -----------
Total......................... -- $ -- 2,474,177 $25,670,575
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Fund Class............... 288,818 $ 3,237,655 160,063 $ 1,694,631
SwissKey Fund Class.............. 272,630 3,053,458 155,720 1,641,689
--------- ----------- --------- -----------
Total Dividend Reinvestment... 561,448 $ 6,291,113 315,783 $ 3,336,320
========= =========== ========= ===========
Redemptions:
Brinson Fund Class............... 77,459 $ 944,496 186,600 $ 2,055,092
SwissKey Fund Class.............. 212,095 2,514,803 523,404 5,704,953
--------- ----------- --------- -----------
Total Redemptions............. 289,554 $ 3,459,299 710,004 $ 7,760,045
========= =========== ========= ===========
<CAPTION>
GLOBAL BOND FUND
-------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............... 402,651 $ 4,150,385 1,094,889 $10,985,420
SwissKey Fund Class.............. 32,865 338,275 345,211 3,599,508
--------- ----------- --------- -----------
Total Sales................... 435,516 $ 4,488,660 1,440,100 $14,584,928
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Fund Class............... 348,609 $ 3,318,757 374,786 $ 3,722,031
SwissKey Fund Class.............. 36,719 349,204 23,414 232,314
--------- ----------- --------- -----------
Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345
========= =========== ========= ===========
Redemptions:
Brinson Fund Class............... 905,614 $ 9,248,017 2,369,683 $24,686,522
SwissKey Fund Class.............. 65,831 689,358 4,197 41,993
--------- ----------- --------- -----------
Total Redemptions............. 971,445 $ 9,937,375 2,373,880 $24,728,515
========= =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
52
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
[Logo of SwissKey Funds]
10 East 50th Street . New York, New York 10022 . Tel: (800) SWISSKEY .
http://networth.galt.com/swisskey
<PAGE>
LOGO
SWISSKEY U.S. BALANCED FUND
SWISSKEY U.S. EQUITY FUND
SWISSKEY U.S. BOND FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
Your Key to Performance
-----------------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
LOGO
TRUSTEES
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
OFFICERS
Frank K. Reilly, CFA Carolyn M. Burke, CPA
Chairman of the Board Assistant Secretary
E. Thomas McFarlan Catherine E. Macrae
President and Treasurer Assistant Secretary
Thomas J. Digenan, CFA, CPA Debra L. Nichols
Assistant Treasurer Assistant Secretary
Bruce G. Leto
Secretary
------------------------------------------------------------
1
<PAGE>
THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
LOGO
In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their
institutional investment management organizations into a single investment
management business operating as Brinson Partners, Inc. in North America and
SBC Brinson in its other world-wide locations. We are a global investment
management organization with over $72 billion in institutional assets under
discretionary active management. We are also the investment advisor for SBC
Private Banking mutual fund assets which total $47 billion. The firm manages
investment portfolios for corporations, public funds, endowments, foundations,
central banks and other institutional investors located throughout the world.
Our organization employs over 590 people in offices in Chicago, Basel,
Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo
and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients and has offered fully integrated global portfolios since then.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is tailored to
specific client objectives and focused upon both risk and return considerations
in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally
developed valuation systems and seasoned judgment. Our independent team
approach allows for rapid responses to market changes, while providing each
client with the benefit of our best talent and the flexibility to customize
portfolios to meet unique requirements.
------------------------------------------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LOGO
Shareholder Letter............................................................ 4
U.S. Economic and Market Highlights........................................... 5
U.S. Balanced Fund............................................................ 6
Schedule of Investments...................................................... 9
Financial Statements.........................................................12
Financial Highlights.........................................................15
U.S. Equity Fund..............................................................17
Schedule of Investments......................................................20
Financial Statements.........................................................22
Financial Highlights.........................................................25
U.S. Bond Fund................................................................27
Schedule of Investments......................................................30
Financial Statements.........................................................31
Financial Highlights.........................................................34
The SwissKey Funds--Notes to Financial Statements.............................36
------------------------------------------------------------
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
LOGO
February 19, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the December 31, 1996 Semi-Annual Report for the U.S. Balanced Fund,
U.S. Equity Fund and U.S. Bond Fund. This Report presents our current U.S.
economic and market outlook, as well as the Funds' recent investment strategies
and performance. To summarize this information:
U.S. Balanced Fund
For the period from July 31, 1995 to December 31, 1996, the Fund has provided
an annualized total return of 13.84%. For the second half of 1996, the Fund
returned 7.75%.
The Fund's market allocation has been characterized by an underweight in the
U.S. equity market and an overweight to the U.S. bond market where return and
risk characteristics are presently more attractive.
U.S. Equity Fund
For the period from July 31, 1995 to December 31, 1996, the Fund provided an
annualized total return of 27.78%. The Fund returned 12.63% in the second half
of 1996.
Fund strategy presently maintains a modest overweight in stocks with high book-
to-price, earnings variability and financial leverage characteristics. In
addition, the Fund is underweighted the foreign earnings exposure embedded in
U.S. corporate earnings, particularly relative to the S&P 500. Current industry
positions include relative overweights in capital goods, banks, transportation,
insurance, healthcare and consumer non-durables issues. The Fund remains
underweighted in energy, technology, utility, chemicals and retail/apparel
stocks.
U.S. Bond Fund
For the period from August 31, 1995 to December 31, 1996, the Fund returned
6.39%. For the second half of 1996, the Fund returned 5.19%.
Fund strategy currently maintains a duration target of 1.3 times that of the
benchmark.
We look forward to the challenges ahead and, as always, welcome your comments
and suggestions. Please visit our website at http://networth.galt.com/swisskey.
Sincerely,
/s/ Raoul Weil /s/ Raymond Simon
Raoul Weil Raymond Simon
Managing Director Executive Director
PRIVATE LOGO BANKING PRIVATE LOGO BANKING
-------------------------------------------------------------
4
<PAGE>
U.S. ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
LOGO
Real GDP grew 2.5% in 1996, consisting of quarterly growth rates alternating
between strong and modest. This was consistent with our view that the economy
will continue to produce moderate growth, although with typical fluctuations
from period to period. Overall, growth is at a level approximating the
economy's long-run potential.
While the bond market has been adjusting yields, often by substantial amounts,
on the slightest bit of news, inflation has remained consistently moderate.
Even though oil prices rose to $25 per barrel last year, there was little
impact discernible on intermediate or final goods prices. While consumer price
inflation has been running between 2.25% and 3.25% since 1991, other measures
of inflation, such as the personal consumption deflator and the core CPI, have
shown even less price pressure. The Federal Reserve continues to act as though
operating with a de facto inflation target, rather than attempting to satisfy
non-inflation aims.
With November's election leaving the balance of power generally unchanged,
fiscal policy is reasonably likely to remain geared toward deficit control.
While any future economic weakness would offset the relatively strong tax
revenues at present, lawmakers realize that many voters are increasingly
reluctant to pay for programs with benefits which do not clearly exceed the
costs.
U.S. ENVIRONMENT
MAJOR MARKETS
One Year Ended December 31, 1996
[BAR CHART APPEARS HERE]
Total Return
U.S. Cash Equivalents 5.16
U.S. Bonds 3.63
U.S. Equities 21.21
SALOMON U.S. TREASURY BENCHMARK RETURNS
One Year Ended December 31, 1996
[BAR CHART APPEARS HERE]
Maturity (Years) Total Return
- ---------------- ------------
1 5.68
2 4.80
3 4.21
5 2.43
10 0.07
30 -4.44
TOP TEN INDUSTRY RETURNS
RELATIVE TO S&P 500
One Year Ended December 31, 1996
[BAR CHART APPEARS HERE]
Banks 9.28
Thrift Institutions 9.57
Apparel, Textiles 10.77
Domestic Petroleum Reserves 11.15
Business Machines 11.35
Aerospace 13.96
Miscellaneous 14.82
Misc. Finance 16.11
Cosmetics 25.93
Oil Service 42.7
Source: BARRA
BOTTOM TEN INDUSTRY RETURNS RELATIVE TO S&P 500
One Year Ended December 31, 1996
[BAR CHART APPEARS HERE]
Coal & Uranium -40.81
Trucking, Freight -34.51
Iron & Steel -24.98
Telephone, Telegraph -19.9
Electric Utilities -19.17
Precious Metals -17.46
Forest Products -16.63
Pollution Control -16.31
Water Transport -13.76
Media -13.57
Source: BARRA
------------------------------------------------------------
5
<PAGE>
U.S. BALANCED FUND
- --------------------------------------------------------------------------------
LOGO
The U.S. Balanced Fund is an actively managed portfolio that applies our value-
based asset allocation process to U.S. stocks, bonds and cash. This Fund's
investment strategy is developed in the context of our global asset allocation
process and is based on analysis of long-term economic and market conditions.
The SwissKey U.S. Balanced Fund has provided an annualized return of 13.84%
since its inception on July 31, 1995. This compares with the corresponding
17.04% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the
year ended December 31, 1996, the Fund produced a total return of 10.86%
compared to the benchmark return of 14.90%. In the second half of 1996, the
Fund returned 7.75% while the benchmark returned 8.25%. Security selection
within all the asset classes contributed positively to relative performance,
while the equity underweight and bond overweight adversely affected relative
performance.
Although inflation was relatively stable throughout 1996, the bond market
experienced a year of rising yields. Coming out of 1995, yields were relatively
low, but they climbed rather strongly through June. The moderately strong
economy in the first half of the year, coupled with higher oil prices, caused
concern that both real rates and inflation may rise. These fears diminished
somewhat in the second half, allowing rates to decline. However, yields failed
to drop to levels seen at the start of the year, resulting in aggregate bond
market performance that was positive but inferior to cash returns.
The equity market turned in another banner year, with broad market indices
showing returns of more than 20%. However, there were large divergences in
relative performance. Small stock performance was outpaced by the returns to
large capitalization stocks by approximately 500 basis points.
After a few weeks of strength in January and early February, the equity market
was flat until mid-September. However, as interest rates fell from that point
to the start of December, equities again produced extremely good returns. The
S&P 500 Index rose roughly 100 points in these two and a half months, from
about 660 to 760. The equity market appears increasingly willing to extrapolate
recent strong earnings growth and low volatility indefinitely into the future.
At year-end, equity price gains had driven the market to an overpricing of
around 25%.
Looking forward, return expectations in stocks appear insufficient compensation
for the risks. Therefore, we have maintained a reduced exposure in the
allocation to equities, with an offsetting increase in the allocation to bonds.
------------------------------------------------------------
6
<PAGE>
U.S. BALANCED FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 7/31/95*
12/31/96 12/31/96 to 12/31/96
- ----------------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY U.S. BALANCED FUND 7.75% 10.86% 13.84%
- ----------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 8.25 14.90 17.04
- ----------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey U.S. Balanced Fund.
**An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 1996. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future results.
Share price and return will vary with market conditions; investors may realize a
gain or loss upon redemption.
SWISSKEY U.S. BALANCED FUND
VS. U.S. BALANCED MUTUAL FUND INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
SwissKey U.S. Balanced Fund U.S. Balanced Mutual Fund Index
--------------------------- -------------------------------
7/31/95 $10,000 $10,000
9/30/95 $10,325 $10,387
12/31/95 $10,841 $10,876
3/31/96 $11,030 $11,203
6/30/96 $11,154 $11,544
9/30/96 $11,412 $11,839
12/31/96 $12,018 $12,496
7/31/95 = $10,000 Data Through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
------------------------------------------------------------
7
<PAGE>
U.S. BALANCED FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals.............................................................. 0.29%
Housing/Paper.......................................................... 1.77
Metals................................................................. 0.23
-----
2.29
Capital Investment
Capital Goods.......................................................... 3.91
Technology............................................................. 2.53
-----
6.44
Consumer
Autos/Durables......................................................... 0.11
Discretionary.......................................................... 2.84
Health: Drugs.......................................................... 3.51
Health: Non-Drugs...................................................... 1.74
Non-Durables........................................................... 4.90
Retail/Apparel......................................................... 1.79
-----
14.89
Energy.................................................................. 2.16
Financial
Banks.................................................................. 4.39
Non-Banks.............................................................. 4.01
-----
8.40
</TABLE>
<TABLE>
<S> <C>
Services................................................................ 2.78%
Transportation.......................................................... 2.70
Utilities............................................................... 1.34
Miscellaneous........................................................... 1.13
------
Total U.S. Equities.................................................. 42.13*
------
U.S. BONDS
Corporate Bonds
Asset-Backed........................................................... 3.16
CMO.................................................................... 0.54
Consumer............................................................... 1.51
Financial.............................................................. 1.65
Industrial............................................................. 0.86
Telecommunications..................................................... 1.62
------
9.34
International Dollar Bonds.............................................. 6.04
U.S. Government Agencies................................................ 16.96
U.S. Government Obligations............................................. 21.03
------
Total U.S. Bonds..................................................... 53.37*
------
SHORT-TERM INVESTMENTS.................................................. 10.20*
------
TOTAL INVESTMENTS.................................................... 105.70
LIABILITIES, LESS
CASH AND OTHER ASSETS.................................................. (5.70)
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
*The Fund held a long position in U.S. Treasury futures on December 31, 1996
which increased U.S. bond exposure from 53.37% to 61.65%. The Fund also held a
short position in stock index futures which reduced U.S. equity exposure from
42.13% to 33.99%. These two adjustments result in a net decrease in the Fund's
exposure to Short-Term Investments from 10.20% to 10.06%.
ASSET ALLOCATION
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
CURRENT
BENCHMARK STRATEGY
- ------------------------------------
<S> <C> <C>
U.S. Equity 65% 35%
U.S. Bonds 35 65
Cash Equivalents 0 0
- ------------------------------------
100% 100%
</TABLE>
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
- ---------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 2.09%
2. Xerox Corp. 1.63
3. Lockheed Martin Corp. 1.62
4. Burlington Northern Santa Fe 1.61
5. Corning, Inc. 1.52
6. Citicorp 1.46
7. Philip Morris Companies, Inc. 1.45
8. Aon Corp. 1.36
9. Goodyear Tire & Rubber Co. 1.24
10. Enron Corp. 1.12
- ---------------------------------------------
</TABLE>
------------------------------------------------------------
8
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
U.S. Equities -- 42.13%
Aetna Life & Casualty Co................................... 24,900 $ 1,992,000
Allergan, Inc.............................................. 40,400 1,439,250
Allstate Corp.............................................. 22,300 1,290,613
Alza Corp. (b)............................................. 39,400 1,019,475
Aon Corp................................................... 52,900 3,286,412
Automatic Data Processing, Inc............................. 39,700 1,702,138
Avon Products, Inc......................................... 26,700 1,525,237
Bard (C.R.), Inc........................................... 24,400 683,200
Beckman Instruments, Inc................................... 15,800 606,325
Birmingham Steel Corp...................................... 15,900 302,100
Boston Technology, Inc. (b)................................ 15,800 454,250
Brinker International, Inc. (b)............................ 14,200 227,200
Burlington Northern Santa Fe............................... 45,100 3,895,513
Centerior Energy Co........................................ 33,200 356,900
Chase Manhattan Corp....................................... 56,900 5,078,325
Choice Hotels International, Inc. (b)...................... 25,800 454,725
CIGNA Corp................................................. 19,600 2,677,850
Circuit City Stores, Inc................................... 6,900 207,862
Citicorp................................................... 34,400 3,543,200
CMS Energy Corp............................................ 43,100 1,449,238
Coca-Cola Enterprises, Inc................................. 16,100 780,850
Comerica, Inc.............................................. 10,800 565,650
Comverse Technology, Inc. (b).............................. 7,300 276,031
Corning, Inc............................................... 79,500 3,676,875
CPC International, Inc..................................... 9,700 751,750
CVS Corp................................................... 31,300 1,295,037
Dial Corp.................................................. 38,700 570,825
EMC Corp./Mass. (b)........................................ 53,800 1,782,125
Enron Corp................................................. 62,800 2,708,250
Federal Express Corp. (b).................................. 58,800 2,616,600
Federated Department Stores (b)............................ 23,000 784,875
FileNet Corp. (b).......................................... 6,100 195,200
First American Corp.-Tenn.................................. 2,600 149,825
First Data Corp............................................ 33,258 1,213,917
First of America Bank Corp................................. 5,100 306,638
Foodstar, Inc. (b)......................................... 12,379 307,928
Ford Motor Co.............................................. 23,000 733,125
Forest Laboratories, Inc. (b).............................. 26,800 877,700
Gannett Co., Inc........................................... 26,300 1,969,212
General Instrument Corp. (b)............................... 78,300 1,693,238
Genzyme Corp. (b).......................................... 15,900 345,825
Geon Co.................................................... 5,800 113,825
Goodyear Tire & Rubber Co.................................. 58,400 3,000,300
Harnischfeger Industries, Inc.............................. 17,200 827,750
Health Care and Retirement Corp. (b)....................... 29,150 834,419
Interpublic Group of Companies, Inc........................ 19,600 931,000
James River Corp. of Virginia.............................. 22,700 751,937
Kimberly-Clark Corp........................................ 18,900 1,800,225
Kroger Co. (b)............................................. 16,600 771,900
Lockheed Martin Corp....................................... 42,971 3,931,847
Lyondell Petrochemical Co.................................. 43,100 948,200
Manor Care, Inc............................................ 25,800 696,600
Martin Marietta Materials, Inc............................. 11,936 277,512
Masco Corp................................................. 25,400 914,400
Mattel, Inc................................................ 93,950 2,607,112
Nabisco Holdings Corp. Class A............................. 28,600 1,111,825
National Semiconductor Corp. (b)........................... 15,900 387,563
Nextel Communications, Inc. Class A (b).................... 39,700 518,581
Old Republic International Corp............................ 18,750 501,562
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Peco Energy Co.......................................... 24,500 $ 618,625
Pentair, Inc............................................ 18,500 596,625
Pharmacia & Upjohn, Inc................................. 50,300 1,993,138
Philip Morris Companies, Inc............................ 31,200 3,513,900
Rhone-Poulenc Rorer, Inc................................ 13,400 1,046,875
RJR Nabisco Convertible Preferred "C"................... 128,300 866,025
Schering Plough Corp.................................... 34,600 2,240,350
Seagate Technology, Inc. (b)............................ 10,600 418,700
Timken Co............................................... 16,600 761,525
Tyson Foods, Inc. Class A............................... 47,300 1,620,025
Ultramar Diamond Shamrock Corp.......................... 44,790 1,416,484
US Bancorp.............................................. 24,000 1,078,500
USF&G Corp.............................................. 18,300 382,012
Vencor, Inc. (b)........................................ 20,700 654,637
Viad Corp............................................... 38,700 638,550
Westvaco Corp........................................... 9,450 271,688
Whitman Corp............................................ 1,700 38,887
WMX Technologies, Inc................................... 64,000 2,088,000
Xerox Corp.............................................. 74,900 3,941,613
York International Corp................................. 16,200 905,175
360 Communications Co. (b).............................. 13,700 316,812
-----------
Total U.S. Equities (Cost $80,838,984).................. 102,127,993
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 53.37%
U.S. CORPORATE BONDS -- 9.34%
AirTouch Communications 7.500%, due 07/15/06............ $2,000,000 $ 2,059,328
American Express Credit Account Master Trust 96-1A
6.800%, due 12/15/03................................... 1,280,000 1,300,250
BellSouth Corp. 0.000%, due 12/15/15.................... 3,175,000 704,844
Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,009,232
Chase Manhattan Auto Owner Trust
96C-4A 6.150%, due 03/15/02............................ 1,360,000 1,353,200
Chase Manhattan Credit Card Master Trust 96-4A 6.730%,
due 02/15/03........................................... 2,000,000 2,027,700
Chrysler Financial Corp. MTN 6.500%, due 08/21/97....... 1,000,000 1,004,753
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
09/25/98............................................... 2,000,000 2,005,380
Ford Motor Credit Corp. MTN 5.370%, due 09/08/98........ 945,000 933,695
GE Capital Mtg. Services, Inc. 94-9A 6.500%, due
02/25/24............................................... 1,560,557 1,309,432
GMAC MTN 6.750%, due 06/10/02........................... 1,000,000 1,003,768
Lockheed Martin Corp. 7.700%, due 06/15/08.............. 2,000,000 2,093,670
News America Corp. 7.750%, due 01/20/24................. 1,000,000 955,896
Telecommunications, Inc. 9.800%, due 02/01/12........... 2,100,000 2,274,647
Time Warner Entertainment, Inc. 8.375%,
due 03/15/23........................................... 1,125,000 1,143,537
Time Warner, Inc. 9.150%, due 02/01/23.................. 425,000 460,563
-----------
22,639,895
-----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
INTERNATIONAL DOLLAR BONDS--6.04%
BCH Cayman Islands Ltd. 7.700%, due 07/15/06........... $ 2,100,000 $ 2,161,226
International Bank for Reconstruction & Development
6.375%, due 07/21/05.................................. 1,500,000 1,479,513
LKB 8.125%, due 01/27/00............................... 1,780,000 1,870,527
Petroliam Nasional 7.125%, due 08/15/05................ 1,500,000 1,512,779
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%,
due 03/15/14.......................................... 1,735,000 1,763,988
Republic of Italy 6.875%, due 09/27/23................. 1,500,000 1,426,980
S.E. Banken 144-A 6.625%, due 03/29/49................. 2,000,000 1,970,000
Southern Investments UK 6.800%, due 12/01/06........... 930,000 910,310
Swedbank FRN 7.500%, due 11/29/49...................... 1,500,000 1,535,625
-----------
14,630,948
-----------
U.S. GOVERNMENT AGENCIES--16.96%
Federal Home Loan Mortgage Corp. 6.520%, due 01/02/02.. 3,500,000 3,510,329
6.500%, due 05/15/21.................................. 1,192,691 1,082,343
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................. 872,323 888,952
9.000%, due 03/01/24.................................. 423,904 452,458
9.500%, due 04/01/25.................................. 1,375,782 1,480,685
Federal National Mortgage Association
6.500%, due 03/01/03.................................. 2,560,000 2,532,813
8.000%, due 12/18/11.................................. 1,000,000 1,033,750
7.500%, due 05/01/25.................................. 1,477,313 1,476,852
6.500%, due 03/01/26.................................. 9,864,563 9,411,414
7.000%, due 03/01/26.................................. 1,000,000 978,438
7.500%, due 12/01/26.................................. 2,632,083 2,632,241
Federal National Mortgage Association Strip
8.000%, due 07/01/24 interest only.................... 1,096,078 337,767
0.000%, due 07/01/26 principal only................... 994,546 669,141
Government National Mortgage Association
11.000%, due 09/15/15................................. 345,360 385,723
8.000%, due 08/15/22.................................. 1,004,798 1,032,610
7.000%, due 06/15/23.................................. 419,966 410,911
7.000%, due 07/15/23.................................. 415,773 406,808
7.000%, due 09/15/23.................................. 95,784 93,718
9.000%, due 07/15/24.................................. 164,420 173,258
8.500%, due 11/15/24.................................. 180,521 186,952
8.500%, due 01/15/25.................................. 374,518 387,860
9.000%, due 05/15/25.................................. 478,039 503,734
7.500%, due 06/15/25.................................. 2,097,195 2,099,607
8.000%, due 02/15/26.................................. 2,329,109 2,393,579
6.500%, due 03/20/26.................................. 1,486,831 1,409,237
8.000%, due 09/15/26.................................. 4,231,054 4,315,675
Independent National Mortgage Corp. 8.350%, due
06/25/25.............................................. 800,000 819,240
-----------
41,106,095
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- ------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--21.03%
U.S. Treasury Coupon Strip 0.000%, due 05/15/08
principal only...................................... $ 9,305,000 $ 4,428,343
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98................................ 2,105,000 2,089,213
6.250%, due 10/31/01................................ 10,115,000 10,121,322
7.000%, due 07/15/06................................ 15,230,000 15,824,929
8.125%, due 05/15/21................................ 15,965,000 18,519,400
------------
50,983,207
------------
Total U.S. Bonds (Cost $129,757,543)................. 129,360,145
------------
SHORT-TERM INVESTMENTS--10.20%
U.S. GOVERNMENT OBLIGATIONS--0.44%
U.S. Treasury Bills 5.063%, due 05/01/97............. 1,085,000 1,066,816
------------
COMMERCIAL PAPER--9.76%
Burlington Northern Santa Fe 5.650%, due 01/17/97.... 1,000,000 997,489
Case Credit Corp.
5.510%, due 01/07/97................................ 1,000,000 999,082
5.600%, due 01/09/97................................ 1,000,000 998,755
Cincinnati Bell, Inc. 7.250%, due 01/02/97........... 5,922,000 5,920,807
CNA Financial Corp. 6.250%, due 01/23/97............. 1,000,000 996,181
Crown Cork & Seal Co., Inc.
5.580%, due 01/29/97................................ 2,500,000 2,489,150
5.580%, due 01/31/97................................ 2,000,000 1,990,700
PanEnergy Corp. 6.050%, due 01/17/97................. 1,500,000 1,495,967
Rite Aid Corp.
5.650%, due 01/06/97................................ 1,000,000 999,215
5.600%, due 01/21/97................................ 2,300,000 2,292,844
Tyson Foods, Inc. 5.750%, due 01/09/97............... 989,000 987,736
US West Capital Funding Inc. 5.600%, due 02/12/97.... 1,500,000 1,490,200
Vastar Resources, Inc. 6.020%, due 01/02/97.......... 1,000,000 999,833
Whirlpool Financial Corp. 6.000%, due 01/03/97....... 1,000,000 999,667
------------
23,657,626
------------
Total Short-Term Investments (Cost $24,724,389)...... 24,724,442
------------
Total Investments
(Cost $235,320,916)--105.70% (a).................... 256,212,580
------------
Liabilities, less cash and other assets--(5.70%)..... (13,806,437)
------------
Net Assets--100%..................................... $242,406,143
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $235,320,916; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $23,263,277
Gross unrealized depreciation................................ (2,371,613)
-----------
Net unrealized appreciation................................ $20,891,664
===========
</TABLE>
(b) Non-income producing security
MTN: Medium term note
FUTURES CONTRACTS (NOTE 4)
The U.S. Balanced Fund had the following open futures contracts as of December
31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST/PROCEEDS VALUE LOSS
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST RATE FUTURES BUY
CONTRACTS
5 Year U.S. Treasury
Note, 55 contracts...... March 1997 $ 5,916,531 $ 5,862,656 $ (53,875)
10 Year U.S. Treasury
Note, 89 contracts...... March 1997 9,861,375 9,712,125 (149,250)
30 Year U.S. Treasury
Bond, 40 contracts...... March 1997 4,599,531 4,505,000 (94,531)
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500, 53
contracts............... March 1997 19,689,500 19,729,250 (39,750)
---------
Total.................. $(337,406)
=========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1996 was $1,066,816.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $235,320,916) (Note 1).............. $256,212,580
Cash............................................................ 5,756,041
Receivables:
Investment securities sold..................................... 415,655
Dividends...................................................... 181,703
Interest....................................................... 1,700,017
Fund shares sold............................................... 191,981
Variation margin (Note 4)...................................... 380,337
Other assets.................................................... 28,745
------------
TOTAL ASSETS................................................. 264,867,059
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 22,156,538
Fund shares redeemed........................................... 36,974
Investment advisory fees (Note 2).............................. 74,069
Accrued expenses............................................... 193,335
------------
TOTAL LIABILITIES............................................ 22,460,916
------------
NET ASSETS....................................................... $242,406,143
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)........................................ $218,436,635
Accumulated distributions in excess of net investment income.... (187)
Accumulated net realized gain................................... 3,415,437
Net unrealized appreciation..................................... 20,554,258
------------
NET ASSETS................................................... $242,406,143
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $240,953,839 and 20,423,505 shares is-
sued and outstanding) (Note 6)................................ $ 11.80
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,452,304 and 123,608 shares issued and outstanding) (Note
6)............................................................ $ 11.75
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $ 4,451,939
Dividends......................................................... 897,064
-----------
TOTAL INCOME................................................... 5,349,003
-----------
EXPENSES:
Advisory (Note 2)................................................. 814,540
Administration.................................................... 80,184
Custodian......................................................... 68,520
Distribution (Note 5)............................................. 2,858
Other............................................................. 214,159
-----------
TOTAL EXPENSES................................................. 1,180,261
Expenses deferred by Advisor (Note 2).......................... (246,439)
-----------
NET EXPENSES................................................... 933,822
-----------
NET INVESTMENT INCOME ......................................... 4,415,181
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 9,666,826
Futures contracts................................................ (461,484)
-----------
Net realized gain.............................................. 9,205,342
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 4,616,972
Futures contracts................................................ (401,550)
-----------
Change in net unrealized appreciation or depreciation.......... 4,215,422
-----------
Net realized and unrealized gain.................................. 13,420,764
-----------
Net increase in net assets resulting from operations.............. $17,835,945
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 4,415,181 $ 8,308,870
Net realized gain............................. 9,205,342 8,233,205
Change in net unrealized appreciation or de-
preciation................................... 4,215,422 8,676,412
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 17,835,945 25,218,487
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class........................... (5,812,532) (7,711,341)
SwissKey Fund Class.......................... (34,116) (9,781)
Distributions from net realized gain:
Brinson Fund Class........................... (10,324,916) (9,885,505)
SwissKey Fund Class.......................... (65,779) (992)
------------ ------------
Total distributions to shareholders........... (16,237,343) (17,607,619)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 19,283,736 81,710,433
Shares issued on reinvestment of distribu-
tions........................................ 16,166,850 17,593,608
Shares redeemed............................... (23,251,338) (36,030,444)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 6)............. 12,199,248 63,273,597
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 13,797,850 70,884,465
------------ ------------
NET ASSETS:
Beginning of period........................... 228,608,293 157,723,828
------------ ------------
End of period (including accumulated undis-
tributed net investment income of ($187) and
$1,459,205, respectively).................... $242,406,143 $228,608,293
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR DECEMBER 30, 1994*
DECEMBER 31, 1996 ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning
of period.................. $ 11.71 $ 11.23 $ 10.00
-------- -------- --------
Income from investment op-
erations:
Net investment income..... 0.23 0.44 .23
Net realized and
unrealized gain.......... 0.71 1.04 1.16
-------- -------- --------
Total income from in-
vestment operations.... 0.94 1.48 1.39
-------- -------- --------
Less distributions:
Distributions from net in-
vestment income.......... (0.31) (0.43) (0.16)
Distributions from net re-
alized gain.............. (0.54) (0.57) --
-------- -------- --------
Total distributions..... (0.85) (1.00) (0.16)
-------- -------- --------
Net asset value, end of pe-
riod....................... $ 11.80 $ 11.71 $ 11.23
======== ======== ========
Total return (non-
annualized)................ 8.02% 13.52% 13.91%
Ratios/Supplemental data
Net assets, end of period
(in 000s)................. $240,954 $227,829 $157,724
Ratio of expenses to aver-
age net assets:
Before expense reimburse-
ment..................... 1.01%** 1.01% 1.06%
After expense reimburse-
ment..................... 0.80%** 0.80% 0.80%
Ratio of net investment in-
come to average net as-
sets:
Before expense reimburse-
ment..................... 3.58%** 3.76% 4.36%
After expense reimburse-
ment..................... 3.79%** 3.97% 4.63%
Portfolio turnover rate.... 172% 240% 196%
Average commission rate
paid per share............ $0.0492 $ 0.0481 N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 11.67 $ 11.38
------- -------
Income from investment operations:
Net investment income....................... 0.20 0.42
Net realized and unrealized gain............ 0.70 0.86
------- -------
Total income from investment operations... 0.90 1.28
------- -------
Less distributions:
Distributions from net investment income.... (0.28) (0.42)
Distributions from net realized gain........ (0.54) (0.57)
------- -------
Total distributions....................... (0.82) (0.99)
------- -------
Net asset value, end of period................ $ 11.75 $ 11.67
======= =======
Total return (non-annualized)................. 7.75% 11.54%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $ 1,452 $ 779
Ratio of expenses to average net assets:
Before expense reimbursement................ 1.51%** 1.51%**
After expense reimbursement................. 1.30%** 1.30%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 3.08%** 3.26%**
After expense reimbursement................. 3.29%** 3.47%**
Portfolio turnover rate...................... 172% 240%
Average commission rate paid per share....... $0.0492 $0.0481
</TABLE>
*Commencement of SwissKey Fund Class distribution
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
The U.S. Equity Fund is an actively managed portfolio that invests in common
stocks of U.S. corporations. The Fund is diversified by issue and industry; it
is typically 70% invested in large capitalization stocks, with the remaining
30% in intermediate and small capitalization stocks. Investment strategies
emphasize stock selection with attention to the management of factor and
industry exposures.
For the period July 31, 1995 to December 31, 1996, the SwissKey U.S. Equity
Fund provided an annualized return of 27.78% compared to its benchmark, the
Wilshire 5000 Index, return of 22.47%. For the year ended December 31, 1996,
the Fund returned 24.90%, while the benchmark returned 21.21%. The total
return of the SwissKey U.S. Equity Fund was 12.63% for the second six months of
1996, compared to the 9.92% return for the Wilshire 5000 Index. The following
paragraphs review the sources of excess returns in the second half of 1996.
The strong excess return of the U.S. Equity Fund in 1996 was attributable to a
number of favorable industry and individual stock positions. Foremost among
these was the sizeable overweighting in commercial banks where lower interest
rates, sound credit quality and consolidation combined to produce strong
industry performance. In addition, bank stock selection over and above the
industry effect added meaningfully to Fund results. In the large capitalization
sector, Citicorp and Chase Manhattan both posted total returns in excess of
50%. A package of smaller regional banks also performed well. These included
U.S. Bancorp, Comerica, State Street Boston, First of America, Magna Group and
First American of Tennessee.
Another important industry position last year was the significant Fund
underweighting in both telephone and electric utility stocks. In the area of
traditional telephone utilities, we believe new technology, intensifying
competition and regulatory adjustments will narrow the gap between telephone
pricing and cost of service in many regional markets. Electric utilities are
also likely to suffer a breakdown in regulatory protection due to the advent of
independent power producers, the wheeling of electric power and difficulty
earning an adequate return on stranded investments.
Insurance and retail are two groups where industry performance was market-like
in 1996 but where our collective issue selections added meaningfully to
results. The strategy in insurance has been to concentrate on those companies
where managements are restructuring and reorienting operations toward core
lines of business. Such companies included Cigna, Aon, Allstate, Aetna, USF&G
and Old Republic International. Similarly, the emphasis in retail was on those
issues where managements were altering the business model with a clear focus on
raising bottom line profitability. Our stock holdings here were CVS (formerly
Melville), Federated Department Stores and Food Lion.
Technology was an industry where an underweight detracted from Fund excess
return in 1996. Nevertheless, stock selections such as EMC Corp., Seagate
Technology and National Semiconductor more than compensated for the shortfall.
In addition, a number of our telecommunications equipment related holdings
performed well including Corning, Comverse Technology, Boston Technology and
Octel Communications. Other noteworthy individual stock contributors to Fund
results last year were Avon Products, Philip Morris, Coca Cola Enterprises and
Tyson Foods.
------------------------------------------------------------
17
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
Annualized
6 months 1 year 7/31/95*
ended ended to
12/31/96 12/31/96 12/31/96
- -------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY U.S. EQUITY FUND 12.63% 24.90% 27.78%
- -------------------------------------------------------
Wilshire 5000 Index 9.92 21.21 22.47
- -------------------------------------------------------
</TABLE>
*Performance inception date of the SwissKey U.S. Equity Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Equity Fund and the Wilshire 5000 Index if you had invested $10,000 on July 31,
1995, and had reinvested all your income dividends and capital gain
distributions through December 31, 1996. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SWISSKEY U.S. EQUITY FUND
VS. WILSHIRE 5000 INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
SwissKey U.S. Equity Fund Wilshire 5000 Index
------------------------- -------------------
7/31/95 $10,000 $10,000
9/30/95 $10,570 $10,483
12/31/95 $11,335 $10,994
3/31/96 $12,194 $11,612
6/30/96 $12,570 $12,123
9/30/96 $12,966 $12,466
12/31/96 $14,157 $13,326
7/31/95 $10,000 Data through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
------------------------------------------------------------
18
<PAGE>
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals.............................................................. 0.65%
Housing/Paper.......................................................... 4.04
Metals................................................................. 0.52
------
5.21
Capital Investments
Capital Goods.......................................................... 8.94
Technology............................................................. 5.77
------
14.71
Consumer
Autos/Durables......................................................... 0.25
Discretionary.......................................................... 6.49
Health: Drugs.......................................................... 8.02
Health: Non-Drugs...................................................... 3.96
Non-Durables........................................................... 11.18
Retail/Apparel......................................................... 4.09
------
33.99
Energy.................................................................. 4.94%
Financial
Banks.................................................................. 10.03
Non-Banks.............................................................. 9.15
------
19.18
Services................................................................ 6.34
Transportation.......................................................... 6.17
Utilities............................................................... 3.07
Miscellaneous........................................................... 2.61
------
Total U.S. Equities.................................................. 96.22*
------
SHORT-TERM INVESTMENTS.................................................. 3.51*
------
TOTAL INVESTMENTS.................................................... 99.73
CASH AND OTHER ASSETS,
LESS LIABILITIES ...................................................... 0.27
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
*The Fund held a net long position in stock index futures on December 31, 1996
which increased U.S. equity exposure from 96.22% to 100% and reduced exposure to
Short-Term investments from 3.51% to -0.27%.
- --------------------------------------------------------------------------------
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ---------------------------------------------
<S> <C>
1. Chase Manhattan Corp. 4.77%
2. Xerox Corp. 3.71
3. Lockheed Martin Corp. 3.70
4. Burlington Northern Santa Fe 3.65
5. Corning, Inc. 3.45
6. Citicorp 3.33
7. Philip Morris Companies, Inc. 3.29
8. Aon Corp. 3.08
9. Goodyear Tire & Rubber Co. 2.81
10. Enron Corp. 2.55
- ---------------------------------------------
</TABLE>
- --------------- ------------------------------------------------------------
19
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
U.S. Equities -- 96.22%
Aetna Life & Casualty Co................................... 40,300 $ 3,224,000
Allergan, Inc.............................................. 67,300 2,397,563
Allstate Corp.............................................. 37,400 2,164,525
Alza Corp. (b)............................................. 65,600 1,697,400
Aon Corp................................................... 87,900 5,460,787
Automatic Data Processing, Inc............................. 64,100 2,748,288
Avon Products, Inc......................................... 47,700 2,724,862
Bard (C.R.), Inc........................................... 40,700 1,139,600
Beckman Instruments, Inc................................... 26,300 1,009,263
Birmingham Steel Corp...................................... 26,400 501,600
Boston Technology, Inc. (b)................................ 26,200 753,250
Brinker International, Inc. (b)............................ 26,600 425,600
Burlington Northern Santa Fe............................... 75,000 6,478,125
Centerior Energy Co........................................ 55,300 594,475
Chase Manhattan Corp....................................... 94,700 8,451,975
Choice Hotels International, Inc. (b)...................... 42,900 756,113
CIGNA Corp................................................. 32,500 4,440,312
Circuit City Stores, Inc. (b).............................. 11,200 337,400
Citicorp................................................... 57,400 5,912,200
CMS Energy Corp............................................ 71,700 2,410,913
Coca-Cola Enterprises, Inc................................. 35,100 1,702,350
Comerica, Inc.............................................. 18,100 947,987
Comverse Technology, Inc. (b).............................. 12,200 461,313
Corning, Inc............................................... 132,200 6,114,250
CPC International, Inc. ................................... 16,200 1,255,500
CVS Corp. ................................................. 51,900 2,147,363
Dial Corp.................................................. 64,400 949,900
EMC Corp./Mass. (b)........................................ 94,500 3,130,312
Enron Corp................................................. 104,800 4,519,500
Federal Express Corp. (b).................................. 97,600 4,343,200
Federated Department Stores (b)............................ 38,300 1,306,988
FileNet Corp. (b).......................................... 15,600 499,200
First American Corp.-Tenn. ................................ 4,700 270,836
First Data Corp............................................ 56,230 2,052,395
First of America Bank Corp................................. 8,400 505,050
Footstar, Inc. (b)......................................... 14,925 371,259
Ford Motor Co.............................................. 34,800 1,109,250
Forest Laboratories, Inc. (b).............................. 44,600 1,460,650
Gannett Co., Inc........................................... 43,800 3,279,525
General Instrument Corp. (b)............................... 130,200 2,815,575
Genzyme Corp. (b).......................................... 26,500 576,375
Geon Co. .................................................. 9,700 190,363
Goodyear Tire & Rubber Co.................................. 96,900 4,978,237
Harnischfeger Industries, Inc. ............................ 28,900 1,390,813
Health Care and Retirement Corp. (b)....................... 48,550 1,389,744
Interpublic Group of Companies, Inc........................ 32,600 1,548,500
James River Corp. of Virginia.............................. 37,700 1,248,812
Kimberly-Clark Corp........................................ 31,600 3,009,900
Kroger Co. (b)............................................. 27,600 1,283,400
Lockheed Martin Corp....................................... 71,627 6,553,871
Lyondell Petrochemical Co.................................. 71,700 1,577,400
Manor Care, Inc. .......................................... 42,900 1,158,300
Martin Marietta Materials, Inc. ........................... 19,157 445,400
Masco Corp. ............................................... 41,400 1,490,400
Mattel, Inc................................................ 156,875 4,353,281
Nabisco Holdings Corp. Class A............................. 47,500 1,846,562
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
National Semiconductor Corp. (b)........................ 25,900 $ 631,313
Nextel Communications, Inc. Class A (b)................. 66,000 862,125
Old Republic International Corp......................... 30,850 825,237
Peco Energy Co. ........................................ 41,900 1,057,975
Pentair, Inc............................................ 34,700 1,119,075
Pharmacia & Upjohn, Inc. ............................... 83,500 3,308,688
Philip Morris Companies, Inc............................ 51,800 5,833,975
Rhone-Poulene Rorer, Inc. .............................. 22,100 1,726,562
RJR Nabisco Convertible Preferred "C"................... 213,600 1,441,800
Schering Plough Corp.................................... 57,500 3,723,125
Seagate Technology, Inc. (b)............................ 17,600 695,200
Timken Co............................................... 27,600 1,266,150
Tyson Foods, Inc. Class A............................... 78,600 2,692,050
Ultramar Diamond Shamrock Corp. ........................ 74,718 2,362,957
US Bancorp.............................................. 39,900 1,793,006
USF&G Corp.............................................. 30,500 636,688
Vencor, Inc. (b)........................................ 34,300 1,084,737
Viad Corp. ............................................. 64,400 1,062,600
Westvaco Corp........................................... 15,700 451,375
Whitman Corp............................................ 3,300 75,488
WMX Technologies, Inc................................... 107,000 3,490,875
Xerox Corp. ............................................ 125,000 6,578,125
York International Corp................................. 27,000 1,508,625
360 Communications Co. (b).............................. 22,733 525,701
------------
Total U.S. Equities (Cost $144,329,405)................. 170,665,464
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Short-Term Investments -- 3.51%
U.S. GOVERNMENT OBLIGATIONS -- 0.17%
U.S. Treasury Bills 5.063%, due 05/01/97................ $ 300,000 $ 294,972
------------
COMMERCIAL PAPER -- 3.34%
Cincinnati Bell, Inc. 7.250%, due 01/02/97.............. 2,430,000 2,429,511
CNA Financial Corp. 6.250%, due 01/23/97................ 500,000 498,090
Crown Cork & Seal Co., Inc. 5.580%, due 01/29/97........ 500,000 497,830
Tyson Foods, Inc. 5.750%, due 01/09/97.................. 261,000 260,667
Vastar Resources, Inc. 6.850%, due 01/10/97............. 1,500,000 1,497,431
Whirlpool Financial Corp. 6.000%, due 01/03/97.......... 750,000 749,750
------------
5,933,279
------------
Total Short-Term Investments
(Cost $6,228,216)...................................... 6,228,251
------------
Total Investments
(Cost $150,557,621) -- 99.73% (a)...................... 176,893,715
------------
Cash and other assets, less liabilities -- 0.27%........ 472,135
------------
Net Assets -- 100%...................................... $177,365,850
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
20
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $150,557,621; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $28,243,273
Gross unrealized depreciation................................ (1,907,179)
-----------
Net unrealized appreciation................................ $26,336,094
===========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS (NOTE 4)
The U.S. Equity Fund had the following open index futures contracts as of
December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN/(LOSS)
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Standard & Poors 500, 18
contracts.................. March 1997 $6,785,075 $6,700,500 $(84,575)
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 1
contract................... March 1997 377,600 377,250 5,350
--------
$(79,225)
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at
December 31, 1996 was $294,972.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $150,557,621) (Note 1) .............. $176,893,715
Cash............................................................. 3,238,167
Receivables:
Investment securities sold...................................... 711,094
Dividends....................................................... 306,932
Fund shares sold................................................ 309,665
Other assets..................................................... 24,831
------------
TOTAL ASSETS.................................................. 181,484,404
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 2,707,175
Fund shares redeemed............................................ 1,074,412
Variation margin (Note 4)....................................... 175,550
Investment advisory fees (Note 2)............................... 36,162
Accrued expenses................................................ 125,255
------------
TOTAL LIABILITIES............................................. 4,118,554
------------
NET ASSETS........................................................ $177,365,850
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $147,729,146
Accumulated undistributed net investment income.................. 4,145
Accumulated net realized gain.................................... 3,375,690
Net unrealized appreciation...................................... 26,256,869
------------
NET ASSETS.................................................... $177,365,850
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $166,642,358 and 11,008,767 shares is-
sued and outstanding) (Note 6)................................. $ 15.14
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $10,723,492 and 709,464 shares issued
and outstanding) (Note 6)...................................... $ 15.11
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 1,360,510
Interest.......................................................... 153,130
-----------
TOTAL INCOME................................................... 1,513,640
-----------
EXPENSES:
Advisory (Note 2)................................................. 530,359
Administration.................................................... 48,142
Custodian......................................................... 47,719
Accounting........................................................ 41,800
Registration...................................................... 40,734
Distribution (Note 5)............................................. 19,756
Other............................................................. 83,749
-----------
TOTAL EXPENSES................................................. 812,259
Expenses deferred by Advisor (Note 2).......................... (186,334)
-----------
NET EXPENSES................................................... 625,925
-----------
NET INVESTMENT INCOME.......................................... 887,715
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments...................................................... 9,682,760
Futures contracts................................................ 377,715
-----------
Net realized gain ............................................. 10,060,475
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 8,716,058
Futures contracts ............................................... (76,450)
-----------
Change in net unrealized appreciation or depreciation.......... 8,639,608
-----------
Net realized and unrealized gain ................................. 18,700,083
-----------
Net increase in net assets resulting from operations.............. $19,587,798
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 887,715 $ 1,333,171
Net realized gain ............................ 10,060,475 7,826,393
Change in net unrealized appreciation or de-
preciation .................................. 8,639,608 13,357,238
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 19,587,798 22,516,802
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class.......................... (1,048,487) (1,233,245)
SwissKey Fund Class......................... (51,089) (17,809)
Distributions from net realized gain:
Brinson Fund Class.......................... (12,393,320) (1,764,213)
SwissKey Fund Class......................... (838,501) (2,611)
------------ ------------
Total distributions to shareholders........... (14,331,397) (3,017,878)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 36,689,740 71,976,805
Shares issued on reinvestment of distribu-
tions........................................ 13,560,021 2,944,272
Shares redeemed............................... (9,869,057) (5,264,717)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 6)............. 40,380,704 69,656,360
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 45,637,105 89,155,284
------------ ------------
NET ASSETS:
Beginning of period........................... 131,728,745 42,573,461
------------ ------------
End of period (including accumulated undis-
tributed net investment income of $4,145 and
$216,006, respectively)...................... $177,365,850 $131,728,745
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR FEBRUARY 22, 1994*
DECEMBER 31, 1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 14.59 $ 11.53 $ 9.65 $10.00
-------- -------- ------- ------
Income from investment
operations:
Net investment income. 0.08 0.17 0.16 0.05
Net realized and
unrealized gain
(loss)............... 1.80 3.31 1.89 (0.36)
-------- -------- ------- ------
Total income (loss)
from investment
operations......... 1.88 3.48 2.05 (0.31)
-------- -------- ------- ------
Less distributions:
Distributions from net
investment income.... (0.10) (0.17) (0.14) (0.04)
Distributions from net
realized gain........ (1.23) (0.25) (0.03) --
-------- -------- ------- ------
Total distributions. (1.33) (0.42) (0.17) (0.04)
-------- -------- ------- ------
Net asset value, end of
period................. 15.14 $ 14.59 $ 11.53 $ 9.65
======== ======== ======= ======
Total return (non-
annualized)............ 12.96% 30.57% 21.45% (3.10%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $166,642 $126,342 $42,573 $8,200
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.04%** 1.14% 1.70% 5.40% **
After expense reim-
bursement............ 0.80%** 0.80% 0.80% 0.80% **
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 0.95%** 1.13% 1.09% (2.82%)**
After expense reim-
bursement............ 1.19%** 1.47% 1.99% 1.78% **
Portfolio turnover
rate.................. 25% 36% 33% 9%
Average commission rate
paid per share........ $ 0.0445 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 14.58 $ 11.94
------- -------
Income from investment operations:
Net investment income....................... 0.04 0.10
Net realized and unrealized gain............ 1.79 2.92
------- -------
Total income from investment operations... 1.83 3.02
------- -------
Less distributions:
Distributions from net investment income.... (0.07) (0.13)
Distributions from net realized gain........ (1.23) (0.25)
------- -------
Total distributions....................... (1.30) (0.38)
------- -------
Net asset value, end of period................ $ 15.11 $ 14.58
======= =======
Total return (non-annualized)................. 12.63% 25.70%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $10,724 $ 5,387
Ratio of expenses to average net assets:
Before expense reimbursement................ 1.56%** 1.66%**
After expense reimbursement................. 1.32%** 1.32%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 0.43%** 0.61%**
After expense reimbursement................. 0.67%** 0.95%**
Portfolio turnover rate...................... 25% 36%
Average commission rate paid per share....... $0.0445 $0.0457
</TABLE>
*Commencement of SwissKey Fund Class distribution
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
U.S. BOND FUND
- --------------------------------------------------------------------------------
LOGO
The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar-
denominated investment-grade fixed income securities. Our goal for the Fund is
to achieve a total return superior to that of an unmanaged market index.
Macroeconomic and monetary analysis are the key elements in our strategy. We
develop expectations about the returns on U.S. bonds based on the divergence of
current market yields from our estimates of equilibrium yields. Relative value
analysis serves as the basis of both our sector and individual security
selection.
The SwissKey U.S. Bond Fund produced an annualized return of 6.39% since its
inception on August 31, 1995 compared to the Salomon Brothers Broad Investment
Grade (BIG) Bond Index return of 6.78%. In 1996, U.S. fixed income markets
proved disappointing to investors by underperforming both cash and most riskier
asset classes. For the year ended December 31, 1996, the Fund produced a total
return of 3.15% compared to the Benchmark return of 3.63%. In the second half of
1996, the Fund returned 5.19% compared to the Benchmark return of 4.94%.
The underlying economic fundamentals that influence bond prices and yields were
unusually well behaved in 1996. The pace of real economic activity fluctuated
around a stable path with alternating periods of above- and below-trend growth.
Inflation rates were stable. Treasury deficits continued to decline. Federal
Reserve interest rate policies were steady. The overnight funds target rate was
cut from 5.50% to 5.25% at the end of January 1996 and remained unchanged at
the 5.25% level through the balance of the year.
In 1996, U.S. interest rates were more volatile than the underlying economic
fundamentals. Investor expectations shifted in reaction to fluctuations in
economic data that were often statistical noise. During 1996, sentiment shifted
from optimism that a slow-growth economy would prompt further Federal Reserve
easing, to pessimism that an economy near full employment would overheat,
resulting in either an up-tick in inflation or Fed tightening or both.
Interest rates, which were at their lows for the year at the beginning of 1996,
rose fairly steadily in the first half of 1996 and moved irregularly lower in
the second half. Year over year, Treasury yields rose 35 basis points for one-
year maturities, while yields in the three-to-ten year range were up
approximately 80 basis points. Thirty-year Treasury bond yields, which were
below 6.00% at the beginning of 1996, rose to a high of 7.20% by mid-year and
fell to 6.65% by year-end. As a result of these shifts, the yield curve
steepened from cash to intermediate maturities while modestly flattening from
intermediate to long maturities.
Our investment strategies in early 1997 involve overweights in the ten-year and
longer segments of the yield curve and corresponding underweights in
intermediate maturities. This results in a Fund duration that is 1.3 times the
duration of the benchmark. Intermediate and long-term U.S. interest rates are
well above our equilibrium estimates. If market forces bring yields back in
line with our estimates of value, U.S. bonds will deliver total returns well in
excess of current yield levels as bond prices appreciate.
------------------------------------------------------------
27
<PAGE>
U.S. BOND FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 8/31/95*
12/31/96 12/31/96 to 12/31/96
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY U.S. BOND FUND 5.19% 3.15% 6.39%
- ----------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade (BIG)
Bond Index 4.94 3.63 6.78
- ----------------------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey U.S. Bond Fund.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if
you had invested $10,000 on August 31, 1995, and had reinvested all your income
dividends and capital gain distributions through December 31, 1996. No
adjustment has been made for any income taxes payable by shareholders on income
dividends and capital gain distributions. Past performance is no guarantee of
future results. Share price and return will vary with market conditions;
investors may realize a gain or loss upon redemption.
SWISSKEY U.S. BOND FUND
VS. SALOMON BROTHERS BIG BOND INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
SwissKey U.S. Bond Fund Salomon Brothers BIG Bond Index
----------------------- -------------------------------
8/31/95 $10,000 $10,000
9/30/95 $10,080 $10,094
12/31/95 $10,529 $10,532
3/31/96 $10,284 $10,350
6/30/96 $10,324 $10,400
9/30/96 $10,491 $10,594
12/31/96 $10,861 $10,914
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
------------------------------------------------------------
28
<PAGE>
U.S. BOND FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percentage of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Asset-backed........................................................... 4.18%
CMO.................................................................... 2.61
Financial.............................................................. 12.76
Industrial............................................................. 1.67
Telecommunications..................................................... 2.55
------
Total U.S. Corporate Bonds........................................... 23.77
U.S. Government Agencies................................................ 27.83
U.S. Government Obligations............................................. 39.67
International Dollar Bonds.............................................. 4.43
------
Total U.S. Bonds..................................................... 95.70
------
SHORT-TERM INVESTMENTS.................................................. 7.10
------
TOTAL INVESTMENTS.................................................... 102.80
LIABILITIES, LESS
CASH AND OTHER ASSETS.................................................. (2.80)
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
------------------------------------------------------------
29
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Bonds -- 95.70%
U.S. CORPORATE BONDS -- 23.77%
American Express Credit Account Master Trust 96-1A
6.800%, due 12/15/03.................................... $ 100,000 $ 101,582
Capital One Bank 6.830%, due 05/17/99.................... 185,000 185,854
Citicorp Mortgage Securities 5.750%, due 06/25/09........ 89,877 76,116
Countrywide Funding FRN 6.650%, due 12/01/03............. 250,000 239,688
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
02/25/02................................................ 100,000 100,269
GMAC MTN 7.450%, due 06/05/97............................ 250,000 251,980
Green Tree Financial 94-2 8.300%, due 05/15/19........... 160,000 169,229
Lehman Brothers Holdings 7.250%, due 04/15/03............ 225,000 226,363
Lockheed Martin Corp. 7.700%, due 06/15/08............... 150,000 157,025
News America Corp. 7.750%, due 01/20/24.................. 250,000 238,974
Premier Auto Trust 96-4A, 6.400%, due 10/06/01........... 190,000 190,912
Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 292,949
----------
2,230,941
----------
INTERNATIONAL DOLLAR BONDS -- 4.43%
Hanson PLC Notes 6.750%, due 09/15/05.................... 100,000 97,934
Republic of Italy 6.875%, due 09/27/23................... 250,000 237,830
Royal Bank of Scotland 7.375%, due 04/01/06.............. 80,000 79,730
----------
415,494
----------
U.S. GOVERNMENT AGENCIES -- 27.83%
Federal Home Loan Mortgage Corp.
6.750%, due 05/30/06.................................... 150,000 151,106
5.800%, due 08/15/19.................................... 330,000 308,246
6.500%, due 05/15/21.................................... 86,167 78,194
Federal Home Loan Mortgage Corp. Gold
6.000%, due 06/01/03.................................... 111,475 108,828
8.000%, due 11/01/22.................................... 72,660 74,627
Federal National Mortgage Association
6.500%, due 03/01/03.................................... 250,000 247,345
8.000%, due 12/18/11.................................... 100,000 103,375
7.500%, due 05/01/25.................................... 210,419 210,353
6.500%, due 02/01/26.................................... 131,483 125,494
6.500%, due 03/01/26.................................... 59,456 56,725
Federal National Mortgage Association Strip
8.000%, due 07/01/24 interest only...................... 104,772 32,287
0.000%, due 07/01/26 principal only..................... 93,546 62,938
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Government National Mortgage Association
9.000%, due 12/15/17................................... $ 68,304 $ 73,159
7.500%, due 12/15/22................................... 409,733 411,979
7.500%, due 06/15/25................................... 132,176 132,328
6.500%, due 03/20/26................................... 118,159 111,992
6.000%, due 11/20/26................................... 199,775 199,935
Independent National Mortgage Corp. 8.350%, due
06/25/25............................................... 120,000 122,886
----------
2,611,797
----------
U.S. GOVERNMENT OBLIGATIONS -- 39.67%
U.S. Treasury Coupon Strip 0.000%,
due 05/15/08 principal only............................ 285,000 135,634
U.S. Treasury Notes and Bonds
6.250%, due 10/31/01................................... 595,000 595,372
6.500%, due 05/15/05................................... 530,000 533,810
7.000%, due 07/15/06................................... 535,000 555,899
8.125%, due 05/15/21................................... 1,640,000 1,902,400
----------
3,723,115
----------
Total U.S. Bonds (Cost $9,003,871)...................... 8,981,347
----------
Short-Term Investments -- 7.10%
COMMERCIAL PAPER -- 7.10%
Cincinnati Bell, 7.250%, due 01/02/97................... 491,000 490,901
Duracell, Inc. 6.750%, due 01/02/97..................... 176,000 175,967
----------
Total Short-Term Investments
(Cost $666,868)........................................ 666,868
----------
Total Investments
(Cost $9,670,739) -- 102.80%(a)........................ 9,648,215
----------
Liabilities, less cash and other assets --(2.80%) (a)... (263,154)
----------
Net Assets -- 100%...................................... $9,385,061
==========
</TABLE>
(a) Aggregate cost for federal income tax purposes was $9,670,739; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation.......... $ 59,916
Gross unrealized de-
preciation.......... (82,440)
--------
Net unrealized de-
preciation......... $(22,524)
========
</TABLE>
FRN:Floating rate note--The rate disclosed is that in effect at December 31,
1996.
MTN: Medium Term Note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $9,670,739) (Note 1)................. $ 9,648,215
Cash............................................................. 272,993
Receivables:
Investment securities sold...................................... 351,190
Interest........................................................ 99,507
Fund shares sold................................................ 52,466
Due from Advisor (Note 2)....................................... 14,375
Other assets..................................................... 10,208
-----------
TOTAL ASSETS.................................................. 10,448,954
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 968,564
Accrued expenses................................................ 95,329
-----------
TOTAL LIABILITIES............................................. 1,063,893
-----------
NET ASSETS........................................................ $ 9,385,061
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $ 9,330,105
Accumulated undistributed net investment income.................. 19,834
Accumulated net realized gain.................................... 57,646
Net unrealized depreciation ..................................... (22,524)
-----------
NET ASSETS.................................................... $ 9,385,061
===========
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $8,891,698 and 882,581 shares issued
and outstanding) (Note 6)...................................... $ 10.07
===========
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $493,363 and 49,046 shares issued and
outstanding) (Note 6).......................................... $ 10.06
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................ $ 312,360
---------
TOTAL INCOME..................................................... 312,360
---------
EXPENSES:
Registration........................................................ 26,797
Professional........................................................ 24,656
Advisory (Note 2)................................................... 23,187
Accounting.......................................................... 22,986
Transfer Agent...................................................... 20,802
Printing............................................................ 17,664
Custodian........................................................... 10,086
Distribution (Note 5)............................................... 1,089
Other............................................................... 9,634
---------
TOTAL EXPENSES................................................... 156,901
Expenses deferred and reimbursed by Advisor (Note 2)............. (128,202)
---------
NET EXPENSES..................................................... 28,699
---------
NET INVESTMENT INCOME ........................................... 283,661
---------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain................................................... 89,999
Change in net unrealized appreciation or depreciation............... 123,739
---------
Net realized and unrealized gain.................................... 213,738
---------
Net increase in net assets resulting from operations................ $ 497,399
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1996 THROUGH
(UNAUDITED) JUNE 30, 1996
OPERATIONS: ----------------- ----------------
<S> <C> <C>
Net investment income...................... $ 283,661 $ 456,231
Net realized gain/(loss)................... 89,999 (11,035)
Change in net unrealized appreciation or
depreciation.............................. 123,739 (146,263)
---------- -----------
Net increase in net assets resulting from
operations................................ 497,399 298,933
---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income... (353,857) (363,467)
Distributions from net realized gain....... (713) --
Distributions in excess of net realized
gain...................................... -- (23,339)
---------- -----------
Total distributions to shareholders**...... (354,570) (386,806)
---------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................ 864,572 10,200,031
Shares issued on reinvestment of distribu-
tions..................................... 344,994 386,807
Shares redeemed............................ (1,649,868) (867,431)
---------- -----------
Net increase (decrease) in net assets re-
sulting from capital share transactions
(Note 6).................................. (440,302) 9,719,407
---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS. (297,473) 9,631,534
---------- -----------
NET ASSETS:
Beginning of period........................ 9,682,534 51,000
---------- -----------
End of period (including accumulated undis-
tributed net investment
income of $19,834 and $90,190, respective-
ly)....................................... $9,385,061 $ 9,682,534
========== ===========
* Commencement of investment operations
**Distributions By Class:
Distributions from net investment income:
Brinson Fund Class........................ (335,801) (350,335)
SwissKey Fund Class....................... (18,056) (13,132)
Distributions from and in excess of net re-
alized gain:
Brinson Fund Class........................ (675) (23,071)
SwissKey Fund Class....................... (38) (268)
---------- -----------
Total distributions to shareholders........ (354,570) (386,806)
---------- -----------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1996 THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........ $ 9.93 $10.00
------ ------
Income from investment operations:
Net investment income..................... 0.32 0.50
Net realized and unrealized gain (loss)... 0.22 (0.14)
------ ------
Total income from investment operations. 0.54 0.36
------ ------
Less distributions:
Distributions from net investment income.. (0.40) (0.40)
Distributions in excess of net realized
gain..................................... -- (0.03)
------ ------
Total distributions..................... (0.40) (0.43)
------ ------
Net asset value, end of period.............. $10.07 $ 9.93
====== ======
Total return (non-annualized)............... 5.42% 3.60%
Ratios/Supplemental data
Net assets, end of period (in 000s)........ $8,892 $9,047
Ratio of expenses to average net assets:
Before expense reimbursement.............. 3.35%** 3.63%**
After expense reimbursement............... 0.60%** 0.60%**
Ratio of net investment income to average
net assets:
Before expense reimbursement.............. 3.37%** 3.00%**
After expense reimbursement............... 6.12%** 6.03%**
Portfolio turnover rate.................... 265% 363%
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1996 THROUGH JUNE 30,
SWISSKEY FUND CLASS (UNAUDITED) 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........ $ 9.92 $10.00
------ ------
Income from investment operations:
Net investment income..................... 0.30 0.46
Net realized and unrealized gain (loss)... 0.22 (0.13)
------ ------
Total income from investment operations. 0.52 0.33
------ ------
Less distributions:
Distributions from net investment income.. (0.38) (0.38)
Distributions in excess of net realized
gain..................................... -- (0.03)
------ ------
Total distributions..................... (0.38) (0.41)
------ ------
Net asset value, end of period.............. $10.06 $ 9.92
====== ======
Total return (non-annualized)............... 5.19% 3.24%
Ratios/Supplemental data
Net assets, end of period (in 000s)........ $ 493 $ 636
Ratio of expenses to average net assets:
Before expense reimbursement.............. 3.82%** 4.10%**
After expense reimbursement............... 1.07%** 1.07%**
Ratio of net investment income to average
net assets:
Before expense reimbursement.............. 2.90%** 2.53%**
After expense reimbursement............... 5.65%** 5.56%**
Portfolio turnover rate.................... 265% 363%
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund, and Non-U.S. Equity Fund. Each Fund has two classes of shares
outstanding, Brinson Fund Class and SwissKey Fund Class. There are an unlimited
number of shares of each class with par value of $0.001 authorized. Each share
represents an identical interest in the investments of the Funds and has the
same rights. The following is a summary of significant accounting policies
consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond
Fund (each a "Fund," collectively the "Funds") in the preparation of their
financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which the most recent bid price or market
quotations are not readily available, including restricted securities which are
subject to limitations on their sale, are valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees. U.S.
equity securities, traded over-the-counter, are valued at the most recent bid
price. Debt securities are valued at the most recent bid price by using market
quotations or independent services. Futures contracts are valued at the
settlement price established each day on the exchange on which they are traded.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
C.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 1996, therefore, no federal income tax provision was required.
E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses.
F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Fund Class will not incur any of the distribution expenses.
G.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
36
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on the Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the six
months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
BRINSON SWISSKEY
CLASS CLASS
ADVISORY EXPENSE EXPENSE ADVISORY FEES DEFERRED
FEE CAP CAP FEES AND/OR REIMBURSED
-------- ------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
U.S. Balanced Fund......... 0.70% 0.80% 1.30% $814,540 $246,439
U.S. Equity Fund........... 0.70 0.80 1.32 530,359 186,334
U.S. Bond Fund............. 0.50 0.60 1.07 23,187 128,202
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees were $3,680, $2,576 and $1,656 for the U.S. Balanced
Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1996, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund.................................... $383,484,882 $384,396,868
U.S. Equity Fund...................................... 63,102,416 37,150,734
U.S. Bond Fund........................................ 23,975,970 24,362,303
</TABLE>
4.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
5.DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan governs payments made for
the expenses incurred in the promotion and distribution of the SwissKey Fund
Class of shares. Annual fees under the Plan, which include a 0.25% service fee,
total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey
Fund Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund,
respectively.
- --------------------------------------------------------------------------------
37
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. BALANCED FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class.................... 1,510,640 $ 18,264,307 6,944,846 $80,934,038
SwissKey Class................... 83,085 1,019,429 67,290 776,395
--------- ------------ --------- -----------
Total Sales.................... 1,593,725 $ 19,283,736 7,012,136 $81,710,433
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Class.................... 1,371,436 $ 16,128,084 1,540,774 $17,588,758
SwissKey Class................... 3,308 38,766 422 4,850
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 1,374,744 $ 16,166,850 1,541,196 $17,593,608
========= ============ ========= ===========
Redemptions:
Brinson Class.................... 1,910,824 $ 22,882,958 3,073,501 $36,019,481
SwissKey Class................... 29,540 368,380 957 10,963
--------- ------------ --------- -----------
Total Redemptions.............. 1,940,364 $ 23,251,338 3,074,458 $36,030,444
========= ============ ========= ===========
<CAPTION>
U.S. EQUITY FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class.................... 2,041,391 $ 30,854,921 5,125,613 $66,685,850
SwissKey Class................... 381,237 5,834,819 375,655 5,290,955
--------- ------------ --------- -----------
Total Sales.................... 2,422,628 $ 36,689,740 5,501,268 $71,976,805
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Class.................... 876,492 $ 13,191,199 222,497 $ 2,935,334
SwissKey Class................... 24,539 368,822 644 8,938
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 901,031 $ 13,560,021 223,141 $ 2,944,272
========= ============ ========= ===========
Redemptions:
Brinson Class.................... 568,938 $ 8,826,760 380,602 $ 5,174,675
SwissKey Class................... 65,737 1,042,297 6,874 90,042
--------- ------------ --------- -----------
Total Redemptions.............. 634,675 $ 9,869,057 387,476 $ 5,264,717
========= ============ ========= ===========
<CAPTION>
U.S. BOND FUND
--------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class.................... 69,080 $ 707,725 953,454 $ 9,550,552
SwissKey Class................... 15,038 156,847 63,717 649,479
--------- ------------ --------- -----------
Total Sales.................... 84,118 $ 864,572 1,017,171 $10,200,031
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Class.................... 33,381 $ 336,476 37,309 $ 373,407
SwissKey Class................... 846 8,518 1,362 13,400
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 34,227 $ 344,994 38,671 $ 386,807
========= ============ ========= ===========
Redemptions:
Brinson Class.................... 131,050 $ 1,335,859 84,593 $ 856,547
SwissKey Class................... 30,962 314,009 1,055 10,884
--------- ------------ --------- -----------
Total Redemptions.............. 162,012 $ 1,649,868 85,648 $ 867,431
========= ============ ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
38
<PAGE>
DISTRIBUTED BY:
FUNDS DISTRIBUTOR, INC.
60 STATE STREET
BOSTON, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
- --------------------------------------------------------------------------------
39
<PAGE>
LOGO
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY .
http//networth.galt.com.swisskey
<PAGE>
LOGO
SWISSKEY NON-U.S. EQUITY FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
Your Key to Performance
-----------------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
LOGO
TRUSTEES
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
OFFICERS
Frank K. Reilly, CFA Carolyn M. Burke, CPA
Chairman of the Board Assistant Secretary
E. Thomas McFarlan Catherine E. Macrae
President and Treasurer Assistant Secretary
Thomas J. Digenan, CFA, CPA Debra L. Nichols
Assistant Treasurer Assistant Secretary
Bruce G. Leto
Secretary
------------------------------------------------------------
1
<PAGE>
THE FUND'S ADVISOR -- BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
LOGO
In 1995, Brinson Partners, Inc. and Swiss Bank Corporation combined their
institutional investment management organizations into a single investment
management business operating as Brinson Partners, Inc. in North America and
SBC Brinson in its other world-wide locations. We are a global investment
management organization with over $72 billion in institutional assets under
discretionary active management. We are also the investment advisor for SBC
Private Banking mutual fund assets which total $47 billion. The firm manages
investment portfolios for corporations, public funds, endowments, foundations,
central banks and other institutional investors located throughout the world.
Our organization employs over 590 people in offices in Chicago, Basel,
Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore, Sydney, Tokyo
and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients and has offered fully integrated global portfolios since then.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is tailored to
specific client objectives and focused upon both risk and return considerations
in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally
developed valuation systems and seasoned judgment. Our independent team
approach allows for rapid responses to market changes, while providing each
client with the benefit of our best talent and the flexibility to customize
portfolios to meet unique requirements.
------------------------------------------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LOGO
Shareholder Letter............................................................ 4
Global Economic and Market Highlights......................................... 5
Non-U.S. Equity Fund.......................................................... 6
Schedule of Investments....................................................... 9
Financial Statements..........................................................14
Financial Highlights..........................................................17
Notes to Financial Statements.................................................19
------------------------------------------------------------
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
LOGO
February 19, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the December 31, 1996 Semi-Annual Report for the Non-U.S. Equity Fund.
This Report presents our current global economic and market outlook, as well
as the Fund's recent investment strategies and performance. To summarize this
information:
For the period from July 31, 1995 (inception date of the Fund) to December 31,
1996, the Fund provided an annualized total return of 14.66%. In the second
half of 1996, the Fund returned 4.85%.
Market Strategy
The Fund continues to hold a 5.00% strategic cash position reflecting our view
that, with very few exceptions, non-U.S. equity markets are modestly
attractive. The Japanese equity market, which is the largest component of the
index, is notably more overpriced than most of the other non-U.S. markets.
Given our valuation analyses and fundamental considerations, we are underweight
in Japan by 6.50%.
Currency Strategy
Currency strategy continues to emphasize those currencies that offer the
highest expected cash returns in U.S. dollar terms. We continue to have limited
exposure to the overvalued DM-bloc currencies and maintain an underweight in
the yen. Offsetting these underweights is an overweight in the U.S. dollar. Our
position is near neutral in the British pound, and in the Australian and
Canadian dollars.
We look forward to the challenges ahead and, as always, welcome your thoughts
and comments. Please visit our web-site at http://networth.galt.com/swisskey
Sincerely,
/s/ Raoul Weil /s/ Raymond Simon
Raoul Weil Raymond Simon
Managing Director Executive Director
PRIVATE LOGO BANKING PRIVATE LOGO BANKING
------------------------------------------------------------
4
<PAGE>
GLOBAL ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
LOGO
A weaker yen is helping Japan recover from its recent recession. Prices at the
consumer level appear to have stopped falling, and the economy has started
showing real growth, although the expansion has been neither strong nor consis-
tent. The weaker yen and incipient recovery may, however, reduce the pressure
to address structural reform. The lack of unequivocal public support for re-
formist candidates in the most recent election also may delay deregulation.
In pursuit of monetary union, the core European countries are trying to meet
the Maastricht criteria. This has produced restrictive fiscal policies at a
time of weak economic growth, thus exacerbating structural weaknesses in labor
markets. The peripheral European economies have benefited from the drive to
EMU, as bond yields and borrowing costs have dropped considerably. The U.S.
economy remains among the most productive of the developed countries, due in
large part to its flexible labor market.
Increases in oil prices to the $25 per barrel range have not flowed through to
higher consumer price inflation. Central banks have been acting more responsi-
bly since the last major bout of inflation around 1980. Increases in the rela-
tive prices of inputs are no longer being accommodated and turned into general
price increases.
NON-U.S. EQUITY ENVIRONMENT
MAJOR MARKETS
<TABLE>
<CAPTION>
Total Return in 6 months 1 year
U.S. Dollar ended ended
Hedged Terms 12/31/96 12/31/96
- ---------------------------------------
<S> <C> <C> <C>
Japan -9.23% 0.06%
U.K. 12.70 15.18
Germany 11.32 25.10
France 11.21 30.73
Canada 18.79 30.20
Netherlands 17.64 41.40
Australia 7.71 7.71
- ---------------------------------------
</TABLE>
MAJOR CURRENCIES
<TABLE>
<CAPTION>
Percent Change 6 months 1 year
Relative to ended ended
U.S. Dollars 12/31/96 12/31/96
- ----------------------------------
<S> <C> <C>
Yen -5.50% -11.13%
Pound 10.14 -10.22
Deutschemark -1.23 -7.12
Canadian Dollar -0.36 -0.50
- ----------------------------------
</TABLE>
------------------------------------------------------------
5
<PAGE>
NON-U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
The Non-U.S. Equity Fund invests in the common stocks of companies
headquartered outside the U.S. We believe that in a non-U.S. investment program
the country allocation decision is the most important. Country assessments are
developed by the non-U.S. strategy team in Chicago working with our investment
teams in Basel, Frankfurt, London, Paris, Singapore, Sydney and Tokyo. Currency
strategies are separately developed and coordinated with market allocations.
Our industry strategies and individual security selections are determined by
fundamental research.
Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has
earned an annualized return of 14.66% versus 6.60% for the benchmark, the
Morgan Stanley Capital International Non-U.S. Equity (Free) Index. For the year
ended December 31, 1996, the Fund returned 11.81% while the benchmark returned
7.11%. For the second half of 1996, the SwissKey Non-U.S. Equity Fund returned
4.85% compared to the 2.19% return of the benchmark.
During 1996 the majority of the developed markets earned double-digit returns,
continuing 1995's strong performance. The best performing markets in dollar-
hedged terms were Spain, rising 46.76%; Finland, gaining 44.95%; the
Netherlands, increasing 41.39%; Sweden, up 39.86% and Hong Kong, adding 33.02%.
The majority of other markets also earned double-digit returns. In sharp
contrast, Japan was the weakest market, gaining 0.06% in dollar-hedged terms,
followed by Singapore, growing 1.42%. The three other markets with single digit
returns were Italy, rising 4.23%; New Zealand, adding 5.08%; and Australia, up
7.71%.
Since inception, market allocation has added to returns, but detracted somewhat
from 1996 performance. Strategic cash, overweights in several Anglo-Saxon
markets and underweights of Sweden, Switzerland and Hong Kong combined to
reduce returns. Value was added from the strategy of underweighting Japan and
Singapore, while overweighting Finland, the Netherlands, Spain and France.
Currency management has added solidly to returns since inception and was the
greatest positive contributor to 1996 performance, helped by both the strength
of the U.S. dollar and other dollar-bloc currencies and the weakness of the yen
and the DM-bloc currencies. The current U.S. dollar overweight is driven by an
underweighted exposure to the Japanese yen and minimal positions in the DM-bloc
currencies.
During 1996, stock selection was strongly positive, largely due to excellent
Japan stock selection, combined with good results in Canada, Germany and Italy.
Positive stock selection from Japan resulted from the portfolio's exposure to
high-quality defensive issues and exporters, and underexposure to financials
and real estate. A negative contribution came from France and Malaysia, where
outperforming momentum and small stocks were avoided.
------------------------------------------------------------
6
<PAGE>
NON-U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 7/31/95*
12/31/96 12/31/96 to 12/31/96
- ------------------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY NON-U.S. EQUITY FUND 4.85% 11.81% 14.66%
MSCI Non-U.S. Equity (Free) Index** 2.19 7.11 6.60
- ------------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey Non-U.S. Equity Fund
**Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income
distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey Non-
U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 1996.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
SWISSKEY NON-U.S. EQUITY FUND
VS. MSCI NON-U.S. EQUITY (FREE) INDEX
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
SwissKey Non-U.S. Equity Fund MSCI Non-U.S. Equity (Free) Index
----------------------------- ---------------------------------
7/31/95 $10,000 $10,000
9/30/95 $10,302 $ 9,817
12/31/95 $10,858 $10,220
3/31/96 $11,158 $10,538
6/30/96 $11,578 $10,713
9/30/96 $11,630 $10,727
12/31/96 $12,140 $10,947
7/31/95 $10,000 Data Through 12/31/96
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
-------------------------------------------------------------
7
<PAGE>
NON-U.S. EQUITY FUND
- --------------------------------------------------------------------------------
LOGO
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1996 (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
NON-U.S. EQUITIES
Airlines................................................................. 0.26%
Appliances & Household Durables.......................................... 2.12
Automobiles.............................................................. 2.83
Banking.................................................................. 10.80
Beverages & Tobacco...................................................... 2.28
Broadcasting & Publishing................................................ 1.37
Building Materials....................................................... 1.14
Business & Public Service................................................ 3.21
Chemicals................................................................ 3.88
Construction............................................................. 1.88
Data Processing.......................................................... 1.00
Electric Components...................................................... 1.23
Electronics.............................................................. 4.09
Energy................................................................... 8.08
Financial Services....................................................... 1.44
Food & House Products.................................................... 4.61
Forest Products.......................................................... 1.77
Gold Mining.............................................................. 0.10
Health & Personal Care................................................... 3.99
Industrial Components.................................................... 2.15
Insurance................................................................ 4.09
Leisure & Tourism........................................................ 0.61
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Machinery & Engineering................................................ 1.38%
Merchandising.......................................................... 4.16
Metals-Steel........................................................... 1.94
Miscellaneous Materials................................................ 1.15
Multi-Industry......................................................... 4.28
Non-Ferrous Metals..................................................... 2.16
Real Estate............................................................ 0.76
Recreation............................................................. 0.54
Shipping............................................................... 0.77
Telecommunications..................................................... 4.99
Textiles & Apparel..................................................... 0.23
Transportation......................................................... 0.83
Utilities.............................................................. 5.89
------
Total Non-U.S. Equities.............................................. 92.01*
------
SHORT-TERM INVESTMENTS................................................. 6.43*
------
TOTAL INVESTMENTS.................................................... 98.44
CASH AND OTHER ASSETS,
LESS LIABILITIES...................................................... 1.56
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
MARKET AND CURRENCY STRATEGY
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Portfolio
-----------------
Market Currency
Strategy Strategy Index
- ---------------------------------------
<S> <C> <C> <C>
U.S. Dollar 0.0% 35.5% 0.0%
Japan 24.2 20.7 30.7
Australia 4.9 2.9 2.8
Belgium 3.2 1.2 1.1
Canada 2.9 3.9 4.5
Finland 1.5 1.5 0.6
France 9.6 1.1 6.6
Germany 8.3 3.8 7.8
Hong Kong 1.4 0.4 3.6
Italy 3.3 3.3 2.9
Malaysia 1.3 1.3 2.5
Netherlands 6.1 0.6 4.5
New Zealand 3.3 3.3 0.4
Spain 3.6 2.1 2.2
Sweden 0.0 0.0 2.4
Switzerland 1.6 0.1 5.4
U.K. 19.8 18.3 18.2
Cash Reserves 5.0 0.0 0.0
Other Markets 0.0 0.0 3.8
- ---------------------------------------
100.0% 100.0% 100.0%
</TABLE>
TOP TEN NON-U.S. EQUITY HOLDINGS
As of December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Percent of Net Assets
- -----------------------
<S> <C>
1. Royal Dutch Petroleum Co. 1.73%
2. British Telecommunications PLC 1.13
3. General Electric Co. PLC 1.12
4. Broken Hill Proprietary Co. Ltd. 1.07
5. Lloyds TSB Group PLC 1.07
6. Matsushita Electric Industrial Co. 1.05
7. British Petroleum Co. PLC 1.05
8. Toray Industries, Inc. 1.03
9. Telecom Corp. of New Zealand Ltd. 0.95
10. Grand Metropolitan PLC 0.87
- ---------------------------------------------
</TABLE>
*The Fund held a long position in Topix futures on December 31, 1996 which
increased Japanese equity exposure from 23.34% to 25.03% and decreased the
Fund's exposure to Short-Term Investments from 6.43% to 4.74%
------------------------------------------------------------
8
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Non-U.S. Equities -- 92.01%
AUSTRALIA -- 4.76%
Amcor Ltd................................................. 85,700 $ 550,685
Boral Ltd. ............................................... 120,000 341,223
Broken Hill Proprietary Co. Ltd. ......................... 192,270 2,736,679
CRA Ltd. ................................................. 66,210 1,038,640
David Jones Ltd. ......................................... 316,600 440,071
Lend Lease Corp. Ltd. .................................... 21,578 418,192
M.I.M. Holdings Ltd. ..................................... 271,976 380,205
National Australia Bank Ltd. ............................. 110,448 1,298,356
News Corp. Ltd. .......................................... 231,257 1,219,656
News Corp. Ltd. Preferred................................. 60,000 266,878
Pacific Dunlop Ltd. ...................................... 152,700 388,118
Qantas Airways Ltd. ...................................... 203,161 338,871
Santos Ltd................................................ 128,900 522,152
WMC Ltd. ................................................. 100,700 634,274
Westpac Bank Corp. Ltd. .................................. 209,851 1,193,434
Woolworth's Ltd. ......................................... 163,000 392,287
------------
12,159,721
------------
BELGIUM -- 3.18%
Delhaize-Le Lion S.A. .................................... 8,100 480,678
Electrabel S.A. .......................................... 6,265 1,481,218
Fortis AG................................................. 5,700 913,378
Fortis AG Strip (b)....................................... 90 45
General de Banque S.A..................................... 1,300 465,536
Groupe Bruxelles Lambert S.A. ............................ 3,530 453,968
Kredietbank NV............................................ 2,410 789,057
Petrofina S.A. ........................................... 3,275 1,041,336
Societe Generale de Belgique.............................. 5,828 456,853
Solvay S.A. Class A....................................... 1,235 755,242
Tractebel................................................. 1,650 767,484
Tractebel Warrants "99" (b)............................... 1,350 19,550
Union Miniere Group S.A. (b).............................. 7,080 479,214
------------
8,103,559
------------
CANADA -- 2.66%
Alcan Aluminium Ltd. ..................................... 14,500 489,293
Bank of Montreal.......................................... 13,100 416,723
Barrick Gold Corp. ....................................... 8,800 252,006
BCE, Inc. ................................................ 8,200 390,676
Canadian National Railway Co. ............................ 10,000 380,125
Canadian Pacific Ltd. .................................... 33,100 870,608
Hudson's Bay Co. ......................................... 13,500 225,558
Imperial Oil Ltd. ........................................ 11,900 560,010
Moore Corp. Ltd. ......................................... 13,000 269,371
Noranda, Inc. ............................................ 15,100 336,572
Northern Telecom Ltd. .................................... 5,000 310,813
NOVA Corp. ............................................... 22,700 201,229
Royal Bank of Canada...................................... 15,000 526,412
Seagram Co. Ltd. ......................................... 12,700 502,681
Thomson Corp. ............................................ 32,400 715,088
TransCanada Pipelines Ltd. ............................... 19,700 344,959
------------
6,792,124
------------
FINLAND -- 1.44%
Merita Ltd. Class A (b)................................... 127,400 395,275
Nokia Ab Class A.......................................... 30,200 1,748,180
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
Outokumpu OY Class A........................................ 20,800 $ 354,263
Pohjola Insurance Group Class B............................. 8,100 181,894
Sampo Insurance Co. Ltd. Class A............................ 3,500 275,656
UPM-Kymmene Corp. (b)....................................... 34,000 711,868
----------
3,667,136
----------
FRANCE -- 9.43%
Accor S.A. ................................................. 6,395 808,186
Alcatel Alsthom............................................. 8,725 699,517
AXA S.A. ................................................... 3,900 247,562
Banque Nationale de Paris................................... 31,930 1,233,298
CEP Communications.......................................... 2,300 162,146
CEP Communications Warrants "97" (b)........................ 4,400 5,036
Cie Bancaire S.A. .......................................... 7,588 896,192
Cie de Saint Gobain......................................... 10,913 1,540,797
Cie de Suez................................................. 13,844 587,452
Cie Generale des Eaux....................................... 15,864 1,962,135
Colas....................................................... 1,977 285,216
Credit Local de France...................................... 14,550 1,265,047
Elf Aquitaine S.A. ......................................... 15,634 1,420,343
GAN-Groupe des Assurances Nationales (b).................... 880 17,774
Groupe Danone............................................... 2,200 305,961
L'Oreal S.A. ............................................... 400 150,345
Lafarge S.A. ............................................... 7,600 455,091
LVMH........................................................ 6,915 1,927,373
Michelin Class B............................................ 18,350 988,677
Pechiney S.A. Class A (b)................................... 15,993 668,798
Peugeot S.A. ............................................... 15,580 1,750,191
Rhone-Poulenc Class A....................................... 36,500 1,242,012
Sanofi...................................................... 1 99
SEITA....................................................... 12,500 521,765
Societe Generale............................................ 12,640 1,364,003
Total S.A. Class B.......................................... 22,895 1,858,482
UAP-Union des Assurances de Paris........................... 26,884 669,682
Usinor Sacilor.............................................. 71,900 1,044,194
----------
24,077,374
----------
GERMANY -- 7.53%
Allianz AG Holding.......................................... 908 1,632,055
BASF AG..................................................... 25,780 986,970
Bayer AG.................................................... 34,990 1,417,900
Bayerische Motoren Werke AG................................. 1,300 895,854
Commerzbank AG.............................................. 27,540 698,731
Daimler-Benz AG (b)......................................... 14,650 1,002,904
Deutsche Bank AG............................................ 26,367 1,228,441
Deutsche Telekom AG (b)..................................... 43,600 908,157
Henkel KGaA-Vorzug AG....................................... 11,550 569,593
Hochtief AG................................................. 7,400 290,507
Hoechst AG.................................................. 11,680 540,383
M.A.N. AG................................................... 1,840 443,553
Mannesmann AG............................................... 2,457 1,055,756
Metro AG.................................................... 7,958 622,243
Muenchener Rueckver AG...................................... 462 1,119,700
Muenchener Rueckver AG Warrants "98" (b).................... 12 2,500
Preussag AG................................................. 2,969 670,438
RWE AG...................................................... 19,000 793,978
Schering AG................................................. 12,192 1,027,669
Siemens AG.................................................. 9,200 426,360
Thyssen AG.................................................. 4,700 832,282
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
Veba AG................................................. 21,988 $ 1,262,694
Volkswagen AG........................................... 1,900 785,965
------------
19,214,633
------------
HONG KONG -- 1.52%
Cheung Kong Holdings Ltd. .............................. 38,000 337,755
China Light & Power Co. Ltd. ........................... 78,000 346,895
Guoco Group Ltd. ....................................... 48,000 268,704
Hang Seng Bank Ltd. .................................... 31,500 382,811
Hong Kong Telecommunications Ltd. ...................... 135,200 217,616
Hutchison Whampoa Ltd. ................................. 85,000 667,591
Jardine Matheson Holdings ADR (c)....................... 31,200 205,920
New World Development Co. Ltd. ......................... 53,000 358,020
Sun Hung Kai Properties Ltd. ........................... 28,000 342,991
Swire Pacific Ltd. Class A ............................. 44,000 419,527
Wharf (Holdings) Ltd. .................................. 68,000 339,345
------------
3,887,175
------------
ITALY -- 2.98%
Assicurazioni Generali.................................. 41,250 779,965
Danieli & Co. Savings (Risp)............................ 73,000 304,867
Edison Spa.............................................. 46,000 290,431
Eni Spa................................................. 40,000 204,801
Eni ADR (c)............................................. 22,100 1,140,913
Fiat Spa-Priv........................................... 324,000 533,785
INA-Istituto Nazionale de Assicurazioni................. 136,000 176,742
Istituto Mobilaire Italiano Spa......................... 99,000 846,432
Italgas Spa............................................. 61,000 254,150
La Rinascente........................................... 35,000 202,565
La Rinascente Savings (Risp)............................ 46,000 117,382
La Rinascente Warrants "99" (b)......................... 2,800 1,232
Mediobanca Spa.......................................... 21,000 113,045
Montedison Spa (b)...................................... 1,060,380 721,100
SAI-Savings (Risp)...................................... 47,000 166,764
Telecom Italia Spa...................................... 502,000 977,258
Telecom Italia Mobile Spa............................... 538,000 766,044
------------
7,597,476
------------
JAPAN -- 23.34%
Amada Co. Ltd. ......................................... 106,000 821,918
Asahi Glass Co. Ltd. ................................... 125,000 1,173,861
Bank of Tokyo-Mitsubishi Ltd. .......................... 95,000 1,759,714
Canon, Inc.............................................. 90,000 1,985,009
Canon Sales Co., Inc. .................................. 35,200 782,424
Citizen Watch Co. Ltd. ................................. 96,000 686,482
Dai Nippon Printing Co. Ltd. ........................... 95,000 1,661,497
Daiichi Pharmaceutical Co. Ltd.......................... 68,000 1,089,687
Daikin Industries Ltd................................... 104,000 922,891
Daiwa House Industry Co. Ltd............................ 52,000 667,528
Fanuc................................................... 42,100 1,345,662
Fujitsu................................................. 61,000 567,589
Hitachi Ltd............................................. 204,000 1,898,165
Honda Motor Co.......................................... 27,000 769,966
Inax.................................................... 132,000 975,756
Isetan.................................................. 36,000 465,237
Ito-Yokado Co. Ltd...................................... 38,000 1,650,039
Kaneka Corp............................................. 52,000 265,667
Keio Teito Electric Railway............................. 118,000 575,411
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Kinki Nippon Railway...................................... 119,000 $ 741,251
Kirin Brewery Co. Ltd..................................... 113,000 1,109,848
Kokuyo.................................................... 22,000 542,087
Kuraray Co. Ltd........................................... 92,000 848,109
Kyocera Corp. ............................................ 9,000 559,835
Maeda Road Construction................................... 24,000 277,074
Matsushita Electric Industrial Co. ....................... 165,000 2,686,741
Mitsubishi Paper Mills.................................... 129,000 503,463
NGK Insulators............................................ 169,000 1,601,620
Nintendo Corp. Ltd........................................ 9,500 678,513
Nippon Denso Co. Ltd...................................... 71,000 1,706,643
Nippon Meat Packers, Inc.................................. 67,000 865,857
Nippon Steel Co........................................... 83,000 244,559
Okumura................................................... 109,000 661,118
Orix Corp................................................. 2,000 83,053
Osaka Gas Co.............................................. 426,000 1,163,453
Sankyo Co. Ltd. .......................................... 76,000 2,147,670
Sanwa Bank Ltd. .......................................... 51,000 694,236
Secom..................................................... 24,000 1,449,470
Seino Transportation ..................................... 37,000 408,030
Sekisui House Ltd. ....................................... 200,000 2,033,256
Shinmaywa Industries Ltd. ................................ 96,000 705,505
Sony Corp................................................. 31,600 2,066,374
Sumitomo Bank............................................. 110,000 1,582,666
Sumitomo Electric Industries.............................. 85,000 1,186,353
Takeda Chemical Industries................................ 77,000 1,612,044
TDK Corp.................................................. 19,000 1,235,892
Tokio Marine & Fire Insurance Co.......................... 94,000 882,743
Tokyo Electric Power...................................... 45,500 995,692
Tokyo Steel Mfg........................................... 76,700 1,090,333
Tonen Corp................................................ 75,000 872,319
Toray Industries, Inc..................................... 425,000 2,618,032
Toshiba Corp.............................................. 243,000 1,524,115
Toyo Suisan Kaisha........................................ 57,000 569,656
Toyota Motor Corp......................................... 27,000 774,619
Yamazaki Baking Co. Ltd. ................................. 50,000 796,933
------------
59,583,665
------------
MALAYSIA -- 1.25%
Hume Industries (Malaysia) Bhd............................ 48,000 302,198
Kuala Lumpur Kepong Bhd................................... 109,000 276,222
Land & General Holdings Bhd............................... 108,500 259,919
Malayan Banking Bhd....................................... 21,000 232,825
Malaysia International Shipping Bhd (Frgn.)............... 63,000 187,092
Nestle (Malaysia) Bhd..................................... 9,000 72,342
Public Bank Bhd (Frgn.)................................... 102,000 216,076
Resorts World Bhd......................................... 39,000 177,589
Sime Darby Bhd............................................ 101,000 397,921
Telekom Malaysia Bhd...................................... 34,000 302,910
Tenaga Nasional Bhd....................................... 120,000 574,936
YTL Corp. Bhd............................................. 34,000 183,092
------------
3,183,122
------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
NETHERLANDS -- 5.99%
ABN AMRO Holdings NV.................................... 19,560 $ 1,271,055
Akzo Nobel NV........................................... 2,500 341,100
DSM NV.................................................. 4,850 477,794
Hoogovens NV............................................ 7,100 295,542
ING Groep NV............................................ 52,834 1,899,910
KLM Royal Dutch Air Lines NV............................ 11,400 320,310
KPN NV.................................................. 33,797 1,287,635
Philips Electronics NV.................................. 16,700 675,840
Royal Dutch Petroleum Co................................ 25,230 4,418,204
Royal Dutch Petroleum Co. NY Shares (c)................. 5,200 887,900
Unilever NV............................................. 11,440 2,021,197
Vendex International NV................................. 19,450 830,985
VNU-Ver Ned Uitgevers................................... 27,100 565,595
------------
15,293,067
------------
NEW ZEALAND -- 3.04%
Brierley Investments Ltd................................ 1,395,600 1,291,766
Carter Holt Harvey Ltd.................................. 481,600 1,092,303
Fletcher Challenge Building............................. 156,550 481,165
Fletcher Challenge Energy............................... 156,550 453,512
Fletcher Challenge Forest Ltd........................... 317,445 531,580
Fletcher Challenge Paper................................ 313,100 643,765
Telecom Corp. of New Zealand Ltd........................ 474,200 2,419,079
Telecom Corp. of New Zealand Ltd. ADS (c)............... 10,500 850,500
------------
7,763,670
------------
SPAIN -- 3.50%
Acerinox S.A. .......................................... 2,500 360,561
Banco Bilbao-Vizcaya S. A............................... 12,500 673,650
Banco Central Hispanoamericano.......................... 11,430 293,054
Banco Intercontinental Espanol S.A...................... 2,091 323,597
Banco Popular Espanol S.A............................... 2,880 564,597
Banco Santander S.A..................................... 11,500 734,692
Cia Sevillana de Electricidad........................... 20,403 231,362
Empresa Nacional de Electridad S.A...................... 15,200 1,079,746
Fomento de Construcciones y Contratas S.A............... 4,300 400,000
Gas Natural SDG S.A. ................................... 1,500 348,261
Iberdrola S.A........................................... 80,600 1,140,142
Mapfre Corp. ........................................... 5,800 352,704
Repsol S.A.............................................. 6,200 237,371
Repsol S.A. ADR (c)..................................... 15,500 590,937
Telefonica de Espana.................................... 52,700 1,221,530
Vallehermosa S.A........................................ 7,700 166,638
Viscofan Envolturas Celulosicas S.A..................... 15,300 223,487
------------
8,942,329
------------
SWITZERLAND -- 1.79%
ABB AG (Bearer)......................................... 210 260,408
CS Holdings AG (Reg.)................................... 2,678 274,242
Nestle S.A. (Reg.)...................................... 1,251 1,338,860
Novartis AG (Reg.)...................................... 957 1,092,635
Roche Holding AG (Gen.)................................. 99 767,919
Schweiz Bankgesellschaft (Bearer)....................... 270 235,875
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Societe Generale de Surveillance Holding S.A. (Bearer)..... 75 $ 183,772
Zurich Versicherungs (Reg.)................................ 1,491 413,087
------------
4,566,798
------------
UNITED KINGDOM -- 19.60%
Abbey National PLC......................................... 63,000 824,833
Bank of Scotland........................................... 104,000 549,101
Bass PLC................................................... 39,500 555,015
B.A.T. Industries PLC...................................... 222,000 1,840,818
Booker PLC................................................. 50,500 345,281
British Energy PLC......................................... 479,000 1,205,083
British Gas PLC............................................ 451,300 1,733,987
British Petroleum Co. PLC.................................. 223,252 2,676,502
British Steel PLC.......................................... 379,000 1,041,066
British Telecommunications PLC............................. 428,200 2,891,065
Charter PLC................................................ 57,171 724,544
Coats Viyella PLC.......................................... 261,100 594,323
FKI PLC.................................................... 213,625 738,529
General Electric Co. PLC................................... 436,700 2,855,030
Glaxo Wellcome PLC......................................... 67,500 1,095,157
Grand Metropolitan PLC..................................... 282,700 2,220,765
Guinness PLC............................................... 224,200 1,755,460
Hanson PLC................................................. 451,500 629,766
Hillsdown Holdings PLC..................................... 321,900 1,101,831
House of Fraser PLC........................................ 360,800 947,849
HSBC Holdings PLC.......................................... 72,000 1,609,310
Imperial Chemical Industries PLC........................... 24,000 315,660
Legal & General Group PLC.................................. 159,000 1,012,288
Lloyds TSB Group PLC....................................... 370,185 2,727,446
Marks & Spencer PLC........................................ 184,900 1,553,755
Millennium Chemicals, Inc. (b)............................. 3,707 65,799
Mirror Group PLC........................................... 153,600 566,504
National Power PLC......................................... 106,500 891,297
National Westminster Bank PLC.............................. 64,500 756,713
Northern Foods PLC......................................... 144,000 503,988
Peninsular & Oriental Steam Navigation Co.................. 177,700 1,794,335
Reckitt & Colman PLC....................................... 34,746 430,534
Redland PLC................................................ 57,600 361,294
RJB Mining PLC............................................. 131,000 964,060
Royal & Sun Alliance Insurance Group PLC................... 106,149 807,517
RTZ Corp. PLC.............................................. 70,800 1,134,763
Sainsbury (J.) PLC......................................... 147,000 976,142
Scottish Hydro-Electric PLC................................ 116,800 655,663
Sears PLC.................................................. 437,700 711,646
Sedgwick Group PLC......................................... 294,000 661,664
SmithKline Beecham PLC..................................... 84,800 1,174,835
Smurfit (Jefferson) Group PLC.............................. 156,000 463,221
Tesco PLC.................................................. 126,900 769,913
Thames Water PLC........................................... 84,600 886,830
Unilever PLC............................................... 40,200 974,556
Vodafone Group PLC......................................... 118,500 499,919
Yorkshire Water PLC........................................ 36,000 436,522
------------
50,032,179
------------
Total Non-U.S. Equities
(Cost $215,959,551)....................................... 234,864,028
------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
Short-Term Investments -- 6.43%
<S> <C> <C>
COMMERCIAL PAPER -- 6.43%
Burlington Northern Santa Fe
5.650%, due 01/17/97................................ $ 1,500,000 $ 1,496,233
Case Credit Corp.
5.510%, due 01/07/97................................ 1,000,000 999,082
Cincinnati Bell, Inc.
7.250%, due 01/02/97................................ 3,032,000 3,031,389
Crown Cork & Seal Co., Inc.
5.520%, due 01/10/97................................ 2,000,000 1,997,240
5.580%, due 01/29/97................................ 1,000,000 995,660
5.580%, due 01/31/97................................ 1,000,000 995,350
CSX Corp. 5.520%, due 01/15/97....................... 1,500,000 1,496,780
Rite Aid Corp.
5.650%, due 01/06/97................................ 1,500,000 1,498,823
5.600%, due 01/21/97................................ 1,000,000 996,889
Tyson Foods, Inc.
5.750%, due 01/09/97................................ 900,000 898,850
Vastar Resources, Inc.
6.020%, due 01/02/97................................ 1,000,000 999,833
Whirlpool Financial Corp.
6.000%, due 01/03/97................................ 1,000,000 999,667
------------
Total Short-Term Investments
(Cost $16,405,796).................................. 16,405,796
------------
Total Investments
(Cost $232,365,347) -- 98.44% (a)................... 251,269,824
------------
Cash and other assets,
less liabilities -- 1.56%........................... 3,994,983
------------
Net Assets -- 100%................................... $255,264,807
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $232,365,347; net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 31,057,745
Gross unrealized depreciation............................... (12,153,268)
------------
Net unrealized appreciation............................... $ 18,904,477
============
</TABLE>
(b) Non-income producing security
(c) Denominated in U.S. dollars
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Non-U.S. Equity Fund had the following open forward foreign currency
contracts as of December 31, 1996:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Canadian Dollar......... 02/20/97 3,200,000 $ 2,342,279 $ (60,845)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar....... 02/20/97 5,750,000 4,564,330 (122,570)
Belgian Franc........... 02/20/97 135,000,000 4,264,267 202,899
British Pound........... 02/20/97 2,150,000 3,675,500 (363,834)
Dutch Guilder........... 02/20/97 23,500,000 13,629,905 584,762
French Franc............ 02/20/97 113,000,000 21,799,221 576,855
German Mark............. 02/20/97 16,400,000 10,675,842 439,372
Hong Kong Dollars....... 02/20/97 17,600,000 2,275,681 (6)
Japanese Yen............ 02/20/97 505,000,000 4,381,039 294,604
Spanish Peseta.......... 02/20/97 420,000,000 3,224,988 72,233
Swiss Franc............. 02/20/97 5,700,000 4,266,553 387,268
----------
Total................. $2,010,738
==========
FUTURES CONTRACTS (NOTE 5)
The Non-U.S. Equity Fund had the following open index futures contracts as of
December 31, 1996:
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE LOSS
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Topix, 34 contracts..... March 1997 $ 4,484,708 $ 4,311,881 $ (172,827)
==========
</TABLE>
The segregated cash pledged to cover margin requirements for the open positions
at December 31, 1996 was $1,068,007.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $232,365,347) (Note 1)............... $251,269,824
Cash............................................................. 6,576,841
Foreign currency, at value (Cost $796,042)....................... 805,150
Receivables:
Investment securities sold...................................... 528,733
Dividends....................................................... 640,537
Fund shares sold................................................ 120,851
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 2,010,738
Other assets..................................................... 50,759
------------
TOTAL ASSETS.................................................. 262,003,433
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 5,090,839
Fund shares redeemed............................................ 1,093,192
Variation margin (Note 5)....................................... 172,827
Investment advisory fees (Note 2)............................... 160,210
Accrued expenses................................................ 221,558
------------
TOTAL LIABILITIES............................................. 6,738,626
------------
NET ASSETS........................................................ $255,264,807
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $233,253,507
Accumulated undistributed net investment income.................. 199,582
Accumulated net realized gain.................................... 1,042,476
Net unrealized appreciation...................................... 20,769,242
------------
NET ASSETS.................................................... $255,264,807
============
OFFERING PRICE PER SHARE:
Brinson Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $253,355,869 and 22,855,725 shares is-
sued and outstanding) (Note 7)................................. $ 11.09
============
SwissKey Fund Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $1,908,938 and 173,185 shares issued
and outstanding) (Note 7)...................................... $ 11.02
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $295,617 for foreign taxes withheld)........... $ 2,331,420
Interest......................................................... 507,549
-----------
TOTAL INCOME.................................................. 2,838,969
-----------
EXPENSES:
Advisory (Note 2)................................................ 933,582
Administration................................................... 72,871
Accounting....................................................... 70,594
Custodian........................................................ 45,674
Distribution (Note 6)............................................ 6,504
Other............................................................ 147,475
-----------
TOTAL EXPENSES................................................ 1,276,700
Expenses deferred by Advisor (Note 2)......................... (103,191)
-----------
NET EXPENSES.................................................. 1,173,509
-----------
NET INVESTMENT INCOME ........................................ 1,665,460
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 5,365,490
Futures contracts............................................... (541,034)
Foreign currency transactions................................... 878,088
-----------
Net realized gain............................................. 5,702,544
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency ............................... 5,665,728
Futures contracts .............................................. (192,976)
Forward contracts............................................... (54,807)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 15,312
-----------
Change in net unrealized appreciation or depreciation......... 5,433,257
-----------
Net realized and unrealized gain.................................. 11,135,801
-----------
Net increase in net assets resulting from operations.............. $12,801,261
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 1,665,460 $ 3,265,964
Net realized gain............................. 5,702,544 22,260,813
Change in net unrealized appreciation or de-
preciation .................................. 5,433,257 10,918,989
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 12,801,261 36,445,766
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Fund Class........................... (2,168,905) (3,057,609)
SwissKey Fund Class.......................... (10,222) (8,629)
Distributions from net realized gain:
Brinson Fund Class........................... (12,209,010) (8,632,717)
SwissKey Fund Class.......................... (94,152) (14,731)
------------ ------------
Total distributions to shareholders.......... (14,482,289) (11,713,686)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 49,366,958 86,752,018
Shares issued on reinvestment of distribu-
tions........................................ 14,118,771 10,473,903
Shares redeemed............................... (20,168,223) (56,648,208)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 7)............. 43,317,506 40,577,713
------------ ------------
TOTAL INCREASE IN NET ASSETS................ 41,636,478 65,309,793
------------ ------------
NET ASSETS:
Beginning of period........................... 213,628,329 148,318,536
------------ ------------
End of period (including accumulated undis-
tributed net investment income of $199,582
and $785,599, respectively).................. $255,264,807 $213,628,329
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR YEAR AUGUST 31, 1993*
1996 ENDED ENDED THROUGH
BRINSON FUND CLASS (UNAUDITED) JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------
Income from investment
operations:
Net investment income. 0.07 0.18 0.15 0.10
Net realized and
unrealized gain
(loss)............... 0.51 2.05 (0.16) (0.34)
-------- -------- -------- -------
Total income (loss)
from investment
operations......... 0.58 2.23 (0.01) (0.24)
-------- -------- -------- -------
Less distributions:
Distributions from net
investment income.... (0.10) (0.18) -- (0.07)
Distributions from net
realized gain........ (0.56) (0.56) -- --
-------- -------- -------- -------
Total distributions. (0.66) (0.74) -- (0.07)
-------- -------- -------- -------
Net asset value, end of
period................. $ 11.09 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== =======
Total return (non-
annualized)............ 5.37% 23.64% (0.10%) (2.45%)
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $253,356 $212,366 $148,319 $71,544
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.08%** 1.20% 1.23% 1.60%**
After expense reim-
bursement............ 1.00%** 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 1.35%** 1.67% 1.93% 1.28%**
After expense reim-
bursement............ 1.43%** 1.87% 2.16% 1.88%**
Portfolio turnover
rate.................. 12% 20% 14% 12%
Average commission rate
paid per share........ $ 0.0224 $ 0.0219 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, 1995*
DECEMBER 31, 1996 THROUGH
SWISSKEY FUND CLASS (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.......... $ 11.12 $ 10.26
------- -------
Income from investment operations:
Net investment income....................... 0.02 0.12
Net realized and unrealized gain............ 0.50 1.45
------- -------
Total income from investment operations... 0.52 1.57
------- -------
Less distributions:
Distributions from net investment income.... (0.06) (0.15)
Distributions from net realized gain........ (0.56) (0.56)
------- -------
Total distributions....................... (0.62) (0.71)
------- -------
Net asset value, end of period................ $ 11.02 $ 11.12
======= =======
Total return (non-annualized)................. 4.85% 15.78%
Ratios/Supplemental data
Net assets, end of period (in 000s).......... $ 1,909 $ 1,262
Ratio of expenses to average net assets:
Before expense reimbursement................ 1.92%** 2.04%**
After expense reimbursement................. 1.84%** 1.84%**
Ratio of net investment income to average net
assets:
Before expense reimbursement................ 0.51%** 0.83%**
After expense reimbursement................. 0.59%** 1.03%**
Portfolio turnover rate...................... 12% 20%
Average commission rate paid per share....... $0.0224 $0.0219
</TABLE>
* Commencement of SwissKey Fund Class distribution
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund and Non-U.S. Equity Fund. The Fund has two classes of shares outstanding,
Brinson Fund Class and SwissKey Fund Class. There are an unlimited number of
shares of each class with par value of $0.001 authorized. Each share of the
Fund represents an identical interest in the investments of the Fund and has
the same rights. The following is a summary of significant accounting policies
consistently followed by the Non-U.S. Equity Fund (the "Fund") in the
preparation of its financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward contracts are valued daily using quoted forward exchange rates.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts, income receipts and expense accruals are translated at the
prevailing exchange rate on the date of each transaction. Realized and
unrealized foreign exchange gains or losses on investments are included as a
component of net realized and unrealized gain or loss on investments in the
statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the six months ended December 31, 1996,
therefore, no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its
net investment income on a semi-annual basis and net capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign
currency transactions. Differences in dividends per share between the classes
are due to distribution expenses.
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Fund Class shares will not incur any of the distribution expenses of
the SwissKey Fund Class.
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
19
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. As compensation for
these services, the Fund pays the Advisor a monthly fee based on the Fund's
average daily net assets. The Advisor has agreed to waive its fees and
reimburse the Fund to the extent total annualized expenses exceed a specified
percentage of the Fund's average daily net assets. The expense cap is 1.00% and
1.84% of the average daily net assets of the Brinson Fund Class and SwissKey
Fund Class, respectively. Investment advisory fees and other transactions with
affiliates for the six months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY FEES
FEE FEES DEFERRED
-------- -------- --------
<S> <C> <C> <C>
Non-U.S. Equity Fund................................. 0.80% $933,582 $103,191
</TABLE>
Certain officers of the Fund are also officers of the Advisor. All officers
serve without direct compensation from the Fund. Trustees' fees paid to
unaffiliated trustees were $3,496.
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1996, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
Non-U.S. Equity Fund.................................... $54,054,840 $24,504,265
</TABLE>
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Fund realizes a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the six months ended December
31, 1996, was the Fund's custodian.
5.FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such contracts to hedge a portion of
its portfolio. Risks of entering into futures contracts include the possibility
that there may be an illiquid market or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Fund, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended. The Plan governs payments
made for the expenses incurred in the promotion and distribution of the
SwissKey Fund Class of shares. Annual fees under the Plan, which include a
0.25% service fee, shall not exceed 0.84% of the average daily net assets of
the SwissKey Fund Class.
- --------------------------------------------------------------------------------
20
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Fund Class............ 4,323,938 $48,513,082 8,044,119 $85,398,213
SwissKey Fund Class........... 77,339 853,876 125,829 1,353,805
--------- ----------- --------- -----------
Total Sales................ 4,401,277 $49,366,958 8,169,948 $86,752,018
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Fund Class............ 1,296,079 $14,049,499 998,992 $10,452,496
SwissKey Fund Class........... 6,426 69,272 2,042 21,407
--------- ----------- --------- -----------
Total Dividend Reinvest-
ment...................... 1,302,505 $14,118,771 1,001,034 $10,473,903
========= =========== ========= ===========
Redemptions:
Brinson Fund Class............ 1,774,371 $19,898,922 5,347,882 $56,492,091
SwissKey Fund Class........... 24,099 269,301 14,352 156,117
--------- ----------- --------- -----------
Total Redemptions.......... 1,798,470 $20,168,223 5,362,234 $56,648,208
========= =========== ========= ===========
</TABLE>
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21
<PAGE>
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.
- --------------------------------------------------------------------------------
<PAGE>
LOGO
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY .
http://networth.galt.com.swisskey
