<PAGE>
-------------------------
The Brinson Funds
Brinson Global Fund
Brinson Global Equity Fund
Brinson Global Bond Fund
Annual Report
June 30, 1997
[LOGO OF THE BRINSON FUNDS]
Global Institutional Asset Management
-------------------------
<PAGE>
Trustees and Officers
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[LOGO OF THE BRINSON FUNDS]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Secretary
E. Thomas McFarlan Carolyn M. Burke, CPA
President Treasurer
Thomas J. Digenan, CFA, CPA Catherine E. Macrae
Vice President Assistant Secretary
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1
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
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[LOGO OF THE BRINSON FUNDS]
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation. Brinson Partners continues as the name used within North
America, while SBC Brinson is the name used outside North America. We are a
global investment management organization with over $75 billion in
institutional assets under discretionary active management. We are also the
investment manager for SBC Private Banking mutual fund assets which total $50
billion. In addition, we act as an investment advisor to SBC Private Banking.
The division manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. Our organization employs over 590 people in offices in Chicago,
Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore,
Sydney, Tokyo and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is focused upon both
risk and return considerations in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
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2
<PAGE>
Table of Contents
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[LOGO OF THE BRINSON FUNDS]
Shareholder Letter.................................................... 4
Global Economic and Market Highlights................................. 6
Global Fund........................................................... 7
Schedule of Investments............................................ 11
Financial Statements............................................... 19
Financial Highlights............................................... 22
Global Equity Fund.................................................... 24
Schedule of Investments............................................ 28
Financial Statements............................................... 34
Financial Highlights............................................... 37
Global Bond Fund...................................................... 39
Schedule of Investments............................................ 42
Financial Statements............................................... 45
Financial Highlights............................................... 48
The Brinson Funds--Notes to Financial Statements...................... 50
Report of Independent Auditors........................................ 54
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3
<PAGE>
Shareholder Letter
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[LOGO OF THE BRINSON FUNDS]
August 20, 1997
Dear Shareholder:
We are very pleased to present the Annual Report for The Brinson Funds for the
fiscal year ended June 30, 1997. The Brinson Funds consist of seven funds
divided into three distinct classifications: Global Funds, International Funds
and Domestic Funds. Within this Report, we'll focus on current global economic
outlook as well as our current strategies and performance updates for our three
Global Funds.
Before we begin the review of the global funds, I would like to discuss a few
improvements and achievements we have accomplished or put into place during the
last fiscal year. As you may know, Brinson Partners, Inc. is an established,
U.S.-based leader in the investment management business, managing portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. Our portfolio management capabilities
are accessed through separately managed portfolios, collective funds and, of
course, The Brinson Mutual Funds. Brinson Partners, Inc. has been in place over
16 years under the same investment philosophy and senior management.
International and global activities originated in the mid-1970s. We've
historically managed our portfolios out of our headquarters in Chicago with
offices in Tokyo and London. We have since expanded our investment analysis and
trading capabilities to include Basel, Frankfurt, Paris, Singapore and Sydney.
Our investment management team encompasses over 255 portfolio management and
research personnel in 8 locations worldwide. We feel that this additional
worldwide investment management expertise will provide additional investment
performance opportunities for our clients. We're also happy to say that the
Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund
have all received 5-star ratings from Morningstar in their respective
classifications for the period ending June 30, 1997.
The Brinson Global Fund, the Brinson Global Equity Fund and the Brinson Global
Bond Fund are all actively managed funds that provide integrated asset
management across and within security markets. The investment process is
strategic in nature and is driven by deviations of market price from fundamental
value. This philosophy offers the greatest potential for achieving enhanced,
long-term returns while controlling risk.
Brinson Global Fund
Since its performance inception on August 31, 1992, the Brinson Global Fund has
produced an annualized total return of 12.10%, compared to the return of 13.82%
of its benchmark, the GSMI Mutual Fund Index. The Brinson Global Fund achieved
this performance with a volatility of 4.89%, well below the benchmark volatility
of 6.29%. For the first half of 1997, the Brinson Global Fund returned 8.87%.
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4
<PAGE>
Shareholder Letter
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[LOGO OF THE BRINSON FUNDS]
Brinson Global Equity Fund
The Brinson Global Equity Fund has provided an annualized return of 13.49% since
its performance inception on January 31, 1994. This is compared to a 14.31%
return for the benchmark, the MSCI World Equity (Free) Index. This performance
was achieved with volatility of 7.79%, well below the 9.14% volatility of the
benchmark. For the first half of 1997, the Brinson Global Equity Fund returned
12.62%.
Brinson Global Bond Fund
The Brinson Global Bond Fund has provided an annualized return of 7.48% since
its performance inception on July 31, 1993. Over the same period, the return of
the Fund's benchmark, the Salomon World Government Bond Index, was 6.91%. This
performance was achieved with volatility of 4.21%, below the 5.41% volatility of
the benchmark. For the first half of 1997, the Brinson Global Bond Fund returned
0.63%.
Each of our Funds employ the same value-oriented investment philosophy applied
across the global spectrum. Each Fund also uses the resources of the entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is tailored
to specific objectives and focused upon both risk and return considerations in
the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach
allows for rapid responses to market changes, while providing each client with
the benefit of our talent and flexibility to customize portfolios to meet unique
requirements. The Reports that follow highlight the investment characteristics
in the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson, CFA
President and Chief Investment Officer
Brinson Partners, Inc.
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5
<PAGE>
Global Economic and Market Highlights
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[LOGO OF THE BRINSON FUNDS]
Fiscal restraint in continental Europe, caused by the drive to monetary union
(EMU), has amplified the economic slowdown, resulting in persistently high
unemployment. These economies are hindered by more structurally rigid labor
markets than in the U.S. and Asia. As yet, governments seem unwilling to take
hard measures necessary to free up wages and encourage labor mobility and
flexibility.
Apart from some temporary yen strengthening in the second quarter, a weaker
currency has aided the Japanese economy. Export-oriented industries in
particular have recovered significantly from the prolonged recession brought on
by the bursting of the "bubble" at the start of the 1990s. The hike in the
consumption tax from 3% to 5% at the start of April had caused a spurt in
spending in the first quarter. However, now that it is in place, there has been
some softening in demand, particularly for big ticket items, which is likely to
adversely affect domestically-oriented firms.
The currency turmoil in Southeast Asia is drawing attention to some of the
weaknesses of those economies. In Thailand, which was the initial casualty, the
crisis was precipitated by a bad bank loan problem. These problems in the
banking system prevented the central bank from increasing rates sufficiently to
maintain the peg to a strengthening U.S. dollar.
Global Environment
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
Major Markets ended ended ended 8/31/92*
Total Return in U.S. Dollars 6/30/97 6/30/97 6/30/97 to 6/30/97
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Equity 17.65% 29.32% 26.74% 19.33%
Non-U.S. Equities (currency unhedged) 11.21 13.64 9.79 12.71
Non-U.S. Equities (currency hedged) 17.76 22.77 14.62 14.94
U.S. Bonds 3.06 8.15 8.52 6.76
Non-U.S. Bonds (currency unhedged) -3.12 2.16 7.22 7.01
Non-U.S. Bonds (currency hedged) 4.67 13.02 11.97 9.76
U.S. Cash Equivalents 2.52 5.14 5.17 4.35
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</TABLE>
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
Major Currencies ended ended ended 8/31/92*
Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97 to 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yen 1.43% -4.15% -4.83% 1.55%
Pound -2.75 7.11 2.54 -3.55
Deutschemark -11.56 -12.65 -2.98 -4.33
Canadian Dollar -0.65 -1.01 0.05 -2.90
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*Inception date of the Brinson Global Fund
</TABLE>
<PAGE>
Global Fund
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[LOGO OF THE BRINSON FUNDS]
The Global Fund is diversified across the equity and fixed income markets of the
U.S. and a broad range of other countries. This Fund is actively managed within
an asset allocation framework, involving value-based market, currency and
individual security selection. Our senior asset allocation, equity and fixed
income professionals form the investment team for this portfolio, supported by a
globally integrated market analysis system. Security selection within each
market is based on the fundamental research of our analytical teams in Chicago,
Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The Brinson Global Fund has provided an annualized return of 12.10% since its
inception on August 31, 1992. This compares with the corresponding 13.82% return
of its benchmark, the GSMI Mutual Fund Index. Fund performance over this period
was achieved with an annualized volatility of 4.89%, well below the benchmark
volatility of 6.29%. For the year ended June 30, 1997, the Fund returned 18.79%,
while the benchmark returned 18.00%. For the first half of 1997, the Brinson
Global Fund returned 8.87% compared to the 10.69% return of the benchmark. A
substantial positive contribution to performance came from the active overweight
of the U.S. dollar relative to the yen, deutschemark and DM-related currencies.
These currencies moved from a substantially overvalued status to levels that
were closer to our long-term equilibriums.
The Fund's market strategy centers on reducing the risk of exposure to the
overpriced equity markets; the relatively attractive bond markets are the
primary overweights. Consequently, market allocation made a substantial negative
contribution to Fund performance. Numerous equity markets provided double-digit
returns in dollar-hedged terms. Bond markets, especially outside the U.S.,
provided positive returns. However, bond markets rallies failed to match the
torrid pace of world equity markets.
The strategy for emerging markets equities is neutral to the normal policy
exposure of 3.0%. The emerging markets debt strategy mirrors the developed bond
market overweight, with a 3.0% exposure relative to the 2.0% normal policy. A
small underweight is carried in the U.S. high yield bond market.
<PAGE>
Global Fund
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[LOGO OF THE BRINSON FUNDS]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 8/31/92*
ended ended ended to
6/30/97 6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Global Fund 8.87% 18.79% 15.87% 12.10%
GSMI Mutual Fund Index
(currency unhedged)** 10.69 18.00 17.08 13.82
GSMI Mutual Fund Index
(currency hedged)** 12.82 21.04 18.61 14.56
- --------------------------------------------------------------------
</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.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Fund and the GSMI Mutual Fund Index (currency unhedged and hedged) if you had
invested $1,000,000 on August 31, 1992, and had reinvested all your income
dividends and capital gain distributions through June 30, 1997. No adjustment
has been made for any income taxes payable by shareholders on income dividends
and capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors may
realize a gain or loss upon redemption.
Brinson Global Fund
vs. GSMI Mutual Fund Index (currency unhedged and hedged)
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GSMI Mutual GSMI Mutual
Brinson Fund Index GSMI Mutual Index
Global Fund (currency unhedged) (currency hedged)
- ---------------------------------------------------------------
<S> <C> <C> <C>
8/31/92 $1,000,000 $1,000,000 $1,000,000
12/31/92 $1,032,925 $1,030,818 $1,056,148
6/30/93 $1,107,567 $1,119,367 $1,128,641
12/31/93 $1,148,054 $1,179,875 $1,197,875
6/30/94 $1,116,140 $1,164,880 $1,155,979
12/31/94 $1,126,372 $1,196,684 $1,186,936
6/30/95 $1,256,423 $1,364,746 $1,323,275
12/31/95 $1,398,239 $1,500,881 $1,487,721
6/30/96 $1,462,269 $1,584,244 $1,593,741
12/31/96 $1,595,424 $1,688,876 $1,709,915
6/30/97 $1,736,975 $1,869,379 $1,929,059
</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.
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8
<PAGE>
Global Fund
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[LOGO OF THE BRINSON FUNDS]
Asset Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------------------------------------
<S> <C> <C>
U.S. Equity 40.0% 23.0%
Non-U.S. Equities 22.0 17.0
Japan Equities 6.5 4.0
Other Equities 15.5 13.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 33.5
U.S. Bonds 19.0 29.5
International $ Bonds 2.0 4.0
High Yield Bonds 3.0 2.5
Non-U.S. Bonds 9.0 18.0
Japan Bonds 2.7 0.0
Other Bonds 6.3 18.0
Emerging Markets Debt 2.0 3.0
Cash Equivalents 0.0 0.0
- -------------------------------------------------------------
100.0% 100.0%
</TABLE>
Currency Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------------------------------------
<S> <C> <C>
U.S. 66.0% 69.5%
Japan 9.6 9.6
U.K. 4.7 1.4
Continental Europe 13.0 13.0
Canada 1.4 1.4
Emerging Markets 3.0 3.0
Other 2.3 2.1
- -------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of June 30, 1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------------
<S> <C>
1. Xerox Corp. 1.36%
2. Chase Manhattan Corp. 1.17
3. Lockheed Martin Corp. 1.08
4 Philip Morris Companies, Inc. 1.07
5. Aon Corp. 0.89
6 CIGNA Corp. 0.88
7. Goodyear Tire & Rubber Co. 0.80
8 Burlington Northern Santa Fe 0.80
9. Federal Express Corp. 0.74
10. Citicorp 0.73
- -------------------------------------------------------------
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------------
<S> <C>
1. Telecom Corp. of New Zealand Ltd. 0.24%
2. Glaxo Wellcome PLC 0.23
3. Royal Dutch Petroleum Co. 0.23
4. General Electric Co. PLC 0.20
5. Matsushita Electric Industrial Co. 0.19
6. British Telecommunications PLC 0.19
7. Toray Industries, Inc. 0.19
8. Lloyds TSB Group PLC 0.18
9. Broken Hill Proprietary Co. Ltd. 0.18
10. British Petroleum Co. PLC 0.17
- -------------------------------------------------------------
</TABLE>
9
<PAGE>
Global Fund
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[LOGO OF THE BRINSON FUNDS]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals............................. 0.59%
Housing/Paper........................ 1.20
Metals............................... 0.16
------
1.95
Capital Investment
Capital Goods........................ 1.99
Technology........................... 2.68
------
4.67
Consumer
Autos/Durables....................... 0.83
Discretionary........................ 1.24
Health: Drugs........................ 1.94
Health: Non-Drugs.................... 0.96
Non-Durables......................... 2.66
Retail/Apparel....................... 1.16
------
8.79
Energy................................. 1.14
Financial
Banks................................ 1.97
Non-Banks............................ 2.06
------
4.03
Post Venture........................... 1.18
Transportation......................... 1.51
Utilities.............................. 1.65
Services/Miscellaneous................. 2.18
------
Total U.S. Equities.................. 27.10*
------
NON-U.S. EQUITIES
Aerospace & Military................... 0.03%
Airlines............................... 0.11
Appliances & Household Durables........ 0.42
Automobiles............................ 0.46
Banking................................ 2.11
Beverages & Tobacco.................... 0.31
Broadcasting & Publishing.............. 0.27
Building Materials..................... 0.32
Business & Public Service.............. 0.70
Chemicals.............................. 0.72
Construction........................... 0.28
Data Processing........................ 0.19
Electric Components.................... 0.25
Electronics............................ 0.73
Energy................................. 1.28
Financial Services..................... 0.24
Food & House Products.................. 0.66
Forest Products........................ 0.37
Gold Mining............................ 0.02
Health & Personal Care................. 0.97
Industrial Components.................. 0.34
Insurance.............................. 0.85
Leisure & Tourism...................... 0.11
Machinery & Engineering................ 0.18
Merchandising.......................... 0.75
Metals--Steel.......................... 0.35
Miscellaneous Materials................ 0.12
Multi-Industry......................... 0.88
Non-Ferrous Metals..................... 0.40
Real Estate............................ 0.16
Recreation............................. 0.15
Shipping............................... 0.09
Telecommunications..................... 1.09
Textiles and Apparel................... 0.04
Transportation......................... 0.16
Utilities.............................. 0.86
Wholesale & International Trade........ 0.05
------
Total Non-U.S. Equities.............. 17.02
------
EMERGING MARKETS EQUITIES.............. 2.71
------
U.S. BONDS
Corporate Bonds
Asset-Backed......................... 0.80
CMO.................................. 0.75
Consumer............................. 0.82
Financial............................ 1.64
Industrial........................... 0.61
Telecommunications................... 0.02
Transportation....................... 0.31
------
4.95
U.S. Government Agencies............... 7.31
U.S. Government Obligations............ 10.83
International Dollar Bonds............. 3.57
------
Total U.S. Bonds..................... 26.66*
------
HIGH YIELD BONDS....................... 2.18
------
NON-U.S. BONDS
Foreign Government Bonds............... 17.22
------
EMERGING MARKETS DEBT.................. 3.32
------
SHORT-TERM INVESTMENTS................. 4.37*
------
TOTAL INVESTMENTS.................... 100.58
LIABILITIES, LESS CASH AND OTHER
ASSETS............................ (0.58)
------
NET ASSETS...................... 100.00%
======
</TABLE>
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* The Fund held a long position in U.S. Treasury futures on June 30, 1997 which
increased U.S. bond exposure from 26.66% to 31.76%. The Fund also held a short
position in stock index futures which reduced U.S. equity exposure from 27.10%
to 22.38%. These adjustments result in a net decrease in the Fund's exposure
to Short-Term Investments from 4.37% to 3.99%.
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10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Equities -- 46.83%
U.S. EQUITIES -- 27.10%
Aetna Life & Casualty Co............................. 20,800 $ 2,129,400
Allergan, Inc........................................ 53,800 1,711,512
Alza Corp. (b)....................................... 52,500 1,522,500
Aon Corp............................................. 105,499 5,459,547
Automatic Data Processing, Inc....................... 51,300 2,411,100
Beckman Instruments, Inc............................. 15,200 733,400
Birmingham Steel Corp................................ 21,100 327,050
Boston Technology, Inc. (b).......................... 20,100 594,206
Brinson Post-Venture Fund (b)........................ 423,765 7,248,708
Browning-Ferris Industries, Inc...................... 39,800 1,323,350
Burlington Northern Santa Fe......................... 54,400 4,889,200
Centerior Energy Co.................................. 45,200 505,675
Champion Enterprises, Inc. (b)....................... 26,000 390,000
Champion International Corp.......................... 1,600 88,400
Chase Manhattan Corp................................. 73,800 7,163,212
CIGNA Corp........................................... 30,400 5,396,000
Circuit City Stores, Inc............................. 77,600 2,759,650
Citicorp............................................. 36,900 4,448,756
CMS Energy Corp...................................... 57,900 2,040,975
Coca-Cola Enterprises, Inc........................... 42,300 972,900
Comerica, Inc........................................ 14,500 986,000
Comverse Technology, Inc. (b)........................ 9,700 504,400
Corning, Inc......................................... 67,200 3,738,000
Covance, Inc......................................... 26,472 511,240
CPC International, Inc............................... 23,000 2,123,187
CVS Corp............................................. 33,400 1,711,750
Dial Corp............................................ 31,900 498,437
Eastman Chemical Co.................................. 36,300 2,305,050
EMC Corp./Mass. (b).................................. 99,900 3,896,100
Enron Corp........................................... 101,300 4,134,306
Entergy Corp......................................... 6,000 164,250
Federal Express Corp. (b)............................ 78,100 4,510,275
Federated Department Stores (b)...................... 29,100 1,011,225
FileNet Corp. (b).................................... 10,900 158,050
First American Corp.-Tenn............................ 13,700 525,737
First Bank System, Inc............................... 10,700 913,512
First Data Corp...................................... 87,230 3,832,668
First of America Bank Corp........................... 10,150 464,362
First Security Corp.................................. 17,250 471,141
Fleetwood Enterprises, Inc........................... 11,300 336,881
Food Lion, Inc. Class A.............................. 83,800 599,694
Forest Laboratories, Inc. (b)........................ 24,100 998,644
Gannett Co., Inc..................................... 34,900 3,446,375
General Instrument Corp. (b)......................... 119,800 2,995,000
Genzyme Corp. (b).................................... 21,200 588,300
Geon Co.............................................. 14,900 301,725
Goodyear Tire & Rubber Co............................ 77,500 4,906,719
Harnischfeger Industries, Inc........................ 34,900 1,448,350
Health Care and Retirement Corp. (b)................. 35,400 1,181,475
Hibernia Corp. Class A............................... 29,300 408,369
Informix Corp. (b)................................... 28,100 252,900
Interpublic Group of Companies, Inc.................. 22,900 1,404,056
James River Corp. of Virginia........................ 42,900 1,587,300
Kroger Co. (b)....................................... 28,600 829,400
Lockheed Martin Corp................................. 64,120 6,640,428
Lyondell Petrochemical Co............................ 57,400 1,252,038
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Manor Care, Inc...................................... 46,798 $ 1,526,785
Martin Marietta Materials, Inc....................... 15,300 495,338
Masco Corp........................................... 61,300 2,559,275
Mattel, Inc.......................................... 76,024 2,575,313
Nabisco Holdings Corp. Class A....................... 53,600 2,137,300
National Service Industries Inc...................... 10,300 501,481
Nextel Communications, Inc. Class A (b).............. 80,100 1,516,894
Octel Communications Corp. (b)....................... 17,300 405,469
Old Republic International Corp...................... 18,896 572,785
Peco Energy Co....................................... 130,300 2,736,300
Pentair, Inc......................................... 27,696 910,506
Pharmacia & Upjohn, Inc.............................. 66,900 2,324,775
Philip Morris Companies, Inc......................... 148,200 6,576,375
Raytheon Co.......................................... 20,300 1,035,300
Regions Financial Corp............................... 13,600 430,100
Reynolds & Reynolds Co. Class A...................... 18,800 296,100
Schering Plough Corp................................. 92,100 4,409,288
Seagate Technology, Inc. (b)......................... 21,900 770,606
Timken Co............................................ 36,300 1,290,919
Trinity Industries, Inc.............................. 9,700 307,975
Tyson Foods, Inc. Class A............................ 107,100 2,048,288
UCAR International, Inc. (b)......................... 1,600 73,200
Ultramar Diamond Shamrock Corp....................... 59,808 1,951,236
US Bancorp........................................... 32,000 2,052,000
Vencor, Inc. (b)..................................... 27,400 1,157,650
Viad Corp............................................ 51,600 993,300
Westvaco Corp........................................ 12,598 396,050
Witco Corp........................................... 5,200 197,275
Xerox Corp........................................... 106,000 8,360,750
York International Corp.............................. 32,700 1,504,200
360 Communications Co. (b)........................... 15,566 266,568
------------
Total U.S. Equities.................................. 166,132,286
------------
NON-U.S. EQUITIES -- 17.02%
AUSTRALIA -- 0.92%
Amcor Ltd............................................ 33,770 222,644
Boral Ltd............................................ 59,240 185,075
Brambles Industries Ltd.............................. 8,590 168,555
Broken Hill Proprietary Co. Ltd...................... 74,200 1,083,070
Coca-Cola Amatil Ltd................................. 11,270 145,228
CSR Ltd.............................................. 42,930 164,997
David Jones Ltd...................................... 147,010 203,758
Lend Lease Corp. Ltd................................. 9,596 201,301
M.I.M. Holdings Ltd.................................. 106,287 156,075
National Australia Bank Ltd.......................... 51,467 731,464
News Corp. Ltd....................................... 107,030 509,185
News Corp. Ltd. Preferred............................ 27,670 108,212
Pacific Dunlop Ltd................................... 70,210 206,197
Qantas Airways Ltd................................... 69,435 161,264
Rio Tinto Ltd........................................ 28,145 476,126
Santos Ltd........................................... 16,610 69,314
Westpac Banking Corp. Ltd............................ 77,408 462,212
WMC Ltd.............................................. 46,840 293,022
Woolworth's Ltd...................................... 30,790 100,345
------------
5,648,044
------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------
<S> <C> <C>
BELGIUM -- 0.64%
Delhaize-Le Lion S.A.................................... 4,670 $ 245,516
Electrabel S.A.......................................... 2,730 585,488
Fortis AG............................................... 216 48
Fortis AG Strip (b)..................................... 2,643 546,244
General de Banque S.A................................... 670 258,122
Groupe Bruxelles Lambert S.A............................ 1,670 280,114
Kredietbank NV.......................................... 1,000 403,338
Kredietbank VVPR........................................ 25 9,875
Petrofina S.A........................................... 1,425 540,073
Societe Generale de Belgique............................ 2,533 236,742
Solvay S.A. Class A..................................... 457 269,497
Tractebel............................................... 675 281,641
Tractebel Warrants "99" (b)............................. 605 6,496
Union Miniere Group S.A. (b)............................ 2,955 277,006
----------
3,940,200
----------
CANADA -- 0.59%
Alcan Aluminium Ltd..................................... 7,250 247,517
Bank of Montreal........................................ 6,390 249,653
Barrick Gold Corp....................................... 4,200 91,483
BCE, Inc................................................ 7,250 201,798
Canadian National Railway Co............................ 5,150 224,724
Canadian Pacific Ltd.................................... 15,650 445,814
Hudson's Bay Co......................................... 6,300 141,563
Imperial Oil Ltd........................................ 5,720 293,339
MacMillan Bloedel Ltd................................... 9,440 129,667
Moore Corp. Ltd......................................... 6,110 120,464
Noranda, Inc............................................ 7,440 160,438
Northern Telecom Ltd.................................... 2,290 206,575
NOVA Corp............................................... 9,920 84,848
Royal Bank of Canada.................................... 7,350 333,243
Seagram Co. Ltd......................................... 6,490 261,086
Thomson Corp............................................ 8,970 206,760
TransCanada Pipelines Ltd............................... 10,020 201,547
----------
3,600,519
----------
FINLAND -- 0.13%
Merita Ltd. Class A..................................... 25,950 86,430
Nokia Ab Class A........................................ 5,250 392,067
Outokumpu Class A....................................... 4,480 88,838
Pohjola Insurance Group Class B......................... 1,050 31,131
Sampo Insurance Co. Ltd. Class A........................ 480 46,667
UPM-Kymmene Corp........................................ 6,870 158,716
----------
803,849
----------
FRANCE -- 1.24%
Accor S.A............................................... 2,092 313,568
Alcatel Alsthom......................................... 2,932 367,561
AXA UAP................................................. 5,258 327,338
AXA UAP Rights (b)...................................... 4,328 16,808
Banque Nationale de Paris............................... 9,920 409,236
Cie Bancaire S.A........................................ 2,038 260,347
Cie de Saint Gobain..................................... 3,090 451,053
Cie de Suez............................................. 37,900 93,282
Cie Generale des Eaux................................... 1,844 236,507
Cie Generale des Eaux Warrants "01" (b)................. 4,224 2,533
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------
<S> <C> <C>
Colas.................................................... 814 $ 107,452
Dexia France............................................. 3,399 331,158
Elf Aquitaine S.A........................................ 4,594 496,098
Groupe Danone............................................ 2,000 330,778
Lafarge S.A.............................................. 2,480 154,393
Lagardere S.C.A.......................................... 6,600 191,896
LVMH..................................................... 1,099 295,762
Michelin Class B......................................... 6,570 394,917
Pechiney S.A. Class A.................................... 6,664 262,769
Peugeot S.A.............................................. 3,580 346,353
Rhone-Poulenc Class A.................................... 8,544 349,269
SEITA.................................................... 6,010 190,404
Societe Generale......................................... 3,334 372,526
Suez Lyonnaise des Eaux S.A.............................. 3,130 315,612
Thomson CSF.............................................. 6,900 177,936
Total S.A. Class B....................................... 3,986 403,284
Usinor Sacilor........................................... 23,380 422,122
----------
7,620,962
----------
GERMANY -- 1.63%
Allianz AG Holding....................................... 4,160 889,246
BASF AG.................................................. 11,480 423,929
Bayer AG................................................. 15,290 589,629
Bayerische Motoren Werke AG.............................. 590 486,870
Commerzbank AG........................................... 12,840 366,941
Daimler-Benz AG.......................................... 5,850 476,366
Deutsche Bank AG......................................... 12,311 723,428
Deutsche Telekom AG...................................... 25,380 624,086
Henkel KGaA-Vorzug AG.................................... 4,540 255,841
Hochtief AG.............................................. 3,500 156,663
Hoechst AG............................................... 4,710 199,741
M.A.N. AG................................................ 750 233,703
Mannesmann AG............................................ 897 400,989
Metro AG................................................. 3,420 372,891
Muenchener Rueckver AG................................... 211 598,152
Muenchener Rueckver AG Warrants "98" (b)................. 2 717
Preussag AG.............................................. 1,122 330,303
RWE AG................................................... 8,870 381,757
Schering AG.............................................. 4,805 515,078
Siemens AG............................................... 5,650 338,657
Thyssen AG............................................... 2,240 539,240
Veba AG.................................................. 10,339 584,409
Volkswagen AG............................................ 710 538,632
----------
10,027,268
----------
HONG KONG -- 0.21%
Cheung Kong Holdings Ltd................................. 14,000 138,242
China Light & Power Co. Ltd.............................. 26,500 150,162
Guoco Group Ltd.......................................... 14,000 73,729
Hang Seng Bank Ltd....................................... 9,700 138,351
Hong Kong Telecommunications Ltd......................... 41,200 98,383
Hutchison Whampoa Ltd.................................... 26,000 224,853
Jardine Matheson Holdings ADR (c)........................ 9,200 65,320
New World Development Co. Ltd............................ 16,000 95,414
Sun Hung Kai Properties Ltd.............................. 7,000 84,255
Swire Pacific Ltd. Class A............................... 13,500 121,542
Wharf (Holdings) Ltd..................................... 21,000 91,077
----------
1,281,328
----------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------
<S> <C> <C>
ITALY -- 0.64%
Assicurazioni Generali.................................. 21,080 $ 382,822
Banca Commerciale Italiana.............................. 55,000 113,782
Credito Italiano Spa.................................... 141,000 257,720
Danieli & Co. Savings (Risp)............................ 36,000 125,889
Edison Spa.............................................. 22,200 110,315
ENI ADR (c)............................................. 7,600 432,250
ENI Spa................................................. 31,000 175,360
Fiat Spa-Priv........................................... 156,000 287,887
INA-Istituto Nazionale delle Assicurazioni.............. 87,000 132,430
Istituto Mobilaire Italiano Spa......................... 22,500 202,321
Italgas Spa............................................. 30,300 97,943
La Rinascente Spa....................................... 18,000 99,918
La Rinascente Spa Rights (b)............................ 45,200 2,019
La Rinascente Spa RNC................................... 27,200 66,102
La Rinascente Spa RNC Rights (b)........................ 45,200 7,358
La Rinascente Spa Warrants "99" (b)..................... 1,400 691
Mediobanca Spa.......................................... 11,000 66,718
Montedison Spa (b)...................................... 357,700 235,874
SAI-Savings (Risp)...................................... 24,500 75,451
Telecom Italia Mobile Spa............................... 60,000 193,946
Telecom Italia Mobile Spa RNC........................... 169,500 302,839
Telecom Italia Spa...................................... 48,000 143,591
Telecom Italia Spa RNC.................................. 194,500 384,656
----------
3,897,882
----------
JAPAN -- 4.16%
Amada Co. Ltd........................................... 40,000 353,054
Asahi Glass Co. Ltd..................................... 48,000 478,196
Bank of Tokyo-Mitsubishi, Ltd........................... 44,000 884,383
Canon, Inc.............................................. 31,000 845,233
Canon Sales Co., Inc.................................... 13,100 305,663
Citizen Watch Co. Ltd................................... 36,000 278,109
Dai Nippon Printing Co. Ltd............................. 36,000 814,821
Daiichi Pharmaceutical Co. Ltd.......................... 26,000 458,971
Daikin Industries Ltd................................... 39,000 354,453
Daiwa House Industry Co. Ltd............................ 20,000 244,691
Fanuc................................................... 15,900 611,378
Fujitsu................................................. 24,000 333,479
Hitachi Ltd............................................. 77,000 861,313
Honda Motor Co.......................................... 10,000 301,494
Inax.................................................... 37,000 277,427
Isetan.................................................. 13,000 161,321
Ito Yokado Co. Ltd...................................... 15,000 871,712
Kaneka Corp............................................. 40,000 250,983
Keio Teito Electric Railway............................. 45,000 214,323
Kinki Nippon Railway.................................... 45,000 275,277
Kirin Brewery Co. Ltd................................... 43,000 447,173
Kokuyo.................................................. 13,000 352,180
Kuraray Co. Ltd......................................... 46,000 458,271
Kyocera Corp............................................ 5,000 397,623
Maeda Road Construction................................. 8,000 68,863
Marui Co. Ltd........................................... 20,000 372,280
Matsushita Electric Industrial Co....................... 58,000 1,170,847
Mitsubishi Paper Mills.................................. 49,000 191,838
NGK Insulators.......................................... 64,000 704,710
Nintendo Corp. Ltd...................................... 3,900 327,187
Nippon Denso Co. Ltd.................................... 19,000 454,951
Nippon Meat Packers, Inc................................ 25,000 323,342
Nippon Steel Co......................................... 27,000 86,359
Okumura................................................. 40,000 212,182
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------
<S> <C> <C>
Osaka Gas Co........................................... 76,000 $ 218,509
Sankyo Co. Ltd......................................... 29,000 975,706
Sanwa Bank Ltd......................................... 19,000 282,269
Secom.................................................. 10,000 734,947
Seino Transportation................................... 27,000 292,581
Sekisui House Ltd...................................... 75,000 760,290
Shinmaywa Industries Ltd............................... 17,000 119,890
Sony Corp.............................................. 9,200 803,181
Sumitomo Bank.......................................... 42,000 690,029
Sumitomo Electric Industries........................... 32,000 536,922
Sumitomo Trust & Banking............................... 22,000 236,476
Takeda Chemical Industries............................. 23,000 647,208
TDK Corp............................................... 7,000 514,463
Tokio Marine & Fire Insurance Co....................... 36,000 471,904
Tokyo Electric Power................................... 9,900 208,503
Tokyo Steel Mfg........................................ 29,000 324,390
Tonen Corp............................................. 29,000 349,733
Toray Industries, Inc.................................. 161,000 1,149,498
Toshiba Corp........................................... 93,000 598,978
Toyo Suisan Kaisha..................................... 22,000 224,941
Toyota Motor Corp...................................... 10,000 295,377
Yamazaki Baking Co. Ltd................................ 19,000 335,402
-----------
25,515,284
-----------
MALAYSIA -- 0.32%
Hume Industries (Malaysia) Bhd......................... 20,000 91,917
Kuala Lumpur Kepong Bhd................................ 57,500 142,383
Land & General Holdings Bhd............................ 73,000 83,875
Malayan Banking Bhd.................................... 26,000 272,979
Malaysia International Shipping Bhd (Frgn.)............ 32,000 83,043
Nestle (Malaysia) Bhd.................................. 9,000 67,393
New Straits Times Press Bhd............................ 6,000 35,182
Perusahaan Otomobil Nasional Bhd....................... 12,000 56,101
Public Bank Bhd (Frgn.)................................ 72,000 112,393
Resorts World Bhd...................................... 30,000 90,333
Rothmans of Pall Mall Bhd.............................. 4,000 39,303
Sime Darby Bhd......................................... 62,000 206,339
Telekom Malaysia Bhd................................... 42,000 196,355
Tenaga Nasional Bhd.................................... 61,000 297,266
UMW Holdings Bhd....................................... 9,000 42,433
United Engineers Ltd................................... 15,000 108,162
YTL Corp. Bhd.......................................... 17,000 52,536
-----------
1,977,993
-----------
NETHERLANDS -- 1.07%
ABN AMRO Holdings NV................................... 27,047 505,242
Akzo Nobel NV.......................................... 860 118,073
DSM NV................................................. 1,610 160,482
Elsevier NV............................................ 23,880 399,767
Heineken NV............................................ 850 145,332
Hoogovens NV........................................... 2,860 159,692
ING Groep NV........................................... 18,760 866,524
KLM Royal Dutch Air Lines NV........................... 8,840 272,964
KPN NV................................................. 14,409 566,270
Philips Electronics NV................................. 8,450 606,375
Royal Dutch Petroleum Co............................... 26,120 1,361,125
Royal Dutch Petroleum Co. NY Shares (c)................ 13,600 739,500
Unilever NV............................................ 3,000 632,675
-----------
6,534,021
-----------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------
<S> <C> <C>
NEW ZEALAND -- 0.66%
Brierley Investments Ltd................................. 677,530 $ 661,292
Carter Holt Harvey Ltd................................... 234,110 604,570
Fletcher Challenge Building.............................. 80,886 242,873
Fletcher Challenge Energy................................ 88,821 267,904
Fletcher Challenge Forest Ltd............................ 153,913 223,250
Fletcher Challenge Paper................................. 159,786 386,641
Telecom Corp. of New Zealand Ltd......................... 293,830 1,493,686
Telecom Corp. of New Zealand Ltd. ADS (c)................ 3,800 154,850
----------
4,035,066
----------
SINGAPORE -- 0.30%
City Developments Ltd.................................... 18,000 176,248
DBS Land Ltd............................................. 27,000 85,355
Development Bank of Singapore Ltd........................ 16,000 201,427
Fraser & Neave Ltd....................................... 3,000 21,401
Hotel Properties Ltd..................................... 42,000 71,381
Keppel Corp. Ltd. (b).................................... 10,000 44,412
Oversea-Chinese Banking Corp. Ltd........................ 32,000 331,235
Singapore Airlines Ltd. (Frgn.).......................... 24,000 214,855
Singapore Press Holdings Ltd. (Frgn.).................... 10,000 201,427
Singapore Telecommunications, Ltd........................ 92,000 169,870
United Overseas Bank Ltd. (Frgn.)........................ 24,000 246,748
Wing Tai Holdings Ltd.................................... 22,000 63,393
----------
1,827,752
----------
SPAIN -- 0.44%
Acerinox S.A............................................. 570 107,008
Banco Bilbao-Vizcaya S.A................................. 3,240 263,703
Banco Central Hispanoamericano........................... 3,920 143,665
Banco Popular Espanol S.A................................ 750 184,096
Banco Santander S.A...................................... 7,980 246,340
Empresa Nacional de Electridad S.A....................... 4,960 417,184
Fomento de Construcciones y Contratas S.A................ 1,100 140,538
Gas Natural SDG S.A...................................... 860 188,233
Iberdrola S.A............................................ 16,410 207,538
Mapfre Corp.............................................. 1,430 76,230
Repsol S.A............................................... 3,910 165,631
Repsol S.A. ADR (c)...................................... 1,000 42,438
Telefonica de Espana..................................... 11,640 337,162
Vallehermosa S.A......................................... 2,670 72,164
Viscofan Envolturas Celulosicas S.A...................... 3,910 91,589
----------
2,683,519
----------
SWITZERLAND -- 0.45%
ABB AG (Bearer).......................................... 105 159,167
Alusuisse-Lonza Holding AG (Reg.)........................ 120 124,453
Ciba Specialty Chemicals AG (Reg.)....................... 358 33,150
CS Holdings AG (Reg.).................................... 1,023 131,568
Nestle S.A. (Reg.)....................................... 395 521,826
Novartis AG (Reg.)....................................... 478 765,246
Roche Holding AG (Gen.).................................. 56 507,223
Swiss Reinsurance Co. (Reg.)............................. 90 127,478
UBS (Bearer)............................................. 106 121,421
Zurich Versicherungs (Reg.).............................. 609 242,698
----------
2,734,230
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------
<S> <C> <C>
UNITED KINGDOM -- 3.62%
Abbey National PLC...................................... 25,620 $ 349,645
Bass PLC................................................ 15,070 183,845
B.A.T. Industries PLC................................... 93,484 836,276
BG PLC.................................................. 191,380 700,734
Booker PLC.............................................. 18,220 82,784
British Energy PLC...................................... 163,630 398,965
British Petroleum Co. PLC............................... 85,794 1,066,624
British Steel PLC....................................... 208,470 518,703
British Telecommunications PLC.......................... 155,980 1,157,811
BTR PLC................................................. 53,420 182,705
Centrica PLC............................................ 196,430 238,652
Charter PLC............................................. 28,846 382,869
Coats Viyella PLC....................................... 112,860 236,671
FKI PLC................................................. 128,500 363,568
General Electric Co. PLC................................ 202,550 1,210,210
Glaxo Wellcome PLC...................................... 67,600 1,397,903
Grand Metropolitan PLC.................................. 52,740 507,343
Guinness PLC............................................ 66,410 649,897
Hanson PLC.............................................. 52,102 258,407
Hillsdown Holdings PLC.................................. 138,520 390,765
House of Fraser PLC..................................... 143,400 380,666
HSBC Holdings PLC....................................... 30,050 924,481
Imperial Chemical Industries PLC........................ 11,450 158,930
Inchcape PLC............................................ 46,470 218,873
Legal & General Group PLC............................... 64,400 436,229
Lloyds TSB Group PLC.................................... 108,409 1,113,229
Marks & Spencer PLC..................................... 78,040 646,816
Mirror Group PLC........................................ 69,450 217,302
National Westminster Bank PLC........................... 27,380 367,968
Northern Foods PLC...................................... 82,040 271,714
Peninsular & Oriental Steam Navigation Co............... 50,040 498,026
Reckitt & Colman PLC.................................... 14,938 223,007
Redland PLC............................................. 27,860 157,650
Reuters Holdings PLC.................................... 30,530 321,636
Rio Tinto PLC........................................... 27,580 480,361
RJB Mining PLC.......................................... 56,570 338,940
Royal & Sun Alliance Insurance Group PLC................ 74,839 553,025
Sainsbury (J.) PLC...................................... 63,920 387,233
Scottish Hydro-Electric PLC............................. 29,480 203,615
Sears PLC............................................... 170,480 192,937
Sedgwick Group PLC...................................... 125,360 256,624
SmithKline Beecham PLC.................................. 37,590 691,616
Smurfit (Jefferson) Group PLC........................... 112,647 324,339
Tesco PLC............................................... 52,140 321,943
Thames Water PLC........................................ 35,210 404,342
Unilever PLC............................................ 8,010 229,162
Vodafone Group PLC...................................... 47,090 229,631
Williams PLC............................................ 62,010 335,412
Yorkshire Water PLC..................................... 29,190 190,924
-----------
22,191,008
-----------
Total Non-U.S. Equities................................. 104,318,925
-----------
EMERGING MARKETS EQUITIES -- 2.71%
Brinson Emerging Markets Equity Fund (b)................ 1,353,286 16,597,643
-----------
Total Equities (Cost $229,910,786)...................... 287,048,854
-----------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------------- ------------
<S> <C> <C>
Bonds -- 49.38%
U.S. BONDS -- 26.66%
<CAPTION>
U.S. CORPORATE BONDS -- 4.95%
Aetna Services Inc. 6.970%, due 08/15/36........... $ 265,000 $ 267,630
Bell Atlantic Corp. 8.000%, due 10/15/29........... 98,000 106,064
BellSouth Savings & Employee ESOP 9.125%, due
07/01/03.......................................... 289,556 301,553
Capital One Bank 6.830%, due 05/17/99.............. 1,946,000 1,953,877
Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due
03/15/02.......................................... 1,000,000 992,430
Chase Manhattan Credit Card Trust 96-4A 6.730%, due
02/15/03.......................................... 1,050,000 1,060,006
Chemical Master Credit Card Trust 95-2A 6.230%, due
06/15/03.......................................... 1,430,000 1,420,977
Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,009,480
Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,197
4.220%, due 03/02/99.............................. 2,385 2,363
Comcast Cable Communications 144-A 8.500%, due
05/01/27.......................................... 1,720,000 1,854,435
Continental Airlines, Inc. Pass Thru 144-A 7.461%,
due 04/01/15...................................... 1,850,000 1,871,514
CS First Boston Mortgage Securities Corp. 97-C1
7.150%, due 06/20/29.............................. 1,465,000 1,486,975
Dayton Hudson Credit Card Master Trust 95-1A 6.100%,
due 02/25/02...................................... 132,000 132,286
Donaldson Lufkin & Jenrette FRN 6.700%, due
06/30/00.......................................... 600,000 600,000
Eastman Chemical Co. 7.600%, due 02/01/27.......... 252,000 249,750
Ford Credit Grantor Trust 95-B 5.900%, due
10/15/00.......................................... 96,130 96,141
GE Capital Management Services, Inc. 94-7 Class A12
6.000%, due 02/25/09.............................. 1,637,884 1,546,212
GMAC 9.625%, due 12/15/01.......................... 331,000 366,251
Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,250,000 1,256,020
Lockheed Martin Corp. 7.700%, due 06/15/08......... 148,000 154,654
MBNA Global Capital Securities FRN 6.659%, due
02/01/27.......................................... 1,100,000 1,086,996
News America Holdings 7.750%, due 01/20/24......... 1,877,000 1,780,928
Premier Auto Trust
96-3A 6.500%, due 03/06/00........................ 215,000 216,408
96-4A 6.400%, due 10/06/01........................ 455,000 455,801
Residential Funding Mortgage
Security Insurance 8.500%,
due 06/25/26...................................... 1,440,000 1,477,087
Salomon, Inc.
6.500%, due 03/01/00.............................. 2,520,000 2,504,051
6.750%, due 02/15/03.............................. 550,000 538,981
Standard Credit Card Trust 95-1A 8.250%, due
01/07/07.......................................... 500,000 537,285
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Thrift Financial Corp. 11.250%,
due 01/01/16.......................................... $ 97,862 $ 105,732
Time Warner, Inc. 9.150%, due 02/01/23................. 1,815,000 2,003,154
Time Warner Entertainment, Inc. 8.375%, due 03/15/23... 1,206,000 1,236,095
WMX Technologies, Inc. 7.000%, due 10/15/06............ 1,500,000 1,485,904
-----------
30,322,237
-----------
INTERNATIONAL DOLLAR BONDS -- 3.57%
Abbey National PLC 7.350%, due 10/29/49................ 250,000 249,461
ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01........ 250,000 248,289
AT&T Corp. 8.250%, due 01/11/00........................ 645,000 669,300
Banque Paribas, Sub. Notes 6.875%, due 03/01/09........ 175,000 165,923
Bayerische Landesbank 6.850%, due 07/19/01............. 212,000 213,530
BBV International 7.000%, due 12/01/25................. 2,200,000 2,025,525
Credit Suisse-London 144-A 7.900%, due 05/01/07........ 2,600,000 2,672,805
Den Danske Bank 144-A 7.400%, due 06/15/10............. 2,050,000 2,065,640
DR Investments 144-A 7.450%, due 05/15/07.............. 320,000 323,218
Empresa Nacional Electric 7.875%, due 02/01/27......... 316,000 318,691
Hanson PLC Notes 6.750%, due 09/15/05.................. 290,000 282,680
International Telecom Satellite 8.125%, due 02/28/05... 335,000 354,934
Japanese Development Bank 8.375%, due 02/15/01......... 970,000 1,022,854
LKB Baden-Wuerttemberg Finance 8.125%, due 01/27/00.... 350,000 362,913
Pan Pacific Industry 144-A 0.000%, due 04/28/07........ 2,130,000 938,789
Petroliam Nasional 7.125%, due 08/15/05................ 420,000 419,825
Province of Quebec 7.500%, due 07/15/23................ 175,000 172,144
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%,
due 03/15/14.......................................... 1,910,000 1,996,897
Repsol International Finance 7.000%, due 08/01/05...... 735,000 737,634
Republic of Italy 6.875%, due 09/27/23................. 150,000 141,102
Republic of South Africa 9.625%, due 12/15/99.......... 1,079,000 1,140,233
Royal Bank of Scotland 7.375%, due 04/29/49............ 690,000 687,669
Skandinaviska Enskilda Banken 144-A 6.625%, due
03/29/49.............................................. 500,000 494,900
Soc Quimica & Minera de Ser 144-A 7.700%, due 09/15/06. 1,500,000 1,526,395
Southern Investments UK 6.800%, due 12/01/06........... 1,625,000 1,587,462
Swedbank FRN 7.773%, due 10/29/49...................... 270,000 274,725
Telstra Corp. Ltd. 6.500%, due 11/28/05................ 350,000 336,639
Usinor Sacilor 7.250%, due 08/01/06.................... 470,000 467,805
-----------
21,897,982
-----------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 7.31%
Federal Home Loan Mortgage Corp.
7.000%, due 03/15/10................................... $ 885,000 $ 881,316
5.800%, due 08/15/19................................... 2,399,000 2,256,931
7.500%, due 01/15/23................................... 749,116 715,683
7.238%, due 05/01/26................................... 396,144 408,013
Federal Home Loan Mortgage
Corp. Gold
8.000%, due 11/01/22................................... 159,672 163,315
8.000%, due 05/01/23................................... 1,672,660 1,710,818
9.000%, due 03/01/24................................... 1,232,440 1,313,128
9.000%, due 04/01/25................................... 1,959,533 2,068,531
9.500%, due 04/01/25................................... 55,514 59,452
Federal National Mortgage Association
5.000%, due 06/01/01................................... 1,534,205 1,465,626
6.500%, due 12/01/03 Balloon TBA....................... 2,520,000 2,486,925
6.220%, due 03/13/06................................... 1,700,000 1,643,732
8.000%, due 02/25/07................................... 1,635,000 1,682,049
6.500%, due 04/25/08................................... 113,544 108,826
6.500%, due 05/25/08................................... 1,040,147 1,022,069
6.500%, due 01/01/11................................... 905,405 886,731
9.000%, due 08/01/21................................... 319,738 339,549
8.000%, due 05/01/22................................... 136,316 139,256
8.500%, due 07/01/22................................... 769,021 809,264
6.500%, due 12/25/23................................... 2,330,000 2,232,546
9.000%, due 01/01/25................................... 1,113,176 1,172,313
9.000%, due 02/01/25................................... 2,066 2,176
6.500%, due 04/01/26................................... 1,606,732 1,536,944
6.500%, due 12/01/26 TBA............................... 6,135,000 5,868,526
7.500%, due 12/01/26 TBA............................... 4,035,000 4,043,837
6.070%, due 08/01/29 TBA............................... 1,430,000 1,413,019
Federal National Mortgage Association Strips 0.000%, due
04/01/27 principal only................................ 3,991,910 2,646,616
Government National Mortgage Association
10.000%, due 09/15/00.................................. 3,695 3,918
10.000%, due 05/15/01.................................. 6,787 7,196
9.000%, due 11/15/04................................... 23,281 24,365
11.000%, due 09/15/15.................................. 221,706 246,233
8.500%, due 05/15/21................................... 56,468 58,638
8.000%, due 08/15/22................................... 557,885 569,914
8.000%, due 11/15/22................................... 467,835 481,314
8.000%, due 12/15/22................................... 1,613,507 1,659,993
7.500%, due 11/15/24................................... 2,628,494 2,646,736
----------
44,775,498
----------
U.S. GOVERNMENT OBLIGATIONS -- 10.83%
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98................................... 172,000 170,925
7.750%, due 11/30/99................................... 215,000 222,458
6.625%, due 07/31/01................................... 9,570,000 9,665,700
6.250%, due 10/31/01................................... 7,910,000 7,875,394
7.000%, due 07/15/06................................... 4,615,000 4,747,681
8.125%, due 05/15/21................................... 1,500,000 1,716,095
6.000%, due 02/15/26................................... 12,628,000 11,298,120
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. Treasury Principal Strips
0.000%, due 02/15/03 .................................. $ 225,000 $ 157,441
0.000%, due 05/15/03 .................................. 1,960,000 1,348,539
0.000%, due 08/15/03 .................................. 6,280,000 4,249,550
0.000%, due 11/15/04................................... 28,467,000 17,637,584
0.000%, due 05/15/08 .................................. 15,095,000 7,319,113
-----------
66,408,600
-----------
Total U.S. Bonds........................................ 163,404,317
-----------
<CAPTION>
SHARES
----------
<S> <C> <C>
HIGH YIELD BONDS -- 2.18%
Brinson High Yield Fund (b)............................. 1,016,353 13,327,440
-----------
<CAPTION>
FACE
AMOUNT
----------
<S> <C> <C>
NON-U.S. BONDS -- 17.22%
AUSTRALIA -- 1.37%
Government of Australia
12.000%, due 11/15/01.............................. AUD 4,150,000 3,780,537
9.000%, due 09/15/04................................... 4,020,000 3,374,817
6.750%, due 11/15/06................................... 1,700,000 1,253,590
-----------
8,408,944
-----------
BELGIUM -- 0.76%
Kingdom of Belgium
5.000%, due 03/28/01............................... BEF 65,000,000 1,849,652
8.750%, due 06/25/02................................... 32,000,000 1,047,855
9.000%, due 03/28/03................................... 7,000,000 233,853
8.500%, due 10/01/07................................... 46,000,000 1,545,958
-----------
4,677,318
-----------
CANADA -- 2.54%
Government of Canada
7.500%, due 09/01/00............................... CAD 3,380,000 2,601,958
7.250%, due 06/01/03................................... 4,840,000 3,733,143
8.750%, due 12/01/05................................... 600,000 505,477
7.000%, due 12/01/06................................... 2,570,000 1,954,139
4.250%, due 12/01/21 (d)............................... 6,060,000 4,717,606
9.000%, due 06/01/25................................... 1,510,000 1,377,705
4.250%, due 12/01/26 (d)............................... 1,000,000 733,859
-----------
15,623,887
-----------
DENMARK -- 1.98%
Kingdom of Denmark
9.000%, due 11/15/98............................... DKK 3,200,000 514,600
9.000%, due 11/15/00................................... 14,600,000 2,505,959
8.000%, due 05/15/03................................... 8,700,000 1,485,010
7.000%, due 12/15/04................................... 16,900,000 2,730,986
8.000%, due 03/15/06................................... 19,000,000 3,224,788
7.000%, due 11/10/24................................... 11,300,000 1,685,448
-----------
12,146,791
-----------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------- ----------
<S> <C> <C>
FRANCE -- 0.72%
Government of France (OAT) 9.500%, due 01/25/01... FRF 8,300,000 $1,656,890
7.500%, due 04/25/05................................. 11,300,000 2,192,443
8.500%, due 12/26/12................................. 2,500,000 533,810
----------
4,383,143
----------
GERMANY -- 4.23%
Bundesrepublik Deutscheland
7.000%, due 09/20/99............................. DEM 7,000,000 4,300,987
8.500%, due 08/21/00................................. 2,180,000 1,413,385
9.000%, due 01/22/01................................. 5,500,000 3,649,202
8.375%, due 05/21/01................................. 1,580,000 1,037,617
6.750%, due 04/22/03................................. 4,900,000 3,068,616
6.750%, due 07/15/04................................. 6,300,000 3,938,133
6.875%, due 05/12/05................................. 800,000 501,320
6.000%, due 01/05/06................................. 1,350,000 798,720
6.250%, due 04/26/06................................. 2,500,000 1,501,635
6.250%, due 01/04/24................................. 2,900,000 1,619,081
Treuhandanstalt
7.750%, due 10/01/02................................. 4,500,000 2,934,839
6.250%, due 03/04/04................................. 1,900,000 1,157,707
----------
25,921,242
----------
ITALY -- 1.67%
Republic of Italy (BTP)
9.500%, due 12/01/97............................. ITL 900,000,000 531,590
9.500%, due 12/01/99................................. 3,900,000,000 2,449,104
10.500%, due 04/01/00................................ 995,000,000 645,478
12.000%, due 09/01/02................................ 1,700,000,000 1,233,911
9.000%, due 10/01/03................................. 5,100,000,000 3,349,844
8.500%, due 04/01/04................................. 3,100,000,000 1,996,280
----------
10,206,207
----------
NETHERLANDS -- 1.11%
Government of Netherlands
6.250%, due 07/15/98............................. NLG 1,400,000 734,834
8.500%, due 03/15/01................................. 2,100,000 1,221,865
8.750%, due 09/15/01................................. 700,000 415,184
6.500%, due 04/15/03................................. 200,000 110,141
7.250%, due 10/01/04................................. 2,400,000 1,371,306
8.250%, due 02/15/07................................. 4,815,000 2,937,954
----------
6,791,284
----------
SPAIN -- 0.43%
Kingdom of Spain
6.750%, due 04/15/00............................. ESP 145,000,000 1,026,890
7.900%, due 02/28/02................................. 100,000,000 744,815
10.000%, due 02/28/05................................ 100,000,000 839,443
----------
2,611,148
----------
SWEDEN -- 0.55%
Kingdom of Sweden
10.250%, due 05/05/03............................ SEK 12,300,000 1,919,350
6.000%, due 02/09/05................................. 11,500,000 1,456,819
----------
3,376,169
----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
--------- ------------
<S> <C> <C>
UNITED KINGDOM -- 1.86%
UK Treasury
8.000%, due 06/10/03............................ GBP 2,490,000 $ 4,318,960
8.500%, due 12/07/05................................ 2,570,000 4,656,882
8.500%, due 07/16/07................................ 1,200,000 2,191,271
8.750%, due 08/25/17................................ 130,000 252,533
------------
11,419,646
------------
Total Non-U.S. Bonds................................. 105,565,779
------------
EMERGING MARKETS DEBT -- 3.32% SHARES
-----------
Brinson Emerging Markets Debt
Fund (b)............................................ 1,066,734 20,369,079
------------
Total Bonds (Cost $296,423,259)...................... 302,666,615
------------
Short-Term Investments-- 4.37%
U.S. GOVERNMENT OBLIGATIONS -- 0.25% FACE AMOUNT
-----------
U.S. Treasury Bill 5.360%, due 11/13/97.............. $ 1,550,000 1,520,065
------------
COMMERCIAL PAPER -- 4.12%
American Stores Co. 5.830%, due 07/23/97............. 1,000,000 996,437
Crown Cork & Seal Co.
5.800%, due 07/09/97................................ 1,500,000 1,498,067
5.770%, due 07/15/97................................ 1,800,000 1,795,961
CSX Corp. 5.800%, due 07/22/97....................... 2,000,000 1,993,233
Enron Oil & Gas 6.520%, due 07/01/97................. 6,467,000 6,467,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................ 1,500,000 1,497,592
5.850%, due 08/11/97................................ 3,000,000 2,980,012
Norfolk Southern Corp.
5.770%, due 07/10/97................................ 1,064,000 1,062,465
5.780%, due 07/18/97................................ 1,500,000 1,495,906
Occidental Petroleum 5.800%, due 08/13/97............ 1,750,000 1,737,876
Sundstrand Corp. 5.800%, due 07/09/97................ 1,000,000 998,711
Tenneco, Inc.
5.780%, due 07/17/97................................ 1,750,000 1,745,504
5.800%, due 07/23/97................................ 1,000,000 996,456
------------
25,265,220
------------
Total Short-Term Investments
(Cost $26,784,066).................................. 26,785,285
------------
Total Investments
(Cost $553,118,111) -- 100.58% (a).................. 616,500,754
------------
Liabilities, less cash and other assets-- (0.58%).... (3,529,952)
------------
Net Assets -- 100%................................... $612,970,802
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $553,326,762; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $75,361,347
Gross unrealized depreciation................................ (12,187,355)
-----------
Net unrealized appreciation............................... $63,173,992
===========
</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 June 30,
1997.
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144-A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1997,
the value of these securities amounted to $13,744,593 or 2.24% of net
assets.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Fund had the following open forward foreign currency contracts as of
June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE LOCAL CURRENCY VALUE GAIN/(LOSS)
---------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Belgian Franc............... 08/05/97 90,000,000 $ 2,509,676 $ (58,084)
British Pound............... 08/05/97 7,800,000 12,967,150 348,700
Canadian Dollar............. 08/05/97 1,400,000 1,017,094 (30,810)
Danish Kroner............... 08/05/97 4,400,000 665,009 (25,957)
Dutch Guilder............... 08/05/97 28,900,000 14,788,206 (632,819)
French Franc................ 08/05/97 132,000,000 22,537,866 (836,060)
German Mark................. 08/05/97 25,900,000 14,902,615 (669,163)
Italian Lira................ 08/05/97 11,500,000,000 6,751,065 (130,539)
Japanese Yen................ 08/05/97 3,680,000,000 32,331,212 1,874,554
Swiss Franc................. 08/05/97 10,800,000 7,440,527 (114,033)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar........... 08/05/97 18,500,000 13,865,052 544,409
Belgian Franc............... 08/05/97 250,000,000 6,971,323 480,242
British Pound............... 08/05/97 20,300,000 33,747,839 (1,135,639)
Canadian Dollar............. 08/05/97 16,500,000 11,987,185 349,975
Danish Kroner............... 08/05/97 71,000,000 10,730,830 693,696
Dutch Guilder............... 08/05/97 38,000,000 19,444,700 1,376,647
French Franc................ 08/05/97 132,000,000 22,537,866 1,463,443
German Mark................. 08/05/97 57,800,000 33,257,574 2,231,938
Italian Lira................ 08/05/97 20,150,000,000 11,829,040 329,829
Swiss Franc................. 08/05/97 2,200,000 1,515,663 57,563
----------
Total...................... $6,117,892
==========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Fund had the following open futures contracts as of June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN/(LOSS)
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes,
60 contracts.............. September 1997 $ 6,301,388 $ 6,353,438 $ 52,050
10 year U.S. Treasury
Notes, 157 contracts...... September 1997 16,795,490 16,936,375 140,885
30 year U.S. Treasury
Bonds, 72 contracts....... September 1997 7,847,977 7,996,500 148,523
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500, 65
contracts................. September 1997 28,298,725 28,933,125 (634,400)
---------
Total..................... $(292,942)
=========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1997 was $1,520,065.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $506,645,477)....................... $558,957,884
Affiliated issuers (Cost $46,472,634).......................... 57,542,870
Cash........................................................... 1,054,556
Foreign currency, at value (Cost $1,121,492).................... 1,135,377
Receivables:
Investment securities sold..................................... 8,894,189
Dividends...................................................... 1,213,182
Interest....................................................... 5,013,738
Fund shares sold............................................... 129,728
Variation margin (Note 5)...................................... 106,656
Net unrealized appreciation on forward foreign currency con-
tracts......................................................... 6,117,892
Other assets.................................................... 16,660
------------
TOTAL ASSETS................................................. 640,182,732
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 24,097,873
Fund shares redeemed........................................... 2,558,669
Investment advisory fees (Note 2).............................. 371,662
Accrued expenses............................................... 183,726
------------
TOTAL LIABILITIES............................................ 27,211,930
------------
NET ASSETS....................................................... $612,970,802
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)........................................ $514,920,224
Accumulated distribution in excess of net investment income..... (964,704)
Accumulated net realized gain................................... 29,814,069
Net unrealized appreciation..................................... 69,201,213
------------
NET ASSETS................................................... $612,970,802
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $586,667,003 and 44,671,292 shares is-
sued and outstanding) (Note 7)................................ $ 13.13
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 76 shares issued and outstanding) (Note 7)......... $ 13.13
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $26,302,799 and 2,015,597 shares is-
sued and outstanding) (Note 7)................................ $ 13.05
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $8,019 for foreign taxes withheld).............. $16,746,503
Dividends (net of $386,201 for foreign taxes withheld)........... 4,910,912
-----------
TOTAL INCOME.................................................. 21,657,415
-----------
EXPENSES:
Advisory (Note 2)................................................ 4,294,925
Administration................................................... 340,936
Custodian........................................................ 135,269
Distribution (Note 6)............................................ 122,983
Other............................................................ 568,542
-----------
TOTAL EXPENSES................................................ 5,462,655
-----------
NET INVESTMENT INCOME ........................................ 16,194,760
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 39,756,574
Futures contracts............................................... (4,286,707)
Foreign currency transactions................................... 7,798,176
-----------
Net realized gain............................................. 43,268,043
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 29,265,335
Futures contracts............................................... (366,385)
Forward contracts............................................... 6,780,244
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 77,694
-----------
Change in net unrealized appreciation or depreciation......... 35,756,888
-----------
Net realized and unrealized gain................................. 79,024,931
-----------
Net increase in net assets resulting from operations............. $95,219,691
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................... $ 16,194,760 $ 15,718,942
Net realized gain............................... 43,268,043 33,576,934
Change in net unrealized appreciation or depre-
ciation........................................ 35,756,888 13,188,606
------------- -------------
Net increase in net assets resulting from opera-
tions.......................................... 95,219,691 62,484,482
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........ (24,660,333) (20,214,114)
Distributions in excess of net investment in-
come........................................... -- (1,430,745)
Distributions from net realized gain............ (26,428,094) (10,937,826)
------------- -------------
Total distributions to shareholders*............ (51,088,427) (32,582,685)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................... 192,297,100 109,483,562
Shares issued on reinvestment of distributions.. 49,580,585 31,162,315
Shares redeemed................................. (145,001,283) (64,262,463)
------------- -------------
Net increase in net assets resulting from capi-
tal share transactions (Note 7)................ 96,876,402 76,383,414
------------- -------------
TOTAL INCREASE IN NET ASSETS................. 141,007,666 106,285,211
------------- -------------
NET ASSETS:
Beginning of year............................... 471,963,136 365,677,925
------------- -------------
End of year (including accumulated undistributed
net investment income of
($964,704) and $9,848,069, respectively)....... $ 612,970,802 $471,963,136
============= =============
<CAPTION>
*DISTRIBUTIONS BY CLASS:
<S> <C> <C>
Distributions from and in excess of net invest-
ment income:
Brinson Class I................................. $ (23,918,105) $ (21,444,413)
SwissKey Class.................................. (742,228) (200,446)
Distributions from net realized gain:
Brinson Class I................................. (25,579,684) (10,892,522)
SwissKey Class.................................. (848,410) (45,304)
------------- -------------
Total distributions to shareholders............. $ (51,088,427) $ (32,582,685)
============= =============
</TABLE>
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>
YEAR ENDED JUNE 30, AUGUST 31, 1992*
-------------------------------------- THROUGH
BRINSON CLASS I 1997 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. 0.38 0.44 0.43 0.33 0.26
Net realized and
unrealized gain
(loss)............... 1.79 1.37 0.86 (0.23) 0.81
-------- -------- -------- -------- --------
Total income from
investment
operations......... 2.17 1.81 1.29 0.10 1.07
-------- -------- -------- -------- --------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.61) (0.62) (0.27) (0.27) (0.20)
Distributions from and
in excess of net
realized gain........ (0.65) (0.32) (0.10) (0.27) --
-------- -------- -------- -------- --------
Total distributions. (1.26) (0.94) (0.37) (0.54) (0.20)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
======== ======== ======== ======== ========
Total return (non-
annualized)............ 18.79% 16.38% 12.57% 0.77% 10.76%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $586,667 $457,933 $365,678 $278,859 $191,389
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.99% 1.04% 1.09% 1.14% 1.35%**
After expense reim-
bursement............ N/A N/A N/A 1.10% 1.05%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 3.03% 3.69% 4.27% 3.21% 3.26%**
After expense reim-
bursement............ N/A N/A N/A 3.25% 3.56%**
Portfolio turnover
rate.................. 150% 142% 238% 231% 149%
Average commission rate
paid per share........ $ 0.0326 $ 0.0291 N/A N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 12.18 $ 11.60
------- -------
Income from investment operations:
Net investment income........................... 0.34 0.39
Net realized and unrealized gain................ 1.75 1.10
------- -------
Total income from investment operations....... 2.09 1.49
------- -------
Less distributions:
Distributions from and in excess of net invest-
ment income.................................... (0.57) (0.59)
Distributions from net realized gain............ (0.65) (0.32)
------- -------
Total distributions........................... (1.22) (0.91)
------- -------
Net asset value, end of period.................... $ 13.05 $ 12.18
======= =======
Total return (non-annualized)..................... 18.13% 13.24%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $26,303 $14,030
Ratio of expenses to average net assets.......... 1.64% 1.69%**
Ratio of net investment income to average net as-
sets............................................ 2.38% 3.04%**
Portfolio turnover rate.......................... 150% 142%
Average commission rate paid per share........... $0.0326 $0.0291
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
The Global Equity Fund is actively managed, providing a fully integrated
approach to the primary equity markets across the world. Market selection and
currency strategies are managed within a global asset allocation framework.
Industry strategies and individual security selections are based on the
fundamental research of our analytical teams in Chicago, Basel, Frankfurt,
London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The Brinson Global Equity Fund has provided an annualized return of 13.49% since
January 31, 1994 (performance inception date), compared to the 14.31% return of
its benchmark, the MSCI World Equity (Free) Index. The Fund performance over
this period was achieved with a volatility of 7.79% vs. the benchmark of 9.14%.
For the year ended June 30, 1997, the Fund returned 21.26%, while the benchmark
returned 22.64%. For the first half of 1997, the Brinson Global Equity Fund
returned 12.62%, lagging the index's unhedged return of 15.51%.
Most major global equity markets have experienced extraordinarily strong
performance year-to-date, led by stellar results in Switzerland (45%), the
Netherlands (38%) and Spain (36%). The U.S. market responded vigorously to
positive corporate earnings surprises, rising 21%. While very good, this return
did not make the U.S. a standout performer. Nonetheless, the U.S. market's
continued strength has extended its fundamental overvaluation, leading to a
decision to increase the scale of the underweight from -10% to -15%. Japan's
comparatively low 10.34% hedged return made it a relative underperformer. Due to
this underperformance and subsequently improved attractiveness, the Japan
underweight was reduced from -10% to -2.5%, in two stages. Given the extreme
overvaluations of many equity markets, the cash allocation within the Global
Equity Fund was increased from 15% to 20% earlier in the year. In the first half
of the year, this risk hedge and the Switzerland underweight detracted from
Fund performance.
The Fund's defensive U.S. dollar overweight, underweight of the Japanese yen and
the core European currencies contributed strongly to Fund performance. As these
currencies returned to fair value, the underweight positions in the yen and
European currencies were gradually removed. At the current time, the Fund is
largely currency neutral.
Stock selection detracted from returns due to negative U.S. stock selection.
Stock selection in Japan had a significant beneficial impact on performance.
- --------------------------------------------------------------------------------
24
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
<TABLE>
<CAPTION>
Total Return
6 months 1 year 3 years 1/31/94*
ended ended ended to
6/30/97 6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Global Equity Fund 12.62% 21.26% 17.34% 13.49%
MSCI World Equity (Free) Index (currency unhedged) 15.51 22.64 17.48 14.31
MSCI World Equity (Free) Index (currency hedged) 19.22 28.04 20.38 15.17
- --------------------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson Global Equity Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Equity Fund and the MSCI World Equity (Free) Index (currency unhedged and
hedged) if you had invested $1,000,000 on January 31, 1994, and had reinvested
all your income dividends and capital gain distributions through June 30, 1997.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
Brinson Global Equity Fund
vs. MSCI World Equity (Free) Index (currency unhedged and hedged)
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson Global MSCI World Equity (Free) MSCI World Equity (Free)
Equity Fund Index (currency unhedged) Index (currency hedged)
-------------- ------------------------- ------------------------
<S> <C> <C> <C>
1/31/94 $1,000,000 $1,000,000 $1,000,000
6/30/94 $ 953,025 $ 974,101 $ 928,758
12/31/94 $ 956,520 $ 989,551 $ 943,274
6/30/95 $1,010,802 $1,082,851 $ 977,009
12/31/95 $1,166,324 $1,200,236 $1,146,472
6/30/96 $1,270,202 $1,287,765 $1,265,328
12/31/96 $1,367,688 $1,367,286 $1,358,885
6/30/97 $1,540,253 $1,579,321 $1,620,127
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on the market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
25
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Market Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -----------------------------------------------------------------
<S> <C> <C>
U.S. 45.5% 30.4%
Japan 17.3 14.8
Australia 1.4 2.5
Belgium 0.6 1.6
Canada 2.5 1.5
France 3.5 2.3
Germany 4.4 4.5
Hong Kong 2.0 0.8
Italy 1.6 1.7
Malaysia 1.1 1.5
Netherlands 2.6 2.9
New Zealand 0.2 1.7
Spain 1.2 1.1
Sweden 1.3 0.0
Switzerland 3.4 1.3
U.K. 9.4 9.8
Other Markets 2.0 1.6
Cash Reserves 0.0 20.0
- -----------------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Currency Allocation
As of June 30, 1997
Current
Benchmark Strategy
- -----------------------------------------------------------------
<S> <C> <C>
U.S. 45.5% 49.9%
Japan 17.3 17.3
Australia 1.4 1.4
Belgium 0.6 0.6
Canada 2.5 2.5
France 3.5 3.5
Germany 4.4 4.4
Hong Kong 2.0 0.0
Italy 1.6 1.6
Malaysia 1.1 1.1
Netherlands 2.6 2.6
New Zealand 0.2 1.7
Spain 1.2 1.2
Sweden 1.3 1.3
Switzerland 3.4 3.4
U.K. 9.4 5.4
Other Markets 2.0 2.1
- -----------------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Top Ten U.S. Equity Holdings
As of June 30, 1997
Percent of
Net Assets
- -----------------------------------------------------------------
<C> <S> <C>
1. Xerox Corp. 2.22%
2. Chase Manhattan Corp. 1.89
3. Lockheed Martin Corp. 1.77
4. Philip Morris Companies, Inc. 1.75
5. Aon Corp. 1.45
6. CIGNA Corp. 1.44
7. Burlington Northern Santa Fe 1.31
8. Goodyear Tire & Rubber Co. 1.30
9. Federal Express Corp. 1.20
10. Citicorp 1.19
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1997
Percent of
Net Assets
- -----------------------------------------------------------------
<C> <S> <C>
1. Royal Dutch Petroleum Co. 0.74%
2. Glaxo Wellcome PLC 0.67
3. Telecom Corp of New Zealand Ltd. 0.64
4. Matsushita Electric Industrial Co. 0.63
5. Toray Industries, Inc. 0.60
6. General Electric Co. PLC 0.58
7. British Telecommunications PLC 0.53
8. British Petroleum Co. PLC 0.53
9. Lloyds TSB Group PLC 0.51
10. Sankyo Co. Ltd. 0.49
- -----------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
26
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1997
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals............................................................. 0.95%
Housing/Paper......................................................... 1.96
Metals................................................................ 0.26
------
3.17
Capital Investments
Capital Goods......................................................... 3.23
Technology............................................................ 4.35
------
7.58
Consumer
Autos/Durables........................................................ 1.36
Discretionary......................................................... 2.02
Health: Drugs......................................................... 3.16
Health: Non-Drugs..................................................... 1.56
Non-Durables.......................................................... 4.33
Retail/Apparel........................................................ 1.89
------
14.32
Energy................................................................. 1.85
Financial
Banks................................................................. 3.20
Non-Banks............................................................. 3.35
------
6.55
Transportation......................................................... 2.45
Utilities.............................................................. 2.68
Services/Miscellaneous................................................. 3.54
------
Total U.S. Equities............................................ 42.14*
------
NON-U.S. EQUITIES
Aerospace & Military................................................... 0.07%
Airlines............................................................... 0.28
Appliances & Household Durables........................................ 1.29
Automobiles............................................................ 1.35
Banking................................................................ 5.87
Beverages & Tobacco.................................................... 0.92
Broadcasting & Publishing.............................................. 0.76
Building Materials..................................................... 0.92
Business & Public Service.............................................. 2.06
Chemicals.............................................................. 2.14
Construction........................................................... 0.88
Data Processing........................................................ 0.62
Electric Components.................................................... 0.80
Electronics............................................................ 2.09
Energy................................................................. 3.54
Financial Services..................................................... 0.70
Food & House Products.................................................. 1.88
Forest Products........................................................ 0.96
Gold Mining............................................................ 0.03
Health & Personal Care................................................. 2.92
Industrial Components.................................................. 1.06
Insurance.............................................................. 2.40
Leisure & Tourism...................................................... 0.30
Machinery & Engineering................................................ 0.58
Merchandising.......................................................... 2.27
Metals-Steel........................................................... 1.02
Miscellaneous Materials................................................ 0.36
Multi-Industry......................................................... 2.37
Non-Ferrous Metal...................................................... 1.03
Real Estate............................................................ 0.42
Recreation............................................................. 0.44
Shipping............................................................... 0.25
Telecommunications..................................................... 3.04
Textiles & Apparel..................................................... 0.11
Transportation......................................................... 0.50
Utilities.............................................................. 2.40
Wholesale & International Trade........................................ 0.15
------
Total Non-U.S. Equities........................................ 48.78
SHORT-TERM INVESTMENTS................................................. 8.38*
------
TOTAL INVESTMENTS.............................................. 99.30
CASH AND OTHER ASSETS, LESS
LIABILITIES.......................................................... 0.70
------
NET ASSETS..................................................... 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
* The Fund held a short position in stock index futures on June 30, 1997 which
reduced U.S. equity exposure from 42.14% to 28.35%. This adjustment results in
an increase in the Fund's exposure to Short-Term Investments from 8.38% to
22.17%.
- --------------------------------------------------------------------------------
27
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C>
Equities -- 90.92%
U.S. EQUITIES -- 42.14%
Aetna Life & Casualty Co................................... 6,000 $ 614,250
Allergan, Inc.............................................. 15,700 499,456
Alza Corp. (b)............................................. 15,300 443,700
Aon Corp................................................... 30,750 1,591,312
Automatic Data Processing, Inc............................. 15,000 705,000
Beckman Instruments, Inc................................... 4,500 217,125
Birmingham Steel Corp...................................... 6,100 94,550
Boston Technology, Inc. (b)................................ 5,800 171,463
Browning-Ferris Industries, Inc............................ 11,600 385,700
Burlington Northern Santa Fe............................... 16,000 1,438,000
Centerior Energy Co........................................ 14,900 166,694
Champion Enterprises, Inc. (b)............................. 7,200 108,000
Champion International Corp................................ 400 22,100
Chase Manhattan Corp....................................... 21,400 2,077,137
CIGNA Corp................................................. 8,900 1,579,750
Circuit City Stores, Inc................................... 22,600 803,712
Citicorp................................................... 10,800 1,302,075
CMS Energy Corp............................................ 16,700 588,675
Coca-Cola Enterprises, Inc................................. 12,300 282,900
Comerica, Inc.............................................. 4,200 285,600
Comverse Technology, Inc. (b).............................. 2,800 145,600
Corning, Inc............................................... 19,600 1,090,250
Covance, Inc............................................... 7,700 148,706
CPC International, Inc..................................... 6,700 618,494
CVS Corp................................................... 9,700 497,125
Dial Corp.................................................. 9,200 143,750
Eastman Chemical Co........................................ 10,400 660,400
EMC Corp./Mass. (b)........................................ 29,100 1,134,900
Enron Corp................................................. 29,400 1,199,887
Entergy Corp............................................... 1,800 49,275
Federal Express Corp. (b).................................. 22,800 1,316,700
Federated Department Stores (b)............................ 8,800 305,800
FileNet Corp. (b).......................................... 3,000 43,500
First American Corp.-Tenn.................................. 4,000 153,500
First Bank System, Inc..................................... 2,400 204,900
First Data Corp............................................ 25,404 1,116,188
First of America Bank Corp................................. 3,000 137,250
First Security Corp........................................ 5,100 139,294
Fleetwood Enterprises, Inc................................. 2,300 68,569
Food Lion, Inc. Class A.................................... 28,100 201,091
Forest Laboratories, Inc. (b).............................. 7,000 290,062
Gannett Co., Inc........................................... 10,300 1,017,125
General Instrument Corp. (b)............................... 34,900 872,500
Genzyme Corp. (b).......................................... 6,200 172,050
Geon Co.................................................... 4,200 85,050
Goodyear Tire & Rubber Co.................................. 22,600 1,430,862
Harnischfeger Industries, Inc.............................. 10,200 423,300
Health Care and Retirement Corp. (b)....................... 11,050 368,794
Hibernia Corp. Class A..................................... 8,500 118,469
Informix Corp. (b)......................................... 8,200 73,800
Interpublic Group of Companies, Inc........................ 6,700 410,794
James River Corp. of Virginia.............................. 12,100 447,700
Kroger Co. (b)............................................. 8,400 243,600
Lockheed Martin Corp....................................... 18,751 1,941,900
Lyondell Petrochemical Co.................................. 16,700 364,269
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C>
Manor Care, Inc............................................ 13,600 $ 443,700
Martin Marietta Materials, Inc............................. 4,535 146,821
Masco Corp................................................. 17,900 747,325
Mattel, Inc................................................ 22,450 760,494
Nabisco Holdings Corp. Class A............................. 15,600 622,050
National Service Industries Inc............................ 3,000 146,063
Nextel Communications, Inc. Class A (b).................... 23,300 441,244
Octel Communications Corp. (b)............................. 4,500 105,469
Old Republic International Corp............................ 5,550 168,234
Peco Energy Co............................................. 38,100 800,100
Pentair, Inc............................................... 8,100 266,288
Pharmacia & Upjohn, Inc.................................... 19,500 677,625
Philip Morris Companies, Inc............................... 43,200 1,917,000
Raytheon Co................................................ 5,300 270,300
Regions Financial Corp..................................... 4,000 126,500
Reynolds & Reynolds Co. Class A............................ 5,500 86,625
Schering Plough Corp....................................... 26,800 1,283,050
Seagate Technology, Inc. (b)............................... 7,100 249,831
Timken Co.................................................. 10,600 376,963
Trinity Industries, Inc.................................... 2,600 82,550
Tyson Foods, Inc. Class A.................................. 31,100 594,787
UCAR International, Inc. (b)............................... 400 18,300
Ultramar Diamond Shamrock Corp............................. 17,452 569,371
US Bancorp................................................. 9,300 596,362
Vencor, Inc. (b)........................................... 8,000 338,000
Viad Corp.................................................. 15,000 288,750
Westvaco Corp.............................................. 3,650 114,747
Witco Corp................................................. 1,000 37,938
Xerox Corp................................................. 30,900 2,437,237
York International Corp.................................... 9,500 437,000
360 Communications Co. (b)................................. 4,533 77,628
-----------
Total U.S. Equities........................................ 46,241,005
-----------
NON-U.S. EQUITIES -- 48.78%
AUSTRALIA -- 2.49%
Amcor Ltd.................................................. 16,100 106,146
Boral Ltd.................................................. 28,800 89,976
Brambles Industries Ltd.................................... 4,000 78,489
Broken Hill Proprietary Co. Ltd............................ 34,450 502,854
Coca-Cola Amatil Ltd....................................... 7,000 90,204
CSR Ltd.................................................... 20,000 76,868
David Jones Ltd............................................ 71,000 98,407
Lend Lease Corp. Ltd....................................... 4,197 88,043
M.I.M. Holdings Ltd........................................ 51,829 76,107
National Australia Bank Ltd................................ 24,475 347,846
News Corp. Ltd............................................. 50,536 240,421
News Corp. Ltd. Preferred.................................. 13,000 50,841
Pacific Dunlop Ltd......................................... 33,600 98,678
Qantas Airways Ltd......................................... 35,664 82,830
Rio Tinto Ltd.............................................. 13,563 229,444
Santos Ltd................................................. 8,000 33,384
Westpac Banking Corp. Ltd.................................. 41,945 250,458
WMC Ltd.................................................... 21,700 135,751
Woolworth's Ltd............................................ 16,000 52,144
-----------
2,728,891
-----------
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ----------
<S> <C> <C>
BELGIUM -- 1.59%
Delhaize-Le Lion S.A.......................................... 2,200 $ 115,661
Electrabel S.A................................................ 1,150 246,634
Fortis AG..................................................... 88 20
Fortis AG Strip (b)........................................... 1,168 241,397
General de Banque S.A......................................... 300 115,577
Groupe Bruxelles Lambert S.A.................................. 730 122,445
Kredietbank NV................................................ 465 187,552
Kredietbank VVPR.............................................. 11 4,345
Petrofina S.A................................................. 610 231,189
Societe Generale de Belgique.................................. 1,140 106,548
Solvay S.A. Class A........................................... 215 126,787
Tractebel..................................................... 300 125,174
Tractebel Warrants "99" (b)................................... 200 2,147
Union Miniere Group S.A. (b).................................. 1,302 122,051
----------
1,747,527
----------
CANADA -- 1.36%
Alcan Aluminium Ltd........................................... 2,900 99,007
Bank of Montreal.............................................. 2,700 105,487
Barrick Gold Corp............................................. 1,600 34,851
BCE, Inc...................................................... 3,200 89,069
Canadian National Railway Co.................................. 2,000 87,272
Canadian Pacific Ltd.......................................... 6,700 190,860
Hudson's Bay Co............................................... 3,400 76,399
Imperial Oil Ltd.............................................. 2,400 123,079
MacMillan Bloedel Ltd......................................... 4,100 56,317
Moore Corp. Ltd............................................... 2,200 43,375
Noranda, Inc.................................................. 2,600 56,067
Northern Telecom Ltd.......................................... 1,000 90,207
NOVA Corp..................................................... 4,300 36,779
Royal Bank of Canada.......................................... 3,000 136,018
Seagram Co. Ltd............................................... 2,600 104,595
Thomson Corp.................................................. 3,900 89,896
TransCanada Pipelines Ltd..................................... 3,400 68,389
----------
1,487,667
----------
FINLAND -- 0.32%
Merita Ltd. Class A........................................... 11,700 38,968
Nokia Ab Class A.............................................. 2,300 171,763
Outokumpu Class A............................................. 2,000 39,660
Pohjola Insurance Group Class B............................... 500 14,824
Sampo Insurance Co. Ltd. Class A.............................. 200 19,445
The Rauma Group............................................... 83 1,901
UPM-Kymmene Corp.............................................. 3,000 69,308
----------
355,869
----------
FRANCE -- 3.29%
Accor S.A..................................................... 977 146,442
Alcatel Alsthom............................................... 1,261 158,082
AXA UAP....................................................... 2,722 169,458
AXA UAP Rights (b)............................................ 1,722 6,687
Banque Nationale de Paris..................................... 4,780 197,192
Cie Bancaire S.A.............................................. 1,003 128,130
Cie de Saint Gobain........................................... 1,357 198,084
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ----------
<S> <C> <C>
Cie de Suez................................................... 24,340 $ 59,907
Cie Generale des Eaux......................................... 971 124,539
Cie Generale des Eaux Warrants "01" (b)....................... 1,771 1,062
Colas......................................................... 330 43,561
Dexia France.................................................. 1,403 136,692
Elf Aquitaine S.A............................................. 2,150 232,175
Groupe Danone................................................. 900 148,850
Lafarge S.A................................................... 1,500 93,382
Lagardere S.C.A............................................... 3,000 87,225
LVMH.......................................................... 530 142,633
Michelin Class B.............................................. 2,934 176,360
Pechiney S.A. Class A......................................... 3,013 118,806
Peugeot S.A................................................... 1,790 173,177
Rhone-Poulenc Class A......................................... 3,800 155,340
SEITA......................................................... 3,200 101,380
Societe Generale.............................................. 1,571 175,537
Suez Lyonnaise des Eaux S.A................................... 1,500 151,252
Thomson CSF................................................... 3,100 79,942
Total S.A. Class B............................................ 1,759 177,967
Usinor Sacilor................................................ 12,400 223,880
----------
3,607,742
----------
GERMANY -- 4.80%
Allianz AG Holding............................................ 2,150 459,586
BASF AG....................................................... 5,800 214,180
Bayer AG...................................................... 7,950 306,576
Bayerische Motoren Werke AG................................... 280 231,057
Commerzbank AG................................................ 6,050 172,897
Daimler-Benz AG............................................... 3,200 260,576
Deutsche Bank AG.............................................. 6,150 361,391
Deutsche Telekom AG........................................... 15,300 376,222
Henkel KGaA-Vorzug AG......................................... 2,550 143,699
Hochtief AG................................................... 1,750 78,331
Hoechst AG.................................................... 2,600 110,260
M.A.N. AG..................................................... 420 130,873
Mannesmann AG................................................. 530 236,928
Metro AG...................................................... 1,870 203,891
Muenchener Rueckver AG........................................ 112 317,503
Muenchener Rueckver AG Warrants "98" (b)...................... 3 1,076
Preussag AG................................................... 660 194,296
RWE AG........................................................ 4,700 202,284
Schering AG................................................... 2,550 273,350
Siemens AG.................................................... 2,600 155,842
Thyssen AG.................................................... 950 228,696
Veba AG....................................................... 5,350 302,407
Volkswagen AG................................................. 400 303,455
----------
5,265,376
----------
HONG KONG -- 0.59%
Cheung Kong Holdings Ltd...................................... 6,000 59,247
China Light & Power Co. Ltd................................... 11,000 62,331
Guoco Group Ltd............................................... 9,000 47,397
Hang Seng Bank Ltd............................................ 5,800 82,726
Hong Kong Telecommunications Ltd.............................. 16,000 38,207
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
HONG KONG (CONTINUED)
Hutchison Whampoa Ltd....................................... 14,000 $ 121,074
Jardine Matheson Holdings ADR (c)........................... 3,600 25,560
New World Development Co. Ltd............................... 9,000 53,670
Sun Hung Kai Properties Ltd................................. 5,000 60,182
Swire Pacific Ltd. Class A.................................. 7,000 63,022
Wharf (Holdings) Ltd........................................ 8,000 34,696
-----------
648,112
-----------
ITALY -- 1.66%
Assicurazioni Generali...................................... 9,540 173,251
Banca Commerciale Italiana.................................. 26,000 53,788
Credito Italiano Spa........................................ 67,000 122,463
Danieli & Co. Savings (Risp)................................ 13,400 46,859
Edison Spa.................................................. 8,000 39,753
ENI ADR (c)................................................. 2,300 130,812
ENI Spa..................................................... 33,000 186,674
Fiat Spa-Priv............................................... 73,000 134,716
INA-Istituto Nazionale delle Assicurazioni.................. 33,000 50,232
Istituto Mobilaire Italiano Spa............................. 10,500 94,417
Italgas Spa................................................. 16,000 51,719
La Rinascente Spa........................................... 8,000 44,408
La Rinascente Spa Rights (b)................................ 23,000 1,027
La Rinascente Spa RNC....................................... 15,000 36,453
La Rinascente Spa RNC Rights (b)............................ 23,000 3,744
La Rinascente Spa Warrants "99" (b)......................... 550 272
Mediobanca Spa.............................................. 2,800 16,983
Montedison Spa (b).......................................... 175,560 115,767
SAI-Savings (Risp).......................................... 13,000 40,035
Telecom Italia Mobile Spa................................... 28,000 90,508
Telecom Italia Mobile Spa RNC............................... 79,000 141,146
Telecom Italia Spa.......................................... 20,000 59,830
Telecom Italia Spa RNC...................................... 96,000 189,856
-----------
1,824,713
-----------
JAPAN -- 13.53%
Amada Co. Ltd............................................... 25,000 220,659
Asahi Glass Co. Ltd......................................... 27,000 268,985
Bank of Tokyo-Mitsubishi, Ltd............................... 25,000 502,491
Canon, Inc.................................................. 18,000 490,780
Canon Sales Co., Inc........................................ 7,600 177,331
Citizen Watch Co. Ltd....................................... 23,000 177,681
Dai Nippon Printing Co. Ltd................................. 21,000 475,312
Daiichi Pharmaceutical Co. Ltd.............................. 16,000 282,443
Daikin Industries Ltd....................................... 23,000 209,036
Daiwa House Industry Co. Ltd................................ 11,000 134,580
Fanuc....................................................... 8,900 342,218
Fujitsu..................................................... 14,000 194,529
Hitachi Ltd................................................. 44,000 492,179
Honda Motor Co.............................................. 6,000 180,897
Inax........................................................ 24,000 179,953
Isetan...................................................... 9,000 111,684
Ito Yokado Co. Ltd.......................................... 9,000 523,027
Kaneka Corp................................................. 21,000 131,766
Keio Teito Electric Railway................................. 28,000 133,357
Kinki Nippon Railway........................................ 27,000 165,166
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Kirin Brewery Co. Ltd........................................ 26,000 $ 270,384
Kokuyo....................................................... 7,000 189,636
Kuraray Co. Ltd.............................................. 28,000 278,948
Kyocera Corp................................................. 3,000 238,574
Maeda Road Construction...................................... 5,000 43,039
Marui Co. Ltd................................................ 12,000 223,368
Matsushita Electric Industrial Co............................ 34,000 686,358
Mitsubishi Paper Mills....................................... 27,000 105,707
NGK Insulators............................................... 37,000 407,411
Nintendo Corp. Ltd........................................... 1,900 159,399
Nippon Denso Co. Ltd......................................... 11,000 263,392
Nippon Meat Packers, Inc..................................... 15,000 194,005
Nippon Steel Co.............................................. 19,000 60,771
Okumura...................................................... 25,000 132,614
Osaka Gas Co................................................. 48,000 138,006
Sankyo Co. Ltd............................................... 16,000 538,320
Sanwa Bank Ltd............................................... 11,000 163,419
Secom........................................................ 5,000 367,474
Seino Transportation......................................... 15,000 162,545
Sekisui House Ltd............................................ 44,000 446,037
Shinmaywa Industries Ltd..................................... 14,000 98,733
Sony Corp.................................................... 5,000 436,511
Sumitomo Bank................................................ 24,000 394,302
Sumitomo Electric Industries................................. 19,000 318,797
Sumitomo Trust & Banking..................................... 14,000 150,485
Takeda Chemical Industries................................... 14,000 393,953
TDK Corp..................................................... 4,000 293,979
Tokio Marine & Fire Insurance Co............................. 21,000 275,277
Tokyo Electric Power......................................... 6,300 132,684
Tokyo Steel Mfg.............................................. 16,500 184,567
Tonen Corp................................................... 17,000 205,016
Toray Industries, Inc........................................ 92,000 656,856
Toshiba Corp................................................. 53,000 341,353
Toyo Suisan Kaisha........................................... 11,000 112,470
Toyota Motor Corp............................................ 6,000 177,226
Yamazaki Baking Co. Ltd...................................... 12,000 211,833
-----------
14,847,523
-----------
MALAYSIA -- 0.85%
Hume Industries (Malaysia) Bhd............................... 11,000 50,555
Kuala Lumpur Kepong Bhd...................................... 30,000 74,287
Land & General Holdings Bhd.................................. 24,000 27,575
Malayan Banking Bhd.......................................... 11,600 121,791
Malaysia International Shipping Bhd (Frgn.).................. 10,000 25,951
Nestle (Malaysia) Bhd........................................ 3,000 22,464
New Straits Times Press Bhd.................................. 7,000 41,046
Perusahaan Otomobil Nasional Bhd............................. 5,000 23,376
Public Bank Bhd (Frgn.)...................................... 27,664 43,184
Resorts World Bhd............................................ 14,000 42,155
Rothmans of Pall Mall Bhd.................................... 2,000 19,651
Sime Darby Bhd............................................... 29,000 96,514
Telekom Malaysia Bhd......................................... 18,500 86,490
Tenaga Nasional Bhd.......................................... 29,000 141,323
UMW Holdings Bhd............................................. 6,000 28,288
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
MALAYSIA (CONTINUED)
United Engineers Ltd......................................... 8,000 $ 57,686
YTL Corp. Bhd................................................ 8,000 24,723
YTL Power International Bhd (b).............................. 800 1,008
----------
928,067
----------
NETHERLANDS -- 3.09%
ABN AMRO Holdings NV......................................... 15,119 282,425
Akzo Nobel NV................................................ 400 54,918
DSM NV....................................................... 880 87,717
Elsevier NV.................................................. 11,900 199,214
Heineken NV.................................................. 500 85,490
Hoogovens NV................................................. 1,448 80,868
ING Groep NV................................................. 10,106 466,796
KLM Royal Dutch Air Lines NV................................. 4,600 142,041
KPN NV....................................................... 7,965 313,022
Philips Electronics NV....................................... 4,050 290,629
Royal Dutch Petroleum Co..................................... 15,600 812,923
Royal Dutch Petroleum Co. NY Shares (c)...................... 4,800 261,000
Unilever NV.................................................. 1,500 316,337
----------
3,393,380
----------
NEW ZEALAND -- 1.74%
Brierley Investments Ltd..................................... 320,000 312,330
Carter Holt Harvey Ltd....................................... 110,500 285,357
Fletcher Challenge Building.................................. 38,220 114,762
Fletcher Challenge Energy.................................... 42,172 127,200
Fletcher Challenge Forest Ltd................................ 65,803 95,447
Fletcher Challenge Paper..................................... 75,400 182,449
Telecom Corp. of New Zealand Ltd............................. 138,000 701,524
Telecom Corp. of New Zealand Ltd. ADS (c).................... 2,200 89,650
----------
1,908,719
----------
SINGAPORE -- 0.72%
City Developments Ltd........................................ 7,000 68,541
DBS Land Ltd................................................. 9,000 28,452
Development Bank of Singapore Ltd............................ 8,000 100,713
Fraser & Neave Ltd........................................... 2,000 14,268
Hotel Properties Ltd......................................... 19,000 32,291
Keppel Corp. Ltd. (b)........................................ 3,750 16,654
Oversea-Chinese Banking Corp. Ltd............................ 14,600 151,126
Singapore Airlines Ltd. (Frgn.).............................. 9,000 80,571
Singapore Press Holdings Ltd. (Frgn.)........................ 5,000 100,713
Singapore Telecommunications, Ltd............................ 38,000 70,164
United Overseas Bank Ltd. (Frgn.)............................ 9,000 92,530
Wing Tai Holdings Ltd........................................ 11,000 31,697
----------
787,720
----------
SPAIN -- 1.15%
Acerinox S.A................................................. 300 56,320
Banco Bilbao-Vizcaya S.A..................................... 1,500 122,085
Banco Central Hispanoamericano............................... 1,700 62,304
Banco Popular Espanol S.A.................................... 400 98,184
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
Banco Santander S.A.......................................... 3,600 $ 111,131
Empresa Nacional de Electridad S.A........................... 2,350 197,658
Fomento de Construcciones y Contratas S.A.................... 500 63,881
Gas Natural SDG S.A.......................................... 400 87,550
Iberdrola S.A................................................ 7,700 97,382
Mapfre Corp.................................................. 700 37,316
Repsol S.A................................................... 2,300 97,430
Telefonica de Espana......................................... 5,400 156,415
Vallehermosa S.A............................................. 1,200 32,434
Viscofan Envolturas Celulosicas S.A.......................... 2,000 46,848
----------
1,266,938
----------
SWITZERLAND -- 1.24%
ABB AG (Bearer).............................................. 55 83,373
Alusuisse-Lonza Holding AG (Reg.)............................ 35 36,299
Ciba Specialty Chemicals AG (Reg.)........................... 160 14,816
CS Holdings AG (Reg.)........................................ 646 83,082
Nestle S.A. (Reg.)........................................... 200 264,216
Novartis AG (Reg.)........................................... 251 400,761
Roche Holding AG (Gen.)...................................... 26 235,496
Swiss Reinsurance Co. (Reg.)................................. 60 84,985
UBS (Bearer)................................................. 42 48,110
Zurich Versicherungs (Reg.).................................. 273 108,796
----------
1,359,934
----------
UNITED KINGDOM -- 10.36%
Abbey National PLC........................................... 13,000 177,415
Bass PLC..................................................... 8,800 107,355
B.A.T. Industries PLC........................................ 49,000 438,337
BG PLC....................................................... 100,500 367,979
Booker PLC................................................... 10,500 47,707
British Energy PLC........................................... 89,000 217,001
British Petroleum Co. PLC.................................... 46,807 581,923
British Steel PLC............................................ 113,000 281,160
British Telecommunications PLC............................... 78,700 584,176
BTR PLC...................................................... 24,000 82,084
Centrica PLC................................................. 93,500 113,597
Charter PLC.................................................. 13,902 184,519
Coats Viyella PLC............................................ 55,000 115,337
FKI PLC...................................................... 58,875 166,577
General Electric Co. PLC..................................... 106,100 633,934
Glaxo Wellcome PLC........................................... 35,500 734,106
Grand Metropolitan PLC....................................... 25,000 240,493
Guinness PLC................................................. 33,300 325,878
Hanson PLC................................................... 25,000 123,991
Hillsdown Holdings PLC....................................... 72,000 203,112
House of Fraser PLC.......................................... 79,000 209,711
HSBC Holdings PLC............................................ 15,000 461,471
Imperial Chemical Industries PLC............................. 5,000 69,402
Inchcape PLC................................................. 24,000 113,040
Legal & General Group PLC.................................... 35,000 237,081
Lloyds TSB Group PLC......................................... 54,630 560,984
Marks & Spencer PLC.......................................... 41,500 343,963
Mirror Group PLC............................................. 36,000 112,640
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
National Westminster Bank PLC............................ 13,800 $ 185,462
Northern Foods PLC....................................... 38,000 125,855
Peninsular & Oriental Steam Navigation Co................ 25,000 248,814
Reckitt & Colman PLC..................................... 8,175 122,043
Redland PLC.............................................. 13,500 76,392
Reuters Holdings PLC..................................... 16,000 168,561
Rio Tinto PLC............................................ 14,700 256,030
RJB Mining PLC........................................... 30,000 179,745
Royal & Sun Alliance Insurance Group PLC................. 37,697 278,563
Sainsbury (J.) PLC....................................... 30,000 181,743
Scottish Hydro-Electric PLC.............................. 18,200 125,705
Sears PLC................................................ 91,000 102,987
Sedgwick Group PLC....................................... 60,000 122,826
SmithKline Beecham PLC................................... 18,900 347,740
Smurfit (Jefferson) Group PLC............................ 54,000 155,480
Tesco PLC................................................ 27,000 166,714
Thames Water PLC......................................... 18,000 206,707
Unilever PLC............................................. 3,500 100,133
Vodafone Group PLC....................................... 23,600 115,084
Williams PLC............................................. 32,000 173,088
Yorkshire Water PLC...................................... 15,000 98,111
-----------
11,372,756
-----------
Total Non-U.S. Equities.................................. 53,530,934
-----------
Total Equities (Cost $82,959,665)........................ 99,771,939
-----------
<CAPTION>
FACE
AMOUNT
----------
<S> <C> <C>
Short-Term Investments -- 8.38%
U.S. GOVERNMENT OBLIGATIONS -- 0.65%
U.S. Treasury Bills 5.375%, due 11/13/97................. $ 720,000 706,095
-----------
COMMERCIAL PAPER -- 7.73%
American Stores Co.
5.830%, due 07/23/97.................................... 500,000 498,218
Case Credit Corp.
5.760%, due 07/21/97.................................... 500,000 498,390
Enron Oil & Gas
6.520%, due 07/01/97.................................... 2,001,000 2,001,000
Hughes Electronics Corp.
5.780%, due 07/11/97.................................... 500,000 499,197
5.850%, due 08/11/97.................................... 500,000 496,669
Marriott Corp.
5.770%, due 07/08/97.................................... 500,000 499,439
Norfolk Southern Corp.
5.770%, due 07/10/97.................................... 500,000 499,279
Occidental Petroleum
5.800%, due 08/13/97.................................... 500,000 496,536
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Tenneco, Inc.
5.780%, due 07/17/97.................................. $ 500,000 $ 498,716
5.800%, due 07/23/97.................................. 500,000 498,228
Textron Financial Corp.
6.400%, due 07/01/97.................................. 2,000,000 2,000,000
------------
8,485,672
------------
Total Short-Term Investments
(Cost $9,191,159)..................................... 9,191,767
------------
Total Investments
(Cost $92,150,824) -- 99.30% (a)...................... 108,963,706
------------
Cash and other assets, less
liabilities -- 0.70%.................................. 771,142
------------
Net Assets -- 100%..................................... $109,734,848
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
32
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $92,209,751; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $18,850,801
Gross unrealized depreciation................................ (2,096,846)
-----------
Net unrealized appreciation................................ $16,753,955
===========
</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 June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollar.............................. 12/03/97 1,400,000 $1,024,021 $ (4,257)
Japanese Yen................................. 12/03/97 380,000,000 3,399,543 39,981
Swedish Krona................................ 12/03/97 9,900,000 1,288,522 (3,990)
Swiss Franc.................................. 12/03/97 3,200,000 2,237,371 (78,449)
FORWARD FOREIGN CURRENCY SALES CONTRACTS
Australian Dollar............................ 12/03/97 3,200,000 2,403,485 44,515
Belgian Franc................................ 12/03/97 36,800,000 1,035,047 24,555
British Pounds............................... 12/03/97 1,850,000 3,064,233 (46,328)
Hong Kong Dollar............................. 12/03/97 4,400,000 566,988 44
Japanese Yen................................. 12/03/97 80,000,000 715,693 22,655
--------
Total.................................... $ (1,274)
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Equity Fund had the following open index futures contracts as of
June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE PROCEEDS VALUE LOSS
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 34 contracts...... September 1997 $14,830,760 $15,134,250 $(303,490)
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1997 was $706,095.
See accompanying notes to the financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $92,150,824) (Note 1)................ $108,963,706
Foreign currency, at value (Cost $205,638)....................... 203,894
Receivables:
Investment securities sold...................................... 713,846
Dividends....................................................... 511,404
Interest........................................................ 20,000
Fund shares sold................................................ 77,238
Variation margin (Note 5)....................................... 112,402
Other assets..................................................... 24,096
------------
TOTAL ASSETS.................................................. 110,626,586
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 643,775
Fund shares redeemed............................................ 7,788
Due to custodian bank........................................... 26,595
Investment advisory fees (Note 2)............................... 101,236
Accrued expenses................................................ 111,070
Net unrealized depreciation on forward foreign currency con-
tracts.......................................................... 1,274
------------
TOTAL LIABILITIES............................................. 891,738
------------
NET ASSETS........................................................ $109,734,848
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $ 89,355,851
Accumulated undistributed net investment income.................. 336,561
Accumulated net realized gain.................................... 3,533,361
Net unrealized appreciation...................................... 16,509,075
------------
NET ASSETS.................................................... $109,734,848
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $48,053,593 and 3,765,449 shares issued
and outstanding) (Note 7)...................................... $ 12.76
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 78 shares issued and outstanding) (Note 7).......... $ 12.76
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $61,680,255 and 4,845,038 shares issued
and outstanding) (Note 7)...................................... $ 12.73
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $136,196 for foreign taxes withheld)........... $ 1,593,631
Interest......................................................... 498,155
-----------
TOTAL INCOME.................................................. 2,091,786
-----------
EXPENSES:
Advisory (Note 2)................................................ 641,075
Distribution (Note 6)............................................ 324,716
Accounting....................................................... 92,251
Custodian........................................................ 85,485
Other............................................................ 183,508
-----------
TOTAL EXPENSES................................................ 1,327,035
Expenses waived by Advisor (Note 2)........................... (195,511)
-----------
NET EXPENSES.................................................. 1,131,524
-----------
NET INVESTMENT INCOME ........................................ 960,262
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 5,245,255
Futures contracts............................................... (1,943,047)
Foreign currency transactions................................... 1,930,570
-----------
Net realized gain............................................. 5,232,778
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 10,953,503
Futures contracts............................................... (330,387)
Forward contracts............................................... (5,030)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 1,431
-----------
Change in net unrealized appreciation or depreciation......... 10,619,517
-----------
Net realized and unrealized gain.................................. 15,852,295
-----------
Net increase in net assets resulting from operations.............. $16,812,557
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 960,262 $ 462,604
Net realized gain................................. 5,232,778 8,259,766
Change in net unrealized appreciation or
depreciation..................................... 10,619,517 1,258,707
------------ -----------
Net increase in net assets resulting from opera-
tions............................................ 16,812,557 9,981,077
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................... (425,929) (295,340)
SwissKey Class.................................... (253,945) (41,698)
Distributions from net realized gain:
Brinson Class I................................... (3,076,886) (1,399,995)
SwissKey Class.................................... (3,396,000) (1,621,590)
------------ -----------
Total distributions to shareholders............... (7,152,760) (3,358,623)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 42,520,630 11,563,213
Shares issued in acquisition of SBC World Growth
Fund (Note 1).................................... -- 25,670,575
Shares issued on reinvestment of distributions.... 6,711,937 3,336,320
Shares redeemed................................... (9,295,598) (7,760,045)
------------ -----------
Net increase in net assets resulting from capital
share transactions (Note 7)...................... 39,936,969 32,810,063
------------ -----------
TOTAL INCREASE IN NET ASSETS................... 49,596,766 39,432,517
------------ -----------
NET ASSETS:
Beginning of year................................. 60,138,082 20,705,565
------------ -----------
End of year (including accumulated undistributed
net investment income of $336,561 and $90,547,
respectively).................................... $109,734,848 $60,138,082
============ ===========
</TABLE>
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>
YEAR ENDED JUNE 30, JANUARY 28, 1994*
------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.57 $ 9.93 $ 9.49 $ 10.00
------- ------- ------- -------
Income from investment opera-
tions:
Net investment income....... 0.16 0.18 0.18 0.07
Net realized and unrealized
gain (loss)................ 2.14 2.29 0.39 (0.54)
------- ------- ------- -------
Total income (loss) from
investment operations.... 2.30 2.47 0.57 (0.47)
------- ------- ------- -------
Less distributions:
Distributions from net in-
vestment income............ (0.12) (0.14) (0.04) (0.04)
Distributions from and in
excess of net
realized gain.............. (0.99) (0.69) (0.09) --
------- ------- ------- -------
Total distributions....... (1.11) (0.83) (0.13) (0.04)
------- ------- ------- -------
Net asset value, end of peri-
od........................... $ 12.76 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= =======
Total return (non-annualized). 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $48,054 $27,126 $20,706 $20,642
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 1.25% 1.77% 2.06% 2.65%**
After expense reimbursement. 1.00% 1.00% 1.00% 1.00%**
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment....................... 1.35% 0.57% 0.71% 0.24%**
After expense reimbursement. 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover rate...... 32% 74% 36% 21%
Average commission rate paid
per share................... $0.0246 $0.0288 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 11.57 $ 10.35
------- -------
Income from investment operations:
Net investment gain (loss)...................... 0.08 (0.01)
Net realized and unrealized gain................ 2.13 1.93
------- -------
Total income from investment operations....... 2.21 1.92
------- -------
Less distributions:
Distributions from net investment income........ (0.06) (0.01)
Distributions from net realized gain............ (0.99) (0.69)
------- -------
Total distributions........................... (1.05) (0.70)
------- -------
Net asset value, end of period.................... $ 12.73 $ 11.57
======= =======
Total return (non-annualized)..................... 20.34% 19.25%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $61,680 $33,012
Ratio of expenses to average net assets:
Before expense reimbursement.................... 2.00% 2.53%**
After expense reimbursement..................... 1.75% 1.76%**
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement.................... 0.60% (0.19)%**
After expense reimbursement..................... 0.85% 0.58%**
Portfolio turnover rate.......................... 32% 74%
Average commission rate paid per share........... $0.0246 $0.0288
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
The Global Bond Fund is actively managed, providing a fully integrated treatment
of the U.S. and other major fixed income markets across the world. This global
approach takes full advantage of relationships both within and across markets,
based on consistent analysis of macroeconomic and market conditions. Market and
currency strategies are developed in a global asset allocation framework, in
conjunction with senior fixed income professionals in Chicago, Basel, Frankfurt,
London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The Brinson Global Bond Fund has provided an annualized return of 7.48% since
July 31, 1993 (performance inception date). Its benchmark, the Salomon World
Government Bond Index, returned 6.91%. This performance was achieved with
volatility of 4.21%, below the 5.41% volatility of the benchmark. For the year
ended June 30, 1997, the Fund returned 7.71%, while the benchmark returned
3.89%.
During the first half of 1997, the Fund returned 0.63%, compared to the index
return of -1.23% on an unhedged basis. The negative index return reflected
weakness of other currencies relative to the U.S. dollar. On a dollar-hedged
basis the index returned 4.02%, ranging from 6.77% in Switzerland to 2.59% in
U.S. Treasuries. This unremarkable performance reflected a period without major
macroeconomic surprises, although U.S. GDP and job growth were somewhat faster
than initially expected.
Market allocation made a minor negative contribution to performance. The Fund
moved to overweight U.S. bonds in February, and this hampered performance, as
did underweighting of Japan. However, the Fund benefited from being overweight
in Denmark and from a well-timed allocation to Australian bonds.
The deutschemark and related European currencies fell against the U.S. dollar
(the DM by 11.6%) during the period. The gap in short-term interest rates
between the U.S. and Germany widened slightly, and there was growing concern
that European Monetary Union might bias the participants towards depreciation.
The Japanese yen depreciated in the first quarter but recovered sharply in the
first half of May, and ended the period 1.4% higher against the dollar.
Currency allocation was the dominant contributor to relative performance during
the first half of 1997. The Fund started the year with a substantial defensive
overweight in U.S. dollars. This position was sharply reduced in February and
again in March, in response to market developments.
Bond management made a small positive contribution to performance. The Fund
benefited from issue selection in the U.S. The short duration strategy in Japan
detracted from performance in the first quarter; however, duration was then
reduced further, and bond prices fell thereafter. Holdings of Canadian Real
Return Bonds hurt relative performance. The range of durations at June 30, 1997
was from 0.5 times the market index in Japan to 1.3 times in Denmark and the
U.S.
================================================================================
39
<PAGE>
Global Bond Fund
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Total Return
6 months 1 year 3 years 7/31/93*
ended ended ended to
6/30/97 6/30/97 6/30/97 6/30/97
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Global Bond Fund 0.63% 7.71% 10.16% 7.48%
Salomon World Government Bond Index (currency unhedged) -1.23 3.89 7.39 6.91
Salomon World Government Bond Index (currency hedged) 4.02 11.17 10.51 7.88
- ---------------------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson Global Bond Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Bond Fund and the Salomon World Government Bond Index (currency unhedged and
hedged) if you had invested $1,000,000 on July 31, 1993, and had reinvested all
your income dividends and capital gain distributions through June 30, 1997. No
adjustment has been made for any income taxes payable by shareholders on income
dividends and capital gain distributions. Past performance is no guarantee of
future results. Share price and return will vary with market conditions;
investors may realize a gain or loss upon redemption.
Brinson Global Bond Fund
vs. Salomon World Government Bond Index (currency unhedged and hedged)
Wealth Value with Dividends Reinvested
$1,326,556 ====== Brinson Global Bond Fund
$1,299,088 ______ Salomon World Gov't Bond
Index (currency unhedged)
$1,345,820 ______ Salomon World Gov't Bond
Index (currency hedged)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Solomon World Gov't Solomon World Gov't
Brinson Global Bond Index Bond Index
Bond Fund (currency unhedged) (currency hedged)
7/31/93 $1,000,000 $1,000,000 $1,000,000
12/31/93 $1,038,591 $1,041,929 $1,049,630
6/30/94 $ 992,146 $1,048,832 $ 997,225
12/31/94 $1,002,396 $1,066,185 $1,010,266
6/30/95 $1,104,638 $1,245,919 $1,111,263
12/31/95 $1,206,119 $1,269,184 $1,190,433
6/30/96 $1,231,653 $1,250,502 $1,210,592
12/31/96 $1,318,299 $1,315,287 $1,293,783
6/30/97 $1,326,556 $1,299,088 $1,345,820
</TABLE>
[GRAPH APPEARS HERE]
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
40
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Asset Allocation
As of June 30, 1997
Current
Benchmark Strategy
- ----------------------------------------------
U.S. 33.4% 39.4%
Japan 19.7 6.2
Australia 1.0 4.3
Austria 0.9 0.0
Belgium 2.5 2.5
Canada 3.4 8.3
Denmark 1.6 6.3
Finland 0.5 0.0
France 7.0 2.2
Germany 9.0 13.2
Ireland 0.4 0.0
Italy 6.5 5.3
Netherlands 3.2 3.2
Spain 2.8 1.3
Sweden 1.5 1.5
Switzerland 0.4 0.0
U.K. 6.2 6.3
- ----------------------------------------------
100.0% 100.0%
Currency Allocation
As of June 30, 1997
Current
Benchmark Strategy
- ----------------------------------------------
U.S. 33.4% 36.9%
Japan 19.7 19.7
Australia 1.0 1.0
Austria 0.9 0.9
Belgium 2.5 2.5
Canada 3.4 3.4
Denmark 1.6 1.6
Finland 0.5 0.5
France 7.0 7.0
Germany 9.0 9.0
Ireland 0.4 0.4
Italy 6.5 6.5
Netherlands 3.2 3.2
Spain 2.8 2.8
Sweden 1.5 1.5
Switzerland 0.4 0.4
U.K. 6.2 2.7
- ----------------------------------------------
100.0% 100.0%
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- ----------------------------------------------
U.S. BONDS
Corporate Bonds
Asset-Backed......................... 2.04
CMO.................................. 0.54
Consumer............................. 0.95
Financial............................ 2.21
Industrial........................... 0.22
Transportation....................... 0.36
------
6.32
International Dollar Bonds........... 2.47
U.S. Government Agencies............. 13.15
U.S. Government Obligations.......... 14.45
------
Total U.S. Bonds.............. 36.39
------
NON-U.S. BONDS
Foreign Financial Bonds............... 13.99
Foreign Government Bonds.............. 42.16
------
Total Non-U.S. Bonds.......... 56.15
------
SHORT-TERM INVESTMENTS................ 11.28*
------
TOTAL INVESTMENTS............. 103.82
LIABILITIES, LESS CASH AND OTHER
ASSETS.............................. (3.82)
------
NET ASSETS.................... 100.00%
======
- --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on June 30, 1997 which
increased U.S. bond exposure from 36.39% to 38.06% and decreased the Fund's
exposure to Short-Term Investments from 11.28% to 9.61%.
- --------------------------------------------------------------------------------
41
<PAGE>
GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- ----------
<S> <C> <C>
Bonds -- 92.54%
U.S. BONDS -- 36.39%
U.S. CORPORATE BONDS -- 6.32%
Capital One Bank
6.830%, due 05/17/99 ..................................... $200,000 $ 200,809
Chase Manhattan Auto Owner Trust 96C-A4
6.150%, due 03/15/02...................................... 125,000 124,054
Chrysler Financial Corp. MTN
6.500%, due 08/21/97...................................... 165,000 165,197
Continental Airlines, Inc. Pass Thru 144-A 7.461%, due
04/01/15.................................................. 210,000 212,442
Countrywide Capital, Inc.
8.000%, due 12/15/26...................................... 250,000 245,545
Donaldson Lufkin & Jenrette FRN
6.700%, due 06/30/00...................................... 375,000 375,000
First Bank Corporate Card Master Trust 97-1A 6.400%, due
02/15/03.................................................. 240,000 237,530
Ford Credit Grantor Trust 95-B
5.900%, due 10/15/00...................................... 50,468 50,474
GE Capital Management Services, Inc. 94-7 Class A12
6.000%, due 02/25/09...................................... 332,540 313,928
Lockheed Martin Corp.
7.700%, due 06/15/08...................................... 125,000 130,620
Metlife Funding
6.850%, due 05/20/08...................................... 225,000 225,598
News America Holdings
7.750%, due 01/20/24...................................... 275,000 260,924
Salomon, Inc.
6.500%, due 03/01/00...................................... 300,000 298,101
Sears Roebuck Acceptance MTN 95-5A 6.050%, due 01/16/08.... 225,000 218,635
The Money Store 94-A3
5.525%, due 09/15/18...................................... 76,492 74,927
Time Warner, Inc.
9.150%, due 02/01/23...................................... 265,000 292,471
World Omni Automobile Lease Securitization Trust
6.850%, due 06/25/03...................................... 255,000 257,864
----------
3,684,119
----------
INTERNATIONAL DOLLAR BONDS -- 2.47%
DR Investments 144-A
7.450%, due 05/15/07...................................... 455,000 459,576
Pan Pacific Industry 144-A
0.000%, due 04/28/07...................................... 715,000 315,133
Province of Quebec
7.500%, due 07/15/23...................................... 235,000 231,165
Republic of South Africa
9.625%, due 12/15/99...................................... 125,000 132,094
Royal Bank of Scotland
7.375%, due 04/29/49...................................... 300,000 298,987
----------
1,436,955
----------
U.S. GOVERNMENT AGENCIES -- 13.15%
Federal Home Loan Mortgage Corp.
7.000%, due 04/15/07...................................... 200,790 196,692
5.800%, due 08/15/19...................................... 90,000 84,670
7.500%, due 01/15/23...................................... 75,101 71,749
6.500%, due 02/15/24...................................... 375,000 351,621
7.238%, due 05/01/26...................................... 68,899 70,963
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23...................................... 104,207 106,584
9.000%, due 03/01/24...................................... 305,522 325,524
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
9.000%, due 04/01/25.................................. $ 264,905 $ 279,641
9.500%, due 04/01/25.................................. 29,129 31,195
Federal National Mortgage Association
6.500%, due 12/01/03 Balloon TBA...................... 585,000 577,322
7.875%, due 02/24/05.................................. 500,000 533,645
6.220%, due 03/13/06.................................. 150,000 145,035
6.500%, due 04/25/08.................................. 104,799 100,445
9.000%, due 08/01/21.................................. 28,233 29,982
8.500%, due 07/01/22.................................. 21,708 22,844
7.500%, due 05/01/25.................................. 4,193 4,202
6.500%, due 03/01/26.................................. 77,040 73,693
6.500%, due 12/01/26 TBA.............................. 1,000,000 956,565
7.000%, due 12/01/26 TBA.............................. 1,150,000 1,127,003
7.500%, due 12/01/26 TBA.............................. 825,000 826,807
6.070%, due 08/01/29 TBA.............................. 205,000 202,566
Federal National Mortgage Association Strips
8.000%, due 07/01/24 interest only.................... 1,031 335
0.000%, due 07/01/26 principal only................... 569 380
0.000%, due 04/01/27 principal only................... 520,231 344,911
Government National Mortgage Association
7.000%, due 08/15/23.................................. 803 788
7.500%, due 08/15/23.................................. 113,659 113,943
7.000%, due 08/15/24.................................. 530,741 523,863
7.000%, due 07/15/25.................................. 73,437 72,159
Tennessee Valley Authority
6.375%, due 06/15/05.................................. 500,000 489,184
----------
7,664,311
----------
U.S. GOVERNMENT OBLIGATIONS-- 14.45%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01.................................. 1,020,000 1,030,200
6.250%, due 10/31/01.................................. 1,120,000 1,115,100
7.000%, due 07/15/06.................................. 760,000 781,850
8.125%, due 05/15/21.................................. 1,315,000 1,504,443
6.000%, due 02/15/26.................................. 1,980,000 1,771,482
U.S. Treasury Principal Strips
0.000%, due 08/15/03.................................. 1,440,000 974,419
0.000%, due 11/15/04.................................. 2,000,000 1,239,160
----------
8,416,654
----------
Total U.S. Bonds....................................... 21,202,039
----------
NON-U.S. BONDS -- 56.15%
AUSTRALIA -- 3.92%
Government of Australia
9.500%, due 08/15/03...............................AUD 1,400,000 1,195,185
9.000%, due 09/15/04.................................. 1,300,000 1,091,359
----------
2,286,544
----------
BELGIUM -- 2.26%
Kingdom of Belgium
10.000%, due 08/02/00............................. BEF 23,000,000 749,051
7.500%, due 07/29/08.................................. 18,000,000 565,736
----------
1,314,787
----------
CANADA -- 7.71%
British Columbia
7.750%, due 06/16/03.............................. CAD 1,250,000 979,396
7.250%, due 09/21/05.................................. 1,640,000 1,241,351
Government of Canada
4.250%, due 12/01/21 (b).............................. 1,820,000 1,416,839
Province of Ontario
7.500%, due 01/19/06.................................. 1,100,000 855,331
----------
4,492,917
----------
</TABLE>
- --------------------------------------------------------------------------------
42
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------- -----------
<S> <C> <C>
DENMARK -- 5.74%
City of Copenhagen
6.250%, due 03/15/01............................ DKK 2,400,000 $ 380,955
Great Belt 7.000%, due 09/02/03...................... 10,650,000 1,730,643
Kingdom of Denmark
7.000%, due 12/15/04................................ 3,500,000 565,589
7.000%, due 11/15/07................................ 1,400,000 221,802
7.000%, due 11/10/24................................ 3,000,000 447,464
-----------
3,346,453
-----------
FRANCE -- 2.19%
Government of France (OAT)
7.500%, due 04/25/05............................ FRF 1,200,000 232,826
8.500%, due 04/25/23................................ 1,600,000 343,819
KFW International Finance
7.750%, due 02/17/98................................ 2,600,000 454,479
Republic of Finland
9.000%, due 08/13/03................................ 1,200,000 246,551
-----------
1,277,675
-----------
GERMANY -- 12.87%
Bundesrepublik Deutscheland
6.500%, due 03/15/00............................ DEM 2,000,000 1,225,295
6.875%, due 05/12/05................................ 800,000 501,320
6.250%, due 01/04/24................................ 800,000 446,643
European Economic Community
6.500%, due 03/10/00................................ 1,910,000 1,166,650
International Bank for Reconstruction & Development
7.125%, due 04/12/05................................ 650,000 411,612
Kingdom of Norway
6.125%, due 05/05/98................................ 1,040,000 610,536
LKB Baden-Wuerttemberg Finance 6.500%, due 09/15/08.. 1,300,000 781,820
Republic of Ireland
7.250%, due 03/18/03................................ 2,900,000 1,848,904
Treuhandanstalt 7.125%, due 01/29/03................. 800,000 508,849
-----------
7,501,629
-----------
ITALY -- 5.15%
Bayerische Landesbank
10.750%, due 03/01/03........................... ITL 250,000,000 174,846
Landesbank Rheinland-Pfalz Girozentrale 8.250%, due
06/02/98............................................ 750,000,000 447,124
LKB Baden-Wuerttemberg Finance 10.750%, due 04/14/03. 1,450,000,000 1,016,236
Republic of Italy (BTP)
7.750%, due 09/15/01................................ 1,500,000,000 928,739
9.000%, due 10/01/03................................ 350,000,000 229,891
9.500%, due 02/01/06................................ 300,000,000 205,936
-----------
3,002,772
-----------
JAPAN -- 4.48%
Government of Japan No.161
4.700%, due 09/22/03............................ JPY 45,000,000 453,068
Government of Japan No.129
6.400%, due 03/20/00................................ 25,000,000 248,951
Republic of Austria
5.000%, due 01/22/01................................ 130,000,000 1,270,974
International Bank for Reconstruction & Development
4.500%, due 06/20/00................................ 40,000,000 382,111
4.750%, due 12/20/04................................ 25,000,000 255,478
-----------
2,610,582
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
--------- -----------
<S> <C> <C>
NETHERLANDS -- 3.05%
Government of Netherlands
7.500%, due 11/15/99............................. NLG 1,000,000 $ 552,799
5.750%, due 09/15/02................................. 500,000 266,805
International Nederland Verzekeringen 6.250%, due
12/28/05............................................. 1,800,000 955,914
-----------
1,775,518
-----------
SPAIN -- 1.28%
Kingdom of Spain
7.900%, due 02/28/02............................. ESP 100,000,000 744,815
-----------
SWEDEN -- 1.50%
Kingdom of Sweden
6.000%, due 02/09/05............................. SEK 6,900,000 874,092
-----------
UNITED KINGDOM -- 6.00%
Abbey National
8.750%, due 05/24/04............................. GBP 350,000 616,002
British Gas PLC 8.125%, due 03/31/03.................. 545,000 927,457
UK Treasury
7.750%, due 09/08/06................................. 555,000 961,216
9.000%, due 10/13/08................................. 340,000 647,031
8.000%, due 09/27/13................................. 190,000 341,220
-----------
3,492,926
-----------
Total Non-U.S. Bonds.................................. 32,720,710
-----------
Total Bonds (Cost $54,127,041)........................ 53,922,749
-----------
Short-Term Investments -- 11.28%
U.S. GOVERNMENT OBLIGATIONS -- 0.04%
U.S. Treasury Bills 5.361%, due 11/13/97.............. $ 25,000 24,517
-----------
COMMERCIAL PAPER -- 11.24%
American Stores Co.
5.830%, due 07/23/97................................. 500,000 498,219
Case Credit Corp. 5.760%, due 07/21/97................ 500,000 498,400
Crown Cork & Seal Co.
5.770%, due 07/15/97................................. 500,000 498,878
Enron Oil & Gas 6.520%, due 07/01/97.................. 2,063,000 2,063,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................. 500,000 499,197
5.850%, due 08/11/97................................. 500,000 496,669
Norfolk Southern Corp.
5.770%, due 07/10/97................................. 500,000 499,279
Occidental Petroleum
5.800%, due 08/13/97................................. 500,000 496,536
Sundstrand Corp. 5.850%, due 07/15/97................. 500,000 498,862
Tenneco, Inc. 5.800%, due 07/23/97.................... 500,000 498,228
-----------
6,547,268
-----------
Total Short-Term Investments
(Cost $6,571,765).................................... 6,571,785
-----------
Total Investments
(Cost $60,698,806) -- 103.82 (a)..................... 60,494,534
-----------
Liabilities, less cash and other assets -- (3.82%).... (2,226,520)
-----------
Net Assets -- 100%.................................... $58,268,014
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
43
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Aggregate cost for federal income tax purposes was $60,723,855; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 1,618,080
Gross unrealized depreciation............................... (1,847,401)
-----------
Net unrealized depreciation............................. $ (229,321)
===========
</TABLE>
(b)Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating Rate Note--The rate disclosed is that in effect at June 30, 1997.
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1997, the value of these securities amounted to $987,151 or 1.69% of net
assets.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Bond Fund had the following open forward foreign currency contracts
as of June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
French Franc............ 11/28/97 16,600,000 $2,856,602 $(51,481)
Italian Lira............ 11/28/97 2,340,000,000 1,370,595 (20,400)
Japanese Yen............ 11/28/97 930,000,000 8,313,616 46,950
Spanish Peseta.......... 11/28/97 230,000,000 1,568,085 (41,432)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar....... 11/28/97 2,900,000 2,177,978 66,622
British Pound........... 11/28/97 940,000 1,557,194 (19,354)
Canadian Dollar......... 11/28/97 3,700,000 2,705,549 27,096
Danish Kroner........... 11/28/97 16,800,000 2,556,813 64,092
German Mark............. 11/28/97 3,900,000 2,263,533 55,167
Italian Lira............ 11/28/97 1,100,000,000 644,297 5,879
Japanese Yen............ 11/28/97 45,000,000 402,272 (3,406)
Spanish Peseta.......... 11/28/97 100,000,000 681,776 7,546
--------
Total............... $137,279
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Bond Fund had the following open futures contracts as of June 30,
1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
-------------- -------- -------- ----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes, 3 con-
tracts............................ September 1997 $315,077 $317,672 $ 2,595
10 year U.S. Treasury Notes, 3 con-
tracts............................ September 1997 321,022 323,625 2,603
30 year U.S. Treasury Bonds, 3 con-
tracts............................ September 1997 326,366 333,187 6,821
-------
Total.......................... $12,019
=======
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1997 was $24,517.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $60,698,806) (Note 1)................ $60,494,534
Cash............................................................. 244,951
Foreign currency, at value (Cost $1,097,578)..................... 1,108,021
Receivables:
Investment securities sold...................................... 671,484
Interest........................................................ 1,218,865
Fund shares sold................................................ 30,035
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 137,279
Other assets..................................................... 43,409
-----------
TOTAL ASSETS.................................................. 63,948,578
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 4,692,855
Fund shares redeemed............................................ 880,477
Investment advisory fees (Note 2)............................... 43,424
Accrued expenses................................................ 60,339
Variation margin (Note 5)....................................... 3,469
-----------
TOTAL LIABILITIES............................................. 5,680,564
-----------
NET ASSETS........................................................ $58,268,014
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $57,507,385
Accumulated undistributed net investment income.................. 489,146
Accumulated net realized gain.................................... 322,580
Net unrealized depreciation...................................... (51,097)
-----------
NET ASSETS.................................................... $58,268,014
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of
$54,157,066 and 5,616,633 shares issued and outstanding) (Note
7).............................................................. $ 9.64
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 104 shares issued and outstanding) (Note 7).......... $ 9.64
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$4,109,948 and 427,815 shares issued and outstanding) (Note 7).. $ 9.61
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $5,999 for foreign taxes withheld)............... $2,856,724
----------
TOTAL INCOME................................................... 2,856,724
----------
EXPENSES:
Advisory (Note 2)................................................. 344,152
Accounting........................................................ 89,764
Professional...................................................... 33,901
Transfer agent.................................................... 33,614
Custodian......................................................... 32,064
Distribution (Note 6)............................................. 18,598
Other............................................................. 72,791
----------
TOTAL EXPENSES................................................. 624,884
Expenses waived by Advisor (Note 2)............................ (194,924)
----------
NET EXPENSES................................................... 429,960
----------
NET INVESTMENT INCOME.......................................... 2,426,764
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments...................................................... 1,109,544
Futures contracts................................................ 31,621
Foreign currency transactions.................................... 582,099
----------
Net realized gain............................................... 1,723,264
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. (682,472)
Futures contracts................................................ 13,878
Forward contracts................................................ 280,252
Translation of other assets and liabilities denominated in for-
eign currency................................................... 6,883
----------
Change in net unrealized appreciation or depreciation........... (381,459)
----------
Net realized and unrealized gain.................................. 1,341,805
----------
Net increase in net assets resulting from operations.............. $3,768,569
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
46
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE JUNE
30, 1997 30, 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income............................... $ 2,426,764 $ 2,351,810
Net realized gain................................... 1,723,264 4,022,906
Change in net unrealized appreciation or deprecia-
tion .............................................. (381,459) (1,992,544)
----------- -----------
Net increase in net assets resulting from opera-
tions.............................................. 3,768,569 4,382,172
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income............ (3,479,707) (3,447,154)
Distributions in excess of net investment income.... (340,005) (1,534,232)
Distributions from net realized gain................ (769,789) (355,057)
----------- -----------
Total distributions to shareholders*................ (4,589,501) (5,336,443)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold......................................... 23,164,253 14,584,928
Shares issued on reinvestment of distributions...... 3,667,961 3,954,345
Shares redeemed..................................... (12,462,273) (24,728,515)
----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 7)................ 14,369,941 (6,189,242)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.......... 13,549,009 (7,143,513)
----------- -----------
NET ASSETS:
Beginning of year................................... 44,719,005 51,862,518
----------- -----------
End of year (including accumulated undistributed net
investment income of $489,146 and $1,052,943, re-
spectively)........................................ $58,268,014 $44,719,005
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment
income
Brinson Class I.................................... $(3,503,032) $(4,734,956)
SwissKey Class..................................... (316,680) (246,430)
Distributions from net realized gain
Brinson Class I.................................... (704,236) (338,786)
SwissKey Class..................................... (65,553) (16,271)
----------- -----------
Total distributions to shareholders................. $(4,589,501) $(5,336,443)
=========== ===========
</TABLE>
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>
YEAR ENDED JUNE 30, JULY 30, 1993*
------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period. $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- -------
Income (loss) from investment opera-
tions:
Net investment income ............. 0.67 0.84 0.50 0.45
Net realized and unrealized gain
(loss)............................ 0.08 0.31 0.58 (0.52)
------- ------- ------- -------
Total income (loss) from invest-
ment operations................. 0.75 1.15 1.08 (0.07)
------- ------- ------- -------
Less distributions:
Distributions from and in excess of
net investment income............. (0.96) (1.40) (0.24) (0.28)
Distributions from net realized
gain.............................. (0.19) (0.10) -- (0.10)
------- ------- ------- -------
Total distributions.............. (1.15) (1.50) (0.24) (0.38)
------- ------- ------- -------
Net asset value, end of period....... $ 9.64 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= =======
Total return (non-annualized)........ 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental data
Net assets, end of period (in 000s). $54,157 $41,066 $51,863 $36,849
Ratio of expenses to average net as-
sets:
Before expense reimbursement....... 1.32% 1.65% 1.43% 1.78%**
After expense reimbursement........ 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment income to
average net assets:
Before expense reimbursement....... 4.90% 4.98% 5.53% 4.03%**
After expense reimbursement........ 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover rate............. 235% 184% 199% 189%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $10.02 $10.56
------ ------
Income from investment operations:
Net investment income........................... 0.62 0.78
Net realized and unrealized gain................ 0.10 0.15
------ ------
Total income from investment operations....... 0.72 0.93
------ ------
Less distributions:
Distributions from and in excess of net invest-
ment income.................................... (0.94) (1.37)
Distributions from net realized gain............ (0.19) (0.10)
------ ------
Total distributions........................... (1.13) (1.47)
------ ------
Net asset value, end of period.................... $ 9.61 $10.02
====== ======
Total return (non-annualized)..................... 7.20% 9.17%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $4,110 $3,653
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.81% 2.14%**
After expense reimbursement..................... 1.39% 1.39%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 4.41% 4.49%**
After expense reimbursement..................... 4.83% 5.24%**
Portfolio turnover rate.......................... 235% 184%
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
49
<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. Effective June 30, 1997, each Fund has three
classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey
Class. There are an unlimited number of shares of each class with par value of
$0.001 authorized. Each share represents an identical interest in the
investments of the Funds and has the same rights.
The Trust entered into an Agreement and Plan of Reorganization dated June 16,
1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995,
pursuant to the Plan of Reorganization, the Trust acquired all of the net
assets of the SBC World Growth Fund of the SwissKey Funds, which totalled
$25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange
solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund.
The SwissKey Fund shares were then distributed to shareholders of the SBC World
Growth Fund according to their respective interests, and the SBC World Growth
Fund was dissolved. The total net assets of the Global Equity Fund were
$47,088,147 immediately after the acquisition.
The following is a summary of significant accounting policies consistently
followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a
"Fund," collectively the "Funds") in the preparation of their financial
statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Investments in affiliated
investment companies are valued each day based on the closing net asset value
of the fund. U.S. equity securities traded over-the-counter are valued at the
most recent bid price. Debt securities are valued at the most recent bid price
by using market quotations or independent services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1997.
Therefore, no federal income tax provision was required.
- --------------------------------------------------------------------------------
50
<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. Amounts equal to
8.05% and 16.09% of the amount taxable as ordinary income qualify for the
dividends received deduction available to corporate shareholders for the Global
Fund and the Global Equity Fund, respectively.
G. INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Funds will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the SwissKey Class.
H. USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, the Funds pay the Advisor a monthly fee based on each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent that total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates, for the year
ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED
-------- --------------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.35% 1.75% $4,294,925 $ --
Global Equity Fund...... 0.80 1.00 1.25 1.76 641,075 195,511
Global Bond Fund........ 0.75 0.90 1.15 1.39 344,152 194,924
</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 for the year ended June 30, 1997, were $11,680,
$4,380 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
The Brinson Global Fund invests in shares of certain affiliated investment
companies also sponsored by Brinson Partners, Inc. These investments
represented 9.39% of the Fund's total net assets at June 30, 1997. Activity for
the year ended June 30, 1997 was as follows:
<TABLE>
<CAPTION>
NET NET
SALES REALIZED UNREALIZED
AFFILIATES PURCHASES PROCEEDS GAINS GAINS VALUE
- ---------- ---------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Brinson Post-Venture
Fund................... $ -- $ -- $ -- $ 1,248,708 $ 7,248,708
Brinson High Yield Fund. -- 639,104 87,104 1,879,440 13,327,440
Brinson Emerging Markets
Equity Fund............ 5,400,000 787,001 101,635 1,883,009 16,597,643
Brinson Emerging Markets
Debt Fund.............. -- 970,548 280,548 6,059,079 20,369,079
---------- ---------- -------- ----------- -----------
$5,400,000 $2,396,653 $469,287 $11,070,236 $57,542,870
========== ========== ======== =========== ===========
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1997, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $854,084,076 $764,571,276
Global Equity Fund.................................... 54,289,814 22,588,116
Global Bond Fund...................................... 112,551,785 98,638,852
</TABLE>
- --------------------------------------------------------------------------------
51
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Funds realize a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the year ended June 30, 1997,
was the Funds' custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for Brinson Class N and the
SwissKey Class. Each Plan governs payments made for the expenses incurred in
the promotion and distribution of the SwissKey Class and, effective June 30,
1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily
net assets of the SwissKey Class of the Global Fund, Global Equity Fund and
Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan
shall not exceed 0.25% of the average daily net assets of the Brinson Class N
of the Global Fund, Global Equity Fund and Global Bond Fund.
7.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ----------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................ 14,513,488 $180,787,534 7,972,013 $ 95,544,500
Brinson Class N................ 76 1,000 -- --
SwissKey Class................. 932,414 11,508,566 1,155,619 13,939,062
---------- ------------ --------- ------------
Total Sales................. 15,445,978 $192,297,100 9,127,632 $109,483,562
========== ============ ========= ============
Dividend Reinvestment:
Brinson Class I................ 4,022,259 $ 48,025,771 2,632,284 $ 30,918,724
Brinson Class N................ -- -- -- --
SwissKey Class................. 130,547 1,554,814 20,488 243,591
---------- ------------ --------- ------------
Total Dividend Reinvestment. 4,152,806 $ 49,580,585 2,652,772 $ 31,162,315
========== ============ ========= ============
Redemptions:
Brinson Class I................ 11,346,380 $142,532,012 5,330,521 $ 63,966,318
Brinson Class N................ -- -- -- --
SwissKey Class................. 198,888 2,469,271 24,583 296,145
---------- ------------ --------- ------------
Total Redemptions........... 11,545,268 $145,001,283 5,355,104 $ 64,262,463
========== ============ ========= ============
</TABLE>
- --------------------------------------------------------------------------------
52
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 1,338,623 $15,816,109 285,419 $ 3,205,567
Brinson Class N.................. 78 1,000 -- --
SwissKey Class................... 2,271,465 26,703,521 746,285 8,357,646
--------- ----------- --------- -----------
Total Sales................... 3,610,166 $42,520,630 1,031,704 $11,563,213
========= =========== ========= ===========
Shares issued in acquisition of
SBC World Growth Fund:
Brinson Class I.................. -- -- -- --
Brinson Class N.................. -- -- -- --
SwissKey Class................... -- -- 2,474,177 $25,670,575
--------- ----------- --------- -----------
Total......................... -- -- 2,474,177 $25,670,575
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 308,273 $ 3,485,504 160,063 $ 1,694,631
Brinson Class N.................. -- -- -- --
SwissKey Class................... 286,226 3,226,433 155,720 1,641,689
--------- ----------- --------- -----------
Total Dividend Reinvestment... 594,499 $ 6,711,937 315,783 $ 3,336,320
========= =========== ========= ===========
Redemptions:
Brinson Class I.................. 225,435 $ 2,683,391 186,600 $ 2,055,092
Brinson Class N.................. -- -- -- --
SwissKey Class................... 565,431 6,612,207 523,404 5,704,953
--------- ----------- --------- -----------
Total Redemptions............. 790,866 $ 9,295,598 710,004 $ 7,760,045
========= =========== ========= ===========
<CAPTION>
GLOBAL BOND FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 2,335,856 $22,155,311 1,094,889 $10,985,420
Brinson Class N.................. 104 1,000 -- --
SwissKey Class................... 103,968 1,007,942 345,211 3,599,508
--------- ----------- --------- -----------
Total Sales................... 2,439,928 $23,164,253 1,440,100 $14,584,928
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 348,609 $ 3,318,757 374,786 $ 3,722,031
Brinson Class N.................. -- -- -- --
SwissKey Class................... 36,719 349,204 23,414 232,314
--------- ----------- --------- -----------
Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345
========= =========== ========= ===========
Redemptions:
Brinson Class I.................. 1,159,373 $11,665,371 2,369,683 $24,686,522
Brinson Class N.................. -- -- -- --
SwissKey Class................... 77,300 796,902 4,197 41,993
--------- ----------- --------- -----------
Total Redemptions............. 1,236,673 $12,462,273 2,373,880 $24,728,515
========= =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
53
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
Global Fund
Global Equity Fund
Global Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--Global Fund,
Global Equity Fund and Global Bond Fund as of June 30, 1997, the related
statements of operations for the year then ended and changes in net assets and
the financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30,
1997, the results of their operations for the year then ended and the changes
in their net assets and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 8, 1997
- --------------------------------------------------------------------------------
54
<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
- --------------------------------------------------------------------------------
[LOGO OF THE
BRINSON FUNDS]
Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris
Singapore . Sydney . Tokyo . Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430
<PAGE>
------------------------------
The Brinson Funds
BRINSON U.S. BALANCED FUND
BRINSON U.S. EQUITY FUND
BRINSON U.S. BOND FUND
ANNUAL REPORT
JUNE 30, 1997
[LOGO OF THE BRINSON FUNDS]
GLOBAL INSTITUTIONAL ASSET MANAGEMENT
------------------------------
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Secretary
E. Thomas McFarlan Carolyn M. Burke, CPA
President Treasurer
Thomas J. Digenan, CFA, CPA Catherine E. Macrae
Vice President Assistant Secretary
- --------------------------------------------------------------------------------
1
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation. Brinson Partners continues as the name used within North
America, while SBC Brinson is the name used outside North America. We are a
global investment management organization with over $75 billion in
institutional assets under discretionary active management. We are also the
investment manager for SBC Private Banking mutual fund assets which total $50
billion. In addition, we act as an investment advisor to SBC Private Banking.
The division manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. Our organization employs over 590 people in offices in Chicago,
Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore,
Sydney, Tokyo and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is focused upon both
risk and return considerations in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
- --------------------------------------------------------------------------------
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Shareholder Letter..................................................... 4
U.S. Economic and Market Highlights.................................... 6
U.S. Balanced Fund..................................................... 7
Schedule of Investments...........................................10
Financial Statements..............................................14
Financial Highlights..............................................17
U.S. Equity Fund.......................................................19
Schedule of Investments...........................................22
Financial Statements..............................................24
Financial Highlights..............................................27
U.S. Bond Fund.........................................................29
Schedule of Investments...........................................31
Financial Statements..............................................33
Financial Highlights..............................................36
The Brinson Funds--Notes to Financial Statements.......................38
Report of Independent Auditors.........................................41
- -------------------------------------------------------------------------------
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
August 20, 1997
Dear Shareholder:
We are very pleased to present the Annual Report for The Brinson Funds for the
fiscal year ended June 30, 1997. The Brinson Funds consists of seven funds
divided into three distinct classifications: Global Funds, International Funds
and Domestic Funds. Within this Report, we'll focus on current domestic
economic outlook as well as our current strategies and performance updates for
our three Domestic Funds.
Before we begin the review of the domestic funds, I would like to discuss a few
improvements and achievements we have accomplished or put into place during the
last fiscal year. As you may know, Brinson Partners, Inc. is an established,
U.S.-based leader in the investment management business, managing portfolios
for corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. Our portfolio management capabilities
are accessed through separately managed portfolios, collective funds and, of
course, The Brinson Mutual Funds. Brinson Partners, Inc. has been in place over
16 years under the same investment philosophy and senior management.
International and global activities originated in the mid-1970s. We've
historically managed our portfolios out of our headquarters in Chicago with
offices in Tokyo and London. We have since expanded our investment analysis and
trading capabilities to include Basel, Frankfurt, Paris, Singapore and Sydney.
Our investment management team encompasses over 255 portfolio management and
research personnel in 8 locations worldwide. We feel that this additional
worldwide investment management expertise will provide additional investment
performance opportunities for our clients.
Brinson U.S. Balanced Fund
Since its performance inception on December 31, 1994, the Brinson U.S. Balanced
Fund has produced an annualized total return of 17.41 %, compared to the return
of 22.84% of its benchmark, the U.S. Balanced Mutual Fund Index. The Brinson
U.S. Balanced Fund achieved this performance with a volatility of 4.73% well
below the benchmark volatility of 6.91%. For the first half of 1997, the Brinson
U.S. Balanced Fund returned 6.92%.
- --------------------------------------------------------------------------------
4
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Brinson U.S. Equity Fund
The Brinson U.S. Equity Fund has provided an annualized return of 23.61% since
its performance inception on February 28, 1994. This is compared to a 21.78%
return for the benchmark, the Wilshire 5000 Index. The Brinson U.S. Equity Fund
achieved this performance with a volatility of 10.40% compared to the benchmark
volatility of 10.35%. For the first half of 1997, the Brinson U.S. Equity Fund
returned 16.74%.
Brinson U.S. Bond Fund
The Brinson U.S. Bond Fund has provided an annualized return of 6.58% since its
performance inception on August 31, 1995. This is compared to a 6.62% return for
the benchmark, the Salomon Brothers BIG Bond Index. For the first half of 1997,
the Brinson U.S. Bond Fund returned 2.87%.
Each of our Funds employ the same value-oriented investment philosophy applied
across the U.S. spectrum. Each Fund also uses the resources of the entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is tailored
to specific objectives and focused upon both risk and return considerations in
the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent and the flexibility to customize portfolios to meet unique
requirements. The Reports that follow highlight investment characteristics of
the respective funds.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/ Gary P. Brinson
- --------------------------------------
Gary P. Brinson, CFA
President and Chief Investment Officer
Brinson Partners, Inc.
- --------------------------------------------------------------------------------
5
<PAGE>
U.S. Economic and Market Highlights
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
The inflation outlook in the U.S. remains good. While consumer price inflation
has generally been running at 3.0% or less since 1991, other measures of
inflation, such as the personal consumption deflator, the producer price index
and the core CPI, indicate even lower price pressures.
Second quarter real GDP growth of 2.2% annualized was dramatically slower than
the almost 5% growth in the first quarter. Personal consumption, particularly
of durable goods, was lackluster, while non-residential fixed investment and
federal government expenditures showed strength. The continued healthy economy
has again brought unemployment back down to 4.8%.
Strong growth has led to an increase in the government's tax revenues and
consequently to a shrinkage in the budget deficit. Congress and the President
have taken advantage of this in the recent budget. However, the agreement on an
array of tax cuts demonstrates the potential for renewed fiscal irresponsibility
in the future.
U.S. Environment
Major Markets
Six Months Ended June 30, 1997
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
U.S. Cash Equivalents U.S. Bonds U.S. Equities
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Return 2.52 2.87 17.65
</TABLE>
Salomon U.S. Treasury Benchmark Returns
Six Months Ended June 30, 1997
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Maturity (Years) U.S. Cash Equivalents
- ----------------------------------------------
<S> <C>
1 2.99
2 2.86
3 2.70
5 2.20
10 2.51
30 -0.74
</TABLE>
Top Ten Industry Returns Relative to S&P 500
Six Months Ended June 30, 1997
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Industry Returns
- ----------------------------------
<S> <C>
Real Property 13.55
Miscellaneous Finance 11.64
Media 7.62
Oil Service 7.59
Life Insurance 5.93
Leisure, Luxury 3.76
Thrift Institutions 3.72
Retail 3.63
Aerospace 3.53
Tire & Rubber 3.12
</TABLE>
Source: BARRA
Bottom Ten Industry Returns Relative to S&P 500
Six Months Ended June 30, 1997
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Industry Returns
- ------------------------------------------
<S> <C>
Containers -9.93
Motor Vehicles -10.01
Pollution Control -10.18
Aluminum -10.49
Electric Utilities -12.26
Domestic Petroleum Reserves -16.09
Tobacco -16.59
Foreign Petroleum Reserves -24.18
Precious Metals -24.96
Coal & Uranium -38.32
</TABLE>
Source: BARRA
- --------------------------------------------------------------------------------
6
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
The U.S. Balanced Fund is an actively managed portfolio that applies our value-
based asset allocation process to U.S. stocks, bonds and cash. This Fund's
investment strategy is developed in the context of our global asset allocation
process and is based on analysis of long-term economic and market conditions.
The Brinson U.S. Balanced Fund has provided an annualized return of 17.41% since
its performance inception on December 31, 1994. This compares with the
corresponding 22.84% return of its benchmark, the U.S. Balanced Mutual Fund
Index. For the year ended June 30, 1997, the Fund produced a total return of
15.50% compared to the benchmark return of 21.71%. In the first half of 1997,
the Fund returned 6.92% while the benchmark returned 12.43%.
Bond management in conventional bonds provided the primary positive contribution
to performance in the first half of the year. The underweight in the equity
market and offsetting overweights in bonds and cash were the main reasons for
the Fund's underperformance. Security selection in the U.S. equity segment of
the Fund was essentially neutral.
The first six months of the year saw bond prices fall and then recover, as
strong economic news led to inflation fears and increases in real interest
rates. Real GDP growth was substantially above average and the unemployment rate
fell to 4.8%, the lowest figure in almost 25 years. However, yields started to
come back down when none of this news had any impact on inflation. Despite the
apparent tightness on the real side of the economy, consumer and producer price
inflation remained quiescent.
Because the bond portion of the Fund maintained duration longer than the
benchmark, the fall in yields benefited performance.
Equities continue to appear greatly overpriced according to our assessment of
fundamental value. The Fund therefore remains overweighted bonds and
underweighted equities.
- --------------------------------------------------------------------------------
7
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Total Return
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 12/31/94*
6/30/97 6/30/97 to 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Balanced Fund 6.92% 15.50% 17.41%
- --------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 12.43 21.71 22.84
- --------------------------------------------------------------------------------
</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 $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested
$1,000,000 on December 31, 1994, and had reinvested all your income dividends
and capital gain distributions through June 30, 1997. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future results.
Share price and return will vary with market conditions; investors may realize a
gain or loss upon redemption.
Brinson U.S. Balanced Fund
vs. U.S. Balanced Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. U.S. Balanced Mutual
Balanced Fund Fund Index
- --------------------------------------------------------------------------------
<S> <C> <C>
12/31/94 $1,000,000 $1,000,000
3/31/95 1,064,000 1,074,390
6/30/95 1,139,086 1,160,041
9/30/95 1,192,845 1,236,361
12/31/95 1,254,813 1,294,523
3/31/96 1,276,616 1,333,439
6/30/96 1,293,124 1,374,034
9/30/96 1,324,045 1,409,152
12/31/96 1,396,859 1,487,401
3/31/97 1,394,492 1,491,506
6/30/97 1,493,510 1,672,330
</TABLE>
12/31/94 = $1,000,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
- --------------------------------------------------------------------------------
8
<PAGE>
<TABLE>
<CAPTION>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- --------------------------------------------------------------------------------
U.S. EQUITIES
<S> <C>
Basic Industries
Chemicals...................................................... 0.86%
Housing/Paper.................................................. 1.76
Metals......................................................... 0.24
------
2.86
Capital Investment
Capital Goods.................................................. 2.91
Technology..................................................... 3.92
------
6.83
Consumer
Autos/Durables................................................. 1.22
Discretionary.................................................. 1.82
Health: Drugs.................................................. 2.85
Health: Non-Drugs.............................................. 1.41
Non-Durables................................................... 3.91
Retail/Apparel................................................. 1.71
------
12.92
Energy........................................................... 1.67
Financial
Banks.......................................................... 2.89
Non-Banks...................................................... 3.02
------
5.91
Transportation................................................... 2.21%
Utilities........................................................ 2.42
Miscellaneous.................................................... 3.17
------
Total U.S. Equities............................................ 37.99*
------
U.S. BONDS
Corporate Bonds
Asset-Backed................................................... 1.89
CMO............................................................ 0.42
Consumer....................................................... 1.63
Financial...................................................... 1.35
Industrial..................................................... 2.32
Telecommunications............................................. 0.57
------
8.18
International Dollar Bonds....................................... 7.59
Mortgage-Backed Securities....................................... 2.25
U.S. Government Agencies......................................... 16.93
U.S. Government Obligations...................................... 21.05
------
Total U.S. Bonds............................................... 56.00*
------
SHORT-TERM INVESTMENTS........................................... 12.44*
------
TOTAL INVESTMENTS.............................................. 106.43
LIABILITIES, LESS CASH
AND OTHER ASSETS............................................... (6.43)
------
NET ASSETS....................................................... 100.00%
======
</TABLE>
* The Fund held a long position in U.S. Treasury futures on June 30, 1997 which
increased U.S. bond exposure from 56.00% to 61.62%. The Fund also held a short
position in stock index futures which reduced U.S. equity exposure from 37.99
to 28.13%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 12.44% to 16.68%.
<TABLE>
<CAPTION>
Asset Allocation
As of June 30, 1997
Current
Benchmark Strategy
- -------------------------------------------------------------------------
<S> <C> <C>
U.S. Equity 65% 30%
U.S. Bonds 35 65
Cash Equivalents 0 5
- -------------------------------------------------------------------------
100% 100%
Top Ten U.S. Equity Holdings
As of June 30, 1997
Percent of
Net Assets
- -------------------------------------------------------------------------
<S> <C>
1. Xerox Corp. 2.00%
2. Chase Manhattan Corp. 1.71
3. Lockheed Martin Corp. 1.59
4. Philip Morris Companies, Inc. 1.57
5. Aon Corp. 1.32
6. CIGNA Corp. 1.29
7. Burlington Northern Santa Fe 1.18
8. Goodyear Tire & Rubber Co. 1.17
9. Federal Express Corp. 1.08
10. Citicorp 1.06
- -------------------------------------------------------------------------
</TABLE>
9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
U.S. Equities -- 37.99%
Aetna Life & Casualty Co................................... 14,100 $ 1,443,487
Allergan, Inc.............................................. 36,600 1,164,337
Alza Corp. (b)............................................. 35,700 1,035,300
Aon Corp................................................... 72,600 3,757,050
Automatic Data Processing, Inc............................. 34,900 1,640,300
Beckman Instruments, Inc................................... 10,500 506,625
Birmingham Steel Corp...................................... 14,400 223,200
Boston Technology, Inc. (b)................................ 13,900 410,919
Browning-Ferris Industries, Inc............................ 27,100 901,075
Burlington Northern Santa Fe............................... 37,400 3,361,325
Centerior Energy Co........................................ 30,600 342,338
Champion Enterprises, Inc. (b)............................. 16,800 252,000
Champion International Corp................................ 1,200 66,300
Chase Manhattan Corp....................................... 50,100 4,862,831
CIGNA Corp................................................. 20,700 3,674,250
Circuit City Stores, Inc................................... 52,800 1,877,700
Citicorp................................................... 25,100 3,026,119
CMS Energy Corp............................................ 39,500 1,392,375
Coca-Cola Enterprises, Inc................................. 28,800 662,400
Comerica, Inc.............................................. 9,800 666,400
Comverse Technology, Inc. (b).............................. 6,600 343,200
Corning, Inc............................................... 45,900 2,553,187
Covance, Inc............................................... 17,975 347,142
CPC International, Inc..................................... 15,600 1,440,075
CVS Corp................................................... 22,700 1,163,375
Dial Corp.................................................. 22,500 351,562
Eastman Chemical Co........................................ 24,400 1,549,400
EMC Corp./Mass. (b)........................................ 67,900 2,648,100
Enron Corp................................................. 68,700 2,803,819
Entergy Corp............................................... 4,000 109,500
Federal Express Corp. (b).................................. 53,100 3,066,525
Federated Department Stores (b)............................ 20,400 708,900
FileNet Corp. (b).......................................... 7,300 105,850
First American Corp.-Tenn.................................. 9,400 360,725
First Bank System, Inc..................................... 7,600 648,850
First Data Corp............................................ 59,257 2,603,604
First of America Bank Corp................................. 6,900 315,675
First Security Corp........................................ 11,950 326,384
Fleetwood Enterprises, Inc................................. 6,700 199,744
Food Lion, Inc. Class A.................................... 66,100 473,028
Forest Laboratories, Inc. (b).............................. 16,400 679,575
Gannett Co., Inc........................................... 23,300 2,300,875
General Instrument Corp. (b)............................... 81,500 2,037,500
Genzyme Corp. (b).......................................... 14,400 399,600
Geon Co.................................................... 9,800 198,450
Goodyear Tire & Rubber Co.................................. 52,700 3,336,569
Harnischfeger Industries, Inc.............................. 23,800 987,700
Health Care and Retirement Corp. (b)....................... 24,450 816,019
Hibernia Corp. Class A..................................... 19,900 277,356
Informix Corp. (b)......................................... 19,100 171,900
Interpublic Group of Companies, Inc........................ 15,500 950,344
James River Corp. of Virginia.............................. 28,200 1,043,400
Kroger Co. (b)............................................. 19,500 565,500
Lockheed Martin Corp....................................... 43,671 4,522,678
Lyondell Petrochemical Co.................................. 39,100 852,869
Manor Care, Inc............................................ 31,800 1,037,475
Martin Marietta Materials, Inc............................. 10,436 337,866
Masco Corp................................................. 41,700 1,740,975
Mattel, Inc................................................ 52,750 1,786,906
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Nabisco Holdings Corp. Class A.......................... 36,400 $ 1,451,450
National Service Industries Inc......................... 7,000 340,813
Nextel Communications, Inc. Class A (b)................. 54,500 1,032,094
Octel Communications Corp. (b).......................... 10,800 253,125
Old Republic International Corp......................... 12,850 389,516
Peco Energy Co.......................................... 89,100 1,871,100
Pentair, Inc............................................ 18,900 621,337
Pharmacia & Upjohn, Inc................................. 45,500 1,581,125
Philip Morris Companies, Inc............................ 100,800 4,473,000
Raytheon Co............................................. 12,700 647,700
Regions Financial Corp.................................. 9,200 290,950
Reynolds & Reynolds Co. Class A......................... 12,900 203,175
Schering Plough Corp.................................... 62,600 2,996,975
Seagate Technology, Inc. (b)............................ 15,000 527,812
Timken Co............................................... 24,800 881,950
Trinity Industries, Inc................................. 6,600 209,550
Tyson Foods, Inc. Class A............................... 72,500 1,386,562
UCAR International, Inc. (b)............................ 700 32,025
Ultramar Diamond Shamrock Corp.......................... 40,590 1,324,249
US Bancorp.............................................. 21,800 1,397,925
Vencor, Inc. (b)........................................ 18,700 790,075
Viad Corp............................................... 35,000 673,750
Westvaco Corp........................................... 8,550 268,791
Witco Corp.............................................. 3,300 125,194
Xerox Corp.............................................. 72,100 5,686,888
York International Corp................................. 22,200 1,021,200
360 Communications Co. (b).............................. 10,600 181,525
-----------
Total U.S. Equities (Cost $81,714,881).................. 108,088,389
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 56.00%
U.S. CORPORATE BONDS -- 8.18%
AirTouch Communications
7.500%, due 07/15/06................................... $2,000,000 $ 2,032,738
Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,008,096
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02............................ 1,360,000 1,349,705
Chase Manhattan Credit Card Master Trust 96-4A 6.730%,
due 02/15/03........................................... 2,000,000 2,019,060
Chrysler Financial Corp. MTN
6.500%, due 08/21/97................................... 1,000,000 1,001,192
Comcast Cable Communications 144-A 8.500%, due 05/01/27. 2,000,000 2,156,320
CSX Transportation, Inc. 144-A
6.950%, due 05/01/27................................... 1,600,000 1,614,099
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
02/25/02............................................... 2,000,000 2,004,340
Donaldson Lufkin & Jenrette FRN
6.700%, due 06/30/00................................... 840,000 840,000
Eastman Chemical Co.
7.600%, due 02/01/27................................... 2,380,000 2,358,749
GE Capital Management Services, Inc.
94-7 Class A12 6.000%, due 02/25/09.................... 1,270,601 1,199,485
Lockheed Martin Corp.
7.700%, due 06/15/08................................... 2,000,000 2,089,916
News America Holdings
7.750%, due 01/20/24................................... 1,000,000 948,816
Time Warner, Inc. 9.150%, due 02/01/23.................. 1,500,000 1,655,499
-----------
23,278,015
-----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
INTERNATIONAL DOLLAR BONDS -- 7.59%
Bangkok Bank 144-A
8.250%, due 03/15/16.................................. $ 3,700,000 $ 3,699,260
Credit Suisse-London 144-A
7.900%, due 05/01/07.................................. 2,170,000 2,230,764
Den Danske Bank 144-A
7.400%, due 06/15/10.................................. 1,400,000 1,410,681
Empresa Nacional Electric
7.875%, due 02/01/27.................................. 2,335,000 2,354,885
International Bank for Reconstruction & Development
6.375%, due 07/21/05.................................. 1,500,000 1,470,171
LKB Baden-Wuerttemberg Finance
8.125%, due 01/27/00.................................. 1,780,000 1,845,673
Montell Finance Co. 144-A
8.100%, due 03/15/27.................................. 1,610,000 1,653,879
Petroliam Nasional
7.125%, due 08/15/05.................................. 1,500,000 1,499,376
Province of Quebec
7.500%, due 07/15/23.................................. 750,000 737,760
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%,
due 03/15/14.......................................... 1,735,000 1,813,936
Skandinaviska Enskilda Banken 144-A 6.625%, due
03/29/49.............................................. 2,000,000 1,979,600
Southern Investments UK
6.800%, due 12/01/06.................................. 930,000 908,517
-----------
21,604,502
-----------
MORTGAGE-BACKED SECURITIES -- 2.25%
Independent National Mortgage Corp.
7.145%, due 02/25/26.................................. 1,876,156 1,879,552
7.000%, due 03/25/26.................................. 1,344,251 1,340,299
Morgan Stanley Capital, Inc.
6.830%, due 10/15/06.................................. 1,250,000 1,253,665
Vanderbilt Mortgage Finance
6.975%, due 08/07/11.................................. 1,925,000 1,930,414
-----------
6,403,930
-----------
U.S. GOVERNMENT AGENCIES -- 16.93%
Federal Home Loan Mortgage Corp.
7.500%, due 01/15/23.................................. 1,023,663 977,977
0.000%, due 04/15/27 principal only................... 2,497,000 1,482,049
Federal Home Loan Mortgage Corp. Gold
6.500%, due 12/01/03 TBA.............................. 2,180,000 2,152,070
8.000%, due 05/01/23.................................. 795,363 813,508
9.000%, due 03/01/24.................................. 399,511 425,667
9.000%, due 04/01/25.................................. 1,201,673 1,268,516
9.500%, due 04/01/25.................................. 1,281,693 1,372,614
Federal National Mortgage Association
6.500%, due 05/25/08.................................. 1,705,842 1,676,194
6.500%, due 08/25/08.................................. 1,945,894 1,906,781
8.000%, due 12/18/11.................................. 1,000,000 1,043,071
6.500%, due 12/25/23.................................. 2,000,000 1,916,348
6.500%, due 04/01/26.................................. 586,130 560,672
6.500%, due 05/01/26.................................. 2,064,982 1,975,290
6.500%, due 12/01/26 TBA.............................. 8,000,000 7,652,520
7.500%, due 12/01/26 TBA.............................. 5,595,000 5,607,253
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Federal National Mortgage Association Strips
8.000%, due 07/01/24 interest only..................... $ 9,671 $ 3,139
0.000%, due 07/01/26 principal only.................... 5,478 3,660
0.000%, due 04/01/27 principal only.................... 4,270,755 2,831,489
Government National Mortgage Association
11.000%, due 09/15/15.................................. 312,435 346,999
8.000%, due 08/15/22................................... 993,405 1,014,826
8.000%, due 11/15/22................................... 2,207,891 2,271,500
7.500%, due 08/15/23................................... 1,079,758 1,082,461
7.500%, due 09/15/23................................... 1,115,920 1,118,713
7.000%, due 12/15/23................................... 1,354,532 1,338,224
9.000%, due 07/15/24................................... 136,907 144,565
8.500%, due 11/15/24................................... 173,216 179,874
8.500%, due 01/15/25................................... 309,204 321,089
9.000%, due 05/15/25................................... 389,027 410,788
7.500%, due 06/15/25................................... 2,026,365 2,035,889
8.000%, due 09/15/26................................... 4,149,445 4,238,919
-----------
48,172,665
-----------
U.S. GOVERNMENT OBLIGATIONS-- 21.05%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01................................... 3,635,000 3,671,350
6.250%, due 10/31/01................................... 12,860,000 12,803,738
7.000%, due 07/15/06................................... 8,230,000 8,466,613
8.125%, due 05/15/21................................... 14,420,000 16,497,388
U.S. Treasury Principal Strips
0.000%, due 08/15/03................................... 7,230,000 4,892,396
0.000%, due 11/15/04................................... 15,985,000 9,903,986
0.000%, due 05/15/08................................... 5,245,000 2,543,143
0.000%, due 02/15/19................................... 4,900,000 1,095,248
-----------
59,873,862
-----------
Total U.S. Bonds (Cost $157,642,385).................... 159,332,974
-----------
Short-Term Investments--12.44%
U.S. GOVERNMENT OBLIGATIONS-- 0.48%
U.S. Treasury Bill 5.360%, due 11/13/97................. 1,400,000 1,372,962
-----------
COMMERCIAL PAPER -- 11.96%
American Stores Co.
5.830%, due 07/23/97................................... 1,000,000 996,437
Case Credit Corp. 5.760%, due 07/21/97.................. 1,000,000 996,800
Crown Cork & Seal Co.
5.800%, due 07/09/97................................... 1,500,000 1,498,067
5.770%, due 07/15/97................................... 1,700,000 1,696,185
CSX Corp.
5.780%, due 07/09/97................................... 2,500,000 2,496,789
5.800%, due 07/22/97................................... 1,000,000 996,617
Cummins Engine Company, Inc.
6.500%, due 07/01/97................................... 500,000 500,000
Enron Oil & Gas 6.520%, due 07/01/97.................... 7,176,000 7,176,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................... 1,500,000 1,497,592
5.850%, due 08/11/97................................... 2,500,000 2,483,344
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Marriott Corp. 5.770%, due 07/08/97.................... $1,000,000 $ 998,878
Norfolk Southern Corp.
5.770%, due 07/10/97.................................. 1,000,000 998,558
5.780%, due 07/18/97.................................. 1,500,000 1,495,906
Occidental Petroleum
5.800%, due 08/13/97.................................. 1,750,000 1,737,876
Sundstrand Corp.
5.800%, due 07/09/97.................................. 1,200,000 1,198,453
5.850%, due 07/15/97.................................. 1,000,000 997,725
Tenneco, Inc.
5.780%, due 07/17/97.................................. 1,750,000 1,745,504
5.800%, due 07/23/97.................................. 1,000,000 996,455
Textron Financial Corp.
6.400%, due 07/01/97.................................. 3,500,000 3,500,000
------------
34,007,186
------------
Total Short-Term Investments
(Cost $35,379,046).................................... 35,380,148
------------
Total Investments
(Cost $274,736,312)--106.43% (a)...................... 302,801,511
------------
Liabilities, less cash and other
assets-- (6.43%)...................................... (18,291,697)
------------
Net Assets--100%....................................... $284,509,814
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $274,855,422; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $29,429,449
Gross unrealized depreciation................................ (1,483,360)
-----------
Net unrealized appreciation................................ $27,946,089
===========
</TABLE>
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1997.
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144-A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1997,
the value of these securities amounted to $16,558,539 or 5.82% of net
assets.
FUTURES CONTRACTS (NOTE 4)
The U.S. Balanced Fund had the following open futures contracts as of June 30,
1997:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN/(LOSS)
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST RATE FUTURES
BUY CONTRACTS
5 Year U.S. Treasury
Note, 55 contracts..... September 1997 $ 5,776,272 $ 5,823,985 $ 47,713
10 Year U.S. Treasury
Note, 49 contracts..... September 1997 5,243,368 5,285,875 42,507
30 Year U.S. Treasury
Bond, 44 contracts..... September 1997 4,797,455 4,886,750 89,295
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500,
63 contracts........... September 1997 26,671,770 28,042,875 (1,371,105)
-----------
Total................. $(1,191,590)
===========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1997 was $1,372,962.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $274,736,312) (Note 1)............... $302,801,511
Receivables:
Investment securities sold...................................... 8,232,355
Dividends....................................................... 232,210
Interest........................................................ 1,792,937
Fund shares sold................................................ 806,039
Variation margin (Note 4)....................................... 154,131
Other assets..................................................... 42,136
------------
TOTAL ASSETS.................................................. 314,061,319
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 27,505,092
Fund shares redeemed............................................ 194,098
Due to custodian bank........................................... 1,596,904
Investment advisory fees (Note 2)............................... 203,965
Accrued expenses................................................ 51,446
------------
TOTAL LIABILITIES............................................. 29,551,505
------------
NET ASSETS........................................................ $284,509,814
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $244,115,671
Accumulated undistributed net investment income.................. 3,271,123
Accumulated net realized gain.................................... 10,249,411
Net unrealized appreciation...................................... 26,873,609
------------
NET ASSETS.................................................... $284,509,814
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $282,859,904 and 22,583,464 shares is-
sued and outstanding) (Note 6)................................. $ 12.53
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 80 shares issued and outstanding) (Note 6).......... $ 12.53
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,648,910 and 132,351 shares issued and outstanding) (Note 6). $ 12.46
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $10,015,932
Dividends......................................................... 1,832,510
-----------
TOTAL INCOME................................................... 11,848,442
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,775,454
Administration.................................................... 131,904
Custodian......................................................... 79,580
Distribution (Note 5)............................................. 6,675
Other............................................................. 260,939
-----------
TOTAL EXPENSES................................................. 2,254,552
Expenses waived by Advisor (Note 2)............................ (215,473)
-----------
NET EXPENSES................................................... 2,039,079
-----------
NET INVESTMENT INCOME ......................................... 9,809,363
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 19,028,392
Futures contracts................................................ (2,961,151)
-----------
Net realized gain.............................................. 16,067,241
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 11,790,507
Futures contracts................................................ (1,255,734)
-----------
Change in net unrealized appreciation or depreciation.......... 10,534,773
-----------
Net realized and unrealized gain.................................. 26,602,014
-----------
Net increase in net assets resulting from operations.............. $36,411,377
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 9,809,363 $ 8,308,870
Net realized gain................................. 16,067,241 8,233,205
Change in net unrealized appreciation or deprecia-
tion............................................. 10,534,773 8,676,412
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 36,411,377 25,218,487
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.................................. (7,953,731) (7,711,341)
SwissKey Class................................... (43,714) (9,781)
Distributions from net realized gain:
Brinson Class I.................................. (10,324,917) (9,885,505)
SwissKey Class................................... (65,778) (992)
------------ ------------
Total distributions to shareholders................ (18,388,140) (17,607,619)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 80,528,530 81,710,433
Shares issued on reinvestment of distributions.... 18,312,423 17,593,608
Shares redeemed................................... (60,962,669) (36,030,444)
------------ ------------
Net increase in net assets resulting from capital
share transactions (Note 6)...................... 37,878,284 63,273,597
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 55,901,521 70,884,465
------------ ------------
NET ASSETS:
Beginning of year................................. 228,608,293 157,723,828
------------ ------------
End of year (including accumulated undistributed
net investment income of $3,271,123 and
$1,459,205, respectively)........................ $284,509,814 $228,608,293
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<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>
YEAR YEAR DECEMBER 30, 1994*
ENDED ENDED THROUGH
BRINSON CLASS I JUNE 30, 1997 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 opera-
tions:
Net investment income......... 0.47 0.44 0.23
Net realized and unrealized
gain......................... 1.29 1.04 1.16
-------- -------- --------
Total income from investment
operations................. 1.76 1.48 1.39
-------- -------- --------
Less distributions:
Distributions from net invest-
ment income.................. (0.40) (0.43) (0.16)
Distributions from net real-
ized gain.................... (0.54) (0.57) --
-------- -------- --------
Total distributions......... (0.94) (1.00) (0.16)
-------- -------- --------
Net asset value, end of period.. $ 12.53 $ 11.71 $ 11.23
======== ======== ========
Total return (non-annualized)... 15.50% 13.52% 13.91%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $282,860 $227,829 $157,724
Ratio of expenses to average
net assets:
Before expense reimbursement.. 0.88% 1.01% 1.06%**
After expense reimbursement... 0.80% 0.80% 0.80%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 3.78% 3.76% 4.36%**
After expense reimbursement... 3.86% 3.97% 4.63%**
Portfolio turnover rate........ 329% 240% 196%
Average commission rate paid
per share..................... $0.0441 $ 0.0481 N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 11.67 $ 11.38
------- -------
Income from investment operations:
Net investment income........................... 0.38 0.42
Net realized and unrealized gain................ 1.31 0.86
------- -------
Total income from investment operations....... 1.69 1.28
------- -------
Less distributions:
Distributions from net investment income........ (0.36) (0.42)
Distributions from net realized gain............ (0.54) (0.57)
------- -------
Total distributions........................... (0.90) (0.99)
------- -------
Net asset value, end of period.................... $ 12.46 $ 11.67
======= =======
Total return (non-annualized)..................... 14.99% 11.54%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $ 1,649 $ 779
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.38% 1.51%**
After expense reimbursement..................... 1.30% 1.30%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 3.28% 3.26%**
After expense reimbursement..................... 3.36% 3.47%**
Portfolio turnover rate.......................... 329% 240%
Average commission rate paid per share........... $0.0441 $0.0481
</TABLE>
*Commencement of SwissKey Class
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
The U.S. Equity Fund is an actively managed portfolio that invests in common
stocks of U.S. corporations. The Fund is diversified by issue and industry; it
is typically 70% invested in large capitalization stocks, with the remaining 30%
in intermediate and small capitalization stocks. Investment strategies
emphasize stock selection with attention to the management of factor and
industry exposures.
For the period February 28, 1994 (performance inception date) to June 30, 1997,
the Brinson U.S. Equity Fund provided an annualized return of 23.61% compared
to its benchmark, the Wilshire 5000 Index, return of 21.78%. This performance
was achieved at an annualized volatility of 10.40%, only slightly above the
index volatility of 10.35%. For the year ended June 30, 1997, the Fund returned
31.87%, while the benchmark returned 29.32%. The total return of the Brinson
U.S. Equity Fund was 16.74% for the first six months of 1997, compared to the
17.65% return for the Wilshire 5000 Index. The following paragraphs review the
sources of returns in the first half of 1997.
Market exposure (average beta of 0.99) detracted modestly from Fund relative
performance in the strong equity market environment which characterized the
first half of 1997. Conversely, other broad factor positions added to results.
The most significant of these was a higher than benchmark exposure to the
strongly performing traditional value measures of earnings-price, book-price,
and yield coupled with an underweighting in growth issues. Also positive was an
underweighting in stocks ranked high in price and earnings momentum. Some
offset to the favorable contribution of these factors was the underweight in
foreign income. Large, multinational issues have been among the best market
performers so far this year.
Industry weightings had a fairly neutral influence upon performance in the first
half. On the positive side, the Fund's low exposure to telephone and electric
utilities continued to benefit results. We strongly believe that a combination
of new technology, intensifying competition and the easing of regulatory
barriers will meaningfully pressure future profitability of the traditional
telephone and electric utilities. Another positive was the underweighting in
several of the basic industries, particularly chemicals. Chemical product
pricing is suffering as rapid capacity growth outstrips demand, particularly in
many developing countries. In addition, the underweight in autos and overweight
in health care contributed favorably to results. Offsetting these gains were
several adverse industry positions including the Fund overweighting in
pollution control stocks. Waste stream volume growth has been lackluster and
landfill tipping fees continue under pressure. Consumer industry weightings were
also a negative due to an underweight in beverages and an overweight in
tobacco. Finally, the underweighting in the miscellaneous finance group, which
includes brokerage and investment management firms, detracted from performance.
The stock specific influence upon the Fund's active return was negative for the
first six months. Among large capitalization issues, the best performers were
Xerox, Schering Plough, Corning, Gannett and CIGNA while the worst were
Pharmacia & Upjohn, Chase Manhattan, Burlington Northern Santa Fe, Enron and
Rhone Poulenc Rorer. In the intermediate capitalization segment of the Fund,
the strongest contributors were Timken, U.S. Bancorp, Nextel Communications,
Coca-Cola Enterprises and Interpublic Group, while the weakest were Tyson Foods,
Allergan, York International, Harnischfeger and Informix.
- --------------------------------------------------------------------------------
19
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 2/28/94*
ended ended ended to
6/30/97 6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson U.S. Equity Fund 16.74% 31.87% 27.85% 23.61%
- --------------------------------------------------------------------------------
Wilshire 5000 Index 17.65 29.32 26.74 21.78
- --------------------------------------------------------------------------------
</TABLE>
* Performance inception date of the Brinson U.S. Equity Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Equity Fund and the Wilshire 5000 Index if you had invested $1,000,000 on
February 28, 1994, and had reinvested all your income dividends and capital gain
distributions through June 30, 1997. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
Brinson U.S. Equity Fund
vs. Wilshire 5000 Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S.
Equity Fund Wilshire 5000 Index
- --------------------------------------------------------------------------------
<S> <C> <C>
2/28/94 $1,000,000 $1,000,000
3/31/94 942,943 954,720
6/30/94 970,003 947,285
9/30/94 1,019,258 998,766
12/31/94 983,676 991,086
3/31/95 1,076,245 1,080,584
6/30/95 1,178,023 1,181,470
9/30/95 1,289,389 1,289,453
12/31/95 1,382,887 1,352,348
3/31/96 1,489,979 1,428,320
6/30/96 1,538,200 1,491,254
9/30/96 1,588,806 1,533,447
12/31/96 1,737,594 1,639,211
3/31/97 1,751,366 1,649,815
6/30/97 2,028,487 1,928,453
</TABLE>
2/28/94 = $1,000,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
- --------------------------------------------------------------------------------
20
<PAGE>
U.S. Equity Fund
- ------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals........................... 2.13%
Housing/Paper....................... 4.38
Metals.............................. 0.59
------
7.10
Capital Investments
Capital Goods....................... 7.24
Technology.......................... 9.75
------
16.99
Consumer
Autos/Durables...................... 3.04
Discretionary....................... 4.52
Health: Drugs....................... 7.08
Health: Non-Drugs................... 3.50
Non-Durables........................ 9.70
Retail/Apparel...................... 4.24
------
32.08
Energy................................ 4.14%
Financial
Banks............................... 7.17
Non-Banks........................... 7.50
------
14.67
Transportation........................ 5.49
Utilities............................. 6.00
Services/Miscellaneous................ 7.93
------
Total U.S. Equities............. 94.40*
------
SHORT-TERM INVESTMENTS................ 6.76*
------
TOTAL INVESTMENTS............... 101.16
------
LIABILITIES, LESS CASH AND
OTHER ASSETS.................... (1.16)
------
NET ASSETS............................ 100.00%
======
</TABLE>
* The Fund held a long position in stock index futures on June 30, 1997 which
increased U.S. equity exposure from 94.40% to 99.65% and reduced exposure to
Short-Term Investments from 6.76% to 1.51%.
- --------------------------------------------------------------------------------
Top Ten U.S. Equity Holdings
As of June 30, 1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------------------------------------
<S> <C>
1. Xerox Corp. 4.98%
2. Chase Manhattan Corp. 4.22
3. Lockheed Martin Corp. 3.96
4. Philip Morris Companies, Inc. 3.92
5. Aon Corp. 3.26
6. CIGNA Corp. 3.21
7. Goodyear Tire & Rubber Co. 2.93
8. Burlington Northern Santa Fe 2.92
9. Federal Express Corp. 2.69
10. Citicorp 2.65
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
U.S. Equities -- 94.40%
Aetna Life & Casualty Co.................................. 46,000 $ 4,709,250
Allergan, Inc............................................. 119,700 3,807,956
Alza Corp. (b)............................................ 116,700 3,384,300
Aon Corp.................................................. 234,650 12,143,137
Automatic Data Processing, Inc............................ 114,000 5,358,000
Beckman Instruments, Inc.................................. 34,000 1,640,500
Birmingham Steel Corp..................................... 46,800 725,400
Boston Technology, Inc. (b)............................... 43,600 1,288,925
Browning-Ferris Industries, Inc........................... 88,500 2,942,625
Burlington Northern Santa Fe.............................. 121,200 10,892,850
Centerior Energy Co....................................... 110,500 1,236,219
Champion Enterprises, Inc. (b)............................ 55,100 826,500
Champion International Corp............................... 4,000 221,000
Chase Manhattan Corp...................................... 162,200 15,743,537
CIGNA Corp................................................ 67,500 11,981,250
Circuit City Stores, Inc.................................. 172,600 6,138,087
Citicorp.................................................. 82,000 9,886,125
CMS Energy Corp........................................... 128,100 4,515,525
Coca-Cola Enterprises, Inc................................ 94,200 2,166,600
Comerica, Inc............................................. 32,100 2,182,800
Comverse Technology, Inc. (b)............................. 21,600 1,123,200
Corning, Inc.............................................. 149,200 8,299,250
Covance, Inc.............................................. 58,750 1,134,609
CPC International, Inc.................................... 51,100 4,717,169
CVS Corp.................................................. 74,200 3,802,750
Dial Corp................................................. 67,700 1,057,813
Eastman Chemical Co....................................... 79,000 5,016,500
EMC Corp./Mass. (b)....................................... 222,100 8,661,900
Enron Corp................................................ 225,300 9,195,056
Entergy Corp.............................................. 13,400 366,825
Federal Express Corp. (b)................................. 173,700 10,031,175
Federated Department Stores (b)........................... 66,200 2,300,450
FileNet Corp. (b)......................................... 23,800 345,100
First American Corp.-Tenn................................. 30,600 1,174,275
First Bank System, Inc.................................... 23,700 2,023,388
First Data Corp........................................... 193,830 8,516,406
First of America Bank Corp................................ 22,450 1,027,088
First Security Corp....................................... 38,600 1,054,263
Fleetwood Enterprises, Inc................................ 23,000 685,688
Food Lion, Inc. Class A................................... 213,800 1,530,006
Forest Laboratories, Inc. (b)............................. 43,700 1,810,819
Gannett Co., Inc.......................................... 76,500 7,554,375
General Instrument Corp. (b).............................. 266,200 6,655,000
Genzyme Corp. (b)......................................... 47,200 1,309,800
Geon Co................................................... 32,300 654,075
Goodyear Tire & Rubber Co................................. 172,400 10,915,075
Harnischfeger Industries, Inc............................. 77,400 3,212,100
Health Care and Retirement Corp. (b)...................... 73,950 2,468,081
Hibernia Corp. Class A.................................... 64,900 904,544
Informix Corp. (b)........................................ 62,400 561,600
Interpublic Group of Companies, Inc....................... 50,700 3,108,544
James River Corp. of Virginia............................. 92,100 3,407,700
Kroger Co. (b)............................................ 63,700 1,847,300
Lockheed Martin Corp...................................... 142,626 14,770,705
Lyondell Petrochemical Co................................. 127,700 2,785,456
Manor Care, Inc........................................... 104,000 3,393,000
Martin Marietta Materials, Inc............................ 34,257 1,109,070
Masco Corp................................................ 136,100 5,682,175
Mattel, Inc............................................... 169,275 5,734,191
Nabisco Holdings Corp. Class A............................ 119,000 4,745,125
National Service Industries Inc........................... 22,800 1,110,075
Nextel Communications, Inc. Class A (b)................... 178,000 3,370,875
Octel Communications Corp. (b)............................ 38,700 907,031
Old Republic International Corp........................... 42,050 1,274,641
Peco Energy Co............................................ 271,500 5,701,500
Pentair, Inc.............................................. 61,800 2,031,675
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
Pharmacia & Upjohn,
Inc.................... 148,700 $ 5,167,325
Philip Morris Companies,
Inc.................... 329,600 14,626,000
Raytheon Co............. 41,400 2,111,400
Regions Financial Corp.. 30,000 948,750
Reynolds & Reynolds Co.
Class A................ 41,800 658,350
Schering Plough Corp.... 204,900 9,809,587
Seagate Technology, Inc.
(b).................... 56,100 1,974,019
Timken Co............... 79,300 2,820,106
Trinity Industries,
Inc.................... 25,200 800,100
Tyson Foods, Inc. Class
A...................... 237,700 4,546,012
UCAR International, Inc.
(b).................... 2,900 132,675
Ultramar Diamond
Shamrock Corp.......... 132,918 4,336,450
US Bancorp.............. 71,100 4,559,287
Vencor, Inc. (b)........ 61,100 2,581,475
Viad Corp............... 114,500 2,204,125
Westvaco Corp........... 27,900 877,106
Witco Corp.............. 14,300 542,506
Xerox Corp.............. 235,700 18,590,838
York International
Corp................... 72,800 3,348,800
360 Communications Co.
(b).................... 34,633 593,090
------------
Total U.S. Equities
(Cost $293,837,346).... 352,106,030
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C> <C>
Short-Term Investments -- 6.76%
U.S. GOVERNMENT OBLIGATIONS --
0.19%
U.S. Treasury Bill
5.368%, due 11/13/97... $ 710,000 $ 696,288
------------
COMMERCIAL PAPER -- 6.57%
Case Credit Corp.
6.250%, due 07/07/97... 1,000,000 998,958
5.760%, due 07/21/97... 500,000 498,400
Crown Cork & Seal Co.
5.800%, due 07/09/97... 500,000 499,356
5.770%, due 07/15/97... 500,000 498,878
CSX Corp. 5.780%, due
07/09/97............... 500,000 499,358
Cummins Engine Company,
Inc. 6.500%, due
07/01/97............... 2,500,000 2,500,000
Enron Oil & Gas 6.520%,
due 07/01/97........... 5,524,000 5,524,000
Hughes Electronics Corp.
5.780%, due 07/11/97... 500,000 499,197
5.850%, due 08/11/97... 500,000 496,669
Marriott Corp. 5.770%,
due 07/08/97........... 500,000 499,439
Norfolk Southern Corp.
5.770%,
due 07/10/97........... 500,000 499,279
Occidental Petroleum
5.800%,
due 08/13/97........... 500,000 496,536
Sundstrand Corp.
5.800%, due 07/09/97... 500,000 499,356
5.850%, due 07/15/97... 500,000 498,862
Tenneco, Inc. 5.780%,
due 07/17/97........... 500,000 498,716
Textron Financial Corp.
6.400%,
due 07/01/97........... 9,500,000 9,500,000
------------
24,507,004
------------
Total Short-Term
Investments
(Cost $25,202,710)..... 25,203,292
------------
Total Investments
(Cost $319,040,056) --
101.16% (a)............ 377,309,322
------------
Liabilities, less cash
and other assets--
(1.16%)................ (4,319,862)
------------
Net Assets -- 100%...... $372,989,460
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
22
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $319,163,004; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $60,885,827
Gross unrealized depreciation................................ (2,739,509)
-----------
Net unrealized appreciation................................ $58,146,318
===========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS (NOTE 4)
The U.S. Equity Fund had the following open index futures contracts as of June
30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Standard & Poor's 500,
44 contracts........... September 1997 $19,350,765 $19,585,500 $234,735
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1997 was $696,288.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $319,040,056) (Note 1) .............. $377,309,322
Cash............................................................. 423,747
Receivables:
Investment securities sold...................................... 1,645,118
Dividends....................................................... 555,543
Fund shares sold................................................ 1,181,693
Other assets..................................................... 39,163
------------
TOTAL ASSETS.................................................. 381,154,586
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 6,850,007
Fund shares redeemed............................................ 885,591
Investment advisory fees (Note 2)............................... 224,739
Variation margin (Note 4)....................................... 147,926
Accrued expenses................................................ 56,863
------------
TOTAL LIABILITIES............................................. 8,165,126
------------
NET ASSETS........................................................ $372,989,460
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $298,910,691
Accumulated undistributed net investment income.................. 679,544
Accumulated net realized gain.................................... 14,895,224
Net unrealized appreciation...................................... 58,504,001
------------
NET ASSETS.................................................... $372,989,460
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $337,949,448 and 19,159,533 shares is-
sued and outstanding) (Note 6)................................. $ 17.64
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 57 shares issued and outstanding) (Note 6).......... $ 17.64
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $35,039,012 and 1,992,413 shares issued
and outstanding) (Note 6)...................................... $ 17.59
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 3,429,477
Interest.......................................................... 545,249
-----------
TOTAL INCOME................................................... 3,974,726
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,423,666
Administration.................................................... 89,029
Distribution (Note 5)............................................. 73,831
Custodian......................................................... 72,024
Other............................................................. 236,863
-----------
TOTAL EXPENSES................................................. 1,895,413
Expenses waived by Advisor (Note 2)............................ (189,305)
-----------
NET EXPENSES................................................... 1,706,108
-----------
NET INVESTMENT INCOME.......................................... 2,268,618
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments...................................................... 19,441,498
Futures contracts................................................ 2,138,520
-----------
Net realized gain ............................................. 21,580,018
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 40,649,230
Futures contracts ............................................... 237,510
-----------
Change in net unrealized appreciation or depreciation.......... 40,886,740
-----------
Net realized and unrealized gain ................................. 62,466,758
-----------
Net increase in net assets resulting from operations.............. $64,735,376
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 2,268,618 $ 1,333,171
Net realized gain ................................ 21,580,018 7,826,393
Change in net unrealized appreciation or deprecia-
tion ............................................ 40,886,740 13,357,238
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 64,735,376 22,516,802
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................. (1,717,943) (1,233,245)
SwissKey Class.................................. (87,137) (17,809)
Distributions from net realized gain:
Brinson Class I................................. (12,393,329) (1,764,213)
SwissKey Class.................................. (838,501) (2,611)
------------ ------------
Total distributions to shareholders............... (15,036,910) (3,017,878)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 212,394,882 71,976,805
Shares issued on reinvestment of distributions.... 14,138,565 2,944,272
Shares redeemed................................... (34,971,198) (5,264,717)
------------ ------------
Net increase in net assets resulting from capital
share transactions (Note 6)...................... 191,562,249 69,656,360
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 241,260,715 89,155,284
------------ ------------
NET ASSETS:
Beginning of year................................. 131,728,745 42,573,461
------------ ------------
End of year (including accumulated undistributed
net investment income of $679,544 and $216,006,
respectively).................................... $372,989,460 $131,728,745
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<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>
YEAR ENDED JUNE 30, FEBRUARY 22, 1994*
--------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 14.59 $ 11.53 $ 9.65 $10.00
-------- -------- ------- ------
Income from investment opera-
tions:
Net investment income........ 0.15 0.17 0.16 0.05
Net realized and unrealized
gain (loss)................. 4.27 3.31 1.89 (0.36)
-------- -------- ------- ------
Total income (loss) from
investment operations..... 4.42 3.48 2.05 (0.31)
-------- -------- ------- ------
Less distributions:
Distributions from net in-
vestment income............. (0.14) (0.17) (0.14) (0.04)
Distributions from net real-
ized gain................... (1.23) (0.25) (0.03) --
-------- -------- ------- ------
Total distributions........ (1.37) (0.42) (0.17) (0.04)
-------- -------- ------- ------
Net asset value, end of period. $ 17.64 $ 14.59 $ 11.53 $ 9.65
======== ======== ======= ======
Total return (non-annualized).. 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data
Net assets, end of period (in
000s)........................ $337,949 $126,342 $42,573 $8,200
Ratio of expenses to average
net assets:
Before expense reimbursement. 0.89% 1.14% 1.70% 5.40% **
After expense reimbursement.. 0.80% 0.80% 0.80% 0.80% **
Ratio of net investment income
to average net assets:
Before expense reimbursement. 1.06% 1.13% 1.09% (2.82)%**
After expense reimbursement.. 1.15% 1.47% 1.99% 1.78% **
Portfolio turnover rate....... 43% 36% 33% 9%
Average commission rate paid
per share.................... $ 0.0422 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27
<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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 14.58 $ 11.94
------- -------
Income from investment operations:
Net investment income........................... 0.11 0.10
Net realized and unrealized gain................ 4.22 2.92
------- -------
Total income from investment operations....... 4.33 3.02
------- -------
Less distributions:
Distributions from net investment income........ (0.09) (0.13)
Distributions from net realized gain............ (1.23) (0.25)
------- -------
Total distributions........................... (1.32) (0.38)
------- -------
Net asset value, end of period.................... $ 17.59 $ 14.58
======= =======
Total return (non-annualized)..................... 31.28% 25.70%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $35,039 $ 5,387
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.41% 1.66%**
After expense reimbursement..................... 1.32% 1.32%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 0.54% 0.61%**
After expense reimbursement..................... 0.63% 0.95%**
Portfolio turnover rate.......................... 43% 36%
Average commission rate paid per share........... $0.0422 $0.0457
</TABLE>
*Commencement of SwissKey Class
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28
<PAGE>
U.S. Bond Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar-
denominated investment-grade fixed income securities. Our goal for the Fund is
to achieve a total return superior to that of an unmanaged market index.
Macroeconomic and monetary analysis are the key elements in our strategy. We
develop expectations about the returns on U.S. bonds based on the divergence of
current market yields from our estimates of equilibrium yields. Relative value
analysis serves as the basis of both our sector and individual security
selection.
The Brinson U.S. Bond Fund produced an annualized return of 6.58% since its
inception on August 31, 1995 compared to the Salomon Brothers Broad Investment
Grade (BIG) Bond Index return of 6.62%. For the year ended June 30, 1997, the
Fund produced a total return of 8.45% compared to the Benchmark return of
8.15%. In the first half of 1997, the Fund returned 2.87% compared to the
Benchmark return of 3.06%.
The first quarter of 1997 in the U.S. was characterized by unusually strong
rates of real economic growth, heightened fears of inflation, rising market
interest rates and a 25 basis point hike in the Federal Reserve's overnight
funds target rate. In the second quarter, economic activity slowed, Fed policy
held steady and market interest rates declined. Over the full semi-annual period
there was a net increase in yields on U.S. fixed income securities of about 10
to 20 basis points.
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. BONDS
<S> <C>
Corporate Bonds
Asset-Backed............................ 3.84%
CMO..................................... 2.60
Consumer................................ 2.18
Financial............................... 8.22
Industrial.............................. 3.93
Telecommunications...................... 0.40
Transportation.......................... 1.48
------
Total U.S. Corporate Bonds............ 22.65
U.S. Government Agencies.................. 28.68
U.S. Government Obligations............... 37.26
International Dollar Bonds................ 6.05
------
Total U.S. Bonds...................... 94.64
------
SHORT-TERM INVESTMENTS.................... 14.42
------
TOTAL INVESTMENTS..................... 109.06
LIABILITIES, LESS CASH
AND OTHER ASSETS........................ (9.06)
------
NET ASSETS................................ 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
U.S. Bond Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Total Return
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 8/31/95*
6/30/97 6/30/97 to 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Bond Fund 2.87% 8.45% 6.58%
- --------------------------------------------------------------------------------
Salomon Brothers Broad Investment
Grade (BIG) Bond Index 3.06 8.15 6.62
- --------------------------------------------------------------------------------
</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 $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if
you had invested $1,000,000 on August 31, 1995, and had reinvested all your
income dividends and capital gain distributions through June 30, 1997. No
adjustment has been made for any income taxes payable by shareholders on income
dividends and capital gain distributions. Past performance is no guarantee of
future results. Share price and return will vary with market conditions;
investors may realize a gain or loss upon redemption.
Brinson U.S. Bond Fund
vs. Salomon Brothers BIG Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Salomon Brothers BIG
Bond Fund Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
8/31/95 $1,000,000 $1,000,000
9/30/95 1,009,000 1,009,400
12/31/95 1,054,932 1,053,220
3/31/96 1,031,398 1,034,956
6/30/96 1,035,997 1,040,029
9/30/96 1,054,776 1,059,391
12/31/96 1,092,169 1,091,411
3/31/97 1,081,323 1,085,686
6/30/97 1,123,558 1,124,790
</TABLE>
8/31/95 = $1,000,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
- --------------------------------------------------------------------------------
30
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- ---------
<S> <C> <C>
Bonds -- 94.64%
U.S. CORPORATE BONDS -- 22.65%
Aetna Services Inc. 6.970%, due 08/15/36.................... $235,000 $ 237,332
BellSouth Savings & Employee ESOP
9.125%, due 07/01/03....................................... 88,949 92,634
Capital One Bank 6.830%, due 05/17/99....................... 359,000 360,453
Chase Mortgage Finance Corp. 93-J1 Class 1A5 6.625%, due
08/25/09................................................... 70,026 66,997
Ches Pot Tel MD 8.000%, due 10/15/29........................ 87,000 94,158
Citicorp Mortgage Securities, Inc. 94-9 Class A8 5.750%, due
06/25/09................................................... 91,612 77,402
Comcast Cable Communications 144-A
8.500%, due 05/01/27....................................... 300,000 323,448
Countrywide Funding Corp. FRN
6.360%, due 12/01/03....................................... 250,000 238,799
CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due
06/20/29................................................... 245,000 248,675
CSX Transportation, Inc. 144-A
6.950%, due 05/01/27....................................... 350,000 353,084
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
02/25/02................................................... 218,000 218,473
Eastman Chemical Co. 7.600%, due 02/01/27................... 223,000 221,009
First Bank Corporate Card Master Trust 97-1A 6.400%, due
02/15/03................................................... 155,000 153,405
GE Capital Management Services, Inc. 94-7 Class A12 6.000%,
due 02/25/09............................................... 178,678 168,678
GMAC 9.625%, due 12/15/01................................... 294,000 325,311
Hanson Overseas BV 6.750%, due 09/15/05..................... 100,000 97,476
Interamer Development Bank
6.800%, due 10/15/25....................................... 100,000 95,100
Lehman Brothers Holdings
7.250%, due 04/15/03....................................... 225,000 226,083
Lockheed Martin Corp. 7.700%, due 06/15/08.................. 282,000 294,678
MBNA Global Capital Securities FRN
6.659%, due 02/01/27....................................... 90,000 88,936
News America Holdings 7.750%, due 01/20/24.................. 358,000 339,676
Premier Auto Trust
96-3A 6.500%, due 03/06/00................................. 190,000 191,244
96-4A 6.400%, due 10/06/01................................. 350,000 350,616
Salomon, Inc. 6.750%, due 02/15/03.......................... 300,000 293,990
Thrift Financial Corp. 11.250%, due 01/01/16................ 54,270 58,634
Time Warner, Inc. 9.150%, due 02/01/23...................... 75,000 82,775
Time Warner Entertainment, Inc.
8.375%, due 03/15/23....................................... 94,000 96,346
---------
5,395,412
---------
INTERNATIONAL DOLLAR BONDS -- 6.05%
Bayerische Landesbank 6.850%, due 07/19/01.................. 188,000 189,357
Empresa Nacional Electric
7.875%, due 02/01/27....................................... 394,000 397,355
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- ---------
<S> <C> <C>
Province of Quebec
7.500%, due 07/15/23....................................... $200,000 $ 196,736
Repsol International Finance
7.000%, due 08/01/05....................................... 200,000 200,717
Republic of South Africa 9.625%, due 12/15/99............... 71,000 75,029
Royal Bank of Scotland 7.375%, due 04/29/49................. 80,000 79,730
Skandinaviska Enskilda Banken 144-A
6.625%, due 03/29/49....................................... 305,000 301,889
---------
1,440,813
---------
U.S. GOVERNMENT AGENCIES -- 28.68%
Federal Home Loan Mortgage Corp.
5.800%, due 08/15/19....................................... 661,000 621,856
7.500%, due 01/15/23....................................... 139,328 133,110
7.238%, due 05/01/26....................................... 51,187 52,721
0.000%, due 04/15/27 principal only........................ 300,000 178,060
Federal Home Loan Mortgage Corp. Gold
6.000%, due 06/01/03....................................... 108,489 105,302
6.500%, due 12/01/03 TBA................................... 300,000 296,156
8.000%, due 11/01/22....................................... 212,105 216,944
9.000%, due 03/01/24....................................... 172,791 184,104
9.000%, due 04/01/25....................................... 410,527 433,362
9.500%, due 04/01/25....................................... 53,394 57,182
Federal National Mortgage Association
6.500%, due 12/01/03 TBA................................... 800,000 759,500
6.500%, due 12/01/03 Balloon TBA........................... 200,000 197,375
6.500%, due 04/25/08....................................... 105,383 101,005
6.500%, due 05/25/08....................................... 132,160 129,863
8.000%, due 12/18/11....................................... 100,000 104,307
9.000%, due 08/01/21....................................... 33,735 35,825
8.500%, due 07/01/22....................................... 25,508 26,843
8.500%, due 12/01/25....................................... 334,233 346,558
6.500%, due 02/01/26....................................... 128,409 122,831
6.500%, due 04/01/26....................................... 423,606 405,207
7.500%, due 12/01/26 TBA................................... 460,000 461,007
6.070%, due 08/01/29 TBA................................... 530,000 523,706
Federal National Mortgage Association Strips
7.500%, due 05/01/23 interest only......................... 188,272 63,317
0.000%, due 07/01/26 principal only........................ 185,521 123,958
0.000%, due 04/01/27 principal only........................ 458,215 303,795
Government National Mortgage Association
10.000%, due 09/15/00...................................... 3,212 3,406
10.000%, due 05/15/01...................................... 6,249 6,626
9.000%, due 11/15/04....................................... 20,543 21,500
9.000%, due 12/15/17....................................... 64,649 69,391
8.000%, due 08/15/22....................................... 89,260 91,185
7.500%, due 12/15/22....................................... 397,800 401,475
7.500%, due 06/15/25....................................... 128,896 129,501
7.000%, due 07/15/25....................................... 127,437 125,219
---------
6,832,197
---------
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
--------- -----------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-- 37.26%
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98................................... $ 153,000 $ 152,044
6.250%, due 10/31/01................................... 525,000 522,703
7.000%, due 07/15/06................................... 940,000 967,025
8.125%, due 05/15/21................................... 1,370,000 1,567,366
6.000%, due 02/15/26................................... 1,812,000 1,621,175
U.S. Treasury Principal Strips
0.000%, due 05/15/03................................... 1,915,000 1,317,577
0.000%, due 08/15/03................................... 1,305,000 883,067
0.000%, due 11/15/04................................... 2,153,000 1,333,956
0.000%, due 05/15/08................................... 1,055,000 511,538
-----------
8,876,451
-----------
Total U.S. Bonds (Cost $22,347,621)..................... 22,544,873
-----------
Short-Term Investments-- 14.42%
COMMERCIAL PAPER -- 14.42%
American Stores Co. 5.830%, due 07/23/97................ 500,000 498,219
Case Credit Corp. 5.760%, due 07/21/97.................. 250,000 249,200
Crown Cork & Seal Co.
5.770%, due 07/15/97................................... 500,000 498,878
CSX Corp. 5.780%, due 07/09/97.......................... 500,000 499,358
Enron Oil & Gas 6.520%, due 07/01/97.................... 143,000 143,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................... 500,000 499,197
Norfolk Southern Corp.
5.770%, due 07/10/97................................... 500,000 499,279
Occidental Petroleum 5.800%, due 08/13/97............... 250,000 248,268
Sundstrand Corp. 5.800%, due 07/09/97................... 300,000 299,613
-----------
Total Short-Term Investments
(Cost $3,435,012)...................................... 3,435,012
-----------
Total Investments
(Cost $25,782,633) -- 109.06% (a)...................... 25,979,885
-----------
Liabilities, less cash and other
assets -- (9.06%)...................................... (2,159,180)
-----------
Net Assets -- 100%...................................... $23,820,705
===========
</TABLE>
(a) Aggregate cost for federal income tax purposes was $25,786,476; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation........... $219,233
Gross unrealized de-
preciation........... (25,824)
--------
Net unrealized ap-
preciation........... $193,409
========
</TABLE>
FRN: Floating rate note---The rate disclosed is that in effect at June 30,
1997.
MTN: Medium Term Note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144-A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1997,
the value of these securities amounted to $978,421 or 4.11% of net assets.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $25,782,633) (Note 1)................ $25,979,885
Cash............................................................. 46,542
Receivables:
Investment securities sold...................................... 980,757
Interest........................................................ 250,445
Fund shares sold................................................ 1,025
Other assets..................................................... 28,677
-----------
TOTAL ASSETS.................................................. 27,287,331
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 3,358,346
Fund shares redeemed............................................ 29,387
Investment advisory fees (Note 2)............................... 29,369
Accrued expenses................................................ 49,524
-----------
TOTAL LIABILITIES............................................. 3,466,626
-----------
NET ASSETS........................................................ $23,820,705
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $23,420,309
Accumulated undistributed net investment income.................. 271,841
Accumulated net realized loss.................................... (68,697)
Net unrealized appreciation...................................... 197,252
-----------
NET ASSETS.................................................... $23,820,705
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $22,420,622 and 2,189,278 shares issued
and outstanding) (Note 6)...................................... $ 10.24
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 98 shares issued and outstanding) (Note 6).......... $ 10.24
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,399,083 and 136,949 shares issued and outstanding) (Note 6). $ 10.22
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $ 921,854
----------
TOTAL INCOME.................................................... 921,854
----------
EXPENSES:
Advisory (Note 2).................................................. 67,835
Accounting......................................................... 38,182
Registration....................................................... 37,673
Transfer Agent..................................................... 35,540
Professional....................................................... 33,928
Distribution (Note 5).............................................. 4,104
Other.............................................................. 10,538
----------
TOTAL EXPENSES.................................................. 227,800
Expenses waived and reimbursed by Advisor (Note 2).............. (142,178)
----------
NET EXPENSES.................................................... 85,622
----------
NET INVESTMENT INCOME .......................................... 836,232
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss.................................................. (36,166)
Change in net unrealized appreciation or depreciation.............. 343,515
----------
Net realized and unrealized gain................................... 307,349
----------
Net increase in net assets resulting from operations............... $1,143,581
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED AUGUST 31, 1995*
JUNE 30, THROUGH
1997 JUNE 30, 1996
OPERATIONS: ----------- ----------------
<S> <C> <C>
Net investment income........................... $ 836,232 $ 456,231
Net realized loss............................... (36,166) (11,035)
Change in net unrealized appreciation or depre-
ciation........................................ 343,515 (146,263)
----------- -----------
Net increase in net assets resulting from opera-
tions.......................................... 1,143,581 298,933
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................ (598,393) (350,335)
SwissKey Class................................. (31,712) (13,132)
Distributions in excess of net realized gain:
Brinson Class I................................ (675) (23,071)
SwissKey Class................................. (39) (268)
----------- -----------
Total distributions to shareholders............. (630,819) (386,806)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................... 16,583,813 10,200,031
Shares issued on reinvestment of distributions.. 461,917 386,807
Shares redeemed................................. (3,420,321) (867,431)
----------- -----------
Net increase in net assets resulting from capi-
tal share transactions (Note 6)................ 13,625,409 9,719,407
----------- -----------
TOTAL INCREASE IN NET ASSETS................. 14,138,171 9,631,534
----------- -----------
NET ASSETS:
Beginning of period............................. 9,682,534 51,000
----------- -----------
End of period (including accumulated undistrib-
uted net investment
income of $271,841 and $90,190, respectively).. $23,820,705 $ 9,682,534
=========== ===========
</TABLE>
*Commencement of investment operations
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<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>
AUGUST 31, 1995*
YEAR ENDED THROUGH
BRINSON CLASS I JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............ $ 9.93 $10.00
------- ------
Income from investment operations:
Net investment income......................... 0.51*** 0.50
Net realized and unrealized gain (loss)....... 0.32 (0.14)
------- ------
Total income from investment operations..... 0.83 0.36
------- ------
Less distributions:
Distributions from net investment income...... (0.52) (0.40)
Distributions in excess of net realized gain.. -- (0.03)
------- ------
Total distributions......................... (0.52) (0.43)
------- ------
Net asset value, end of period.................. $ 10.24 $ 9.93
======= ======
Total return (non-annualized)................... 8.45% 3.60%
Ratios/Supplemental data
Net assets, end of period (in 000s)............ $22,421 $9,047
Ratio of expenses to average net assets:
Before expense reimbursement.................. 1.65% 3.63%**
After expense reimbursement................... 0.60% 0.60%**
Ratio of net investment income to average net
assets:
Before expense reimbursement.................. 5.14% 3.00%**
After expense reimbursement................... 6.19% 6.03%**
Portfolio turnover rate........................ 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<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>
AUGUST 31, 1995*
YEAR ENDED THROUGH JUNE 30,
SWISSKEY CLASS JUNE 30, 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............ $ 9.92 $10.00
------ ------
Income from investment operations:
Net investment income......................... 0.46*** 0.46
Net realized and unrealized gain (loss)....... 0.32 (0.13)
------ ------
Total income from investment operations..... 0.78 0.33
------ ------
Less distributions:
Distributions from net investment income...... (0.48) (0.38)
Distributions in excess of net realized gain.. -- (0.03)
------ ------
Total distributions......................... (0.48) (0.41)
------ ------
Net asset value, end of period.................. $10.22 $ 9.92
====== ======
Total return (non-annualized)................... 7.91% 3.24%
Ratios/Supplemental data
Net assets, end of period (in 000s)............ $1,399 $ 636
Ratio of expenses to average net assets:
Before expense reimbursement.................. 2.12% 4.10%**
After expense reimbursement................... 1.07% 1.07%**
Ratio of net investment income to average net
assets:
Before expense reimbursement.................. 4.67% 2.53%**
After expense reimbursement................... 5.72% 5.56%**
Portfolio turnover rate........................ 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<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. Effective June 30, 1997, each Fund has three
classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey
Class. There are an unlimited number of shares of each class with par value of
$0.001 authorized. Each share represents an identical interest in the
investments of the Funds and has the same rights. The following is a summary of
significant accounting policies consistently followed by the U.S. Balanced
Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively the
"Funds") in the preparation of their financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which the most recent bid price or market
quotations are not readily available, including restricted securities which are
subject to limitations on their sale, are valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees. Equity
securities traded over-the-counter are valued at the most recent bid price.
Debt securities are valued at the most recent bid price by using market
quotations or independent services. Futures contracts are valued at the
settlement price established each day on the exchange on which they are traded.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
C.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1997,
therefore, no federal income tax provision was required.
E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses. Amounts equal to 15.05% and 38.95% of the
amount taxable as ordinary income qualify for the dividends received deduction
available to corporate shareholders for the U.S. Balanced Fund and the U.S.
Equity Fund, respectively.
F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
G.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
38
<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 that total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the year
ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES WAIVED
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES AND/OR REIMBURSED
-------- --------------- --------------- -------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,775,454 $215,473
U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,423,666 189,305
U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 67,835 142,178
</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 for the year ended June 30, 1997, were $7,300, $4,998 and
$3,828 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund,
respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1997, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund.................................... $809,073,589 $785,163,972
U.S. Equity Fund...................................... 226,474,872 84,130,110
U.S. Bond Fund........................................ 66,672,483 53,682,174
</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 PLANS
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the SwissKey Class of shares and,
effective June 30, 1997, the Brinson Class N shares. Annual fees under the
SwissKey Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47%
of the average daily net assets of the SwissKey Class of the U.S. Balanced
Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. Annual fees under the
Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of
the Brinson Class N of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond
Fund.
- --------------------------------------------------------------------------------
39
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. BALANCED FUND
---------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................. 6,578,157 $ 78,728,712 6,944,846 $80,934,038
Brinson Class N................. 80 1,000 -- --
SwissKey Class.................. 148,317 1,798,818 67,290 776,395
---------- ------------ --------- -----------
Total Sales................... 6,726,554 $ 80,528,530 7,012,136 $81,710,433
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I................. 1,541,262 $ 18,266,191 1,540,774 $17,588,758
Brinson Class N................. -- -- -- --
SwissKey Class.................. 3,904 46,232 422 4,850
---------- ------------ --------- -----------
Total Dividend Reinvestment... 1,545,166 $ 18,312,423 1,541,196 $17,593,608
========== ============ ========= ===========
Redemptions:
Brinson Class I................. 4,988,208 $ 59,912,281 3,073,501 $36,019,481
Brinson Class N................. -- -- -- --
SwissKey Class.................. 86,625 1,050,388 957 10,963
---------- ------------ --------- -----------
Total Redemptions............. 5,074,833 $ 60,962,669 3,074,458 $36,030,444
========== ============ ========= ===========
<CAPTION>
U.S. EQUITY FUND
---------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................. 11,551,336 $183,660,431 5,125,613 $66,685,850
Brinson Class N................. 57 1,000 -- --
SwissKey Class.................. 1,834,556 28,733,451 375,655 5,290,955
---------- ------------ --------- -----------
Total Sales................... 13,385,949 $212,394,882 5,501,268 $71,976,805
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I................. 907,559 $ 13,745,444 222,497 $ 2,935,334
Brinson Class N................. -- -- -- --
SwissKey Class.................. 25,905 393,121 644 8,938
---------- ------------ --------- -----------
Total Dividend Reinvestment... 933,464 $ 14,138,565 223,141 $ 2,944,272
========== ============ ========= ===========
Redemptions:
Brinson Class I................. 1,959,184 $ 31,250,336 380,602 $ 5,174,675
Brinson Class N................. -- -- -- --
SwissKey Class.................. 237,473 3,720,862 6,874 90,042
---------- ------------ --------- -----------
Total Redemptions............. 2,196,657 $ 34,971,198 387,476 $ 5,264,717
========== ============ ========= ===========
<CAPTION>
U.S. BOND FUND
---------------------------------------------
YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................. 1,521,821 $ 15,371,166 953,454 $ 9,550,552
Brinson Class N................. 98 1,000 -- --
SwissKey Class.................. 119,951 1,211,647 63,717 649,479
---------- ------------ --------- -----------
Total Sales................... 1,641,870 $ 16,583,813 1,017,171 $10,200,031
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I................. 44,351 $ 449,362 37,309 $ 373,407
Brinson Class N................. -- -- -- --
SwissKey Class.................. 1,239 12,555 1,362 13,400
---------- ------------ --------- -----------
Total Dividend Reinvestment... 45,590 $ 461,917 38,671 $ 386,807
========== ============ ========= ===========
Redemptions:
Brinson Class I................. 288,064 $ 2,929,252 84,593 $ 856,547
Brinson Class N................. -- -- -- --
SwissKey Class.................. 48,365 491,069 1,055 10,884
---------- ------------ --------- -----------
Total Redemptions............. 336,429 $ 3,420,321 85,648 $ 867,431
========== ============ ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
40
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--U.S. Balanced
Fund, U.S. Equity Fund and U.S. Bond Fund as of June 30, 1997, the related
statements of operations for the year then ended and changes in net assets and
the financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund at June
30, 1997, the results of their operations for the year then ended and the
changes in their net assets and the financial highlights for the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 8, 1997
- --------------------------------------------------------------------------------
41
<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
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris
Singapore . Sydney . Tokyo . Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430
<PAGE>
----------------------
THE BRINSON FUNDS
BRINSON NON-U.S. EQUITY FUND
ANNUAL REPORT
JUNE 30, 1997
[LOGO OF THE BRINSON FUNDS]
GLOBAL INSTITUTIONAL ASSET MANAGEMENT
----------------------
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
<TABLE>
<CAPTION>
<S> <C>
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Secretary
E. Thomas McFarlan Carolyn M. Burke, CPA
President Treasurer
Thomas J. Digenan, CFA, CPA Catherine E. Macrae
Vice President Assistant Secretary
</TABLE>
================================================================================
1
<PAGE>
The Fund's Advisor -- Brinson Partners, Inc.
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation. Brinson Partners continues as the name used within North
America, while SBC Brinson is the name used outside North America. We are a
global investment management organization with over $75 billion in
institutional assets under discretionary active management. We are also the
investment manager for SBC Private Banking mutual fund assets which total $50
billion. In addition, we act as an investment advisor to SBC Private Banking.
The division manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. Our organization employs over 590 people in offices in Chicago,
Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore,
Sydney, Tokyo and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is focused upon both
risk and return considerations in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
================================================================================
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter........................................................... 4
Global Economic and Market Highlights........................................ 5
Non-U.S. Equity Fund......................................................... 6
Schedule of Investments...................................................... 9
Financial Statements.........................................................14
Financial Highlights.........................................................17
Notes to Financial Statements................................................19
Report of Independent Auditors...............................................22
</TABLE>
================================================================================
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
August 20, 1997
Dear Shareholder:
We are very pleased to present the Annual Report for the Brinson Non-U.S. Equity
Fund for the fiscal year ended June 30, 1997. Within this Report, we will focus
on the current international economic outlook as well as our current strategy
and performance update.
Before we begin the review of the Fund, I would like to discuss a few
improvements put into place during the last fiscal year. As you may know,
Brinson Partners, Inc. is an established, U.S.-based leader in the investment
management business, managing portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. Our portfolio management capabilities are accessed through separately
managed portfolios, collective funds and, of course, The Brinson Mutual Funds.
Brinson Partners, Inc. has been in place over 16 years under the same investment
philosophy and senior management. International and global activities originated
in the mid-1970s. We've historically managed our portfolios out of our
headquarters in Chicago with offices in Tokyo and London. We have since expanded
our investment analysis and trading capabilities to include Basel, Frankfurt,
Paris, Singapore and Sydney. Our investment management team encompasses over 255
portfolio management and research personnel in 8 locations worldwide. We feel
that this additional worldwide investment management expertise will provide
additional investment performance opportunities for our clients.
Brinson Non-U.S. Equity Fund
Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund has
produced an annualized total return of 10.16% versus 9.47% for its benchmark,
the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. This
return was achieved at an annualized volatility of 10.10%, below the benchmark
volatility of 12.13%. For the first half of 1997, the Brinson Non-U.S. Equity
Fund returned 14.14%.
Our international funds employ the same value-oriented investment philosophy
within and across the international spectrum, as do our other funds. Each fund
uses the resources of the entire worldwide organization. Investment performance
for our clients is maximized within and across major asset classes through a
comprehensive understanding of global investment markets and their
interrelationships. Portfolio structure is tailored to specific objectives and
focused upon both risk and return considerations in the context of full
investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent and the flexibility to customize portfolios to meet unique
requirements. The report that follows highlights the investment characteristics
of the Brinson Non-U.S. Equity Fund.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson
President and Chief Investment Officer
Brinson Partners, Inc.
- --------------------------------------------------------------------------------
4
<PAGE>
Global Economic and Market Highlights
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Fiscal restraint in continental Europe, caused by the drive to monetary union
(EMU), has amplified the economic slowdown, resulting in persistently high
unemployment. These economies are hindered by more structurally rigid labor
markets than in the U.S. and Asia. As yet, governments seem unwilling to take
the hard measures necessary to free up wages and encourage labor mobility and
flexibility.
Apart from some temporary yen strengthening in the second quarter, a weaker
currency has aided the Japanese economy. Export-oriented industries in
particular have recovered significantly from the prolonged recession brought on
by the bursting of the "bubble" at the start of the 1990s. The hike in the
consumption tax from 3% to 5% at the start of April had caused a spurt in
spending in the first quarter. However, now that it is in place, there has been
some softening in demand, particularly for big ticket items, which is likely to
adversely affect domestically-oriented firms.
The currency turmoil in Southeast Asia is drawing attention to some of the
weaknesses of those economies. In Thailand, which was the initial casualty, the
crisis was precipitated by a bad bank loan problem. These problems in the
banking system prevented the central bank from increasing rates sufficiently to
maintain the peg to a strengthening U.S. dollar.
<TABLE>
<CAPTION>
Non-U.S. Equity Environment
6 months 1 year 3 years Annualized
Major Markets ended ended ended 8/31/93*
Total Return in U.S. Dollar Hedged Terms 6/30/97 6/30/97 6/30/97 to 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japan 10.34% 0.16% 4.88% 4.00%
U.K. 12.04 26.27 18.58 13.13
Germany 33.62 48.75 23.49 18.47
France 24.72 38.71 19.05 11.05
Canada 13.72 35.08 22.36 17.08
Netherlands 37.77 62.07 36.24 27.85
Australia 12.64 21.32 11.28 9.61
- --------------------------------------------------------------------------------
6 months 1 year 3 years Annualized
Major Currencies ended ended ended 8/31/93*
Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97 to 6/30/97
- --------------------------------------------------------------------------------
Yen 1.43% -4.15% -4.83% -2.29%
Pound -2.75 7.11 2.54 2.97
Deutschemark -11.56 -12.65 -2.98 -0.98
Canadian Dollar -0.65 -1.01 0.05 -1.13
- --------------------------------------------------------------------------------
</TABLE>
*Inception date of the Non-U.S. Equity Fund
- --------------------------------------------------------------------------------
5
<PAGE>
Non-U.S. Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
The Non-U.S. Equity Fund invests in the common stocks of companies headquartered
outside the U.S. We believe that in a non-U.S. investment program the country
allocation decision is the most important. Country assessments are developed by
the non-U.S. strategy team in Chicago working with our investment teams in
Basel, Frankfurt, London, Paris, Singapore, Sydney and Tokyo. Currency
strategies are separately developed and coordinated with market allocations. Our
industry strategies and individual security selections are determined by
fundamental research.
Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund has
earned an annualized return of 10.16% versus 9.47% for the benchmark, the
Morgan Stanley Capital International Non-U.S. Equity (Free) Index. This return
was achieved at an annualized volatility of 10.10%, below the benchmark
volatility of 12.13%. For the year ended June 30, 1997, the Fund returned 20.27%
while the benchmark returned 13.64%. For the first half of 1997, the Brinson
Non-U.S. Equity Fund returned 14.14% outperforming the 11.21% return of the
benchmark.
In the first half of the year, the best performing markets in dollar-hedged
terms were Switzerland, the Netherlands and Spain, followed by Germany, Finland
and Sweden, each growing over 30%. In aggregate, the non-U.S. markets were very
strong, gaining 17.76% in dollar-hedged terms. At the opposite end of the
spectrum, Malaysia experienced a steep decline, down 12.34%, followed by
Singapore's loss of 3.79%; notably, these were the only markets to decline.
Japan's 10.34% hedged increase was relatively subdued, the fourth weakest in the
year-to-date period.
Market allocation had a somewhat negative impact on returns. The value added
from underweighting Japan and Southeast Asia, as from overweighting continental
Europe, was offset by holding strategic cash, underweighting Switzerland and
overweighting New Zealand.
Currency management had a highly significant positive impact on performance,
accounting for an important portion of the value added by the Fund. Defensive
strategies that focused on holding the U.S. dollar, while maintaining minimal
exposure to the core European currencies and the yen, continued to prove highly
successful for the first half of the year. This was a period when the DM-bloc
currencies fell considerably: the Belgian franc, the Dutch guilder, the French
franc and the DM, all losing over 12%.
Overall stock selection was very beneficial. In particular, Japanese stock
selection added substantial value, while stock selection in several other
markets (the Netherlands, Germany, France and Finland) also made a positive
contribution.
- --------------------------------------------------------------------------------
6
<PAGE>
Non-U.S. Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 8/31/93*
ended ended ended to
6/30/97 6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Non-U.S. Equity Fund 14.14% 20.27% 14.10% 10.16%
MSCI Non-U.S. Equity (Free) Index
(currency unhedged)** 11.21 13.64 9.79 9.47
MSCI Non-U.S. Equity (Free) Index
(currency hedged)** 17.76 22.77 14.62 11.53
- --------------------------------------------------------------------------------
</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.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson
Non-U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index (currency
unhedged and hedged) if you had invested $1,000,000 on August 31, 1993, and had
reinvested all your income dividends and capital gain distributions through June
30, 1997.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
Brinson Non-U.S. Equity Fund
vs. MSCI Non-U.S. Equity (Free) Index (currency unhedged and hedged)
Wealth Value with Dividends Reinvested
<TABLE>
<CAPTION>
MSCI Non-U.S. MSCI Non-U.S.
Brinson Non-U.S. Equity (Free) Index Equity (Free) Index
Equity Fund (currency unhedged) (currency unhedged)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
8/31/93 $1,000,000 $1,000,000 $1,000,000
12/31/93 $ 965,500 $ 988,754 $1,019,573
6/30/94 $ 975,547 $1,068,786 $1,009,004
12/31/94 $ 974,540 $1,062,774 $1,002,779
6/30/95 $ 974,540 $1,095,525 $ 944,943
12/31/95 $1,126,103 $1,187,456 $1,125,441
6/30/96 $1,204,891 $1,244,668 $1,237,556
12/31/96 $1,269,637 $1,271,887 $1,290,200
6/30/97 $1,449,115 $1,414,422 $1,519,392
</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>
Non-U.S. Equity Fund
- -------------------------------------------------------------------
[LOGO OF THE BRINSON FUNDS]
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1997
- -------------------------------------------------------------------
<S> <C>
NON-U.S. EQUITIES
Aerospace & Military....................................... 0.13%
Airlines................................................... 0.55
Appliances & Household Durables............................ 2.52
Automobiles................................................ 2.47
Banking.................................................... 11.10
Beverages & Tobacco........................................ 1.74
Broadcasting & Publishing.................................. 1.43
Building Materials......................................... 1.66
Business & Public Service.................................. 3.95
Chemicals.................................................. 4.10
Construction............................................... 1.70
Data Processing............................................ 1.21
Electric Components........................................ 1.52
Electronics................................................ 4.06
Energy..................................................... 6.57
Financial Services......................................... 1.27
Food & House Products...................................... 3.33
Forest Products............................................ 1.88
Gold Mining................................................ 0.07
Health & Personal Care..................................... 5.38
Industrial Components...................................... 2.01
Insurance.................................................. 4.42
Leisure & Tourism.......................................... 0.56
Machinery & Engineering.................................... 1.09
Merchandising.............................................. 4.17
Metals-Steel............................................... 1.84
Miscellaneous Materials.................................... 0.66
Multi-Industry............................................. 4.54
Non-Ferrous Metals......................................... 2.00
Real Estate................................................ 0.91
Recreation................................................. 0.82
Shipping................................................... 0.52
Telecommunications......................................... 5.80
Textiles & Apparel......................................... 0.19
Transportation............................................. 0.95
Utilities.................................................. 4.51
Wholesale & International Trade............................ 0.27
------
Total Non-U.S. Equities............................ 91.90*
------
SHORT-TERM INVESTMENTS..................................... 8.31*
------
TOTAL INVESTMENTS.................................. 100.21
LIABILITIES, LESS CASH
AND OTHER ASSETS................................... (0.21)
------
NET ASSETS......................................... 100.00%
======
</TABLE>
Market and Currency Strategy
As of June 30,1997
<TABLE>
<CAPTION>
Portfolio
-------------------
Market Currency
Strategy Strategy Index
- -------------------------------------------------
<S> <C> <C> <C>
U.S. Dollar 0.0% 5.9% 0.0%
Japan 28.7 31.7 31.7
Australia 4.8 2.7 2.7
Belgium 3.1 1.1 1.1
Canada 2.8 4.5 4.5
Finland 0.7 0.7 0.7
France 4.5 6.4 6.4
Germany 8.6 8.1 8.1
Hong Kong 1.4 0.4 3.6
Italy 3.3 3.3 2.9
Malaysia 2.8 2.0 2.0
Netherlands 5.5 4.8 4.8
New Zealand 3.2 3.2 0.3
Spain 2.2 2.2 2.3
Sweden 0.0 2.3 2.3
Switzerland 2.4 6.2 6.2
U.K. 18.8 13.3 17.3
Cash Reserves 5.0 0.0 0.0
Other Markets 2.2 1.2 3.1
- -------------------------------------------------
100.0% 100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of June 30,1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------------
<S> <C>
1. Royal Dutch Petroleum Co. 1.46%
2. Glaxo Wellcome PLC 1.24
3. Matsushita Electric Industrial Co. 1.20
4. Toray Industries, Inc. 1.17
5. Telecom Corp. of New Zealand Ltd. 1.15
6. General Electric Co. PLC 1.06
7. British Telecommunications PLC 0.99
8. Sankyo Co. Ltd. 0.98
9. Lloyds TSB Group PLC 0.96
10. British Petroleum Co. PLC 0.94
- ----------------------------------------------------------
</TABLE>
* The Fund held a long position in Topix futures on June 30, 1997 which
increased Japanese equity exposure from 25.76% to 26.72% and decreased the
Fund's exposure to Short-Term Investments from 8.31% to 7.35%
8
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Non-U.S. Equities -- 91.90%
AUSTRALIA -- 4.72%
Amcor Ltd................................................. 118,700 $ 782,583
Boral Ltd................................................. 202,000 631,080
Brambles Industries Ltd................................... 29,000 569,045
Broken Hill Proprietary Co. Ltd........................... 261,270 3,813,662
Coca-Cola Amatil Ltd...................................... 37,000 476,790
CSR Ltd................................................... 152,000 584,195
David Jones Ltd........................................... 505,600 700,770
Lend Lease Corp. Ltd...................................... 34,578 725,362
M.I.M. Holdings Ltd....................................... 346,840 509,310
National Australia Bank Ltd............................... 185,448 2,635,641
News Corp. Ltd............................................ 387,257 1,842,340
News Corp. Ltd. Preferred................................. 95,000 371,528
Pacific Dunlop Ltd........................................ 242,700 712,775
Qantas Airways Ltd........................................ 249,010 578,329
Rio Tinto Ltd............................................. 94,209 1,593,724
Santos Ltd................................................ 73,900 308,387
Westpac Banking Corp. Ltd................................. 323,851 1,933,750
WMC Ltd................................................... 167,700 1,049,099
Woolworth's Ltd........................................... 124,000 404,118
------------
20,222,488
------------
BELGIUM -- 3.03%
Delhaize-Le Lion S.A...................................... 16,200 851,683
Electrabel S.A............................................ 8,965 1,922,675
Fortis AG................................................. 723 161
Fortis AG Strip (b)....................................... 8,833 1,825,569
General de Banque S.A..................................... 2,000 770,515
Groupe Bruxelles Lambert S.A.............................. 5,230 877,243
Kredietbank NV............................................ 3,286 1,325,369
Petrofina S.A............................................. 4,775 1,809,718
Societe Generale de Belgique.............................. 8,428 787,707
Solvay S.A. Class A....................................... 1,503 886,331
Tractebel................................................. 2,350 980,528
Tractebel Warrants "99" (b)............................... 1,350 14,495
Union Miniere Group S.A. (b).............................. 10,070 943,975
------------
12,995,969
------------
CANADA -- 2.92%
Alcan Aluminium Ltd....................................... 24,300 829,610
Bank of Montreal.......................................... 22,000 859,524
Barrick Gold Corp......................................... 13,600 296,231
BCE, Inc.................................................. 27,000 751,522
Canadian National Railway Co.............................. 16,900 737,446
Canadian Pacific Ltd...................................... 55,600 1,583,850
Hudson's Bay Co........................................... 23,000 516,816
Imperial Oil Ltd.......................................... 20,000 1,025,660
MacMillan Bloedel Ltd..................................... 33,300 457,404
Moore Corp. Ltd........................................... 21,800 429,806
Noranda, Inc.............................................. 25,100 541,262
Northern Telecom Ltd...................................... 8,400 757,741
NOVA Corp................................................. 35,000 299,362
Royal Bank of Canada...................................... 24,700 1,119,879
Seagram Co. Ltd........................................... 21,300 856,879
Thomson Corp.............................................. 34,900 804,451
TransCanada Pipelines Ltd................................. 33,100 665,791
------------
12,533,234
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
FINLAND -- 0.69%
Merita Ltd. Class A....................................... 94,500 $ 314,745
Nokia Ab Class A.......................................... 19,200 1,433,845
Outokumpu Class A......................................... 16,200 321,243
Pohjola Insurance Group Class B........................... 3,900 115,629
Sampo Insurance Co. Ltd. Class A.......................... 1,700 165,281
The Rauma Group........................................... 693 15,877
UPM-Kymmene Corp.......................................... 24,900 575,257
------------
2,941,877
------------
FRANCE -- 5.90%
Accor S.A................................................. 6,695 1,003,509
Alcatel Alsthom........................................... 9,725 1,219,145
AXA UAP................................................... 19,551 1,217,150
AXA UAP Rights (b)........................................ 10,752 41,755
Banque Nationale de Paris................................. 21,930 904,692
Cie Bancaire S.A.......................................... 6,688 854,369
Cie de Saint Gobain....................................... 10,613 1,549,198
Cie de Suez............................................... 162,880 400,889
Cie Generale des Eaux..................................... 7,964 1,021,443
Cie Generale des Eaux Warrants "01" (b)................... 13,864 8,312
Colas..................................................... 3,077 406,179
Dexia France.............................................. 9,050 881,724
Elf Aquitaine S.A......................................... 15,334 1,655,894
Groupe Danone............................................. 6,100 1,008,874
Lafarge S.A............................................... 9,000 560,296
Lagardere S.C.A........................................... 20,800 604,762
LVMH...................................................... 3,715 999,779
Michelin Class B.......................................... 21,550 1,295,349
Pechiney S.A. Class A..................................... 21,893 863,265
Peugeot S.A............................................... 12,280 1,188,050
Rhone-Poulenc Class A..................................... 31,230 1,276,648
SEITA..................................................... 23,700 750,843
Societe Generale.......................................... 11,203 1,251,775
Suez Lyonnaise des Eaux S.A............................... 9,600 968,012
Thomson CSF............................................... 21,700 559,595
Total S.A. Class B........................................ 13,595 1,375,478
Usinor Sacilor............................................ 79,900 1,442,582
------------
25,309,567
------------
GERMANY -- 8.90%
Allianz AG Holding........................................ 15,730 3,362,461
BASF AG................................................... 42,880 1,583,455
Bayer AG.................................................. 56,790 2,189,997
Bayerische Motoren Werke AG............................... 2,000 1,650,407
Commerzbank AG............................................ 46,940 1,341,451
Daimler-Benz AG........................................... 22,450 1,828,104
Deutsche Bank AG.......................................... 45,567 2,677,643
Deutsche Telekom AG....................................... 112,550 2,767,570
Henkel KGaA-Vorzug AG..................................... 17,950 1,011,529
Hochtief AG............................................... 13,400 599,793
Hoechst AG................................................ 18,580 787,939
M.A.N. AG................................................. 3,040 947,274
Mannesmann AG............................................. 3,607 1,612,449
Metro AG.................................................. 13,208 1,440,101
Muenchener Rueckver AG.................................... 792 2,245,197
Muenchener Rueckver AG Warrants "98" (b).................. 12 4,304
Preussag AG............................................... 4,469 1,315,619
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
RWE AG.................................................. 32,200 $ 1,385,860
Schering AG............................................. 18,592 1,992,991
Siemens AG.............................................. 23,500 1,408,571
Thyssen AG.............................................. 7,150 1,721,235
Veba AG................................................. 37,688 2,130,304
Volkswagen AG........................................... 2,850 2,162,114
------------
38,166,368
------------
HONG KONG -- 1.39%
Cheung Kong Holdings Ltd................................ 58,000 572,716
China Light & Power Co. Ltd............................. 111,000 628,980
Guoco Group Ltd......................................... 68,000 358,112
Hang Seng Bank Ltd...................................... 45,500 648,968
Hong Kong Telecommunications Ltd........................ 193,200 461,348
Hutchison Whampoa Ltd................................... 123,000 1,063,725
Jardine Matheson Holdings ADR (c)....................... 45,200 320,920
New World Development Co. Ltd........................... 77,000 459,179
Sun Hung Kai Properties Ltd............................. 39,000 469,422
Swire Pacific Ltd. Class A.............................. 63,000 567,198
Wharf (Holdings) Ltd.................................... 98,000 425,025
------------
5,975,593
------------
ITALY -- 3.24%
Assicurazioni Generali.................................. 74,250 1,348,413
Banca Commerciale Italiana.............................. 198,000 409,615
Credito Italiano Spa.................................... 502,000 917,555
Danieli & Co. Savings (Risp)............................ 129,100 451,452
Edison Spa.............................................. 79,600 395,544
ENI ADR (c)............................................. 22,100 1,256,938
ENI Spa................................................. 165,000 933,368
Fiat Spa-Priv........................................... 551,200 1,017,201
INA-Istituto Nazionale delle Assicurazioni.............. 310,100 472,030
Istituto Mobilaire Italiano Spa......................... 79,100 711,272
Italgas Spa............................................. 107,300 346,841
La Rinascente Spa....................................... 68,900 382,463
La Rinascente Spa Rights (b)............................ 159,200 7,111
La Rinascente Spa RNC................................... 90,300 219,448
La Rinascente Spa RNC Rights (b)........................ 159,200 25,917
La Rinascente Spa Warrants "99" (b)..................... 2,800 1,382
Mediobanca Spa.......................................... 34,600 209,857
Montedison Spa (b)...................................... 1,408,280 928,646
SAI-Savings (Risp)...................................... 83,000 255,610
Telecom Italia Mobile Spa............................... 214,000 691,743
Telecom Italia Mobile Spa RNC........................... 600,000 1,071,995
Telecom Italia Spa...................................... 130,000 388,892
Telecom Italia Spa RNC.................................. 732,300 1,448,245
------------
13,891,538
------------
JAPAN -- 25.76%
Amada Co. Ltd........................................... 173,000 1,526,960
Asahi Glass Co. Ltd..................................... 204,000 2,032,334
Bank of Tokyo-Mitsubishi, Ltd........................... 187,000 3,758,630
Canon, Inc.............................................. 139,000 3,789,915
Canon Sales Co., Inc.................................... 58,200 1,357,983
Citizen Watch Co. Ltd................................... 157,000 1,212,864
Dai Nippon Printing Co. Ltd............................. 158,000 3,576,160
Daiichi Pharmaceutical Co. Ltd.......................... 113,000 1,994,757
Daikin Industries Ltd................................... 170,000 1,545,049
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Daiwa House Industry Co. Ltd.............................. 85,000 $ 1,039,937
Fanuc..................................................... 68,100 2,618,544
Fujitsu................................................... 101,000 1,403,391
Hitachi Ltd............................................... 337,000 3,769,641
Honda Motor Co............................................ 43,000 1,296,426
Inax...................................................... 177,000 1,327,152
Isetan.................................................... 58,000 719,741
Ito Yokado Co. Ltd........................................ 65,000 3,777,419
Kaneka Corp............................................... 158,000 991,383
Keio Teito Electric Railway............................... 193,000 919,208
Kinki Nippon Railway...................................... 195,000 1,192,869
Kirin Brewery Co. Ltd..................................... 184,000 1,913,484
Kokuyo.................................................... 56,000 1,517,085
Kuraray Co. Ltd........................................... 202,000 2,012,409
Kyocera Corp.............................................. 21,000 1,670,017
Maeda Road Construction................................... 34,000 292,668
Marui Co. Ltd............................................. 90,000 1,675,260
Matsushita Electric Industrial Co......................... 255,000 5,147,689
Mitsubishi Paper Mills.................................... 211,000 826,077
NGK Insulators............................................ 275,000 3,028,052
Nintendo Corp. Ltd........................................ 15,500 1,300,358
Nippon Denso Co. Ltd...................................... 82,000 1,963,471
Nippon Meat Packers, Inc.................................. 108,000 1,396,836
Nippon Steel Co........................................... 132,000 422,197
Okumura................................................... 173,000 917,688
Osaka Gas Co.............................................. 330,000 948,790
Sankyo Co. Ltd............................................ 125,000 4,205,628
Sanwa Bank Ltd............................................ 83,000 1,233,068
Secom..................................................... 40,000 2,939,789
Seino Transportation...................................... 114,000 1,235,340
Sekisui House Ltd......................................... 331,000 3,355,414
Shinmaywa Industries Ltd.................................. 72,000 507,769
Sony Corp................................................. 38,600 3,369,868
Sumitomo Bank............................................. 181,000 2,973,696
Sumitomo Chemical Co...................................... 20,000 90,710
Sumitomo Electric Industries.............................. 140,000 2,349,034
Sumitomo Trust & Banking.................................. 95,000 1,021,148
Takeda Chemical Industries................................ 106,000 2,982,784
TDK Corp.................................................. 30,000 2,204,841
Tokio Marine & Fire Insurance Co.......................... 154,000 2,018,701
Tokyo Electric Power...................................... 44,500 937,211
Tokyo Steel Mfg........................................... 123,700 1,383,693
Tonen Corp................................................ 123,000 1,483,352
Toray Industries, Inc..................................... 702,000 5,012,095
Toshiba Corp.............................................. 397,000 2,556,926
Toyo Suisan Kaisha........................................ 93,000 950,887
Toyota Motor Corp......................................... 44,000 1,299,659
Yamazaki Baking Co. Ltd................................... 81,000 1,429,870
------------
110,423,927
------------
MALAYSIA -- 1.63%
Hume Industries (Malaysia) Bhd............................ 70,000 321,712
Kuala Lumpur Kepong Bhd................................... 182,000 450,673
Land & General Holdings Bhd............................... 211,500 243,007
Malayan Banking Bhd....................................... 90,000 944,929
Malaysia International Shipping Bhd (Frgn.)............... 126,000 326,981
Nestle (Malaysia) Bhd..................................... 30,000 224,643
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
MALAYSIA (CONTINUED)
New Straits Times Press Bhd.............................. 24,000 $ 140,729
Perusahaan Otomobil Nasional Bhd......................... 35,000 163,629
Public Bank Bhd (Frgn.).................................. 194,998 304,395
Resorts World Bhd........................................ 134,000 403,487
Rothmans of Pall Mall Bhd................................ 20,000 196,513
Sime Darby Bhd........................................... 219,000 728,843
Telekom Malaysia Bhd..................................... 171,000 799,445
Tenaga Nasional Bhd...................................... 207,000 1,008,756
UMW Holdings Bhd......................................... 36,000 169,731
United Engineers Ltd..................................... 51,000 367,750
YTL Corp. Bhd............................................ 55,000 169,968
YTL Power International Bhd (b).......................... 4,900 6,174
------------
6,971,365
------------
NETHERLANDS -- 5.66%
ABN AMRO Holdings NV..................................... 102,046 1,906,233
Akzo Nobel NV............................................ 3,400 466,799
DSM NV................................................... 6,450 642,926
Elsevier NV.............................................. 89,800 1,503,313
Heineken NV.............................................. 3,700 632,624
Hoogovens NV............................................. 10,900 608,615
ING Groep NV............................................. 69,233 3,197,870
KLM Royal Dutch Air Lines NV............................. 34,300 1,059,128
KPN NV................................................... 55,248 2,171,233
Philips Electronics NV................................... 32,000 2,296,330
Royal Dutch Petroleum Co................................. 119,720 6,238,663
Royal Dutch Petroleum Co. NY Shares (c).................. 20,800 1,131,000
Unilever NV.............................................. 11,440 2,412,601
------------
24,267,335
------------
NEW ZEALAND -- 3.33%
Brierley Investments Ltd................................. 2,405,600 2,347,945
Carter Holt Harvey Ltd................................... 829,600 2,142,376
Fletcher Challenge Building.............................. 286,572 860,477
Fletcher Challenge Energy................................ 315,692 952,194
Fletcher Challenge Forest Ltd............................ 546,445 792,615
Fletcher Challenge Paper................................. 568,984 1,376,798
Telecom Corp. of New Zealand Ltd......................... 970,200 4,932,017
Telecom Corp. of New Zealand ADS (c)..................... 21,000 855,750
------------
14,260,172
------------
SINGAPORE -- 1.47%
City Developments Ltd.................................... 51,000 499,371
DBS Land Ltd............................................. 82,000 259,225
Development Bank of Singapore Ltd........................ 63,000 793,118
Fraser & Neave Ltd....................................... 13,000 92,740
Hotel Properties Ltd..................................... 155,000 263,428
Keppel Corp. Ltd. (b).................................... 36,750 163,213
Oversea-Chinese Banking Corp. Ltd........................ 113,400 1,173,815
Singapore Airlines Ltd. (Frgn.).......................... 80,000 716,184
Singapore Press Holdings Ltd. (Frgn.).................... 37,000 745,279
Singapore Telecommunications, Ltd........................ 290,000 535,459
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
United Overseas Bank Ltd. (Frgn.)......................... 81,000 $ 832,774
Wing Tai Holdings Ltd..................................... 78,000 224,759
------------
6,299,365
------------
SPAIN -- 2.30%
Acerinox S.A.............................................. 1,900 356,694
Banco Bilbao-Vizcaya S.A.................................. 12,300 1,001,095
Banco Central Hispanoamericano............................ 14,830 543,508
Banco Popular Espanol S.A................................. 2,680 657,836
Banco Santander S.A....................................... 29,400 907,568
Empresa Nacional de Electridad S.A........................ 17,500 1,471,918
Fomento de Construcciones y Contratas S.A................. 4,000 511,049
Gas Natural SDG S.A....................................... 2,800 612,851
Iberdrola S.A............................................. 61,900 782,852
Mapfre Corp............................................... 5,200 277,201
Repsol S.A................................................ 13,800 584,579
Repsol S.A. ADR (c)....................................... 7,700 326,769
Telefonica de Espana...................................... 42,300 1,225,253
Vallehermosa S.A.......................................... 10,000 270,279
Viscofan Envolturas Celulosicas S.A....................... 14,400 337,309
------------
9,866,761
------------
SWITZERLAND -- 2.08%
ABB AG (Bearer)........................................... 315 477,502
Alusuisse-Lonza Holding AG (Reg.)......................... 350 362,988
Ciba Specialty Chemicals AG (Reg.)........................ 1,267 117,323
CS Holdings AG (Reg.)..................................... 3,878 498,748
Nestle S.A. (Reg.)........................................ 1,305 1,724,007
Novartis AG (Reg.)........................................ 1,603 2,566,295
Roche Holding AG (Gen.)................................... 184 1,666,589
Swiss Reinsurance Co. (Reg.).............................. 250 354,105
UBS (Bearer).............................................. 400 458,193
Zurich Versicherungs (Reg.)............................... 1,741 693,821
------------
8,919,571
------------
UNITED KINGDOM -- 18.88%
Abbey National PLC........................................ 101,000 1,378,381
Bass PLC.................................................. 61,500 750,262
B.A.T. Industries PLC..................................... 353,000 3,157,818
BG PLC.................................................... 711,300 2,604,410
Booker PLC................................................ 74,500 338,495
British Energy PLC........................................ 620,000 1,511,692
British Petroleum Co. PLC................................. 324,534 4,034,732
British Steel PLC......................................... 789,000 1,963,144
British Telecommunications PLC............................ 574,200 4,262,182
BTR PLC................................................... 183,000 625,888
Centrica PLC.............................................. 706,300 858,116
Charter PLC............................................... 88,914 1,180,143
Coats Viyella PLC......................................... 392,100 822,245
FKI PLC................................................... 440,625 1,246,671
General Electric Co. PLC.................................. 757,700 4,527,158
Glaxo Wellcome PLC........................................ 256,500 5,304,173
Grand Metropolitan PLC.................................... 116,700 1,122,620
Guinness PLC.............................................. 257,200 2,516,994
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Hanson PLC................................................ 156,312 $ 775,251
Hillsdown Holdings PLC.................................... 501,900 1,415,862
House of Fraser PLC....................................... 536,800 1,424,975
HSBC Holdings PLC......................................... 111,000 3,414,887
Imperial Chemical Industries PLC.......................... 36,000 499,692
Inchcape PLC.............................................. 173,000 814,829
Legal & General Group PLC................................. 244,000 1,652,792
Lloyds TSB Group PLC...................................... 400,185 4,109,414
Marks & Spencer PLC....................................... 292,900 2,427,631
Mirror Group PLC.......................................... 230,600 721,525
National Westminster Bank PLC............................. 102,500 1,377,528
Northern Foods PLC........................................ 292,000 967,097
Peninsular & Oriental Steam Navigation Co................. 189,700 1,888,002
Reckitt & Colman PLC...................................... 55,746 832,224
Redland PLC............................................... 86,600 490,039
Reuters Holdings PLC...................................... 112,000 1,179,928
Rio Tinto PLC............................................. 109,800 1,912,386
RJB Mining PLC............................................ 205,000 1,228,260
Royal & Sun Alliance Insurance Group PLC.................. 274,149 2,025,833
Sainsbury (J.) PLC........................................ 222,000 1,344,895
Scottish Hydro-Electric PLC............................... 117,800 813,631
Sears PLC................................................. 657,700 744,339
Sedgwick Group PLC........................................ 429,000 878,206
SmithKline Beecham PLC.................................... 127,800 2,351,384
Smurfit (Jefferson) Group PLC............................. 390,000 1,122,909
Tesco PLC................................................. 196,900 1,215,776
Thames Water PLC.......................................... 133,600 1,534,226
Unilever PLC.............................................. 28,200 806,787
Vodafone Group PLC........................................ 182,500 889,948
Williams PLC.............................................. 227,000 1,227,844
Yorkshire Water PLC....................................... 94,400 617,445
------------
80,910,669
------------
Total Non-U.S. Equities
(Cost $344,810,576)...................................... 393,955,799
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
Short-Term Investments -- 8.31%
<S> <C> <C>
COMMERCIAL PAPER -- 8.31%
American Stores Co.
5.830%, due 07/23/97.................................. $1,500,000 $ 1,499,146
Case Credit Corp.
6.250%, due 07/07/97.................................. 2,000,000 1,997,916
5.760%, due 07/21/97.................................. 1,250,000 1,246,000
Crown Cork & Seal Co.
5.800%, due 07/09/97.................................. 1,500,000 1,498,067
CSX Corp. 5.780%, due 07/09/97......................... 2,000,000 1,997,431
Cummins Engine Company, Inc.
6.500%, due 07/01/97.................................. 2,500,000 2,500,000
Enron Oil & Gas 6.520%, due 07/01/97................... 2,183,000 2,183,000
Hughes Electronics Corp.
5.780%, due 07/11/97.................................. 1,000,000 998,395
5.850%, due 08/11/97.................................. 3,000,000 2,980,012
Marriott Corp. 5.770%, due 07/08/97.................... 1,000,000 998,878
Norfolk Southern Corp.
5.780%, due 07/18/97.................................. 1,500,000 1,495,906
Occidental Petroleum
5.800%, due 08/13/97.................................. 1,750,000 1,737,876
Sundstrand Corp.
5.800%, due 07/09/97.................................. 2,000,000 1,997,422
5.850%, due 07/15/97.................................. 1,000,000 997,725
Tenneco, Inc.
5.780%, due 07/17/97.................................. 1,500,000 1,496,147
5.800%, due 07/23/97.................................. 2,000,000 1,992,911
Textron Financial Corp.
6.400%, due 07/01/97.................................. 8,000,000 8,000,000
------------
Total Short-Term Investments
(Cost $35,616,832).................................... 35,616,832
------------
Total Investments
(Cost $380,427,408) -- 100.21% (a).................... 429,572,631
------------
Liabilities, less cash and other
assets -- (0.21%)..................................... (920,308)
------------
Net Assets -- 100%..................................... $428,652,323
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $381,041,356; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $58,108,348
Gross unrealized depreciation................................ (9,577,073)
-----------
Net unrealized appreciation................................ $48,531,275
===========
</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 June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Canadian Dollar......... 08/22/97 7,100,000 $ 5,163,674 $ (134,833)
Dutch Guilder........... 08/22/97 12,700,000 6,506,548 (231,329)
French Franc............ 08/22/97 82,000,000 14,016,830 (405,811)
German Mark............. 08/22/97 5,500,000 3,168,659 (87,835)
Japanese Yen............ 08/22/97 3,025,000,000 26,643,827 1,619,521
Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 (139,252)
Swedish Krona........... 08/22/97 65,000,000 8,424,229 (359,555)
Swiss Franc............. 08/22/97 21,600,000 14,912,081 (52,213)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar....... 08/22/97 18,800,000 14,092,320 495,907
Belgian Franc........... 08/22/97 235,000,000 6,560,714 205,614
British Pounds.......... 08/22/97 8,750,000 14,538,989 (569,527)
Dutch Guilder........... 08/22/97 19,700,000 10,092,834 337,621
French Franc............ 08/22/97 82,000,000 14,016,830 409,757
German Mark............. 08/22/97 8,800,000 5,069,855 157,972
Hong Kong Dollar........ 08/22/97 25,800,000 3,327,727 (1,613)
Japanese Yen............ 08/22/97 1,150,000,000 10,129,058 (466,880)
Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 80,228
-----------
Total................. $ 857,772
===========
FUTURES CONTRACTS (NOTE 5)
The Non-U.S. Equity Fund had the following open index futures contracts as of
June 30, 1997:
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Topix, 30 contracts..... September 1997 $ 4,009,756 $ 4,117,382 $ 107,626
===========
</TABLE>
The segregated cash pledged to cover margin requirements for the open positions
at June 30, 1997 was $1,019,494.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $380,427,408) (Note 1)............... $429,572,631
Cash............................................................. 879,934
Foreign currency, at value (Cost $2,612,014)..................... 3,192,987
Receivables:
Investment securities sold...................................... 5,328,950
Dividends....................................................... 2,962,324
Fund shares sold................................................ 127,682
Variation margin (Note 5)....................................... 107,626
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 857,772
Other assets..................................................... 56,372
------------
TOTAL ASSETS.................................................. 443,086,278
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 12,332,011
Fund shares redeemed............................................ 1,596,751
Investment advisory fees (Note 2)............................... 378,079
Accrued expenses................................................ 127,114
------------
TOTAL LIABILITIES............................................. 14,433,955
------------
NET ASSETS........................................................ $428,652,323
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $356,332,425
Accumulated undistributed net investment income.................. 1,777,930
Accumulated net realized gain.................................... 19,814,253
Net unrealized appreciation...................................... 50,727,715
------------
NET ASSETS.................................................... $428,652,323
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $420,854,653 and 33,436,374 shares is-
sued and outstanding) (Note 7)................................. $ 12.59
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 79 shares issued and outstanding) (Note 7).......... $ 12.59
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $7,796,670 and 624,388 shares issued
and outstanding) (Note 7)...................................... $ 12.49
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,127,372 for foreign taxes withheld)......... $ 7,182,900
Interest......................................................... 1,394,180
-----------
TOTAL INCOME.................................................. 8,577,080
-----------
EXPENSES:
Advisory (Note 2)................................................ 2,420,667
Custodian........................................................ 116,023
Distribution (Note 6)............................................ 24,209
Other............................................................ 486,426
-----------
TOTAL EXPENSES................................................ 3,047,325
-----------
NET INVESTMENT INCOME ........................................ 5,529,755
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 13,830,230
Futures contracts............................................... (371,505)
Foreign currency transactions................................... 10,962,774
-----------
Net realized gain............................................. 24,421,499
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency ............................... 36,478,339
Futures contracts .............................................. 87,477
Forward contracts............................................... (1,207,773)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 33,687
-----------
Change in net unrealized appreciation or depreciation......... 35,391,730
-----------
Net realized and unrealized gain.................................. 59,813,229
-----------
Net increase in net assets resulting from operations.............. $65,342,984
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 5,529,755 $ 3,265,964
Net realized gain................................. 24,421,499 22,260,813
Change in net unrealized appreciation or deprecia-
tion ............................................ 35,391,730 10,918,989
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 65,342,984 36,445,766
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I ................................. (4,371,883) (3,057,609)
SwissKey Class................................... (40,369) (8,629)
Distributions from net realized gain:
Brinson Class I.................................. (12,209,010) (8,632,717)
SwissKey Class................................... (94,152) (14,731)
------------ ------------
Total distributions to shareholders............... (16,715,414) (11,713,686)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 232,045,893 86,752,018
Shares issued on reinvestment of distributions.... 16,204,754 10,473,903
Shares redeemed................................... (81,854,223) (56,648,208)
------------ ------------
Net increase in net assets resulting from capital
share transactions (Note 7)...................... 166,396,424 40,577,713
------------ ------------
TOTAL INCREASE IN NET ASSETS.................... 215,023,994 65,309,793
------------ ------------
NET ASSETS:
Beginning of year................................. 213,628,329 148,318,536
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,777,930 and $785,599,
respectively).................................... $428,652,323 $213,628,329
============ ============
</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>
YEAR ENDED JUNE 30, AUGUST 31, 1993*
----------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------
Income from investment opera-
tions:
Net investment income....... 0.18 0.18 0.15 0.10
Net realized and unrealized
gain (loss)................ 1.97 2.05 (0.16) (0.34)
-------- -------- -------- -------
Total income (loss) from
investment operations.... 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------
Less distributions:
Distributions from net in-
vestment income............ (0.17) (0.18) -- (0.07)
Distributions from net real-
ized gain.................. (0.56) (0.56) -- --
-------- -------- -------- -------
Total distributions....... (0.73) (0.74) -- (0.07)
-------- -------- -------- -------
Net asset value, end of peri-
od........................... $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== =======
Total return (non-annualized). 20.27% 23.64% (0.10)% (2.45)%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $420,855 $212,366 $148,319 $71,544
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 1.00% 1.20% 1.23% 1.60%**
After expense reimbursement. N/A 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reimburse-
ment....................... 1.83% 1.67% 1.93% 1.28%**
After expense reimbursement. N/A 1.87% 2.16% 1.88%**
Portfolio turnover rate...... 25% 20% 14% 12%
Average commission rate paid
per share................... $ 0.0245 $ 0.0219 N/A N/A
</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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 11.12 $ 10.26
------- -------
Income from investment operations:
Net investment income........................... 0.11 0.12
Net realized and unrealized gain................ 1.93 1.45
------- -------
Total income from investment operations....... 2.04 1.57
------- -------
Less distributions:
Distributions from net investment income........ (0.11) (0.15)
Distributions from net realized gain............ (0.56) (0.56)
------- -------
Total distributions........................... (0.67) (0.71)
------- -------
Net asset value, end of period.................... $ 12.49 $ 11.12
======= =======
Total return (non-annualized)..................... 19.32% 15.78%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $ 7,797 $ 1,262
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.81% 2.04%**
After expense reimbursement..................... N/A 1.84%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 1.02% 0.83%**
After expense reimbursement..................... N/A 1.03%**
Portfolio turnover rate.......................... 25% 20%
Average commission rate paid per share........... $0.0245 $0.0219
</TABLE>
* Commencement of SwissKey Class
** Annualized
N/A = Not applicable
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. Effective June 30, 1997, the Fund has three
classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey
Class. There are an unlimited number of shares of each class with par value of
$0.001 authorized. Each share of the Fund represents an identical interest in
the investments of the Fund and has the same rights. The following is a summary
of significant accounting policies consistently followed by the Non-U.S. Equity
Fund (the "Fund") in the preparation of its financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward foreign currency contracts are valued daily using quoted
forward exchange rates. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the year ended June 30, 1997, therefore,
no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its
net investment income on a semi-annual basis and net capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing tax treatments for foreign
currency transactions. Differences in dividends per share between the classes
are due to distribution expenses.
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the SwissKey Class.
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
19
<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 that total annualized expenses exceed a
specified percentage of the Fund's average daily net assets. The expense cap is
1.00%, 1.25% and 1.84% of the average daily net assets of the Brinson Class I,
Brinson Class N and SwissKey Class, respectively. Investment advisory fees and
other transactions with affiliates for the year ended June 30, 1997 were as
follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY
FEE FEES
-------- ----------
<S> <C> <C>
Non-U.S. Equity Fund........................................ 0.80% $2,420,667
</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 $5,780.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1997, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ -----------
<S> <C> <C>
Non-U.S. Equity Fund................................... $223,917,155 $69,621,954
</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 year ended June 30, 1997,
was the Fund's custodian.
5.FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such contracts to hedge a portion of
its portfolio. Risks of entering into futures contracts include the possibility
that there may be an illiquid market or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Fund, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.DISTRIBUTION PLANS
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the SwissKey Class and, effective June 30,
1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, shall not exceed 0.84% of the average daily net
assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall
not exceed 0.25% of the average daily net assets of the Brinson Class N.
- --------------------------------------------------------------------------------
20
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 19,910,853 $225,344,857 8,044,119 $85,398,213
Brinson Class N.................. 79 1,000 -- --
SwissKey Class................... 590,377 6,700,036 125,829 1,353,805
---------- ------------ --------- -----------
Total Sales................... 20,501,309 $232,045,893 8,169,948 $86,752,018
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 1,461,013 $ 16,110,105 998,992 $10,452,496
Brinson Class N.................. -- -- -- --
SwissKey Class................... 8,477 94,649 2,042 21,407
---------- ------------ --------- -----------
Total Dividend Reinvestment... 1,469,490 $ 16,204,754 1,001,034 $10,473,903
========== ============ ========= ===========
Redemptions:
Brinson Class I.................. 6,945,571 $ 80,838,515 5,347,882 $56,492,091
Brinson Class N.................. -- -- -- --
SwissKey Class................... 87,985 1,015,708 14,352 156,117
---------- ------------ --------- -----------
Total Redemptions............. 7,033,556 $ 81,854,223 5,362,234 $56,648,208
========== ============ ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds--Non-U.S. Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of
June 30, 1997, the related statements of operations for the year then ended and
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Non-U.S. Equity Fund at June 30, 1997, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 8, 1997
- --------------------------------------------------------------------------------
22
<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
- -------------------------------------------------------------------------------
[LOGO OF THE
BRINSON FUNDS]
Chicago . Basel . Frankfurt . Geneva . London . Melbourne . New York . Paris
Singapore . Sydney . Tokyo . Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430
<PAGE>
SWISSKEY GLOBAL FUND
SWISSKEY GLOBAL EQUITY FUND
SWISSKEY GLOBAL BOND FUND
ANNUAL REPORT
JUNE 30, 1997
Your Key to Performance
-----------------------------
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Secretary
E. Thomas McFarlan Carolyn M. Burke, CPA
President Treasurer
Thomas J. Digenan, CFA, CPA Catherine E. Macrae
Vice President Assistant Secretary
- --------------------------------------------------------------------------------
1
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
- --------------------------------------------------------------------------------
Brinson Partners is the global institutional asset management division of
Swiss Bank Corporation. Brinson Partners continues as the name used within
North America, while SBC Brinson is the name used outside North America. We are
a global investment management organization with over $75 billion in
institutional assets under discretionary active management. We are also the
investment manager for SBC Private Banking mutual fund assets which total $50
billion. In addition, we act as an investment advisor to SBC Private Banking.
The division manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. Our organization employs over 590 people in offices in Chicago,
Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore,
Sydney, Tokyo and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is focused upon both
risk and return considerations in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally
developed valuation systems and seasoned judgment. Our independent team
approach allows for rapid responses to market changes, while providing each
client with the benefit of our best talent and the flexibility to customize
portfolios to meet unique requirements.
- --------------------------------------------------------------------------------
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Shareholder Letter................................................... 4
Global Economic and Market Highlights................................ 5
Global Fund.......................................................... 6
Schedule of Investments......................................... 10
Financial Statements............................................ 18
Financial Highlights............................................ 21
Global Equity Fund................................................... 23
Schedule of Investments......................................... 27
Financial Statements............................................ 33
Financial Highlights............................................ 36
Global Bond Fund..................................................... 38
Schedule of Investments......................................... 41
Financial Statements............................................ 44
Financial Highlights............................................ 47
The SwissKey Funds--Notes to Financial Statements.................... 49
Report of Independent Auditors....................................... 53
- --------------------------------------------------------------------------------
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
August 20, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the June 30, 1997 Annual Report for the Global Fund, Global Equity Fund
and Global Bond Fund. This Report presents our current global economic and
market outlook, as well as the Funds' recent investment strategies and
performance. To summarize this information:
SwissKey Global Fund
For the period from July 31, 1995 to June 30, 1997, the Fund provided an
annualized total return of 16.39%. The Fund returned 8.48% in the first half of
1997.
The strategy of underweighting the overpriced equity markets in favor of the
attractive bond markets remains in place. Currency strategy is largely neutral
except for the sterling and Hong Kong dollar underweights.
SwissKey Global Equity Fund
For the period from July 31, 1995 to June 30, 1997, the Fund provided an
annualized total return of 20.74%. The Fund returned 12.23% in the first half
of 1997.
Reflecting only modestly attractive equity markets, the Fund maintains its
20% cash hedge. The primary underweight is the U.S. market, in light of its
overvaluation and increasing volatility. Currency strategy is largely neutral
except for the sterling and Hong Kong dollar underweights.
SwissKey Global Bond Fund
For the period from July 31, 1995 to June 30, 1997, the Fund provided an
annualized total return of 8.55%. The Fund returned 0.42% in the first half of
1997.
Bond markets are generally attractive. However, yields in Japan are
unsustainably low, making that market very unattractive. It remains the largest
underweight in the portfolio. Currency strategy is largely neutral except for
the sterling and Hong Kong dollar underweights.
We look forward to the challenges ahead and, as always, welcome your comments
and suggestions. Please visit our website at http://networth.galt.com/swisskey.
Sincerely,
/s/ Raoul Weil /s/ Raymond Simon
Raoul Weil Raymond Simon
Managing Director Executive Director
Private.Banking Private.Banking
- --------------------------------------------------------------------------------
4
<PAGE>
Global Economic and Market Highlights
- ------------------------------------------------------------------------------
Fiscal restraint in continental Europe, caused by the drive to monetary
union (EMU), has amplified the economic slowdown, resulting in persistently
high unemployment. These economies are hindered by more structurally rigid
labor markets than in the U.S. and Asia. As yet, governments seem unwilling to
take hard measures necessary to free up wages and encourage labor mobility and
flexibility.
Apart from some temporary yen strengthening in the second quarter, a weaker
currency has aided the Japanese economy. Export-oriented industries in
particular have recovered significantly from the prolonged recession brought on
by the bursting of the "bubble" at the start of the 1990s. The hike in the
consumption tax from 3% to 5% at the start of April had caused a spurt in
spending in the first quarter. However, now that it is in place, there has been
some softening in demand, particularly for big ticket items, which is likely to
adversely affect domestically-oriented firms.
The currency turmoil in Southeast Asia is drawing attention to some of the
weaknesses of those economies. In Thailand, which was the initial casualty, the
crisis was precipitated by a bad bank loan problem. These problems in the
banking system prevented the central bank from increasing rates sufficiently to
maintain the peg to a strengthening U.S. dollar.
<TABLE>
<CAPTION>
Global Environment
6 months 1 year 7/31/95*
Major Markets ended ended to
Total Return in U.S. Dollars 6/30/97 6/30/97 6/30/97
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Equity 17.65% 29.32% 26.44%
Non-U.S. Equities (currency unhedged) 11.21 13.64 10.81
Non-U.S. Equities (currency hedged) 17.76 22.77 23.54
U.S. Bonds 3.06 8.15 6.96
Non-U.S. Bonds (currency unhedged) -3.12 2.16 -0.04
Non-U.S. Bonds (currency hedged) 4.67 13.02 12.14
U.S. Cash Equivalents 2.52 5.14 5.23
- ------------------------------------------------------------------------------
6 months 1 year 7/31/95*
Major Currencies ended ended to
Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Yen 1.43% -4.15% -12.78%
Pound -2.75 7.11 2.07
Deutschemark -11.56 -12.65 -11.44
Canadian Dollar -0.65 -1.01 -0.27
- ------------------------------------------------------------------------------
</TABLE>
* Inception date of the SwissKey Class.
Returns in excess of 1 year are average annualized returns.
- ------------------------------------------------------------------------------
5
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
The Global Fund is diversified across the equity and fixed income markets of the
U.S. and a broad range of other countries. This Fund is actively managed within
an asset allocation framework, involving value-based market, currency and
individual security selection. Our senior asset allocation, equity and fixed
income professionals form the investment team for this portfolio, supported by a
globally integrated market analysis system. Security selection within each
market is based on the fundamental research of our analytical teams in Chicago,
Basel, Frankfurt, London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The SwissKey Global Fund has provided an annualized return of 16.39% since its
inception on July 31, 1995. This compares with the corresponding 15.97% return
of its benchmark, the GSMI Mutual Fund Index. For the year ended June 30, 1997,
the Fund returned 18.13%, while the benchmark returned 18.00%. For the first
half of 1997, the SwissKey Global Fund returned 8.48% compared to the 10.69%
return of the benchmark.
A substantial positive contribution to performance came from the active
overweight of the U.S. dollar relative to the yen, deutschemark and DM-related
currencies. These currencies moved from a substantially overvalued status to
levels that were closer to our long-term equilibriums.
The Fund's market strategy centers on reducing the risk of exposure to the
overpriced equity markets; the relatively attractive bond markets are the
primary overweights. Consequently, market allocation made a substantial
negative contribution to Fund performance. Numerous equity markets provided
double-digit returns in dollar-hedged terms. Bond markets, especially outside
the U.S., provided positive returns. However, bond markets rallies failed to
match the torrid pace of world equity markets.
The strategy for emerging markets equities is neutral to the normal policy
exposure of 3.0%. The emerging markets debt strategy mirrors the developed bond
market overweight, with a 3.0% exposure relative to the 2.0% normal policy. A
small underweight is carried in the U.S. high yield bond market.
- --------------------------------------------------------------------------------
6
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
Total Return
6 months 1 year 7/31/95*
ended ended to
6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
SwissKey Global Fund 8.48% 18.13% 16.39%
GSMI Mutual Fund Index** 10.69 18.00 15.97
- --------------------------------------------------------------------------------
* Inception date of the SwissKey Global Fund.
** An un-managed index compiled by the Advisor, constructed as follows:
40% Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index;
19% Salomon BIG Bond Index; 2% International Dollar Bond Index;
9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+;
3% IFC Investable Index; and 3% High Yield Bond Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Global
Fund and the GSMI Mutual Fund Index if you had invested $10,000 on July 31,
1995, and had reinvested all your income dividends and capital gain
distributions through June 30, 1997. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SwissKey Global Fund
vs. GSMI Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
SwissKey GSMI Mutual
Global Fund Fund Index
- --------------------------------------------------------------------------------
<S> <C> <C>
7/31/95 $10,000.00 $10,000.00
9/30/95 $10,293.00 $10,232.00
12/31/95 $10,861.00 $10,665.00
3/31/96 $11,091.00 $10,963.00
6/30/96 $11,324.00 $11,258.00
9/30/96 $11,687.00 $11,505.00
12/31/96 $12,332.00 $12,001.00
3/31/97 $12,373.00 $11,965.00
6/30/97 $13,377.00 $13,284.00
</TABLE>
7/31/95 = $10,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are
based solely on market returns without deduction for fees or transaction costs
for rebalancing.
- --------------------------------------------------------------------------------
7
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
Asset Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Equity 40.0% 23.0%
Non-U.S. Equities 22.0 17.0
Japan Equities 6.5 4.0
Other Equities 15.5 13.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 33.5
U.S. Bonds 19.0 29.5
International $ Bonds 2.0 4.0
High Yield Bonds 3.0 2.5
Non-U.S. Bonds 9.0 18.0
Japan Bonds 2.7 0.0
Other Bonds 6.3 18.0
Emerging Markets Debt 2.0 3.0
Cash Equivalents 0.0 0.0
- --------------------------------------------------------------------
100.0% 100.0%
</TABLE>
Currency Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------------------------------------
<S> <C> <C>
U.S. 66.0% 69.5%
Japan 9.6 9.6
U.K. 4.7 1.4
Continental Europe 13.0 13.0
Canada 1.4 1.4
Emerging Markets 3.0 3.0
Other 2.3 2.1
- --------------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of June 30, 1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------
<S> <C> <C>
1. Xerox Corp. 1.36%
2. Chase Manhattan Corp. 1.17
3. Lockheed Martin Corp. 1.08
4. Philip Morris Companies, Inc. 1.07
5. Aon Corp. 0.89
6. CIGNA Corp. 0.88
7. Goodyear Tire & Rubber Co. 0.80
8. Burlington Northern Santa Fe 0.80
9. Federal Express Corp. 0.74
10. Citicorp 0.73
- --------------------------------------------------
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------
<S> <C> <C>
1. Telecom Corp. of New Zealand Ltd. 0.24%
2. Glaxo Wellcome PLC 0.23
3. Royal Dutch Petroleum Co. 0.23
4. General Electric Co. PLC 0.20
5. Matsushita Electric Industrial Co. 0.19
6. British Telecommunications PLC 0.19
7. Toray Industries, Inc. 0.19
8. Lloyds TSB Group PLC 0.18
9. Broken Hill Proprietary Co. Ltd. 0.18
10. British Petroleum Co. PLC 0.17
- --------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
8
<PAGE>
Global Fund
- -------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals................................. 0.59%
Housing/Paper............................. 1.20
Metals.................................... 0.16
------
1.95
Capital Investment
Capital Goods............................. 1.99
Technology................................ 2.68
------
4.67
Consumer
Autos/Durables............................ 0.83
Discretionary............................. 1.24
Health: Drugs............................. 1.94
Health: Non-Drugs......................... 0.96
Non-Durables.............................. 2.66
Retail/Apparel............................ 1.16
------
8.79
Energy..................................... 1.14
Financial
Banks..................................... 1.97
Non-Banks................................. 2.06
------
4.03
Post Venture............................... 1.18
Transportation............................. 1.51
Utilities.................................. 1.65
Services/Miscellaneous..................... 2.18
------
Total U.S. Equities................ 27.10*
------
NON-U.S. EQUITIES
Aerospace & Military....................... 0.03%
Airlines................................... 0.11
Appliances & Household Durables............ 0.42
Automobiles................................ 0.46
Banking.................................... 2.11
Beverages & Tobacco........................ 0.31
Broadcasting & Publishing.................. 0.27
Building Materials......................... 0.32
Business & Public Service.................. 0.70
Chemicals.................................. 0.72
Construction............................... 0.28
Data Processing............................ 0.19
Electric Components........................ 0.25
Electronics................................ 0.73
Energy..................................... 1.28
Financial Services......................... 0.24
Food & House Products...................... 0.66
Forest Products............................ 0.37
Gold Mining................................ 0.02
Health & Personal Care..................... 0.97
Industrial Components...................... 0.34
Insurance.................................. 0.85
Leisure & Tourism.......................... 0.11
Machinery & Engineering.................... 0.18
Merchandising.............................. 0.75
Metals--Steel.............................. 0.35
Miscellaneous Materials.................... 0.12
Multi-Industry............................. 0.88
Non-Ferrous Metals......................... 0.40
Real Estate................................ 0.16
Recreation................................. 0.15
Shipping................................... 0.09
Telecommunications......................... 1.09
Textiles and Apparel....................... 0.04
Transportation............................. 0.16
Utilities.................................. 0.86
Wholesale & International Trade............ 0.05
------
Total Non-U.S. Equities........... 17.02
------
EMERGING MARKETS EQUITIES.................. 2.71
------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
U.S. BONDS
Corporate Bonds
Asset-Backed.............................. 0.80
CMO....................................... 0.75
Consumer.................................. 0.82
Financial................................. 1.64
Industrial................................ 0.61
Telecommunications........................ 0.02
Transportation............................ 0.31
------
4.95
U.S. Government Agencies................... 7.31
U.S. Government Obligations................ 10.83
International Dollar Bonds................. 3.57
------
Total U.S. Bonds.................. 26.66*
------
HIGH YIELD BONDS........................... 2.18
------
NON-U.S. BONDS
Foreign Government Bonds................... 17.22
------
EMERGING MARKETS DEBT...................... 3.32
------
SHORT-TERM INVESTMENTS..................... 4.37*
------
TOTAL INVESTMENTS................. 100.58
LIABILITIES, LESS CASH AND OTHER
ASSETS................................... (0.58)
------
NET ASSETS........................ 100.00%
======
</TABLE>
- -------------------------------------------------------------------------------
* The Fund held a long position in U.S. Treasury futures on June 30, 1997
which increased U.S. bond exposure from 26.66% to 31.76%. The Fund also held a
short position in stock index futures which reduced U.S. equity exposure from
27.10% to 22.38%. These adjustments result in a net decrease in the Fund's
exposure to Short-Term Investments from 4.37% to 3.99%.
- --------------------------------------------------------------------------------
9
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Equities -- 46.83%
U.S. EQUITIES -- 27.10%
Aetna Life & Casualty Co............................. 20,800 $ 2,129,400
Allergan, Inc........................................ 53,800 1,711,512
Alza Corp. (b)....................................... 52,500 1,522,500
Aon Corp............................................. 105,499 5,459,547
Automatic Data Processing, Inc....................... 51,300 2,411,100
Beckman Instruments, Inc............................. 15,200 733,400
Birmingham Steel Corp................................ 21,100 327,050
Boston Technology, Inc. (b).......................... 20,100 594,206
Brinson Post-Venture Fund (b)........................ 423,765 7,248,708
Browning-Ferris Industries, Inc...................... 39,800 1,323,350
Burlington Northern Santa Fe......................... 54,400 4,889,200
Centerior Energy Co.................................. 45,200 505,675
Champion Enterprises, Inc. (b)....................... 26,000 390,000
Champion International Corp.......................... 1,600 88,400
Chase Manhattan Corp................................. 73,800 7,163,212
CIGNA Corp........................................... 30,400 5,396,000
Circuit City Stores, Inc............................. 77,600 2,759,650
Citicorp............................................. 36,900 4,448,756
CMS Energy Corp...................................... 57,900 2,040,975
Coca-Cola Enterprises, Inc........................... 42,300 972,900
Comerica, Inc........................................ 14,500 986,000
Comverse Technology, Inc. (b)........................ 9,700 504,400
Corning, Inc......................................... 67,200 3,738,000
Covance, Inc......................................... 26,472 511,240
CPC International, Inc............................... 23,000 2,123,187
CVS Corp............................................. 33,400 1,711,750
Dial Corp............................................ 31,900 498,437
Eastman Chemical Co.................................. 36,300 2,305,050
EMC Corp./Mass. (b).................................. 99,900 3,896,100
Enron Corp........................................... 101,300 4,134,306
Entergy Corp......................................... 6,000 164,250
Federal Express Corp. (b)............................ 78,100 4,510,275
Federated Department Stores (b)...................... 29,100 1,011,225
FileNet Corp. (b).................................... 10,900 158,050
First American Corp.-Tenn............................ 13,700 525,737
First Bank System, Inc............................... 10,700 913,512
First Data Corp...................................... 87,230 3,832,668
First of America Bank Corp........................... 10,150 464,362
First Security Corp.................................. 17,250 471,141
Fleetwood Enterprises, Inc........................... 11,300 336,881
Food Lion, Inc. Class A.............................. 83,800 599,694
Forest Laboratories, Inc. (b)........................ 24,100 998,644
Gannett Co., Inc..................................... 34,900 3,446,375
General Instrument Corp. (b)......................... 119,800 2,995,000
Genzyme Corp. (b).................................... 21,200 588,300
Geon Co.............................................. 14,900 301,725
Goodyear Tire & Rubber Co............................ 77,500 4,906,719
Harnischfeger Industries, Inc........................ 34,900 1,448,350
Health Care and Retirement Corp. (b)................. 35,400 1,181,475
Hibernia Corp. Class A............................... 29,300 408,369
Informix Corp. (b)................................... 28,100 252,900
Interpublic Group of Companies, Inc.................. 22,900 1,404,056
James River Corp. of Virginia........................ 42,900 1,587,300
Kroger Co. (b)....................................... 28,600 829,400
Lockheed Martin Corp................................. 64,120 6,640,428
Lyondell Petrochemical Co............................ 57,400 1,252,038
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Manor Care, Inc...................................... 46,798 $ 1,526,785
Martin Marietta Materials, Inc....................... 15,300 495,338
Masco Corp........................................... 61,300 2,559,275
Mattel, Inc.......................................... 76,024 2,575,313
Nabisco Holdings Corp. Class A....................... 53,600 2,137,300
National Service Industries Inc...................... 10,300 501,481
Nextel Communications, Inc. Class A (b).............. 80,100 1,516,894
Octel Communications Corp. (b)....................... 17,300 405,469
Old Republic International Corp...................... 18,896 572,785
Peco Energy Co....................................... 130,300 2,736,300
Pentair, Inc......................................... 27,696 910,506
Pharmacia & Upjohn, Inc.............................. 66,900 2,324,775
Philip Morris Companies, Inc......................... 148,200 6,576,375
Raytheon Co.......................................... 20,300 1,035,300
Regions Financial Corp............................... 13,600 430,100
Reynolds & Reynolds Co. Class A...................... 18,800 296,100
Schering Plough Corp................................. 92,100 4,409,288
Seagate Technology, Inc. (b)......................... 21,900 770,606
Timken Co............................................ 36,300 1,290,919
Trinity Industries, Inc.............................. 9,700 307,975
Tyson Foods, Inc. Class A............................ 107,100 2,048,288
UCAR International, Inc. (b)......................... 1,600 73,200
Ultramar Diamond Shamrock Corp....................... 59,808 1,951,236
US Bancorp........................................... 32,000 2,052,000
Vencor, Inc. (b)..................................... 27,400 1,157,650
Viad Corp............................................ 51,600 993,300
Westvaco Corp........................................ 12,598 396,050
Witco Corp........................................... 5,200 197,275
Xerox Corp........................................... 106,000 8,360,750
York International Corp.............................. 32,700 1,504,200
360 Communications Co. (b)........................... 15,566 266,568
------------
Total U.S. Equities.................................. 166,132,286
------------
NON-U.S. EQUITIES -- 17.02%
AUSTRALIA -- 0.92%
Amcor Ltd............................................ 33,770 222,644
Boral Ltd............................................ 59,240 185,075
Brambles Industries Ltd.............................. 8,590 168,555
Broken Hill Proprietary Co. Ltd...................... 74,200 1,083,070
Coca-Cola Amatil Ltd................................. 11,270 145,228
CSR Ltd.............................................. 42,930 164,997
David Jones Ltd...................................... 147,010 203,758
Lend Lease Corp. Ltd................................. 9,596 201,301
M.I.M. Holdings Ltd.................................. 106,287 156,075
National Australia Bank Ltd.......................... 51,467 731,464
News Corp. Ltd....................................... 107,030 509,185
News Corp. Ltd. Preferred............................ 27,670 108,212
Pacific Dunlop Ltd................................... 70,210 206,197
Qantas Airways Ltd................................... 69,435 161,264
Rio Tinto Ltd........................................ 28,145 476,126
Santos Ltd........................................... 16,610 69,314
Westpac Banking Corp. Ltd............................ 77,408 462,212
WMC Ltd.............................................. 46,840 293,022
Woolworth's Ltd...................................... 30,790 100,345
------------
5,648,044
------------
</TABLE>
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10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C>
BELGIUM -- 0.64%
Delhaize-Le Lion S.A.................................... 4,670 $ 245,516
Electrabel S.A.......................................... 2,730 585,488
Fortis AG............................................... 216 48
Fortis AG Strip (b)..................................... 2,643 546,244
General de Banque S.A................................... 670 258,122
Groupe Bruxelles Lambert S.A............................ 1,670 280,114
Kredietbank NV.......................................... 1,000 403,338
Kredietbank VVPR........................................ 25 9,875
Petrofina S.A........................................... 1,425 540,073
Societe Generale de Belgique............................ 2,533 236,742
Solvay S.A. Class A..................................... 457 269,497
Tractebel............................................... 675 281,641
Tractebel Warrants "99" (b)............................. 605 6,496
Union Miniere Group S.A. (b)............................ 2,955 277,006
----------
3,940,200
----------
CANADA -- 0.59%
Alcan Aluminium Ltd..................................... 7,250 247,517
Bank of Montreal........................................ 6,390 249,653
Barrick Gold Corp....................................... 4,200 91,483
BCE, Inc................................................ 7,250 201,798
Canadian National Railway Co............................ 5,150 224,724
Canadian Pacific Ltd.................................... 15,650 445,814
Hudson's Bay Co......................................... 6,300 141,563
Imperial Oil Ltd........................................ 5,720 293,339
MacMillan Bloedel Ltd................................... 9,440 129,667
Moore Corp. Ltd......................................... 6,110 120,464
Noranda, Inc............................................ 7,440 160,438
Northern Telecom Ltd.................................... 2,290 206,575
NOVA Corp............................................... 9,920 84,848
Royal Bank of Canada.................................... 7,350 333,243
Seagram Co. Ltd......................................... 6,490 261,086
Thomson Corp............................................ 8,970 206,760
TransCanada Pipelines Ltd............................... 10,020 201,547
----------
3,600,519
----------
FINLAND -- 0.13%
Merita Ltd. Class A..................................... 25,950 86,430
Nokia Ab Class A........................................ 5,250 392,067
Outokumpu Class A....................................... 4,480 88,838
Pohjola Insurance Group Class B......................... 1,050 31,131
Sampo Insurance Co. Ltd. Class A........................ 480 46,667
UPM-Kymmene Corp........................................ 6,870 158,716
----------
803,849
----------
FRANCE -- 1.24%
Accor S.A............................................... 2,092 313,568
Alcatel Alsthom......................................... 2,932 367,561
AXA UAP................................................. 5,258 327,338
AXA UAP Rights (b)...................................... 4,328 16,808
Banque Nationale de Paris............................... 9,920 409,236
Cie Bancaire S.A........................................ 2,038 260,347
Cie de Saint Gobain..................................... 3,090 451,053
Cie de Suez............................................. 37,900 93,282
Cie Generale des Eaux................................... 1,844 236,507
Cie Generale des Eaux Warrants "01" (b)................. 4,224 2,533
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C>
Colas.................................................... 814 $ 107,452
Dexia France............................................. 3,399 331,158
Elf Aquitaine S.A........................................ 4,594 496,098
Groupe Danone............................................ 2,000 330,778
Lafarge S.A.............................................. 2,480 154,393
Lagardere S.C.A.......................................... 6,600 191,896
LVMH..................................................... 1,099 295,762
Michelin Class B......................................... 6,570 394,917
Pechiney S.A. Class A.................................... 6,664 262,769
Peugeot S.A.............................................. 3,580 346,353
Rhone-Poulenc Class A.................................... 8,544 349,269
SEITA.................................................... 6,010 190,404
Societe Generale......................................... 3,334 372,526
Suez Lyonnaise des Eaux S.A.............................. 3,130 315,612
Thomson CSF.............................................. 6,900 177,936
Total S.A. Class B....................................... 3,986 403,284
Usinor Sacilor........................................... 23,380 422,122
----------
7,620,962
----------
GERMANY -- 1.63%
Allianz AG Holding....................................... 4,160 889,246
BASF AG.................................................. 11,480 423,929
Bayer AG................................................. 15,290 589,629
Bayerische Motoren Werke AG.............................. 590 486,870
Commerzbank AG........................................... 12,840 366,941
Daimler-Benz AG.......................................... 5,850 476,366
Deutsche Bank AG......................................... 12,311 723,428
Deutsche Telekom AG...................................... 25,380 624,086
Henkel KGaA-Vorzug AG.................................... 4,540 255,841
Hochtief AG.............................................. 3,500 156,663
Hoechst AG............................................... 4,710 199,741
M.A.N. AG................................................ 750 233,703
Mannesmann AG............................................ 897 400,989
Metro AG................................................. 3,420 372,891
Muenchener Rueckver AG................................... 211 598,152
Muenchener Rueckver AG Warrants "98" (b)................. 2 717
Preussag AG.............................................. 1,122 330,303
RWE AG................................................... 8,870 381,757
Schering AG.............................................. 4,805 515,078
Siemens AG............................................... 5,650 338,657
Thyssen AG............................................... 2,240 539,240
Veba AG.................................................. 10,339 584,409
Volkswagen AG............................................ 710 538,632
----------
10,027,268
----------
HONG KONG -- 0.21%
Cheung Kong Holdings Ltd................................. 14,000 138,242
China Light & Power Co. Ltd.............................. 26,500 150,162
Guoco Group Ltd.......................................... 14,000 73,729
Hang Seng Bank Ltd....................................... 9,700 138,351
Hong Kong Telecommunications Ltd......................... 41,200 98,383
Hutchison Whampoa Ltd.................................... 26,000 224,853
Jardine Matheson Holdings ADR (c)........................ 9,200 65,320
New World Development Co. Ltd............................ 16,000 95,414
Sun Hung Kai Properties Ltd.............................. 7,000 84,255
Swire Pacific Ltd. Class A............................... 13,500 121,542
Wharf (Holdings) Ltd..................................... 21,000 91,077
----------
1,281,328
----------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ----------
<S> <C> <C>
ITALY -- 0.64%
Assicurazioni Generali.................................. 21,080 $ 382,822
Banca Commerciale Italiana.............................. 55,000 113,782
Credito Italiano Spa.................................... 141,000 257,720
Danieli & Co. Savings (Risp)............................ 36,000 125,889
Edison Spa.............................................. 22,200 110,315
ENI ADR (c)............................................. 7,600 432,250
ENI Spa................................................. 31,000 175,360
Fiat Spa-Priv........................................... 156,000 287,887
INA-Istituto Nazionale delle Assicurazioni.............. 87,000 132,430
Istituto Mobilaire Italiano Spa......................... 22,500 202,321
Italgas Spa............................................. 30,300 97,943
La Rinascente Spa....................................... 18,000 99,918
La Rinascente Spa Rights (b)............................ 45,200 2,019
La Rinascente Spa RNC................................... 27,200 66,102
La Rinascente Spa RNC Rights (b)........................ 45,200 7,358
La Rinascente Spa Warrants "99" (b)..................... 1,400 691
Mediobanca Spa.......................................... 11,000 66,718
Montedison Spa (b)...................................... 357,700 235,874
SAI-Savings (Risp)...................................... 24,500 75,451
Telecom Italia Mobile Spa............................... 60,000 193,946
Telecom Italia Mobile Spa RNC........................... 169,500 302,839
Telecom Italia Spa...................................... 48,000 143,591
Telecom Italia Spa RNC.................................. 194,500 384,656
----------
3,897,882
----------
JAPAN -- 4.16%
Amada Co. Ltd........................................... 40,000 353,054
Asahi Glass Co. Ltd..................................... 48,000 478,196
Bank of Tokyo-Mitsubishi, Ltd........................... 44,000 884,383
Canon, Inc.............................................. 31,000 845,233
Canon Sales Co., Inc.................................... 13,100 305,663
Citizen Watch Co. Ltd................................... 36,000 278,109
Dai Nippon Printing Co. Ltd............................. 36,000 814,821
Daiichi Pharmaceutical Co. Ltd.......................... 26,000 458,971
Daikin Industries Ltd................................... 39,000 354,453
Daiwa House Industry Co. Ltd............................ 20,000 244,691
Fanuc................................................... 15,900 611,378
Fujitsu................................................. 24,000 333,479
Hitachi Ltd............................................. 77,000 861,313
Honda Motor Co.......................................... 10,000 301,494
Inax.................................................... 37,000 277,427
Isetan.................................................. 13,000 161,321
Ito Yokado Co. Ltd...................................... 15,000 871,712
Kaneka Corp............................................. 40,000 250,983
Keio Teito Electric Railway............................. 45,000 214,323
Kinki Nippon Railway.................................... 45,000 275,277
Kirin Brewery Co. Ltd................................... 43,000 447,173
Kokuyo.................................................. 13,000 352,180
Kuraray Co. Ltd......................................... 46,000 458,271
Kyocera Corp............................................ 5,000 397,623
Maeda Road Construction................................. 8,000 68,863
Marui Co. Ltd........................................... 20,000 372,280
Matsushita Electric Industrial Co....................... 58,000 1,170,847
Mitsubishi Paper Mills.................................. 49,000 191,838
NGK Insulators.......................................... 64,000 704,710
Nintendo Corp. Ltd...................................... 3,900 327,187
Nippon Denso Co. Ltd.................................... 19,000 454,951
Nippon Meat Packers, Inc................................ 25,000 323,342
Nippon Steel Co......................................... 27,000 86,359
Okumura................................................. 40,000 212,182
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
Osaka Gas Co........................................... 76,000 $ 218,509
Sankyo Co. Ltd......................................... 29,000 975,706
Sanwa Bank Ltd......................................... 19,000 282,269
Secom.................................................. 10,000 734,947
Seino Transportation................................... 27,000 292,581
Sekisui House Ltd...................................... 75,000 760,290
Shinmaywa Industries Ltd............................... 17,000 119,890
Sony Corp.............................................. 9,200 803,181
Sumitomo Bank.......................................... 42,000 690,029
Sumitomo Electric Industries........................... 32,000 536,922
Sumitomo Trust & Banking............................... 22,000 236,476
Takeda Chemical Industries............................. 23,000 647,208
TDK Corp............................................... 7,000 514,463
Tokio Marine & Fire Insurance Co....................... 36,000 471,904
Tokyo Electric Power................................... 9,900 208,503
Tokyo Steel Mfg........................................ 29,000 324,390
Tonen Corp............................................. 29,000 349,733
Toray Industries, Inc.................................. 161,000 1,149,498
Toshiba Corp........................................... 93,000 598,978
Toyo Suisan Kaisha..................................... 22,000 224,941
Toyota Motor Corp...................................... 10,000 295,377
Yamazaki Baking Co. Ltd................................ 19,000 335,402
-----------
25,515,284
-----------
MALAYSIA -- 0.32%
Hume Industries (Malaysia) Bhd......................... 20,000 91,917
Kuala Lumpur Kepong Bhd................................ 57,500 142,383
Land & General Holdings Bhd............................ 73,000 83,875
Malayan Banking Bhd.................................... 26,000 272,979
Malaysia International Shipping Bhd (Frgn.)............ 32,000 83,043
Nestle (Malaysia) Bhd.................................. 9,000 67,393
New Straits Times Press Bhd............................ 6,000 35,182
Perusahaan Otomobil Nasional Bhd....................... 12,000 56,101
Public Bank Bhd (Frgn.)................................ 72,000 112,393
Resorts World Bhd...................................... 30,000 90,333
Rothmans of Pall Mall Bhd.............................. 4,000 39,303
Sime Darby Bhd......................................... 62,000 206,339
Telekom Malaysia Bhd................................... 42,000 196,355
Tenaga Nasional Bhd.................................... 61,000 297,266
UMW Holdings Bhd....................................... 9,000 42,433
United Engineers Ltd................................... 15,000 108,162
YTL Corp. Bhd.......................................... 17,000 52,536
-----------
1,977,993
-----------
NETHERLANDS -- 1.07%
ABN AMRO Holdings NV................................... 27,047 505,242
Akzo Nobel NV.......................................... 860 118,073
DSM NV................................................. 1,610 160,482
Elsevier NV............................................ 23,880 399,767
Heineken NV............................................ 850 145,332
Hoogovens NV........................................... 2,860 159,692
ING Groep NV........................................... 18,760 866,524
KLM Royal Dutch Air Lines NV........................... 8,840 272,964
KPN NV................................................. 14,409 566,270
Philips Electronics NV................................. 8,450 606,375
Royal Dutch Petroleum Co............................... 26,120 1,361,125
Royal Dutch Petroleum Co. NY Shares (c)................ 13,600 739,500
Unilever NV............................................ 3,000 632,675
-----------
6,534,021
-----------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------
<S> <C> <C>
NEW ZEALAND -- 0.66%
Brierley Investments Ltd................................. 677,530 $ 661,292
Carter Holt Harvey Ltd................................... 234,110 604,570
Fletcher Challenge Building.............................. 80,886 242,873
Fletcher Challenge Energy................................ 88,821 267,904
Fletcher Challenge Forest Ltd............................ 153,913 223,250
Fletcher Challenge Paper................................. 159,786 386,641
Telecom Corp. of New Zealand Ltd......................... 293,830 1,493,686
Telecom Corp. of New Zealand Ltd. ADS (c)................ 3,800 154,850
----------
4,035,066
----------
SINGAPORE -- 0.30%
City Developments Ltd.................................... 18,000 176,248
DBS Land Ltd............................................. 27,000 85,355
Development Bank of Singapore Ltd........................ 16,000 201,427
Fraser & Neave Ltd....................................... 3,000 21,401
Hotel Properties Ltd..................................... 42,000 71,381
Keppel Corp. Ltd. (b).................................... 10,000 44,412
Oversea-Chinese Banking Corp. Ltd........................ 32,000 331,235
Singapore Airlines Ltd. (Frgn.).......................... 24,000 214,855
Singapore Press Holdings Ltd. (Frgn.).................... 10,000 201,427
Singapore Telecommunications, Ltd........................ 92,000 169,870
United Overseas Bank Ltd. (Frgn.)........................ 24,000 246,748
Wing Tai Holdings Ltd.................................... 22,000 63,393
----------
1,827,752
----------
SPAIN -- 0.44%
Acerinox S.A............................................. 570 107,008
Banco Bilbao-Vizcaya S.A................................. 3,240 263,703
Banco Central Hispanoamericano........................... 3,920 143,665
Banco Popular Espanol S.A................................ 750 184,096
Banco Santander S.A...................................... 7,980 246,340
Empresa Nacional de Electridad S.A....................... 4,960 417,184
Fomento de Construcciones y Contratas S.A................ 1,100 140,538
Gas Natural SDG S.A...................................... 860 188,233
Iberdrola S.A............................................ 16,410 207,538
Mapfre Corp.............................................. 1,430 76,230
Repsol S.A............................................... 3,910 165,631
Repsol S.A. ADR (c)...................................... 1,000 42,438
Telefonica de Espana..................................... 11,640 337,162
Vallehermosa S.A......................................... 2,670 72,164
Viscofan Envolturas Celulosicas S.A...................... 3,910 91,589
----------
2,683,519
----------
SWITZERLAND -- 0.45%
ABB AG (Bearer).......................................... 105 159,167
Alusuisse-Lonza Holding AG (Reg.)........................ 120 124,453
Ciba Specialty Chemicals AG (Reg.)....................... 358 33,150
CS Holdings AG (Reg.).................................... 1,023 131,568
Nestle S.A. (Reg.)....................................... 395 521,826
Novartis AG (Reg.)....................................... 478 765,246
Roche Holding AG (Gen.).................................. 56 507,223
Swiss Reinsurance Co. (Reg.)............................. 90 127,478
UBS (Bearer)............................................. 106 121,421
Zurich Versicherungs (Reg.).............................. 609 242,698
----------
2,734,230
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------
<S> <C> <C>
UNITED KINGDOM -- 3.62%
Abbey National PLC...................................... 25,620 $ 349,645
Bass PLC................................................ 15,070 183,845
B.A.T. Industries PLC................................... 93,484 836,276
BG PLC.................................................. 191,380 700,734
Booker PLC.............................................. 18,220 82,784
British Energy PLC...................................... 163,630 398,965
British Petroleum Co. PLC............................... 85,794 1,066,624
British Steel PLC....................................... 208,470 518,703
British Telecommunications PLC.......................... 155,980 1,157,811
BTR PLC................................................. 53,420 182,705
Centrica PLC............................................ 196,430 238,652
Charter PLC............................................. 28,846 382,869
Coats Viyella PLC....................................... 112,860 236,671
FKI PLC................................................. 128,500 363,568
General Electric Co. PLC................................ 202,550 1,210,210
Glaxo Wellcome PLC...................................... 67,600 1,397,903
Grand Metropolitan PLC.................................. 52,740 507,343
Guinness PLC............................................ 66,410 649,897
Hanson PLC.............................................. 52,102 258,407
Hillsdown Holdings PLC.................................. 138,520 390,765
House of Fraser PLC..................................... 143,400 380,666
HSBC Holdings PLC....................................... 30,050 924,481
Imperial Chemical Industries PLC........................ 11,450 158,930
Inchcape PLC............................................ 46,470 218,873
Legal & General Group PLC............................... 64,400 436,229
Lloyds TSB Group PLC.................................... 108,409 1,113,229
Marks & Spencer PLC..................................... 78,040 646,816
Mirror Group PLC........................................ 69,450 217,302
National Westminster Bank PLC........................... 27,380 367,968
Northern Foods PLC...................................... 82,040 271,714
Peninsular & Oriental Steam Navigation Co............... 50,040 498,026
Reckitt & Colman PLC.................................... 14,938 223,007
Redland PLC............................................. 27,860 157,650
Reuters Holdings PLC.................................... 30,530 321,636
Rio Tinto PLC........................................... 27,580 480,361
RJB Mining PLC.......................................... 56,570 338,940
Royal & Sun Alliance Insurance Group PLC................ 74,839 553,025
Sainsbury (J.) PLC...................................... 63,920 387,233
Scottish Hydro-Electric PLC............................. 29,480 203,615
Sears PLC............................................... 170,480 192,937
Sedgwick Group PLC...................................... 125,360 256,624
SmithKline Beecham PLC.................................. 37,590 691,616
Smurfit (Jefferson) Group PLC........................... 112,647 324,339
Tesco PLC............................................... 52,140 321,943
Thames Water PLC........................................ 35,210 404,342
Unilever PLC............................................ 8,010 229,162
Vodafone Group PLC...................................... 47,090 229,631
Williams PLC............................................ 62,010 335,412
Yorkshire Water PLC..................................... 29,190 190,924
-----------
22,191,008
-----------
Total Non-U.S. Equities................................. 104,318,925
-----------
EMERGING MARKETS EQUITIES -- 2.71%
Brinson Emerging Markets Equity Fund (b)................ 1,353,286 16,597,643
-----------
Total Equities (Cost $229,910,786)...................... 287,048,854
-----------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------------- ------------
<S> <C> <C>
Bonds -- 49.38%
U.S. BONDS -- 26.66%
U.S. CORPORATE BONDS -- 4.95%
Aetna Services Inc. 6.970%, due 08/15/36........... $ 265,000 $ 267,630
Bell Atlantic Corp. 8.000%, due 10/15/29........... 98,000 106,064
BellSouth Savings & Employee ESOP 9.125%, due
07/01/03.......................................... 289,556 301,553
Capital One Bank 6.830%, due 05/17/99.............. 1,946,000 1,953,877
Chase Manhattan Auto Owner Trust 96C-A4 6.150%, due
03/15/02.......................................... 1,000,000 992,430
Chase Manhattan Credit Card Trust 96-4A 6.730%, due
02/15/03.......................................... 1,050,000 1,060,006
Chemical Master Credit Card Trust 95-2A 6.230%, due
06/15/03.......................................... 1,430,000 1,420,977
Choice Credit Card 7.200%, due 03/15/98............ 1,000,000 1,009,480
Chrysler Financial Corp. MTN 6.500%, due 08/21/97.. 165,000 165,197
4.220%, due 03/02/99.............................. 2,385 2,363
Comcast Cable Communications 144-A 8.500%, due
05/01/27.......................................... 1,720,000 1,854,435
Continental Airlines, Inc. Pass Thru 144-A 7.461%,
due 04/01/15...................................... 1,850,000 1,871,514
CS First Boston Mortgage Securities Corp. 97-C1
7.150%, due 06/20/29.............................. 1,465,000 1,486,975
Dayton Hudson Credit Card Master Trust 95-1A 6.100%,
due 02/25/02...................................... 132,000 132,286
Donaldson Lufkin & Jenrette FRN 6.700%, due
06/30/00.......................................... 600,000 600,000
Eastman Chemical Co. 7.600%, due 02/01/27.......... 252,000 249,750
Ford Credit Grantor Trust 95-B 5.900%, due
10/15/00.......................................... 96,130 96,141
GE Capital Management Services, Inc. 94-7 Class A12
6.000%, due 02/25/09.............................. 1,637,884 1,546,212
GMAC 9.625%, due 12/15/01.......................... 331,000 366,251
Lehman Brothers Holdings 7.250%, due 04/15/03...... 1,250,000 1,256,020
Lockheed Martin Corp. 7.700%, due 06/15/08......... 148,000 154,654
MBNA Global Capital Securities FRN 6.659%, due
02/01/27.......................................... 1,100,000 1,086,996
News America Holdings 7.750%, due 01/20/24......... 1,877,000 1,780,928
Premier Auto Trust
96-3A 6.500%, due 03/06/00........................ 215,000 216,408
96-4A 6.400%, due 10/06/01........................ 455,000 455,801
Residential Funding Mortgage
Security Insurance 8.500%,
due 06/25/26...................................... 1,440,000 1,477,087
Salomon, Inc.
6.500%, due 03/01/00.............................. 2,520,000 2,504,051
6.750%, due 02/15/03.............................. 550,000 538,981
Standard Credit Card Trust 95-1A 8.250%, due
01/07/07.......................................... 500,000 537,285
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Thrift Financial Corp. 11.250%,
due 01/01/16.......................................... $ 97,862 $ 105,732
Time Warner, Inc. 9.150%, due 02/01/23................. 1,815,000 2,003,154
Time Warner Entertainment, Inc. 8.375%, due 03/15/23... 1,206,000 1,236,095
WMX Technologies, Inc. 7.000%, due 10/15/06............ 1,500,000 1,485,904
-----------
30,322,237
-----------
INTERNATIONAL DOLLAR BONDS -- 3.57%
Abbey National PLC 7.350%, due 10/29/49................ 250,000 249,461
ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01........ 250,000 248,289
AT&T Corp. 8.250%, due 01/11/00........................ 645,000 669,300
Banque Paribas, Sub. Notes 6.875%, due 03/01/09........ 175,000 165,923
Bayerische Landesbank 6.850%, due 07/19/01............. 212,000 213,530
BBV International 7.000%, due 12/01/25................. 2,200,000 2,025,525
Credit Suisse-London 144-A 7.900%, due 05/01/07........ 2,600,000 2,672,805
Den Danske Bank 144-A 7.400%, due 06/15/10............. 2,050,000 2,065,640
DR Investments 144-A 7.450%, due 05/15/07.............. 320,000 323,218
Empresa Nacional Electric 7.875%, due 02/01/27......... 316,000 318,691
Hanson PLC Notes 6.750%, due 09/15/05.................. 290,000 282,680
International Telecom Satellite 8.125%, due 02/28/05... 335,000 354,934
Japanese Development Bank 8.375%, due 02/15/01......... 970,000 1,022,854
LKB Baden-Wuerttemberg Finance 8.125%, due 01/27/00.... 350,000 362,913
Pan Pacific Industry 144-A 0.000%, due 04/28/07........ 2,130,000 938,789
Petroliam Nasional 7.125%, due 08/15/05................ 420,000 419,825
Province of Quebec 7.500%, due 07/15/23................ 175,000 172,144
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%,
due 03/15/14.......................................... 1,910,000 1,996,897
Repsol International Finance 7.000%, due 08/01/05...... 735,000 737,634
Republic of Italy 6.875%, due 09/27/23................. 150,000 141,102
Republic of South Africa 9.625%, due 12/15/99.......... 1,079,000 1,140,233
Royal Bank of Scotland 7.375%, due 04/29/49............ 690,000 687,669
Skandinaviska Enskilda Banken 144-A 6.625%, due
03/29/49.............................................. 500,000 494,900
Soc Quimica & Minera de Ser 144-A 7.700%, due 09/15/06. 1,500,000 1,526,395
Southern Investments UK 6.800%, due 12/01/06........... 1,625,000 1,587,462
Swedbank FRN 7.773%, due 10/29/49...................... 270,000 274,725
Telstra Corp. Ltd. 6.500%, due 11/28/05................ 350,000 336,639
Usinor Sacilor 7.250%, due 08/01/06.................... 470,000 467,805
-----------
21,897,982
-----------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 7.31%
Federal Home Loan Mortgage Corp.
7.000%, due 03/15/10................................... $ 885,000 $ 881,316
5.800%, due 08/15/19................................... 2,399,000 2,256,931
7.500%, due 01/15/23................................... 749,116 715,683
7.238%, due 05/01/26................................... 396,144 408,013
Federal Home Loan Mortgage
Corp. Gold
8.000%, due 11/01/22................................... 159,672 163,315
8.000%, due 05/01/23................................... 1,672,660 1,710,818
9.000%, due 03/01/24................................... 1,232,440 1,313,128
9.000%, due 04/01/25................................... 1,959,533 2,068,531
9.500%, due 04/01/25................................... 55,514 59,452
Federal National Mortgage Association
5.000%, due 06/01/01................................... 1,534,205 1,465,626
6.500%, due 12/01/03 Balloon TBA....................... 2,520,000 2,486,925
6.220%, due 03/13/06................................... 1,700,000 1,643,732
8.000%, due 02/25/07................................... 1,635,000 1,682,049
6.500%, due 04/25/08................................... 113,544 108,826
6.500%, due 05/25/08................................... 1,040,147 1,022,069
6.500%, due 01/01/11................................... 905,405 886,731
9.000%, due 08/01/21................................... 319,738 339,549
8.000%, due 05/01/22................................... 136,316 139,256
8.500%, due 07/01/22................................... 769,021 809,264
6.500%, due 12/25/23................................... 2,330,000 2,232,546
9.000%, due 01/01/25................................... 1,113,176 1,172,313
9.000%, due 02/01/25................................... 2,066 2,176
6.500%, due 04/01/26................................... 1,606,732 1,536,944
6.500%, due 12/01/26 TBA............................... 6,135,000 5,868,526
7.500%, due 12/01/26 TBA............................... 4,035,000 4,043,837
6.070%, due 08/01/29 TBA............................... 1,430,000 1,413,019
Federal National Mortgage Association Strips 0.000%, due
04/01/27 principal only................................ 3,991,910 2,646,616
Government National Mortgage Association
10.000%, due 09/15/00.................................. 3,695 3,918
10.000%, due 05/15/01.................................. 6,787 7,196
9.000%, due 11/15/04................................... 23,281 24,365
11.000%, due 09/15/15.................................. 221,706 246,233
8.500%, due 05/15/21................................... 56,468 58,638
8.000%, due 08/15/22................................... 557,885 569,914
8.000%, due 11/15/22................................... 467,835 481,314
8.000%, due 12/15/22................................... 1,613,507 1,659,993
7.500%, due 11/15/24................................... 2,628,494 2,646,736
----------
44,775,498
----------
U.S. GOVERNMENT OBLIGATIONS -- 10.83%
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98................................... 172,000 170,925
7.750%, due 11/30/99................................... 215,000 222,458
6.625%, due 07/31/01................................... 9,570,000 9,665,700
6.250%, due 10/31/01................................... 7,910,000 7,875,394
7.000%, due 07/15/06................................... 4,615,000 4,747,681
8.125%, due 05/15/21................................... 1,500,000 1,716,095
6.000%, due 02/15/26................................... 12,628,000 11,298,120
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. Treasury Principal Strips
0.000%, due 02/15/03 .................................. $ 225,000 $ 157,441
0.000%, due 05/15/03 .................................. 1,960,000 1,348,539
0.000%, due 08/15/03 .................................. 6,280,000 4,249,550
0.000%, due 11/15/04................................... 28,467,000 17,637,584
0.000%, due 05/15/08 .................................. 15,095,000 7,319,113
-----------
66,408,600
-----------
Total U.S. Bonds........................................ 163,404,317
-----------
<CAPTION>
SHARES
----------
<S> <C> <C>
HIGH YIELD BONDS -- 2.18%
Brinson High Yield Fund (b)............................. 1,016,353 13,327,440
-----------
<CAPTION>
FACE
AMOUNT
----------
<S> <C> <C>
NON-U.S. BONDS -- 17.22%
AUSTRALIA -- 1.37%
Government of Australia
12.000%, due 11/15/01.............................. AUD 4,150,000 3,780,537
9.000%, due 09/15/04................................... 4,020,000 3,374,817
6.750%, due 11/15/06................................... 1,700,000 1,253,590
-----------
8,408,944
-----------
BELGIUM -- 0.76%
Kingdom of Belgium
5.000%, due 03/28/01............................... BEF 65,000,000 1,849,652
8.750%, due 06/25/02................................... 32,000,000 1,047,855
9.000%, due 03/28/03................................... 7,000,000 233,853
8.500%, due 10/01/07................................... 46,000,000 1,545,958
-----------
4,677,318
-----------
CANADA -- 2.54%
Government of Canada
7.500%, due 09/01/00............................... CAD 3,380,000 2,601,958
7.250%, due 06/01/03................................... 4,840,000 3,733,143
8.750%, due 12/01/05................................... 600,000 505,477
7.000%, due 12/01/06................................... 2,570,000 1,954,139
4.250%, due 12/01/21 (d)............................... 6,060,000 4,717,606
9.000%, due 06/01/25................................... 1,510,000 1,377,705
4.250%, due 12/01/26 (d)............................... 1,000,000 733,859
-----------
15,623,887
-----------
DENMARK -- 1.98%
Kingdom of Denmark
9.000%, due 11/15/98............................... DKK 3,200,000 514,600
9.000%, due 11/15/00................................... 14,600,000 2,505,959
8.000%, due 05/15/03................................... 8,700,000 1,485,010
7.000%, due 12/15/04................................... 16,900,000 2,730,986
8.000%, due 03/15/06................................... 19,000,000 3,224,788
7.000%, due 11/10/24................................... 11,300,000 1,685,448
-----------
12,146,791
-----------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ----------
<S> <C> <C>
FRANCE -- 0.72%
Government of France (OAT) 9.500%, due 01/25/01... FRF 8,300,000 $1,656,890
7.500%, due 04/25/05................................. 11,300,000 2,192,443
8.500%, due 12/26/12................................. 2,500,000 533,810
----------
4,383,143
----------
GERMANY -- 4.23%
Bundesrepublik Deutscheland
7.000%, due 09/20/99............................. DEM 7,000,000 4,300,987
8.500%, due 08/21/00................................. 2,180,000 1,413,385
9.000%, due 01/22/01................................. 5,500,000 3,649,202
8.375%, due 05/21/01................................. 1,580,000 1,037,617
6.750%, due 04/22/03................................. 4,900,000 3,068,616
6.750%, due 07/15/04................................. 6,300,000 3,938,133
6.875%, due 05/12/05................................. 800,000 501,320
6.000%, due 01/05/06................................. 1,350,000 798,720
6.250%, due 04/26/06................................. 2,500,000 1,501,635
6.250%, due 01/04/24................................. 2,900,000 1,619,081
Treuhandanstalt
7.750%, due 10/01/02................................. 4,500,000 2,934,839
6.250%, due 03/04/04................................. 1,900,000 1,157,707
----------
25,921,242
----------
ITALY -- 1.67%
Republic of Italy (BTP)
9.500%, due 12/01/97............................. ITL 900,000,000 531,590
9.500%, due 12/01/99................................. 3,900,000,000 2,449,104
10.500%, due 04/01/00................................ 995,000,000 645,478
12.000%, due 09/01/02................................ 1,700,000,000 1,233,911
9.000%, due 10/01/03................................. 5,100,000,000 3,349,844
8.500%, due 04/01/04................................. 3,100,000,000 1,996,280
----------
10,206,207
----------
NETHERLANDS -- 1.11%
Government of Netherlands
6.250%, due 07/15/98............................. NLG 1,400,000 734,834
8.500%, due 03/15/01................................. 2,100,000 1,221,865
8.750%, due 09/15/01................................. 700,000 415,184
6.500%, due 04/15/03................................. 200,000 110,141
7.250%, due 10/01/04................................. 2,400,000 1,371,306
8.250%, due 02/15/07................................. 4,815,000 2,937,954
----------
6,791,284
----------
SPAIN -- 0.43%
Kingdom of Spain
6.750%, due 04/15/00............................. ESP 145,000,000 1,026,890
7.900%, due 02/28/02................................. 100,000,000 744,815
10.000%, due 02/28/05................................ 100,000,000 839,443
----------
2,611,148
----------
SWEDEN -- 0.55%
Kingdom of Sweden
10.250%, due 05/05/03............................ SEK 12,300,000 1,919,350
6.000%, due 02/09/05................................. 11,500,000 1,456,819
----------
3,376,169
----------
UNITED KINGDOM -- 1.86%
UK Treasury
8.000%, due 06/10/03............................ GBP 2,490,000 $ 4,318,960
8.500%, due 12/07/05................................ 2,570,000 4,656,882
8.500%, due 07/16/07................................ 1,200,000 2,191,271
8.750%, due 08/25/17................................ 130,000 252,533
------------
11,419,646
------------
Total Non-U.S. Bonds................................. 105,565,779
------------
EMERGING MARKETS DEBT -- 3.32% SHARES
-----------
Brinson Emerging Markets Debt
Fund (b)............................................ 1,066,734 20,369,079
------------
Total Bonds (Cost $296,423,259)...................... 302,666,615
------------
Short-Term Investments -- 4.37%
U.S. GOVERNMENT FACE AMOUNT
OBLIGATIONS -- 0.25% -----------
U.S. Treasury Bill 5.360%, due 11/13/97.............. $ 1,550,000 1,520,065
------------
COMMERCIAL PAPER -- 4.12%
American Stores Co. 5.830%, due 07/23/97............. 1,000,000 996,437
Crown Cork & Seal Co.
5.800%, due 07/09/97................................ 1,500,000 1,498,067
5.770%, due 07/15/97................................ 1,800,000 1,795,961
CSX Corp. 5.800%, due 07/22/97....................... 2,000,000 1,993,233
Enron Oil & Gas 6.520%, due 07/01/97................. 6,467,000 6,467,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................ 1,500,000 1,497,592
5.850%, due 08/11/97................................ 3,000,000 2,980,012
Norfolk Southern Corp.
5.770%, due 07/10/97................................ 1,064,000 1,062,465
5.780%, due 07/18/97................................ 1,500,000 1,495,906
Occidental Petroleum 5.800%, due 08/13/97............ 1,750,000 1,737,876
Sundstrand Corp. 5.800%, due 07/09/97................ 1,000,000 998,711
Tenneco, Inc.
5.780%, due 07/17/97................................ 1,750,000 1,745,504
5.800%, due 07/23/97................................ 1,000,000 996,456
------------
25,265,220
------------
Total Short-Term Investments
(Cost $26,784,066).................................. 26,785,285
------------
Total Investments
(Cost $553,118,111) -- 100.58% (a).................. 616,500,754
------------
Liabilities, less cash and other assets-- (0.58%).... (3,529,952)
------------
Net Assets -- 100%................................... $612,970,802
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $553,326,762; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $75,361,347
Gross unrealized depreciation................................ (12,187,355)
-----------
Net unrealized appreciation............................... $63,173,992
===========
</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 June 30,
1997.
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144-A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1997,
the value of these securities amounted to $13,744,593 or 2.24% of net
assets.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Fund had the following open forward foreign currency contracts as of
June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE LOCAL CURRENCY VALUE GAIN/(LOSS)
---------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Belgian Franc............... 08/05/97 90,000,000 $ 2,509,676 $ (58,084)
British Pound............... 08/05/97 7,800,000 12,967,150 348,700
Canadian Dollar............. 08/05/97 1,400,000 1,017,094 (30,810)
Danish Kroner............... 08/05/97 4,400,000 665,009 (25,957)
Dutch Guilder............... 08/05/97 28,900,000 14,788,206 (632,819)
French Franc................ 08/05/97 132,000,000 22,537,866 (836,060)
German Mark................. 08/05/97 25,900,000 14,902,615 (669,163)
Italian Lira................ 08/05/97 11,500,000,000 6,751,065 (130,539)
Japanese Yen................ 08/05/97 3,680,000,000 32,331,212 1,874,554
Swiss Franc................. 08/05/97 10,800,000 7,440,527 (114,033)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar........... 08/05/97 18,500,000 13,865,052 544,409
Belgian Franc............... 08/05/97 250,000,000 6,971,323 480,242
British Pound............... 08/05/97 20,300,000 33,747,839 (1,135,639)
Canadian Dollar............. 08/05/97 16,500,000 11,987,185 349,975
Danish Kroner............... 08/05/97 71,000,000 10,730,830 693,696
Dutch Guilder............... 08/05/97 38,000,000 19,444,700 1,376,647
French Franc................ 08/05/97 132,000,000 22,537,866 1,463,443
German Mark................. 08/05/97 57,800,000 33,257,574 2,231,938
Italian Lira................ 08/05/97 20,150,000,000 11,829,040 329,829
Swiss Franc................. 08/05/97 2,200,000 1,515,663 57,563
----------
Total...................... $6,117,892
==========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Fund had the following open futures contracts as of June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN/(LOSS)
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes,
60 contracts.............. September 1997 $ 6,301,388 $ 6,353,438 $ 52,050
10 year U.S. Treasury
Notes, 157 contracts...... September 1997 16,795,490 16,936,375 140,885
30 year U.S. Treasury
Bonds, 72 contracts....... September 1997 7,847,977 7,996,500 148,523
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500, 65
contracts................. September 1997 28,298,725 28,933,125 (634,400)
---------
Total..................... $(292,942)
=========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1997 was $1,520,065.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $506,645,477)....................... $558,957,884
Affiliated issuers (Cost $46,472,634).......................... 57,542,870
Cash........................................................... 1,054,556
Foreign currency, at value (Cost $1,121,492).................... 1,135,377
Receivables:
Investment securities sold..................................... 8,894,189
Dividends...................................................... 1,213,182
Interest....................................................... 5,013,738
Fund shares sold............................................... 129,728
Variation margin (Note 5)...................................... 106,656
Net unrealized appreciation on forward foreign currency con-
tracts......................................................... 6,117,892
Other assets.................................................... 16,660
------------
TOTAL ASSETS................................................. 640,182,732
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 24,097,873
Fund shares redeemed........................................... 2,558,669
Investment advisory fees (Note 2).............................. 371,662
Accrued expenses............................................... 183,726
------------
TOTAL LIABILITIES............................................ 27,211,930
------------
NET ASSETS....................................................... $612,970,802
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)........................................ $514,920,224
Accumulated distribution in excess of net investment income..... (964,704)
Accumulated net realized gain................................... 29,814,069
Net unrealized appreciation..................................... 69,201,213
------------
NET ASSETS................................................... $612,970,802
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $586,667,003 and 44,671,292 shares is-
sued and outstanding) (Note 7)................................ $ 13.13
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 76 shares issued and outstanding) (Note 7)......... $ 13.13
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $26,302,799 and 2,015,597 shares is-
sued and outstanding) (Note 7)................................ $ 13.05
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $8,019 for foreign taxes withheld).............. $16,746,503
Dividends (net of $386,201 for foreign taxes withheld)........... 4,910,912
-----------
TOTAL INCOME.................................................. 21,657,415
-----------
EXPENSES:
Advisory (Note 2)................................................ 4,294,925
Administration................................................... 340,936
Custodian........................................................ 135,269
Distribution (Note 6)............................................ 122,983
Other............................................................ 568,542
-----------
TOTAL EXPENSES................................................ 5,462,655
-----------
NET INVESTMENT INCOME ........................................ 16,194,760
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 39,756,574
Futures contracts............................................... (4,286,707)
Foreign currency transactions................................... 7,798,176
-----------
Net realized gain............................................. 43,268,043
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 29,265,335
Futures contracts............................................... (366,385)
Forward contracts............................................... 6,780,244
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 77,694
-----------
Change in net unrealized appreciation or depreciation......... 35,756,888
-----------
Net realized and unrealized gain................................. 79,024,931
-----------
Net increase in net assets resulting from operations............. $95,219,691
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................... $ 16,194,760 $ 15,718,942
Net realized gain............................... 43,268,043 33,576,934
Change in net unrealized appreciation or depre-
ciation........................................ 35,756,888 13,188,606
------------- -------------
Net increase in net assets resulting from opera-
tions.......................................... 95,219,691 62,484,482
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........ (24,660,333) (20,214,114)
Distributions in excess of net investment in-
come........................................... -- (1,430,745)
Distributions from net realized gain............ (26,428,094) (10,937,826)
------------- -------------
Total distributions to shareholders*............ (51,088,427) (32,582,685)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................... 192,297,100 109,483,562
Shares issued on reinvestment of distributions.. 49,580,585 31,162,315
Shares redeemed................................. (145,001,283) (64,262,463)
------------- -------------
Net increase in net assets resulting from capi-
tal share transactions (Note 7)................ 96,876,402 76,383,414
------------- -------------
TOTAL INCREASE IN NET ASSETS................. 141,007,666 106,285,211
------------- -------------
NET ASSETS:
Beginning of year............................... 471,963,136 365,677,925
------------- -------------
End of year (including accumulated undistributed
net investment income of
($964,704) and $9,848,069, respectively)....... $ 612,970,802 $471,963,136
============= =============
<CAPTION>
*DISTRIBUTIONS BY CLASS:
<S> <C> <C>
Distributions from and in excess of net invest-
ment income:
Brinson Class I................................. $ (23,918,105) $ (21,444,413)
SwissKey Class.................................. (742,228) (200,446)
Distributions from net realized gain:
Brinson Class I................................. (25,579,684) (10,892,522)
SwissKey Class.................................. (848,410) (45,304)
------------- -------------
Total distributions to shareholders............. $ (51,088,427) $ (32,582,685)
============= =============
</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>
YEAR ENDED JUNE 30, AUGUST 31, 1992*
-------------------------------------- THROUGH
BRINSON CLASS I 1997 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. 0.38 0.44 0.43 0.33 0.26
Net realized and
unrealized gain
(loss)............... 1.79 1.37 0.86 (0.23) 0.81
-------- -------- -------- -------- --------
Total income from
investment
operations......... 2.17 1.81 1.29 0.10 1.07
-------- -------- -------- -------- --------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.61) (0.62) (0.27) (0.27) (0.20)
Distributions from and
in excess of net
realized gain........ (0.65) (0.32) (0.10) (0.27) --
-------- -------- -------- -------- --------
Total distributions. (1.26) (0.94) (0.37) (0.54) (0.20)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
======== ======== ======== ======== ========
Total return (non-
annualized)............ 18.79% 16.38% 12.57% 0.77% 10.76%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $586,667 $457,933 $365,678 $278,859 $191,389
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.99% 1.04% 1.09% 1.14% 1.35%**
After expense reim-
bursement............ N/A N/A N/A 1.10% 1.05%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 3.03% 3.69% 4.27% 3.21% 3.26%**
After expense reim-
bursement............ N/A N/A N/A 3.25% 3.56%**
Portfolio turnover
rate.................. 150% 142% 238% 231% 149%
Average commission rate
paid per share........ $ 0.0326 $ 0.0291 N/A N/A N/A
</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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 12.18 $ 11.60
------- -------
Income from investment operations:
Net investment income........................... 0.34 0.39
Net realized and unrealized gain................ 1.75 1.10
------- -------
Total income from investment operations....... 2.09 1.49
------- -------
Less distributions:
Distributions from and in excess of net invest-
ment income.................................... (0.57) (0.59)
Distributions from net realized gain............ (0.65) (0.32)
------- -------
Total distributions........................... (1.22) (0.91)
------- -------
Net asset value, end of period.................... $ 13.05 $ 12.18
======= =======
Total return (non-annualized)..................... 18.13% 13.24%
Ratios/Supplemental data:
Net assets, end of period (in 000s).............. $26,303 $14,030
Ratio of expenses to average net assets.......... 1.64% 1.69%**
Ratio of net investment income to average net as-
sets............................................ 2.38% 3.04%**
Portfolio turnover rate.......................... 150% 142%
Average commission rate paid per share........... $0.0326 $0.0291
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
The Global Equity Fund is actively managed, providing a fully integrated
approach to the primary equity markets across the world. Market selection and
currency strategies are managed within a global asset allocation framework.
Industry strategies and individual security selections are based on the
fundamental research of our analytical teams in Chicago, Basel, Frankfurt,
London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The SwissKey Global Equity Fund has provided an annualized return of 20.74%
since July 31, 1995, compared to the 18.70% return of its benchmark, the MSCI
World Equity (Free) Index. For the year ended June 30, 1997, the Fund returned
20.34%, while the benchmark returned 22.64%. For the first half of 1997, the
SwissKey Global Equity Fund returned 12.23%, lagging the index's unhedged
return of 15.51%.
Most major global equity markets have experienced extraordinarily strong
performance year-to-date, led by stellar results in Switzerland (45%), the
Netherlands (38%) and Spain (36%). The U.S. market responded vigorously to
positive corporate earnings surprises, rising 21%. While very good, this return
did not make the U.S. a standout performer. Nonetheless, the U.S. market's
continued strength has extended its fundamental overvaluation, leading to a
decision to increase the scale of the underweight from -10% to -15%. Japan's
comparatively low 10.34% hedged return made it a relative underperformer. Due to
this underperformance and subsequently improved attractiveness, the Japan
underweight was reduced from -10% to-2.5%, in two stages. Given the extreme
overvaluations of many equity markets, the cash allocation within the Global
Equity Fund was increased from 15% to 20% earlier in the year. In the first half
of the year, this risk hedge and the Switzerland underweight detracted from Fund
performance.
The Fund's defensive U.S. dollar overweight, underweight of the Japanese yen and
the core European currencies contributed strongly to Fund performance. As these
currencies returned to fair value, the underweight positions in the yen and
European currencies were gradually removed. At the current time, the Fund is
largely currency neutral.
Stock selection detracted from returns due to negative U.S. stock selection.
Stock selection in Japan had a significant beneficial impact on performance.
- --------------------------------------------------------------------------------
23
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
Total Return
6 months 1 year 7/31/95*
ended ended to
6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
SwissKey Global Equity Fund 12.23% 20.34% 20.74%
MSCI World Equity (Free) Index 15.51 22.64 18.70
- --------------------------------------------------------------------------------
* Inception date of the SwissKey Global Equity Fund.
Total return includes reinvestment of all capital gain and income
distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Global
Equity Fund and the MSCI World Equity (Free) Index if you had invested $10,000
on July 31, 1995, and had reinvested all your income dividends and capital gain
distributions through June 30, 1997. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SwissKey Global Equity Fund
vs. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
$14,351 ====== SwissKey Global Equity Fund
$13,889 ------ MSCI World Equity (Free) Index
<TABLE>
SwissKey MSCI World Equity
Global Equity Fund (Free) Index
- --------------------------------------------------------------------------------
<S> <C> <C>
7/31/95 $10,000.00 $10,000.00
9/30/95 $10,329.00 $10,066.00
12/31/95 $10,993.00 $10,556.00
3/31/96 $11,539.00 $10,998.00
6/30/96 $11,925.00 $11,325.00
9/30/96 $12,110.00 $11,488.00
12/31/96 $12,787.00 $12,025.00
3/31/97 $13,011.00 $12,064.00
6/30/97 $14,351.00 $13,889.00
</TABLE>
7/31/95 = $10,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are
based solely on market returns without deduction for fees or transaction costs
for rebalancing.
- --------------------------------------------------------------------------------
24
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
Market Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------------------------
<S> <C> <C>
U.S. 45.5% 30.4%
Japan 17.3 14.8
Australia 1.4 2.5
Belgium 0.6 1.6
Canada 2.5 1.5
France 3.5 2.3
Germany 4.4 4.5
Hong Kong 2.0 0.8
Italy 1.6 1.7
Malaysia 1.1 1.5
Netherlands 2.6 2.9
New Zealand 0.2 1.7
Spain 1.2 1.1
Sweden 1.3 0.0
Switzerland 3.4 1.3
U.K. 9.4 9.8
Other Markets 2.0 1.6
Cash Reserves 0.0 20.0
- ---------------------------------------------------
100.0% 100.0%
</TABLE>
Currency Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------------------------
<S> <C> <C>
U.S. 45.5% 49.9%
Japan 17.3 17.3
Australia 1.4 1.4
Belgium 0.6 0.6
Canada 2.5 2.5
France 3.5 3.5
Germany 4.4 4.4
Hong Kong 2.0 0.0
Italy 1.6 1.6
Malaysia 1.1 1.1
Netherlands 2.6 2.6
New Zealand 0.2 1.7
Spain 1.2 1.2
Sweden 1.3 1.3
Switzerland 3.4 3.4
U.K. 9.4 5.4
Other Markets 2.0 2.1
- ---------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of June 30, 1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------
<S> <C>
1. Xerox Corp. 2.22%
2. Chase Manhattan Corp. 1.89
3. Lockheed Martin Corp. 1.77
4. Philip Morris Companies, Inc. 1.75
5. Aon Corp. 1.45
6. CIGNA Corp. 1.44
7. Burlington Northern Santa Fe 1.31
8. Goodyear Tire & Rubber Co. 1.30
9. Federal Express Corp. 1.20
10. Citicorp 1.19
- ----------------------------------------------
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1997
<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------
<S> <C>
1. Royal Dutch Petroleum Co. 0.74%
2. Glaxo Wellcome PLC 0.67
3. Telecom Corp of New Zealand Ltd. 0.64
4. Matsushita Electric Industrial Co. 0.63
5. Toray Industries, Inc. 0.60
6. General Electric Co. PLC 0.58
7. British Telecommunications PLC 0.53
8. British Petroleum Co. PLC 0.53
9. Lloyds TSB Group PLC 0.51
10. Sankyo Co. Ltd. 0.49
- --------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
25
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals................................................. 0.95%
Housing/Paper............................................. 1.96
Metals.................................................... 0.26
------
3.17
Capital Investments
Capital Goods............................................. 3.23
Technology................................................ 4.35
------
7.58
Consumer
Autos/Durables............................................ 1.36
Discretionary............................................. 2.02
Health: Drugs............................................. 3.16
Health: Non-Drugs......................................... 1.56
Non-Durables.............................................. 4.33
Retail/Apparel............................................ 1.89
------
14.32
Energy...................................................... 1.85
Financial
Banks..................................................... 3.20
Non-Banks................................................. 3.35
------
6.55
Transportation.............................................. 2.45
Utilities................................................... 2.68
Services/Miscellaneous...................................... 3.54
------
Total U.S. Equities...................................... 42.14*
------
NON-U.S. EQUITIES
Aerospace & Military........................................ 0.07%
Airlines.................................................... 0.28
Appliances & Household Durables............................. 1.29
Automobiles................................................. 1.35
Banking..................................................... 5.87
Beverages & Tobacco......................................... 0.92
Broadcasting & Publishing................................... 0.76
Building Materials.......................................... 0.92
Business & Public Service................................... 2.06
Chemicals................................................... 2.14
Construction................................................ 0.88
Data Processing............................................. 0.62
Electric Components......................................... 0.80
Electronics................................................. 2.09
Energy...................................................... 3.54
Financial Services.......................................... 0.70
Food & House Products....................................... 1.88
Forest Products............................................. 0.96
Gold Mining................................................. 0.03
Health & Personal Care...................................... 2.92
Industrial Components....................................... 1.06
Insurance................................................... 2.40
Leisure & Tourism........................................... 0.30
Machinery & Engineering..................................... 0.58
Merchandising............................................... 2.27
Metals--Steel............................................... 1.02
Miscellaneous Materials..................................... 0.36
Multi-Industry.............................................. 2.37
Non-Ferrous Metal........................................... 1.03
Real Estate................................................. 0.42
Recreation.................................................. 0.44
Shipping.................................................... 0.25
Telecommunications.......................................... 3.04
Textiles & Apparel.......................................... 0.11
Transportation.............................................. 0.50
Utilities................................................... 2.40
Wholesale & International Trade............................. 0.15
------
Total Non-U.S. Equities.................................. 48.78
------
SHORT-TERM INVESTMENTS...................................... 8.38*
------
TOTAL INVESTMENTS........................................ 99.30
CASH AND OTHER ASSETS, LESS LIABILITIES..................... 0.70
------
NET ASSETS............................................... 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
* The Fund held a short position in stock index futures on June 30, 1997 which
reduced U.S. equity exposure from 42.14% to 28.35%. This adjustment results in
an increase in the Fund's exposure to Short-Term Investments from 8.38% to
22.17%.
================================================================================
26
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C>
Equities -- 90.92%
U.S. EQUITIES -- 42.14%
Aetna Life & Casualty Co................................... 6,000 $ 614,250
Allergan, Inc.............................................. 15,700 499,456
Alza Corp. (b)............................................. 15,300 443,700
Aon Corp................................................... 30,750 1,591,312
Automatic Data Processing, Inc............................. 15,000 705,000
Beckman Instruments, Inc................................... 4,500 217,125
Birmingham Steel Corp...................................... 6,100 94,550
Boston Technology, Inc. (b)................................ 5,800 171,463
Browning-Ferris Industries, Inc............................ 11,600 385,700
Burlington Northern Santa Fe............................... 16,000 1,438,000
Centerior Energy Co........................................ 14,900 166,694
Champion Enterprises, Inc. (b)............................. 7,200 108,000
Champion International Corp................................ 400 22,100
Chase Manhattan Corp....................................... 21,400 2,077,137
CIGNA Corp................................................. 8,900 1,579,750
Circuit City Stores, Inc................................... 22,600 803,712
Citicorp................................................... 10,800 1,302,075
CMS Energy Corp............................................ 16,700 588,675
Coca-Cola Enterprises, Inc................................. 12,300 282,900
Comerica, Inc.............................................. 4,200 285,600
Comverse Technology, Inc. (b).............................. 2,800 145,600
Corning, Inc............................................... 19,600 1,090,250
Covance, Inc............................................... 7,700 148,706
CPC International, Inc..................................... 6,700 618,494
CVS Corp................................................... 9,700 497,125
Dial Corp.................................................. 9,200 143,750
Eastman Chemical Co........................................ 10,400 660,400
EMC Corp./Mass. (b)........................................ 29,100 1,134,900
Enron Corp................................................. 29,400 1,199,887
Entergy Corp............................................... 1,800 49,275
Federal Express Corp. (b).................................. 22,800 1,316,700
Federated Department Stores (b)............................ 8,800 305,800
FileNet Corp. (b).......................................... 3,000 43,500
First American Corp.-Tenn.................................. 4,000 153,500
First Bank System, Inc..................................... 2,400 204,900
First Data Corp............................................ 25,404 1,116,188
First of America Bank Corp................................. 3,000 137,250
First Security Corp........................................ 5,100 139,294
Fleetwood Enterprises, Inc................................. 2,300 68,569
Food Lion, Inc. Class A.................................... 28,100 201,091
Forest Laboratories, Inc. (b).............................. 7,000 290,062
Gannett Co., Inc........................................... 10,300 1,017,125
General Instrument Corp. (b)............................... 34,900 872,500
Genzyme Corp. (b).......................................... 6,200 172,050
Geon Co.................................................... 4,200 85,050
Goodyear Tire & Rubber Co.................................. 22,600 1,430,862
Harnischfeger Industries, Inc.............................. 10,200 423,300
Health Care and Retirement Corp. (b)....................... 11,050 368,794
Hibernia Corp. Class A..................................... 8,500 118,469
Informix Corp. (b)......................................... 8,200 73,800
Interpublic Group of Companies, Inc........................ 6,700 410,794
James River Corp. of Virginia.............................. 12,100 447,700
Kroger Co. (b)............................................. 8,400 243,600
Lockheed Martin Corp....................................... 18,751 1,941,900
Lyondell Petrochemical Co.................................. 16,700 364,269
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C>
Manor Care, Inc............................................ 13,600 $ 443,700
Martin Marietta Materials, Inc............................. 4,535 146,821
Masco Corp................................................. 17,900 747,325
Mattel, Inc................................................ 22,450 760,494
Nabisco Holdings Corp. Class A............................. 15,600 622,050
National Service Industries Inc............................ 3,000 146,063
Nextel Communications, Inc. Class A (b).................... 23,300 441,244
Octel Communications Corp. (b)............................. 4,500 105,469
Old Republic International Corp............................ 5,550 168,234
Peco Energy Co............................................. 38,100 800,100
Pentair, Inc............................................... 8,100 266,288
Pharmacia & Upjohn, Inc.................................... 19,500 677,625
Philip Morris Companies, Inc............................... 43,200 1,917,000
Raytheon Co................................................ 5,300 270,300
Regions Financial Corp..................................... 4,000 126,500
Reynolds & Reynolds Co. Class A............................ 5,500 86,625
Schering Plough Corp....................................... 26,800 1,283,050
Seagate Technology, Inc. (b)............................... 7,100 249,831
Timken Co.................................................. 10,600 376,963
Trinity Industries, Inc.................................... 2,600 82,550
Tyson Foods, Inc. Class A.................................. 31,100 594,787
UCAR International, Inc. (b)............................... 400 18,300
Ultramar Diamond Shamrock Corp............................. 17,452 569,371
US Bancorp................................................. 9,300 596,362
Vencor, Inc. (b)........................................... 8,000 338,000
Viad Corp.................................................. 15,000 288,750
Westvaco Corp.............................................. 3,650 114,747
Witco Corp................................................. 1,000 37,938
Xerox Corp................................................. 30,900 2,437,237
York International Corp.................................... 9,500 437,000
360 Communications Co. (b)................................. 4,533 77,628
-----------
Total U.S. Equities........................................ 46,241,005
-----------
NON-U.S. EQUITIES -- 48.78%
AUSTRALIA -- 2.49%
Amcor Ltd.................................................. 16,100 106,146
Boral Ltd.................................................. 28,800 89,976
Brambles Industries Ltd.................................... 4,000 78,489
Broken Hill Proprietary Co. Ltd............................ 34,450 502,854
Coca-Cola Amatil Ltd....................................... 7,000 90,204
CSR Ltd.................................................... 20,000 76,868
David Jones Ltd............................................ 71,000 98,407
Lend Lease Corp. Ltd....................................... 4,197 88,043
M.I.M. Holdings Ltd........................................ 51,829 76,107
National Australia Bank Ltd................................ 24,475 347,846
News Corp. Ltd............................................. 50,536 240,421
News Corp. Ltd. Preferred.................................. 13,000 50,841
Pacific Dunlop Ltd......................................... 33,600 98,678
Qantas Airways Ltd......................................... 35,664 82,830
Rio Tinto Ltd.............................................. 13,563 229,444
Santos Ltd................................................. 8,000 33,384
Westpac Banking Corp. Ltd.................................. 41,945 250,458
WMC Ltd.................................................... 21,700 135,751
Woolworth's Ltd............................................ 16,000 52,144
-----------
2,728,891
-----------
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ----------
<S> <C> <C>
BELGIUM -- 1.59%
Delhaize-Le Lion S.A.......................................... 2,200 $ 115,661
Electrabel S.A................................................ 1,150 246,634
Fortis AG..................................................... 88 20
Fortis AG Strip (b)........................................... 1,168 241,397
General de Banque S.A......................................... 300 115,577
Groupe Bruxelles Lambert S.A.................................. 730 122,445
Kredietbank NV................................................ 465 187,552
Kredietbank VVPR.............................................. 11 4,345
Petrofina S.A................................................. 610 231,189
Societe Generale de Belgique.................................. 1,140 106,548
Solvay S.A. Class A........................................... 215 126,787
Tractebel..................................................... 300 125,174
Tractebel Warrants "99" (b)................................... 200 2,147
Union Miniere Group S.A. (b).................................. 1,302 122,051
----------
1,747,527
----------
CANADA -- 1.36%
Alcan Aluminium Ltd........................................... 2,900 99,007
Bank of Montreal.............................................. 2,700 105,487
Barrick Gold Corp............................................. 1,600 34,851
BCE, Inc...................................................... 3,200 89,069
Canadian National Railway Co.................................. 2,000 87,272
Canadian Pacific Ltd.......................................... 6,700 190,860
Hudson's Bay Co............................................... 3,400 76,399
Imperial Oil Ltd.............................................. 2,400 123,079
MacMillan Bloedel Ltd......................................... 4,100 56,317
Moore Corp. Ltd............................................... 2,200 43,375
Noranda, Inc.................................................. 2,600 56,067
Northern Telecom Ltd.......................................... 1,000 90,207
NOVA Corp..................................................... 4,300 36,779
Royal Bank of Canada.......................................... 3,000 136,018
Seagram Co. Ltd............................................... 2,600 104,595
Thomson Corp.................................................. 3,900 89,896
TransCanada Pipelines Ltd..................................... 3,400 68,389
----------
1,487,667
----------
FINLAND -- 0.32%
Merita Ltd. Class A........................................... 11,700 38,968
Nokia Ab Class A.............................................. 2,300 171,763
Outokumpu Class A............................................. 2,000 39,660
Pohjola Insurance Group Class B............................... 500 14,824
Sampo Insurance Co. Ltd. Class A.............................. 200 19,445
The Rauma Group............................................... 83 1,901
UPM-Kymmene Corp.............................................. 3,000 69,308
----------
355,869
----------
FRANCE -- 3.29%
Accor S.A..................................................... 977 146,442
Alcatel Alsthom............................................... 1,261 158,082
AXA UAP....................................................... 2,722 169,458
AXA UAP Rights (b)............................................ 1,722 6,687
Banque Nationale de Paris..................................... 4,780 197,192
Cie Bancaire S.A.............................................. 1,003 128,130
Cie de Saint Gobain........................................... 1,357 198,084
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ----------
<S> <C> <C>
Cie de Suez................................................... 24,340 $ 59,907
Cie Generale des Eaux......................................... 971 124,539
Cie Generale des Eaux Warrants "01" (b)....................... 1,771 1,062
Colas......................................................... 330 43,561
Dexia France.................................................. 1,403 136,692
Elf Aquitaine S.A............................................. 2,150 232,175
Groupe Danone................................................. 900 148,850
Lafarge S.A................................................... 1,500 93,382
Lagardere S.C.A............................................... 3,000 87,225
LVMH.......................................................... 530 142,633
Michelin Class B.............................................. 2,934 176,360
Pechiney S.A. Class A......................................... 3,013 118,806
Peugeot S.A................................................... 1,790 173,177
Rhone-Poulenc Class A......................................... 3,800 155,340
SEITA......................................................... 3,200 101,380
Societe Generale.............................................. 1,571 175,537
Suez Lyonnaise des Eaux S.A................................... 1,500 151,252
Thomson CSF................................................... 3,100 79,942
Total S.A. Class B............................................ 1,759 177,967
Usinor Sacilor................................................ 12,400 223,880
----------
3,607,742
----------
GERMANY -- 4.80%
Allianz AG Holding............................................ 2,150 459,586
BASF AG....................................................... 5,800 214,180
Bayer AG...................................................... 7,950 306,576
Bayerische Motoren Werke AG................................... 280 231,057
Commerzbank AG................................................ 6,050 172,897
Daimler-Benz AG............................................... 3,200 260,576
Deutsche Bank AG.............................................. 6,150 361,391
Deutsche Telekom AG........................................... 15,300 376,222
Henkel KGaA-Vorzug AG......................................... 2,550 143,699
Hochtief AG................................................... 1,750 78,331
Hoechst AG.................................................... 2,600 110,260
M.A.N. AG..................................................... 420 130,873
Mannesmann AG................................................. 530 236,928
Metro AG...................................................... 1,870 203,891
Muenchener Rueckver AG........................................ 112 317,503
Muenchener Rueckver AG Warrants "98" (b)...................... 3 1,076
Preussag AG................................................... 660 194,296
RWE AG........................................................ 4,700 202,284
Schering AG................................................... 2,550 273,350
Siemens AG.................................................... 2,600 155,842
Thyssen AG.................................................... 950 228,696
Veba AG....................................................... 5,350 302,407
Volkswagen AG................................................. 400 303,455
----------
5,265,376
----------
HONG KONG -- 0.59%
Cheung Kong Holdings Ltd...................................... 6,000 59,247
China Light & Power Co. Ltd................................... 11,000 62,331
Guoco Group Ltd............................................... 9,000 47,397
Hang Seng Bank Ltd............................................ 5,800 82,726
Hong Kong Telecommunications Ltd.............................. 16,000 38,207
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
HONG KONG (CONTINUED)
Hutchison Whampoa Ltd....................................... 14,000 $ 121,074
Jardine Matheson Holdings ADR (c)........................... 3,600 25,560
New World Development Co. Ltd............................... 9,000 53,670
Sun Hung Kai Properties Ltd................................. 5,000 60,182
Swire Pacific Ltd. Class A.................................. 7,000 63,022
Wharf (Holdings) Ltd........................................ 8,000 34,696
-----------
648,112
-----------
ITALY -- 1.66%
Assicurazioni Generali...................................... 9,540 173,251
Banca Commerciale Italiana.................................. 26,000 53,788
Credito Italiano Spa........................................ 67,000 122,463
Danieli & Co. Savings (Risp)................................ 13,400 46,859
Edison Spa.................................................. 8,000 39,753
ENI ADR (c)................................................. 2,300 130,812
ENI Spa..................................................... 33,000 186,674
Fiat Spa-Priv............................................... 73,000 134,716
INA-Istituto Nazionale delle Assicurazioni.................. 33,000 50,232
Istituto Mobilaire Italiano Spa............................. 10,500 94,417
Italgas Spa................................................. 16,000 51,719
La Rinascente Spa........................................... 8,000 44,408
La Rinascente Spa Rights (b)................................ 23,000 1,027
La Rinascente Spa RNC....................................... 15,000 36,453
La Rinascente Spa RNC Rights (b)............................ 23,000 3,744
La Rinascente Spa Warrants "99" (b)......................... 550 272
Mediobanca Spa.............................................. 2,800 16,983
Montedison Spa (b).......................................... 175,560 115,767
SAI-Savings (Risp).......................................... 13,000 40,035
Telecom Italia Mobile Spa................................... 28,000 90,508
Telecom Italia Mobile Spa RNC............................... 79,000 141,146
Telecom Italia Spa.......................................... 20,000 59,830
Telecom Italia Spa RNC...................................... 96,000 189,856
-----------
1,824,713
-----------
JAPAN -- 13.53%
Amada Co. Ltd............................................... 25,000 220,659
Asahi Glass Co. Ltd......................................... 27,000 268,985
Bank of Tokyo-Mitsubishi, Ltd............................... 25,000 502,491
Canon, Inc.................................................. 18,000 490,780
Canon Sales Co., Inc........................................ 7,600 177,331
Citizen Watch Co. Ltd....................................... 23,000 177,681
Dai Nippon Printing Co. Ltd................................. 21,000 475,312
Daiichi Pharmaceutical Co. Ltd.............................. 16,000 282,443
Daikin Industries Ltd....................................... 23,000 209,036
Daiwa House Industry Co. Ltd................................ 11,000 134,580
Fanuc....................................................... 8,900 342,218
Fujitsu..................................................... 14,000 194,529
Hitachi Ltd................................................. 44,000 492,179
Honda Motor Co.............................................. 6,000 180,897
Inax........................................................ 24,000 179,953
Isetan...................................................... 9,000 111,684
Ito Yokado Co. Ltd.......................................... 9,000 523,027
Kaneka Corp................................................. 21,000 131,766
Keio Teito Electric Railway................................. 28,000 133,357
Kinki Nippon Railway........................................ 27,000 165,166
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Kirin Brewery Co. Ltd........................................ 26,000 $ 270,384
Kokuyo....................................................... 7,000 189,636
Kuraray Co. Ltd.............................................. 28,000 278,948
Kyocera Corp................................................. 3,000 238,574
Maeda Road Construction...................................... 5,000 43,039
Marui Co. Ltd................................................ 12,000 223,368
Matsushita Electric Industrial Co............................ 34,000 686,358
Mitsubishi Paper Mills....................................... 27,000 105,707
NGK Insulators............................................... 37,000 407,411
Nintendo Corp. Ltd........................................... 1,900 159,399
Nippon Denso Co. Ltd......................................... 11,000 263,392
Nippon Meat Packers, Inc..................................... 15,000 194,005
Nippon Steel Co.............................................. 19,000 60,771
Okumura...................................................... 25,000 132,614
Osaka Gas Co................................................. 48,000 138,006
Sankyo Co. Ltd............................................... 16,000 538,320
Sanwa Bank Ltd............................................... 11,000 163,419
Secom........................................................ 5,000 367,474
Seino Transportation......................................... 15,000 162,545
Sekisui House Ltd............................................ 44,000 446,037
Shinmaywa Industries Ltd..................................... 14,000 98,733
Sony Corp.................................................... 5,000 436,511
Sumitomo Bank................................................ 24,000 394,302
Sumitomo Electric Industries................................. 19,000 318,797
Sumitomo Trust & Banking..................................... 14,000 150,485
Takeda Chemical Industries................................... 14,000 393,953
TDK Corp..................................................... 4,000 293,979
Tokio Marine & Fire Insurance Co............................. 21,000 275,277
Tokyo Electric Power......................................... 6,300 132,684
Tokyo Steel Mfg.............................................. 16,500 184,567
Tonen Corp................................................... 17,000 205,016
Toray Industries, Inc........................................ 92,000 656,856
Toshiba Corp................................................. 53,000 341,353
Toyo Suisan Kaisha........................................... 11,000 112,470
Toyota Motor Corp............................................ 6,000 177,226
Yamazaki Baking Co. Ltd...................................... 12,000 211,833
-----------
14,847,523
-----------
MALAYSIA -- 0.85%
Hume Industries (Malaysia) Bhd............................... 11,000 50,555
Kuala Lumpur Kepong Bhd...................................... 30,000 74,287
Land & General Holdings Bhd.................................. 24,000 27,575
Malayan Banking Bhd.......................................... 11,600 121,791
Malaysia International Shipping Bhd (Frgn.).................. 10,000 25,951
Nestle (Malaysia) Bhd........................................ 3,000 22,464
New Straits Times Press Bhd.................................. 7,000 41,046
Perusahaan Otomobil Nasional Bhd............................. 5,000 23,376
Public Bank Bhd (Frgn.)...................................... 27,664 43,184
Resorts World Bhd............................................ 14,000 42,155
Rothmans of Pall Mall Bhd.................................... 2,000 19,651
Sime Darby Bhd............................................... 29,000 96,514
Telekom Malaysia Bhd......................................... 18,500 86,490
Tenaga Nasional Bhd.......................................... 29,000 141,323
UMW Holdings Bhd............................................. 6,000 28,288
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
MALAYSIA (CONTINUED)
United Engineers Ltd......................................... 8,000 $ 57,686
YTL Corp. Bhd................................................ 8,000 24,723
YTL Power International Bhd (b).............................. 800 1,008
----------
928,067
----------
NETHERLANDS -- 3.09%
ABN AMRO Holdings NV......................................... 15,119 282,425
Akzo Nobel NV................................................ 400 54,918
DSM NV....................................................... 880 87,717
Elsevier NV.................................................. 11,900 199,214
Heineken NV.................................................. 500 85,490
Hoogovens NV................................................. 1,448 80,868
ING Groep NV................................................. 10,106 466,796
KLM Royal Dutch Air Lines NV................................. 4,600 142,041
KPN NV....................................................... 7,965 313,022
Philips Electronics NV....................................... 4,050 290,629
Royal Dutch Petroleum Co..................................... 15,600 812,923
Royal Dutch Petroleum Co. NY Shares (c)...................... 4,800 261,000
Unilever NV.................................................. 1,500 316,337
----------
3,393,380
----------
NEW ZEALAND -- 1.74%
Brierley Investments Ltd..................................... 320,000 312,330
Carter Holt Harvey Ltd....................................... 110,500 285,357
Fletcher Challenge Building.................................. 38,220 114,762
Fletcher Challenge Energy.................................... 42,172 127,200
Fletcher Challenge Forest Ltd................................ 65,803 95,447
Fletcher Challenge Paper..................................... 75,400 182,449
Telecom Corp. of New Zealand Ltd............................. 138,000 701,524
Telecom Corp. of New Zealand Ltd. ADS (c).................... 2,200 89,650
----------
1,908,719
----------
SINGAPORE -- 0.72%
City Developments Ltd........................................ 7,000 68,541
DBS Land Ltd................................................. 9,000 28,452
Development Bank of Singapore Ltd............................ 8,000 100,713
Fraser & Neave Ltd........................................... 2,000 14,268
Hotel Properties Ltd......................................... 19,000 32,291
Keppel Corp. Ltd. (b)........................................ 3,750 16,654
Oversea-Chinese Banking Corp. Ltd............................ 14,600 151,126
Singapore Airlines Ltd. (Frgn.).............................. 9,000 80,571
Singapore Press Holdings Ltd. (Frgn.)........................ 5,000 100,713
Singapore Telecommunications, Ltd............................ 38,000 70,164
United Overseas Bank Ltd. (Frgn.)............................ 9,000 92,530
Wing Tai Holdings Ltd........................................ 11,000 31,697
----------
787,720
----------
SPAIN -- 1.15%
Acerinox S.A................................................. 300 56,320
Banco Bilbao-Vizcaya S.A..................................... 1,500 122,085
Banco Central Hispanoamericano............................... 1,700 62,304
Banco Popular Espanol S.A.................................... 400 98,184
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
Banco Santander S.A.......................................... 3,600 $ 111,131
Empresa Nacional de Electridad S.A........................... 2,350 197,658
Fomento de Construcciones y Contratas S.A.................... 500 63,881
Gas Natural SDG S.A.......................................... 400 87,550
Iberdrola S.A................................................ 7,700 97,382
Mapfre Corp.................................................. 700 37,316
Repsol S.A................................................... 2,300 97,430
Telefonica de Espana......................................... 5,400 156,415
Vallehermosa S.A............................................. 1,200 32,434
Viscofan Envolturas Celulosicas S.A.......................... 2,000 46,848
----------
1,266,938
----------
SWITZERLAND -- 1.24%
ABB AG (Bearer).............................................. 55 83,373
Alusuisse-Lonza Holding AG (Reg.)............................ 35 36,299
Ciba Specialty Chemicals AG (Reg.)........................... 160 14,816
CS Holdings AG (Reg.)........................................ 646 83,082
Nestle S.A. (Reg.)........................................... 200 264,216
Novartis AG (Reg.)........................................... 251 400,761
Roche Holding AG (Gen.)...................................... 26 235,496
Swiss Reinsurance Co. (Reg.)................................. 60 84,985
UBS (Bearer)................................................. 42 48,110
Zurich Versicherungs (Reg.).................................. 273 108,796
----------
1,359,934
----------
UNITED KINGDOM -- 10.36%
Abbey National PLC........................................... 13,000 177,415
Bass PLC..................................................... 8,800 107,355
B.A.T. Industries PLC........................................ 49,000 438,337
BG PLC....................................................... 100,500 367,979
Booker PLC................................................... 10,500 47,707
British Energy PLC........................................... 89,000 217,001
British Petroleum Co. PLC.................................... 46,807 581,923
British Steel PLC............................................ 113,000 281,160
British Telecommunications PLC............................... 78,700 584,176
BTR PLC...................................................... 24,000 82,084
Centrica PLC................................................. 93,500 113,597
Charter PLC.................................................. 13,902 184,519
Coats Viyella PLC............................................ 55,000 115,337
FKI PLC...................................................... 58,875 166,577
General Electric Co. PLC..................................... 106,100 633,934
Glaxo Wellcome PLC........................................... 35,500 734,106
Grand Metropolitan PLC....................................... 25,000 240,493
Guinness PLC................................................. 33,300 325,878
Hanson PLC................................................... 25,000 123,991
Hillsdown Holdings PLC....................................... 72,000 203,112
House of Fraser PLC.......................................... 79,000 209,711
HSBC Holdings PLC............................................ 15,000 461,471
Imperial Chemical Industries PLC............................. 5,000 69,402
Inchcape PLC................................................. 24,000 113,040
Legal & General Group PLC.................................... 35,000 237,081
Lloyds TSB Group PLC......................................... 54,630 560,984
Marks & Spencer PLC.......................................... 41,500 343,963
Mirror Group PLC............................................. 36,000 112,640
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
National Westminster Bank PLC............................. 13,800 $ 185,462
Northern Foods PLC........................................ 38,000 125,855
Peninsular & Oriental Steam Navigation Co................. 25,000 248,814
Reckitt & Colman PLC...................................... 8,175 122,043
Redland PLC............................................... 13,500 76,392
Reuters Holdings PLC...................................... 16,000 168,561
Rio Tinto PLC............................................. 14,700 256,030
RJB Mining PLC............................................ 30,000 179,745
Royal & Sun Alliance Insurance Group PLC.................. 37,697 278,563
Sainsbury (J.) PLC........................................ 30,000 181,743
Scottish Hydro-Electric PLC............................... 18,200 125,705
Sears PLC................................................. 91,000 102,987
Sedgwick Group PLC........................................ 60,000 122,826
SmithKline Beecham PLC.................................... 18,900 347,740
Smurfit (Jefferson) Group PLC............................. 54,000 155,480
Tesco PLC................................................. 27,000 166,714
Thames Water PLC.......................................... 18,000 206,707
Unilever PLC.............................................. 3,500 100,133
Vodafone Group PLC........................................ 23,600 115,084
Williams PLC.............................................. 32,000 173,088
Yorkshire Water PLC....................................... 15,000 98,111
-----------
11,372,756
-----------
Total Non-U.S. Equities................................... 53,530,934
-----------
Total Equities (Cost $82,959,665)......................... 99,771,939
-----------
<CAPTION>
FACE
AMOUNT
---------
<S> <C> <C>
Short-Term Investments -- 8.38%
U.S. GOVERNMENT OBLIGATIONS -- 0.65%
U.S. Treasury Bills 5.375%, due 11/13/97.................. $ 720,000 706,095
-----------
COMMERCIAL PAPER -- 7.73%
American Stores Co.
5.830%, due 07/23/97..................................... 500,000 498,218
Case Credit Corp.
5.760%, due 07/21/97..................................... 500,000 498,390
Enron Oil & Gas
6.520%, due 07/01/97..................................... 2,001,000 2,001,000
Hughes Electronics Corp.
5.780%, due 07/11/97..................................... 500,000 499,197
5.850%, due 08/11/97..................................... 500,000 496,669
Marriott Corp.
5.770%, due 07/08/97..................................... 500,000 499,439
Norfolk Southern Corp.
5.770%, due 07/10/97..................................... 500,000 499,279
Occidental Petroleum
5.800%, due 08/13/97..................................... 500,000 496,536
</TABLE>
<TABLE>
<S> <C> <C>
Tenneco, Inc.
5.780%, due 07/17/97.................................. $ 500,000 $ 498,716
5.800%, due 07/23/97.................................. 500,000 498,228
Textron Financial Corp.
6.400%, due 07/01/97.................................. 2,000,000 2,000,000
------------
8,485,672
------------
Total Short-Term Investments
(Cost $9,191,159)..................................... 9,191,767
------------
Total Investments
(Cost $92,150,824) -- 99.30% (a)...................... 108,963,706
------------
Cash and other assets, less
liabilities -- 0.70%.................................. 771,142
------------
Net Assets -- 100%..................................... $109,734,848
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $92,209,751; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $18,850,801
Gross unrealized depreciation................................ (2,096,846)
-----------
Net unrealized appreciation................................ $16,753,955
===========
</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 June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollar............... 12/03/97 1,400,000 $1,024,021 $ (4,257)
Japanese Yen.................. 12/03/97 380,000,000 3,399,543 39,981
Swedish Krona................. 12/03/97 9,900,000 1,288,522 (3,990)
Swiss Franc................... 12/03/97 3,200,000 2,237,371 (78,449)
FORWARD FOREIGN CURRENCY SALES CONTRACTS
Australian Dollar............. 12/03/97 3,200,000 2,403,485 44,515
Belgian Franc................. 12/03/97 36,800,000 1,035,047 24,555
British Pounds................ 12/03/97 1,850,000 3,064,233 (46,328)
Hong Kong Dollar.............. 12/03/97 4,400,000 566,988 44
Japanese Yen.................. 12/03/97 80,000,000 715,693 22,655
--------
Total..................... $ (1,274)
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Equity Fund had the following open index futures contracts as of
June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE PROCEEDS VALUE LOSS
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 34 contracts............ September 1997 $14,830,760 $15,134,250 $(303,490)
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1997 was $706,095.
See accompanying notes to the financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $92,150,824) (Note 1)................ $108,963,706
Foreign currency, at value (Cost $205,638)....................... 203,894
Receivables:
Investment securities sold...................................... 713,846
Dividends....................................................... 511,404
Interest........................................................ 20,000
Fund shares sold................................................ 77,238
Variation margin (Note 5)....................................... 112,402
Other assets..................................................... 24,096
------------
TOTAL ASSETS.................................................. 110,626,586
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 643,775
Fund shares redeemed............................................ 7,788
Due to custodian bank........................................... 26,595
Investment advisory fees (Note 2)............................... 101,236
Accrued expenses................................................ 111,070
Net unrealized depreciation on forward foreign currency con-
tracts.......................................................... 1,274
------------
TOTAL LIABILITIES............................................. 891,738
------------
NET ASSETS........................................................ $109,734,848
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $ 89,355,851
Accumulated undistributed net investment income.................. 336,561
Accumulated net realized gain.................................... 3,533,361
Net unrealized appreciation...................................... 16,509,075
------------
NET ASSETS.................................................... $109,734,848
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $48,053,593 and 3,765,449 shares issued
and outstanding) (Note 7)...................................... $ 12.76
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 78 shares issued and outstanding) (Note 7).......... $ 12.76
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $61,680,255 and 4,845,038 shares issued
and outstanding) (Note 7)...................................... $ 12.73
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $136,196 for foreign taxes withheld)........... $ 1,593,631
Interest......................................................... 498,155
-----------
TOTAL INCOME.................................................. 2,091,786
-----------
EXPENSES:
Advisory (Note 2)................................................ 641,075
Distribution (Note 6)............................................ 324,716
Accounting....................................................... 92,251
Custodian........................................................ 85,485
Other............................................................ 183,508
-----------
TOTAL EXPENSES................................................ 1,327,035
Expenses waived by Advisor (Note 2)........................... (195,511)
-----------
NET EXPENSES.................................................. 1,131,524
-----------
NET INVESTMENT INCOME ........................................ 960,262
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 5,245,255
Futures contracts............................................... (1,943,047)
Foreign currency transactions................................... 1,930,570
-----------
Net realized gain............................................. 5,232,778
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 10,953,503
Futures contracts............................................... (330,387)
Forward contracts............................................... (5,030)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 1,431
-----------
Change in net unrealized appreciation or depreciation......... 10,619,517
-----------
Net realized and unrealized gain.................................. 15,852,295
-----------
Net increase in net assets resulting from operations.............. $16,812,557
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 960,262 $ 462,604
Net realized gain................................. 5,232,778 8,259,766
Change in net unrealized appreciation or
depreciation..................................... 10,619,517 1,258,707
------------ -----------
Net increase in net assets resulting from opera-
tions............................................ 16,812,557 9,981,077
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................... (425,929) (295,340)
SwissKey Class.................................... (253,945) (41,698)
Distributions from net realized gain:
Brinson Class I................................... (3,076,886) (1,399,995)
SwissKey Class.................................... (3,396,000) (1,621,590)
------------ -----------
Total distributions to shareholders............... (7,152,760) (3,358,623)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 42,520,630 11,563,213
Shares issued in acquisition of SBC World Growth
Fund (Note 1).................................... -- 25,670,575
Shares issued on reinvestment of distributions.... 6,711,937 3,336,320
Shares redeemed................................... (9,295,598) (7,760,045)
------------ -----------
Net increase in net assets resulting from capital
share transactions (Note 7)...................... 39,936,969 32,810,063
------------ -----------
TOTAL INCREASE IN NET ASSETS................... 49,596,766 39,432,517
------------ -----------
NET ASSETS:
Beginning of year................................. 60,138,082 20,705,565
------------ -----------
End of year (including accumulated undistributed
net investment income of $336,561 and $90,547,
respectively).................................... $109,734,848 $60,138,082
============ ===========
</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>
YEAR ENDED JUNE 30, JANUARY 28, 1994*
------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.57 $ 9.93 $ 9.49 $ 10.00
------- ------- ------- -------
Income from investment opera-
tions:
Net investment income....... 0.16 0.18 0.18 0.07
Net realized and unrealized
gain (loss)................ 2.14 2.29 0.39 (0.54)
------- ------- ------- -------
Total income (loss) from
investment operations.... 2.30 2.47 0.57 (0.47)
------- ------- ------- -------
Less distributions:
Distributions from net in-
vestment income............ (0.12) (0.14) (0.04) (0.04)
Distributions from and in
excess of net
realized gain.............. (0.99) (0.69) (0.09) --
------- ------- ------- -------
Total distributions....... (1.11) (0.83) (0.13) (0.04)
------- ------- ------- -------
Net asset value, end of peri-
od........................... $ 12.76 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= =======
Total return (non-annualized). 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $48,054 $27,126 $20,706 $20,642
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 1.25% 1.77% 2.06% 2.65%**
After expense reimbursement. 1.00% 1.00% 1.00% 1.00%**
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment....................... 1.35% 0.57% 0.71% 0.24%**
After expense reimbursement. 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover rate...... 32% 74% 36% 21%
Average commission rate paid
per share................... $0.0246 $0.0288 N/A N/A
</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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 11.57 $ 10.35
------- -------
Income from investment operations:
Net investment gain (loss)...................... 0.08 (0.01)
Net realized and unrealized gain................ 2.13 1.93
------- -------
Total income from investment operations....... 2.21 1.92
------- -------
Less distributions:
Distributions from net investment income........ (0.06) (0.01)
Distributions from net realized gain............ (0.99) (0.69)
------- -------
Total distributions........................... (1.05) (0.70)
------- -------
Net asset value, end of period.................... $ 12.73 $ 11.57
======= =======
Total return (non-annualized)..................... 20.34% 19.25%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $61,680 $33,012
Ratio of expenses to average net assets:
Before expense reimbursement.................... 2.00% 2.53%**
After expense reimbursement..................... 1.75% 1.76%**
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement.................... 0.60% (0.19)%**
After expense reimbursement..................... 0.85% 0.58%**
Portfolio turnover rate.......................... 32% 74%
Average commission rate paid per share........... $0.0246 $0.0288
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
The Global Bond Fund is actively managed, providing a fully integrated treatment
of the U.S. and other major fixed income markets across the world. This global
approach takes full advantage of relationships both within and across markets,
based on consistent analysis of macroeconomic and market conditions. Market and
currency strategies are developed in a global asset allocation framework, in
conjunction with senior fixed income professionals in Chicago, Basel, Frankfurt,
London, Melbourne, Paris, Singapore, Sydney and Tokyo.
The SwissKey Global Bond Fund has provided an annualized return of 8.55% since
July 31, 1995. Its benchmark, the Salomon World Government Bond Index, returned
2.08%. For the year ended June 30, 1997, the Fund returned 7.20%, while the
benchmark returned 3.89%.
During the first half of 1997, the Fund returned 0.42%, compared to the index
return of -1.23% on an unhedged basis. The negative index return reflected
weakness of other currencies relative to the U.S. dollar. On a dollar-hedged
basis the index returned 4.02%, ranging from 6.77% in Switzerland to 2.59% in
U.S. Treasuries. This unremarkable performance reflected a period without major
macroeconomic surprises, although U.S. GDP and job growth were somewhat faster
than initially expected.
Market allocation made a minor negative contribution to performance. The Fund
moved to overweight U.S. bonds in February, and this hampered performance, as
did underweighting of Japan. However, the Fund benefited from being overweight
in Denmark and from a well-timed allocation to Australian bonds.
The deutschemark and related European currencies fell against the U.S. dollar
(the DM by 11.6%) during the period. The gap in short-term interest rates
between the U.S. and Germany widened slightly, and there was growing concern
that European Monetary Union might bias the participants towards depreciation.
The Japanese yen depreciated in the first quarter but recovered sharply in the
first half of May, and ended the period 1.4% higher against the dollar.
Currency allocation was the dominant contributor to relative performance during
the first half of 1997. The Fund started the year with a substantial defensive
overweight in U.S. dollars. This position was sharply reduced in February and
again in March, in response to market developments.
Bond management made a small positive contribution to performance. The Fund
benefited from issue selection in the U.S. The short duration strategy in Japan
detracted from performance in the first quarter; however, duration was then
reduced further, and bond prices fell thereafter. Holdings of Canadian Real
Return Bonds hurt relative performance. The range of durations at June 30, 1997
was from 0.5 times the market index in Japan to 1.3 times in Denmark and the
U.S.
- --------------------------------------------------------------------------------
38
<PAGE>
GLOBAL BOND FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total Return
6 months 1 year 7/31/95*
ended ended to
6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey Global Bond Fund 0.42% 7.20% 8.55%
Salomon World Government Bond Index -1.23 3.89 2.08
- --------------------------------------------------------------------------------
</TABLE>
* Inception date of the SwissKey Global Bond Fund.
Total return includes reinvestment of all capital gain and income
distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Global
Bond Fund and the Salomon World Government Bond Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through June 30, 1997. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
SwissKey Global Bond Fund
vs. Salomon World Government Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
$11,703 ====== SwissKey Global Bond Fund
$10,402 ------ Salomon World Government Bond Index
<TABLE>
Label A B
- --------------------------------------------------------------------------------
SwissKey Global Salomon World
Bond Fund Gov't Bond Index
<S> <C> <C> <C>
7/31/95 $10,000 $10,000
9/30/95 $10,218 $ 9,871
12/31/95 $10,722 $10,162
3/31/96 $10,701 $ 9,972
6/30/96 $10,917 $10,013
9/30/96 $11,287 $10,287
12/31/96 $11,654 $10,531
3/31/97 $11,313 $10,096
6/30/97 $11,703 $10,402
</TABLE>
7/31/95 = $10,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are
based solely on market returns without deduction for fees or transaction costs
for rebalancing.
- --------------------------------------------------------------------------------
39
<PAGE>
GLOBAL BOND FUND
- --------------------------------------------------------------------------------
Asset Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. 33.4% 39.4%
Japan 19.7 6.2
Australia 1.0 4.3
Austria 0.9 0.0
Belgium 2.5 2.5
Canada 3.4 8.3
Denmark 1.6 6.3
Finland 0.5 0.0
France 7.0 2.2
Germany 9.0 13.2
Ireland 0.4 0.0
Italy 6.5 5.3
Netherlands 3.2 3.2
Spain 2.8 1.3
Sweden 1.5 1.5
Switzerland 0.4 0.0
U.K. 6.2 6.3
- --------------------------------------------------------------------------------
100.0% 100.0%
</TABLE>
Currency Allocation
As of June 30, 1997
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. 33.4% 36.9%
Japan 19.7 19.7
Australia 1.0 1.0
Austria 0.9 0.9
Belgium 2.5 2.5
Canada 3.4 3.4
Denmark 1.6 1.6
Finland 0.5 0.5
France 7.0 7.0
Germany 9.0 9.0
Ireland 0.4 0.4
Italy 6.5 6.5
Netherlands 3.2 3.2
Spain 2.8 2.8
Sweden 1.5 1.5
Switzerland 0.4 0.4
U.K. 6.2 2.7
- --------------------------------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- --------------------------------------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Asset-Backed................................................. 2.04%
CMO.......................................................... 0.54
Consumer..................................................... 0.95
Financial.................................................... 2.21
Industrial................................................... 0.22
Transportation............................................... 0.36
------
6.32
International Dollar Bonds................................... 2.47
U.S. Government Agencies..................................... 13.15
U.S. Government Obligations.................................. 14.45
------
Total U.S. Bonds....................................... 36.39*
------
NON-U.S. BONDS
Foreign Financial Bonds........................................ 13.99
Foreign Government Bonds....................................... 42.16
------
Total Non-U.S. Bonds................................... 56.15
------
SHORT-TERM INVESTMENTS......................................... 11.28*
------
TOTAL INVESTMENTS...................................... 103.82
LIABILITIES, LESS CASH AND OTHER
ASSETS....................................................... (3.82)
------
NET ASSETS................................................ 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on June 30, 1997
which increased U.S. bond exposure from 36.39% to 38.06% and decreased the
Fund's exposure to Short-Term Investments from 11.28% to 9.61%.
- --------------------------------------------------------------------------------
40
<PAGE>
GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- ----------
<S> <C> <C>
Bonds -- 92.54%
U.S. BONDS -- 36.39%
U.S. CORPORATE BONDS -- 6.32%
Capital One Bank
6.830%, due 05/17/99 ..................................... $200,000 $ 200,809
Chase Manhattan Auto Owner Trust 96C-A4
6.150%, due 03/15/02...................................... 125,000 124,054
Chrysler Financial Corp. MTN
6.500%, due 08/21/97...................................... 165,000 165,197
Continental Airlines, Inc. Pass Thru 144-A 7.461%, due
04/01/15.................................................. 210,000 212,442
Countrywide Capital, Inc.
8.000%, due 12/15/26...................................... 250,000 245,545
Donaldson Lufkin & Jenrette FRN
6.700%, due 06/30/00...................................... 375,000 375,000
First Bank Corporate Card Master Trust 97-1A 6.400%, due
02/15/03.................................................. 240,000 237,530
Ford Credit Grantor Trust 95-B
5.900%, due 10/15/00...................................... 50,468 50,474
GE Capital Management Services, Inc. 94-7 Class A12
6.000%, due 02/25/09...................................... 332,540 313,928
Lockheed Martin Corp.
7.700%, due 06/15/08...................................... 125,000 130,620
Metlife Funding
6.850%, due 05/20/08...................................... 225,000 225,598
News America Holdings
7.750%, due 01/20/24...................................... 275,000 260,924
Salomon, Inc.
6.500%, due 03/01/00...................................... 300,000 298,101
Sears Roebuck Acceptance MTN 95-5A 6.050%, due 01/16/08.... 225,000 218,635
The Money Store 94-A3
5.525%, due 09/15/18...................................... 76,492 74,927
Time Warner, Inc.
9.150%, due 02/01/23...................................... 265,000 292,471
World Omni Automobile Lease Securitization Trust
6.850%, due 06/25/03...................................... 255,000 257,864
----------
3,684,119
----------
INTERNATIONAL DOLLAR BONDS -- 2.47%
DR Investments 144-A
7.450%, due 05/15/07...................................... 455,000 459,576
Pan Pacific Industry 144-A
0.000%, due 04/28/07...................................... 715,000 315,133
Province of Quebec
7.500%, due 07/15/23...................................... 235,000 231,165
Republic of South Africa
9.625%, due 12/15/99...................................... 125,000 132,094
Royal Bank of Scotland
7.375%, due 04/29/49...................................... 300,000 298,987
----------
1,436,955
----------
U.S. GOVERNMENT AGENCIES -- 13.15%
Federal Home Loan Mortgage Corp.
7.000%, due 04/15/07...................................... 200,790 196,692
5.800%, due 08/15/19...................................... 90,000 84,670
7.500%, due 01/15/23...................................... 75,101 71,749
6.500%, due 02/15/24...................................... 375,000 351,621
7.238%, due 05/01/26...................................... 68,899 70,963
Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23. 104,207 106,584
9.000%, due 03/01/24...................................... 305,522 325,524
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
9.000%, due 04/01/25.................................. $ 264,905 $ 279,641
9.500%, due 04/01/25.................................. 29,129 31,195
Federal National Mortgage Association 6.500%, due
12/01/03 Balloon TBA.................................. 585,000 577,322
7.875%, due 02/24/05.................................. 500,000 533,645
6.220%, due 03/13/06.................................. 150,000 145,035
6.500%, due 04/25/08.................................. 104,799 100,445
9.000%, due 08/01/21.................................. 28,233 29,982
8.500%, due 07/01/22.................................. 21,708 22,844
7.500%, due 05/01/25.................................. 4,193 4,202
6.500%, due 03/01/26.................................. 77,040 73,693
6.500%, due 12/01/26 TBA.............................. 1,000,000 956,565
7.000%, due 12/01/26 TBA.............................. 1,150,000 1,127,003
7.500%, due 12/01/26 TBA.............................. 825,000 826,807
6.070%, due 08/01/29 TBA.............................. 205,000 202,566
Federal National Mortgage Association Strips
8.000%, due 07/01/24 interest only.................... 1,031 335
0.000%, due 07/01/26 principal only................... 569 380
0.000%, due 04/01/27 principal only................... 520,231 344,911
Government National Mortgage Association
7.000%, due 08/15/23.................................. 803 788
7.500%, due 08/15/23.................................. 113,659 113,943
7.000%, due 08/15/24.................................. 530,741 523,863
7.000%, due 07/15/25.................................. 73,437 72,159
Tennessee Valley Authority
6.375%, due 06/15/05.................................. 500,000 489,184
----------
7,664,311
----------
U.S. GOVERNMENT OBLIGATIONS-- 14.45%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01.................................. 1,020,000 1,030,200
6.250%, due 10/31/01.................................. 1,120,000 1,115,100
7.000%, due 07/15/06.................................. 760,000 781,850
8.125%, due 05/15/21.................................. 1,315,000 1,504,443
6.000%, due 02/15/26.................................. 1,980,000 1,771,482
U.S. Treasury Principal Strips
0.000%, due 08/15/03.................................. 1,440,000 974,419
0.000%, due 11/15/04.................................. 2,000,000 1,239,160
----------
8,416,654
----------
Total U.S. Bonds....................................... 21,202,039
----------
NON-U.S. BONDS -- 56.15%
AUSTRALIA -- 3.92%
Government of Australia
9.500%, due 08/15/03...............................AUD 1,400,000 1,195,185
9.000%, due 09/15/04.................................. 1,300,000 1,091,359
----------
2,286,544
----------
BELGIUM -- 2.26%
Kingdom of Belgium
10.000%, due 08/02/00............................. BEF 23,000,000 749,051
7.500%, due 07/29/08.................................. 18,000,000 565,736
----------
1,314,787
----------
CANADA -- 7.71%
British Columbia
7.750%, due 06/16/03.............................. CAD 1,250,000 979,396
7.250%, due 09/21/05.................................. 1,640,000 1,241,351
Government of Canada
4.250%, due 12/01/21 (b).............................. 1,820,000 1,416,839
Province of Ontario
7.500%, due 01/19/06.................................. 1,100,000 855,331
----------
4,492,917
----------
</TABLE>
- --------------------------------------------------------------------------------
41
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
DENMARK -- 5.74%
City of Copenhagen
6.250%, due 03/15/01............................ DKK 2,400,000 $ 380,955
Great Belt 7.000%, due 09/02/03...................... 10,650,000 1,730,643
Kingdom of Denmark
7.000%, due 12/15/04................................ 3,500,000 565,589
7.000%, due 11/15/07................................ 1,400,000 221,802
7.000%, due 11/10/24................................ 3,000,000 447,464
-----------
3,346,453
-----------
FRANCE -- 2.19%
Government of France (OAT)
7.500%, due 04/25/05............................ FRF 1,200,000 232,826
8.500%, due 04/25/23................................ 1,600,000 343,819
KFW International Finance
7.750%, due 02/17/98................................ 2,600,000 454,479
Republic of Finland
9.000%, due 08/13/03................................ 1,200,000 246,551
-----------
1,277,675
-----------
GERMANY -- 12.87%
Bundesrepublik Deutscheland
6.500%, due 03/15/00............................ DEM 2,000,000 1,225,295
6.875%, due 05/12/05................................ 800,000 501,320
6.250%, due 01/04/24................................ 800,000 446,643
European Economic Community
6.500%, due 03/10/00................................ 1,910,000 1,166,650
International Bank for Reconstruction & Development
7.125%, due 04/12/05................................ 650,000 411,612
Kingdom of Norway
6.125%, due 05/05/98................................ 1,040,000 610,536
LKB Baden-Wuerttemberg Finance 6.500%, due 09/15/08.. 1,300,000 781,820
Republic of Ireland
7.250%, due 03/18/03................................ 2,900,000 1,848,904
Treuhandanstalt 7.125%, due 01/29/03................. 800,000 508,849
-----------
7,501,629
-----------
ITALY -- 5.15%
Bayerische Landesbank
10.750%, due 03/01/03........................... ITL 250,000,000 174,846
Landesbank Rheinland-Pfalz Girozentrale 8.250%, due
06/02/98............................................ 750,000,000 447,124
LKB Baden-Wuerttemberg Finance 10.750%, due 04/14/03. 1,450,000,000 1,016,236
Republic of Italy (BTP)
7.750%, due 09/15/01................................ 1,500,000,000 928,739
9.000%, due 10/01/03................................ 350,000,000 229,891
9.500%, due 02/01/06................................ 300,000,000 205,936
-----------
3,002,772
-----------
JAPAN -- 4.48%
Government of Japan No.161
4.700%, due 09/22/03............................ JPY 45,000,000 453,068
Government of Japan No.129
6.400%, due 03/20/00................................ 25,000,000 248,951
Republic of Austria
5.000%, due 01/22/01................................ 130,000,000 1,270,974
International Bank for Reconstruction & Development
4.500%, due 06/20/00................................ 40,000,000 382,111
4.750%, due 12/20/04................................ 25,000,000 255,478
-----------
2,610,582
-----------
NETHERLANDS -- 3.05%
Government of Netherlands
7.500%, due 11/15/99............................. NLG 1,000,000 $ 552,799
5.750%, due 09/15/02................................. 500,000 266,805
International Nederland Verzekeringen 6.250%, due
12/28/05............................................. 1,800,000 955,914
-----------
1,775,518
-----------
SPAIN -- 1.28%
Kingdom of Spain
7.900%, due 02/28/02............................. ESP 100,000,000 744,815
-----------
SWEDEN -- 1.50%
Kingdom of Sweden
6.000%, due 02/09/05............................. SEK 6,900,000 874,092
-----------
UNITED KINGDOM -- 6.00%
Abbey National
8.750%, due 05/24/04............................. GBP 350,000 616,002
British Gas PLC 8.125%, due 03/31/03.................. 545,000 927,457
UK Treasury
7.750%, due 09/08/06................................. 555,000 961,216
9.000%, due 10/13/08................................. 340,000 647,031
8.000%, due 09/27/13................................. 190,000 341,220
-----------
3,492,926
-----------
Total Non-U.S. Bonds.................................. 32,720,710
-----------
Total Bonds (Cost $54,127,041)........................ 53,922,749
-----------
Short-Term Investments -- 11.28%
U.S. GOVERNMENT OBLIGATIONS -- 0.04%
U.S. Treasury Bills 5.361%, due 11/13/97.............. $ 25,000 24,517
-----------
COMMERCIAL PAPER -- 11.24%
American Stores Co.
5.830%, due 07/23/97................................. 500,000 498,219
Case Credit Corp. 5.760%, due 07/21/97................ 500,000 498,400
Crown Cork & Seal Co.
5.770%, due 07/15/97................................. 500,000 498,878
Enron Oil & Gas 6.520%, due 07/01/97.................. 2,063,000 2,063,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................. 500,000 499,197
5.850%, due 08/11/97................................. 500,000 496,669
Norfolk Southern Corp.
5.770%, due 07/10/97................................. 500,000 499,279
Occidental Petroleum
5.800%, due 08/13/97................................. 500,000 496,536
Sundstrand Corp. 5.850%, due 07/15/97................. 500,000 498,862
Tenneco, Inc. 5.800%, due 07/23/97.................... 500,000 498,228
-----------
6,547,268
-----------
Total Short-Term Investments
(Cost $6,571,765).................................... 6,571,785
-----------
Total Investments
(Cost $60,698,806) -- 103.82 (a)..................... 60,494,534
-----------
Liabilities, less cash and other assets -- (3.82%).... (2,226,520)
-----------
Net Assets -- 100%.................................... $58,268,014
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
42
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Aggregate cost for federal income tax purposes was $60,723,855; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 1,618,080
Gross unrealized depreciation............................... (1,847,401)
-----------
Net unrealized depreciation............................. $ (229,321)
===========
</TABLE>
(b)Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating Rate Note--The rate disclosed is that in effect at June 30, 1997.
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1997,
the value of these securities amounted to $987,151 or 1.69% of net assets.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Bond Fund had the following open forward foreign currency contracts
as of June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
French Franc.................. 11/28/97 16,600,000 $2,856,602 $(51,481)
Italian Lira.................. 11/28/97 2,340,000,000 1,370,595 (20,400)
Japanese Yen.................. 11/28/97 930,000,000 8,313,616 46,950
Spanish Peseta................ 11/28/97 230,000,000 1,568,085 (41,432)
FORWARD FOREIGN CURRENCY SALE
CONTRACTS
Australian Dollar............. 11/28/97 2,900,000 2,177,978 66,622
British Pound................. 11/28/97 940,000 1,557,194 (19,354)
Canadian Dollar............... 11/28/97 3,700,000 2,705,549 27,096
Danish Kroner................. 11/28/97 16,800,000 2,556,813 64,092
German Mark................... 11/28/97 3,900,000 2,263,533 55,167
Italian Lira.................. 11/28/97 1,100,000,000 644,297 5,879
Japanese Yen.................. 11/28/97 45,000,000 402,272 (3,406)
Spanish Peseta................ 11/28/97 100,000,000 681,776 7,546
--------
Total..................... $137,279
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Bond Fund had the following open futures contracts as of June 30,
1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
-------------- -------- -------- ----------
<S> <C> <C> <C> <C>
FUTURES BUY CONTRACTS
5 year U.S. Treasury Notes, 3 con-
tracts............................ September 1997 $315,077 $317,672 $ 2,595
10 year U.S. Treasury Notes, 3 con-
tracts............................ September 1997 321,022 323,625 2,603
30 year U.S. Treasury Bonds, 3 con-
tracts............................ September 1997 326,366 333,187 6,821
-------
Total.......................... $12,019
=======
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1997 was $24,517.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $60,698,806) (Note 1)................ $60,494,534
Cash............................................................. 244,951
Foreign currency, at value (Cost $1,097,578)..................... 1,108,021
Receivables:
Investment securities sold...................................... 671,484
Interest........................................................ 1,218,865
Fund shares sold................................................ 30,035
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 137,279
Other assets..................................................... 43,409
-----------
TOTAL ASSETS.................................................. 63,948,578
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 4,692,855
Fund shares redeemed............................................ 880,477
Investment advisory fees (Note 2)............................... 43,424
Accrued expenses................................................ 60,339
Variation margin (Note 5)....................................... 3,469
-----------
TOTAL LIABILITIES............................................. 5,680,564
-----------
NET ASSETS........................................................ $58,268,014
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $57,507,385
Accumulated undistributed net investment income.................. 489,146
Accumulated net realized gain.................................... 322,580
Net unrealized depreciation...................................... (51,097)
-----------
NET ASSETS.................................................... $58,268,014
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of
$54,157,066 and 5,616,633 shares issued and outstanding) (Note
7).............................................................. $ 9.64
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 104 shares issued and outstanding) (Note 7).......... $ 9.64
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$4,109,948 and 427,815 shares issued and outstanding) (Note 7).. $ 9.61
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $5,999 for foreign taxes withheld)............... $2,856,724
----------
TOTAL INCOME................................................... 2,856,724
----------
EXPENSES:
Advisory (Note 2)................................................. 344,152
Accounting........................................................ 89,764
Professional...................................................... 33,901
Transfer agent.................................................... 33,614
Custodian......................................................... 32,064
Distribution (Note 6)............................................. 18,598
Other............................................................. 72,791
----------
TOTAL EXPENSES................................................. 624,884
Expenses waived by Advisor (Note 2)............................ (194,924)
----------
NET EXPENSES................................................... 429,960
----------
NET INVESTMENT INCOME.......................................... 2,426,764
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments...................................................... 1,109,544
Futures contracts................................................ 31,621
Foreign currency transactions.................................... 582,099
----------
Net realized gain............................................... 1,723,264
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. (682,472)
Futures contracts................................................ 13,878
Forward contracts................................................ 280,252
Translation of other assets and liabilities denominated in for-
eign currency................................................... 6,883
----------
Change in net unrealized appreciation or depreciation........... (381,459)
----------
Net realized and unrealized gain.................................. 1,341,805
----------
Net increase in net assets resulting from operations.............. $3,768,569
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE JUNE
30, 1997 30, 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income............................... $ 2,426,764 $ 2,351,810
Net realized gain................................... 1,723,264 4,022,906
Change in net unrealized appreciation or deprecia-
tion .............................................. (381,459) (1,992,544)
----------- -----------
Net increase in net assets resulting from opera-
tions.............................................. 3,768,569 4,382,172
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income............ (3,479,707) (3,447,154)
Distributions in excess of net investment income.... (340,005) (1,534,232)
Distributions from net realized gain................ (769,789) (355,057)
----------- -----------
Total distributions to shareholders*................ (4,589,501) (5,336,443)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold......................................... 23,164,253 14,584,928
Shares issued on reinvestment of distributions...... 3,667,961 3,954,345
Shares redeemed..................................... (12,462,273) (24,728,515)
----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 7)................ 14,369,941 (6,189,242)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.......... 13,549,009 (7,143,513)
----------- -----------
NET ASSETS:
Beginning of year................................... 44,719,005 51,862,518
----------- -----------
End of year (including accumulated undistributed net
investment income of $489,146 and $1,052,943, re-
spectively)........................................ $58,268,014 $44,719,005
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment
income:
Brinson Class I.................................... $(3,503,032) $(4,734,956)
SwissKey Class..................................... (316,680) (246,430)
Distributions from net realized gain:
Brinson Class I.................................... (704,236) (338,786)
SwissKey Class..................................... (65,553) (16,271)
----------- -----------
Total distributions to shareholders................. $(4,589,501) $(5,336,443)
=========== ===========
</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>
YEAR ENDED JUNE 30, JULY 30, 1993*
------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period. $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- -------
Income (loss) from investment opera-
tions:
Net investment income ............. 0.67 0.84 0.50 0.45
Net realized and unrealized gain
(loss)............................ 0.08 0.31 0.58 (0.52)
------- ------- ------- -------
Total income (loss) from invest-
ment operations................. 0.75 1.15 1.08 (0.07)
------- ------- ------- -------
Less distributions:
Distributions from and in excess of
net investment income............. (0.96) (1.40) (0.24) (0.28)
Distributions from net realized
gain.............................. (0.19) (0.10) -- (0.10)
------- ------- ------- -------
Total distributions.............. (1.15) (1.50) (0.24) (0.38)
------- ------- ------- -------
Net asset value, end of period....... $ 9.64 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= =======
Total return (non-annualized)........ 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental data
Net assets, end of period (in 000s). $54,157 $41,066 $51,863 $36,849
Ratio of expenses to average net as-
sets:
Before expense reimbursement....... 1.32% 1.65% 1.43% 1.78%**
After expense reimbursement........ 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment income to
average net assets:
Before expense reimbursement....... 4.90% 4.98% 5.53% 4.03%**
After expense reimbursement........ 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover rate............. 235% 184% 199% 189%
</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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $10.02 $10.56
------ ------
Income from investment operations:
Net investment income........................... 0.62 0.78
Net realized and unrealized gain................ 0.10 0.15
------ ------
Total income from investment operations....... 0.72 0.93
------ ------
Less distributions:
Distributions from and in excess of net invest-
ment income.................................... (0.94) (1.37)
Distributions from net realized gain............ (0.19) (0.10)
------ ------
Total distributions........................... (1.13) (1.47)
------ ------
Net asset value, end of period.................... $ 9.61 $10.02
====== ======
Total return (non-annualized)..................... 7.20% 9.17%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $4,110 $3,653
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.81% 2.14%**
After expense reimbursement..................... 1.39% 1.39%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 4.41% 4.49%**
After expense reimbursement..................... 4.83% 5.24%**
Portfolio turnover rate.......................... 235% 184%
</TABLE>
* Commencement of SwissKey Class
** 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. Effective June 30, 1997, each Fund has three
classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey
Class. There are an unlimited number of shares of each class with par value of
$0.001 authorized. Each share represents an identical interest in the
investments of the Funds and has the same rights.
The Trust entered into an Agreement and Plan of Reorganization dated June 16,
1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995,
pursuant to the Plan of Reorganization, the Trust acquired all of the net
assets of the SBC World Growth Fund of the SwissKey Funds, which totalled
$25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange
solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund.
The SwissKey Fund shares were then distributed to shareholders of the SBC World
Growth Fund according to their respective interests, and the SBC World Growth
Fund was dissolved. The total net assets of the Global Equity Fund were
$47,088,147 immediately after the acquisition.
The following is a summary of significant accounting policies consistently
followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a
"Fund," collectively the "Funds") in the preparation of their financial
statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Investments in affiliated
investment companies are valued each day based on the closing net asset value
of the fund. U.S. equity securities traded over-the-counter are valued at the
most recent bid price. Debt securities are valued at the most recent bid price
by using market quotations or independent services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1997.
Therefore, no federal income tax provision was required.
- --------------------------------------------------------------------------------
49
<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. Amounts equal to
8.05% and 16.09% of the amount taxable as ordinary income qualify for the
dividends received deduction available to corporate shareholders for the Global
Fund and the Global Equity Fund, respectively.
G. INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Funds will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the SwissKey Class.
H. USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, the Funds pay the Advisor a monthly fee based on each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent that total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates, for the year
ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED
-------- --------------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.35% 1.75% $4,294,925 $ --
Global Equity Fund...... 0.80 1.00 1.25 1.76 641,075 195,511
Global Bond Fund........ 0.75 0.90 1.15 1.39 344,152 194,924
</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 for the year ended June 30, 1997, were $11,680,
$4,380 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
The Brinson Global Fund invests in shares of certain affiliated investment
companies also sponsored by Brinson Partners, Inc. These investments
represented 9.39% of the Fund's total net assets at June 30, 1997. Activity for
the year ended June 30, 1997 was as follows:
<TABLE>
<CAPTION>
NET NET
SALES REALIZED UNREALIZED
AFFILIATES PURCHASES PROCEEDS GAINS GAINS VALUE
- ---------- ---------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Brinson Post-Venture
Fund................... $ -- $ -- $ -- $ 1,248,708 $ 7,248,708
Brinson High Yield Fund. -- 639,104 87,104 1,879,440 13,327,440
Brinson Emerging Markets
Equity Fund............ 5,400,000 787,001 101,635 1,883,009 16,597,643
Brinson Emerging Markets
Debt Fund.............. -- 970,548 280,548 6,059,079 20,369,079
---------- ---------- -------- ----------- -----------
$5,400,000 $2,396,653 $469,287 $11,070,236 $57,542,870
========== ========== ======== =========== ===========
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1997, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $854,084,076 $764,571,276
Global Equity Fund.................................... 54,289,814 22,588,116
Global Bond Fund...................................... 112,551,785 98,638,852
</TABLE>
- --------------------------------------------------------------------------------
50
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Funds realize a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the year ended June 30, 1997,
was the Funds' custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for Brinson Class N and the
SwissKey Class. Each Plan governs payments made for the expenses incurred in
the promotion and distribution of the SwissKey Class and, effective June 30,
1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily
net assets of the SwissKey Class of the Global Fund, Global Equity Fund and
Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan
shall not exceed 0.25% of the average daily net assets of the Brinson Class N
of the Global Fund, Global Equity Fund and Global Bond Fund.
7.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ----------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................ 14,513,488 $180,787,534 7,972,013 $ 95,544,500
Brinson Class N................ 76 1,000 -- --
SwissKey Class................. 932,414 11,508,566 1,155,619 13,939,062
---------- ------------ --------- ------------
Total Sales................. 15,445,978 $192,297,100 9,127,632 $109,483,562
========== ============ ========= ============
Dividend Reinvestment:
Brinson Class I................ 4,022,259 $ 48,025,771 2,632,284 $ 30,918,724
Brinson Class N................ -- -- -- --
SwissKey Class................. 130,547 1,554,814 20,488 243,591
---------- ------------ --------- ------------
Total Dividend Reinvestment. 4,152,806 $ 49,580,585 2,652,772 $ 31,162,315
========== ============ ========= ============
Redemptions:
Brinson Class I................ 11,346,380 $142,532,012 5,330,521 $ 63,966,318
Brinson Class N................ -- -- -- --
SwissKey Class................. 198,888 2,469,271 24,583 296,145
---------- ------------ --------- ------------
Total Redemptions........... 11,545,268 $145,001,283 5,355,104 $ 64,262,463
========== ============ ========= ============
</TABLE>
- --------------------------------------------------------------------------------
51
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 1,338,623 $15,816,109 285,419 $ 3,205,567
Brinson Class N.................. 78 1,000 -- --
SwissKey Class................... 2,271,465 26,703,521 746,285 8,357,646
--------- ----------- --------- -----------
Total Sales................... 3,610,166 $42,520,630 1,031,704 $11,563,213
========= =========== ========= ===========
Shares issued in acquisition of
SBC World Growth Fund:
Brinson Class I.................. -- -- -- --
Brinson Class N.................. -- -- -- --
SwissKey Class................... -- -- 2,474,177 $25,670,575
--------- ----------- --------- -----------
Total......................... -- -- 2,474,177 $25,670,575
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 308,273 $ 3,485,504 160,063 $ 1,694,631
Brinson Class N.................. -- -- -- --
SwissKey Class................... 286,226 3,226,433 155,720 1,641,689
--------- ----------- --------- -----------
Total Dividend Reinvestment... 594,499 $ 6,711,937 315,783 $ 3,336,320
========= =========== ========= ===========
Redemptions:
Brinson Class I.................. 225,435 $ 2,683,391 186,600 $ 2,055,092
Brinson Class N.................. -- -- -- --
SwissKey Class................... 565,431 6,612,207 523,404 5,704,953
--------- ----------- --------- -----------
Total Redemptions............. 790,866 $ 9,295,598 710,004 $ 7,760,045
========= =========== ========= ===========
<CAPTION>
GLOBAL BOND FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 2,335,856 $22,155,311 1,094,889 $10,985,420
Brinson Class N.................. 104 1,000 -- --
SwissKey Class................... 103,968 1,007,942 345,211 3,599,508
--------- ----------- --------- -----------
Total Sales................... 2,439,928 $23,164,253 1,440,100 $14,584,928
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 348,609 $ 3,318,757 374,786 $ 3,722,031
Brinson Class N.................. -- -- -- --
SwissKey Class................... 36,719 349,204 23,414 232,314
--------- ----------- --------- -----------
Total Dividend Reinvestment... 385,328 $ 3,667,961 398,200 $ 3,954,345
========= =========== ========= ===========
Redemptions:
Brinson Class I.................. 1,159,373 $11,665,371 2,369,683 $24,686,522
Brinson Class N.................. -- -- -- --
SwissKey Class................... 77,300 796,902 4,197 41,993
--------- ----------- --------- -----------
Total Redemptions............. 1,236,673 $12,462,273 2,373,880 $24,728,515
========= =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
52
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
Global Fund
Global Equity Fund
Global Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--Global Fund,
Global Equity Fund and Global Bond Fund as of June 30, 1997, the related
statements of operations for the year then ended and changes in net assets and
the financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30,
1997, the results of their operations for the year then ended and the changes
in their net assets and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting principles.
LOGO
Chicago, Illinois
August 8, 1997
- --------------------------------------------------------------------------------
53
<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>
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY .
http://networth.galt.com/swisskey
<PAGE>
SWISSKEY U.S. BALANCED FUND
SWISSKEY U.S. EQUITY FUND
SWISSKEY U.S. BOND FUND
ANNUAL REPORT
JUNE 30, 1997
YOUR KEY TO PERFORMANCE
-----------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Secretary
E. Thomas McFarlan Carolyn M. Burke, CPA
President Treasurer
Thomas J. Digenan, CFA, CPA Catherine E. Macrae
Vice President Assistant Secretary
- --------------------------------------------------------------------------------
1
<PAGE>
THE FUNDS' ADVISOR--BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation. Brinson Partners continues as the name used within North
America, while SBC Brinson is the name used outside North America. We are a
global investment management organization with over $75 billion in institutional
assets under discretionary active management. We are also the investment manager
for SBC Private Banking mutual fund assets which total $50 billion. In addition,
we act as an investment advisor to SBC Private Banking. The division manages
investment portfolios for corporations, public funds, endowments, foundations,
central banks and other investors located throughout the world. Our organization
employs over 590 people in offices in Chicago, Basel, Frankfurt, Geneva, London,
Melbourne, New York, Paris, Singapore, Sydney, Tokyo and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is focused upon both risk and
return considerations in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
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2
<PAGE>
TABLE OF CONTENTS
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Shareholder Letter........................................................... 4
U.S. Economic and Market Highlights.......................................... 5
U.S. Balanced Fund........................................................... 6
Schedule of Investments................................................. 9
Financial Statements....................................................13
Financial Highlights....................................................16
U.S. Equity Fund.............................................................18
Schedule of Investments.................................................21
Financial Statements....................................................23
Financial Highlights....................................................26
U.S. Bond Fund...............................................................28
Schedule of Investments.................................................30
Financial Statements....................................................32
Financial Highlights....................................................35
The SwissKey Funds--Notes to Financial Statements............................37
Report of Independent Auditors...............................................40
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3
<PAGE>
Shareholder Letter
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August 20, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the June 30, 1997 Annual Report for the U.S. Balanced Fund, U.S. Equity
Fund and U.S. Bond Fund. This Report presents our current U.S. economic and
market outlook, as well as the Funds' recent investment strategies and
performance. To summarize this information:
SwissKey U.S. Balanced Fund
For the period from July 31, 1995 to June 30, 1997, the Fund provided an
annualized total return of 13.87%. For the first half of 1997, the Fund returned
6.72%.
The strategy of underweighting the overpriced U.S. equity market in favor of the
attractive U.S. bond market remains in place. Return and risk characteristics
continue to be more attractive in the U.S. bond market.
SwissKey U.S. Equity Fund
For the period from July 31, 1995 to June 30, 1997, the Fund provided an
annualized total return of 29.85%. The Fund returned 16.54% in the first half of
1997.
One of the most significant factor positions in the Fund is the tilt away from
the very largest stocks in the market. Fund strategy presently maintains an
overweight in stocks with high book-to-price and earnings variability. In
addition, the Fund has underweighted the foreign earnings exposure embedded in
U.S. corporate earnings as well as relative strength.
Current industry positions include relative overweights in air freight,
railroads, business machines, electric utilities, tire and rubber, and
insurance. The fund is underweight in electronics, energy reserves,
miscellaneous finance and traditional telephone.
SwissKey U.S. Bond Fund
For the period from August 31, 1995 to June 30, 1997, the Fund provided an
annualized total return of 6.09%. For the first half of 1997, the Fund returned
2.58%.
Fund strategy currently maintains a duration target of 1.0 times that of the
benchmark. This duration is in response to the less favorable valuations
accompanying falling market yields as well as an increase in our concern about
asset price inflation and the Federal Reserve's potential reaction to it.
We look forward to the challenges ahead and, as always, welcome your comments
and suggestions. Please visit our website at http://networth.galt.com/swisskey
Sincerely,
Raoul Weil Raymond Simon
Managing Director Executive Director
Private . Banking Private . Banking
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4
<PAGE>
U.S. Economic and Market Highlights
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The inflation outlook in the U.S. remains good. While consumer price inflation
has generally been running at 3.0% or less since 1991, other measures of
inflation, such as the personal consumption deflator, the producer price index
and the core CPI, indicate even lower price pressures.
Second quarter real GDP growth of 2.2% annualized was dramatically slower than
the almost 5% growth in the first quarter. Personal consumption, particularly of
durable goods, was lackluster, while non-residential fixed investment and
federal government expenditures showed strength. The continued healthy economy
has again brought unemployment back down to 4.8%.
Strong growth has led to an increase in the government's tax revenues and
consequently to a shrinkage in the budget deficit. Congress and the President
have taken advantage of this in the recent budget. However, the agreement on an
array of tax cuts demonstrates the potential for renewed fiscal irresponsibility
in the future.
U.S. Environment
Major Markets
Six Months Ended June 30, 1997
[GRAPH]
<TABLE>
<S> <C>
U.S. CASH
EQUIVALENTS 2.52
U.S.
BONDS 3.06
U.S.
EQUITIES 17.65
</TABLE>
Salomon U.S. Treasury Benchmark Returns
Six Months Ended June 30, 1997
[GRAPH]
Total Return
<TABLE>
<S> <C>
1 year 2.99
2 years 2.86
3 years 2.70
5 years 2.20
10 years 2.51
30 years -0.74
</TABLE>
Top Ten Industry Returns Relative to S&P 500
Six Months Ended June 30, 1997
[GRAPH]
<TABLE>
<S> <C>
Real Property 13.55
Miscellaneous Finance 11.64
Media 7.62
Oil 7.59
Life Insurance 5.93
Leisure, Luxury 3.76
Thrift Institutions 3.72
Retail 3.63
Aerospace 3.53
Tire & Rubber 3.12
</TABLE>
<TABLE>
Bottom Ten Industry Returns Relative to S&P 500
Six Months Ended June 30, 1997
[GRAPH]
<S> <C>
Containers -9.93
Motor Vehicles -10.01
Pollution Control -10.18
Aluminum -10.49
Electric Utilities -12.26
Domestic Petroleum Reserves -16.09
Tobacco -16.59
Foreign Petroleum Reserves -24.18
Precious Metals -24.96
Coal & Uranium -38.32
</TABLE>
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5
<PAGE>
U.S. Balanced Fund
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The U.S. Balanced Fund is an actively managed portfolio that applies our value-
based asset allocation process to U.S. stocks, bonds and cash. This Fund's
investment strategy is developed in the context of our global asset allocation
process and is based on analysis of long-term economic and market conditions.
The SwissKey U.S. Balanced Fund has provided an annualized return of 13.87%
since its inception on July 31, 1995. This compares with the corresponding
19.41% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the
year ended June 30, 1997, the Fund produced a total return of 14.99% compared to
the benchmark return of 21.71%. In the first half of 1997, the Fund returned
6.72% while the benchmark returned 12.43%.
Bond management in conventional bonds provided the primary positive contribution
to performance in the first half of the year. The underweight in the equity
market and offsetting overweights in bonds and cash were the main reasons for
the Fund's underperformance. Security selection in the U.S. equity segment of
the Fund was essentially neutral.
The first six months of the year saw bond prices fall and then recover, as
strong economic news led to inflation fears and increases in real interest
rates. Real GDP growth was substantially above average and the unemployment rate
fell to 4.8%, the lowest figure in almost 25 years. However, yields started to
come back down when none of this news had any impact on inflation. Despite the
apparent tightness on the real side of the economy, consumer and producer price
inflation remained quiescent.
Because the bond portion of the Fund maintained duration longer than the
benchmark, the fall in yields benefited performance.
Equities continue to appear greatly overpriced according to our assessment of
fundamental value. The Fund therefore remains overweighted bonds and
underweighted equities.
================================================================================
6
<PAGE>
U.S. Balanced Fund
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Total Return
Annualized
6 months 1 year 7/31/95*
ended ended to
6/30/97 6/30/97 6/30/97
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SwissKey U.S. Balanced Fund 6.72% 14.99% 13.87%
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U.S. Balanced Mutual Fund Index** 12.43 21.71 19.41
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* Inception date of the SwissKey U.S. Balanced Fund.
** An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond
Index.
Total return includes reinvestment of all capital gain and income
distributions.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through June 30, 1997. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
SwissKey U.S. Balanced Fund
vs. U.S. Balanced Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
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SwissKey U.S. Balanced Fund U.S. Balanced Mutual Fund Index
<S> <C> <C>
7/31/95 $10,000 $10,000
9/30/95 10,387 10,368
12/31/95 11,058 11,091
3/31/96 11,049 11,354
6/30/96 10,982 11,150
9/30/96 11,670 12,040
12/31/96 12,162 12,948
3/31/97 12,182 12,949
6/30/97 12,826 14,050
</TABLE>
7/31/95 = $10,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are
based solely on market returns without deduction for fees or transaction costs
for rebalancing.
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7
<PAGE>
U.S. Balanced Fund
<TABLE>
<CAPTION>
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Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- ----------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals................................. 0.86%
Housing/Paper............................. 1.76
Metals.................................... 0.24
------
2.86
Capital Investment
Capital Goods............................. 2.91
Technology................................ 3.92
------
6.83
Consumer
Autos/Durables............................ 1.22
Discretionary............................. 1.82
Health: Drugs............................. 2.85
Health: Non-Drugs......................... 1.41
Non-Durables.............................. 3.91
Retail/Apparel............................ 1.71
------
12.92
Energy..................................... 1.67
Financial
Banks..................................... 2.89
Non-Banks................................. 3.02
------
5.91
Transportation............................. 2.21
Utilities.................................. 2.42
Miscellaneous.............................. 3.17
------
Total U.S. Equities................. 37.99*
------
U.S. BONDS
Corporate Bonds
Asset-Backed.............................. 1.89
CMO....................................... 0.42
Consumer.................................. 1.63
Financial................................. 1.35
Industrial................................ 2.32
Telecommunications........................ 0.57
------
8.18
International Dollar Bonds................. 7.59
Mortgage-Backed Securities................. 2.25
U.S. Government Agencies................... 16.93
U.S. Government Obligations................ 21.05
------
Total U.S. Bonds.................... 56.00*
------
SHORT-TERM INVESTMENTS..................... 12.44*
------
TOTAL INVESTMENTS...................106.43
LIABILITIES, LESS CASH
AND OTHER ASSETS................... (6.43)
------
NET ASSETS.................................100.00%
======
</TABLE>
* The Fund held a long position in U.S. Treasury futures on June 30, 1997 which
increased U.S. bond exposure from 56.00% to 61.62%. The Fund also held a short
position in stock index futures which reduced U.S. equity exposure from 37.99
to 28.13%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 12.44% to 16.68%.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Asset Allocation
As of June 30, 1997
Current
Benchmark Strategy
- ---------------------------------------------------
<S> <C> <C>
U.S. Equity 65% 30%
U.S. Bonds 35 65
Cash Equivalents 0 5
- ---------------------------------------------------
100% 100%
</TABLE>
<TABLE>
<CAPTION>
Top Ten U.S. Equity Holdings
As of June 30, 1997
Percent of
Net Assets
- ---------------------------------------------------
<S> <C> <C>
1. Xerox Corp. 2.00%
2. Chase Manhattan Corp. 1.71
3. Lockheed Martin Corp. 1.59
4. Philip Morris Companies, Inc. 1.57
5. Aon Corp. 1.32
6. CIGNA Corp. 1.29
7. Burlington Northern Santa Fe 1.18
8. Goodyear Tire & Rubber Co. 1.17
9. Federal Express Corp. 1.08
10. Citicorp 1.06
- ---------------------------------------------------
</TABLE>
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8
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
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<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
U.S. Equities -- 37.99%
Aetna Life & Casualty Co................................... 14,100 $ 1,443,487
Allergan, Inc.............................................. 36,600 1,164,337
Alza Corp. (b)............................................. 35,700 1,035,300
Aon Corp................................................... 72,600 3,757,050
Automatic Data Processing, Inc............................. 34,900 1,640,300
Beckman Instruments, Inc................................... 10,500 506,625
Birmingham Steel Corp...................................... 14,400 223,200
Boston Technology, Inc. (b)................................ 13,900 410,919
Browning-Ferris Industries, Inc............................ 27,100 901,075
Burlington Northern Santa Fe............................... 37,400 3,361,325
Centerior Energy Co........................................ 30,600 342,338
Champion Enterprises, Inc. (b)............................. 16,800 252,000
Champion International Corp................................ 1,200 66,300
Chase Manhattan Corp....................................... 50,100 4,862,831
CIGNA Corp................................................. 20,700 3,674,250
Circuit City Stores, Inc................................... 52,800 1,877,700
Citicorp................................................... 25,100 3,026,119
CMS Energy Corp............................................ 39,500 1,392,375
Coca-Cola Enterprises, Inc................................. 28,800 662,400
Comerica, Inc.............................................. 9,800 666,400
Comverse Technology, Inc. (b).............................. 6,600 343,200
Corning, Inc............................................... 45,900 2,553,187
Covance, Inc............................................... 17,975 347,142
CPC International, Inc..................................... 15,600 1,440,075
CVS Corp................................................... 22,700 1,163,375
Dial Corp.................................................. 22,500 351,562
Eastman Chemical Co........................................ 24,400 1,549,400
EMC Corp./Mass. (b)........................................ 67,900 2,648,100
Enron Corp................................................. 68,700 2,803,819
Entergy Corp............................................... 4,000 109,500
Federal Express Corp. (b).................................. 53,100 3,066,525
Federated Department Stores (b)............................ 20,400 708,900
FileNet Corp. (b).......................................... 7,300 105,850
First American Corp.-Tenn.................................. 9,400 360,725
First Bank System, Inc..................................... 7,600 648,850
First Data Corp............................................ 59,257 2,603,604
First of America Bank Corp................................. 6,900 315,675
First Security Corp........................................ 11,950 326,384
Fleetwood Enterprises, Inc................................. 6,700 199,744
Food Lion, Inc. Class A.................................... 66,100 473,028
Forest Laboratories, Inc. (b).............................. 16,400 679,575
Gannett Co., Inc........................................... 23,300 2,300,875
General Instrument Corp. (b)............................... 81,500 2,037,500
Genzyme Corp. (b).......................................... 14,400 399,600
Geon Co.................................................... 9,800 198,450
Goodyear Tire & Rubber Co.................................. 52,700 3,336,569
Harnischfeger Industries, Inc.............................. 23,800 987,700
Health Care and Retirement Corp. (b)....................... 24,450 816,019
Hibernia Corp. Class A..................................... 19,900 277,356
Informix Corp. (b)......................................... 19,100 171,900
Interpublic Group of Companies, Inc........................ 15,500 950,344
James River Corp. of Virginia.............................. 28,200 1,043,400
Kroger Co. (b)............................................. 19,500 565,500
Lockheed Martin Corp....................................... 43,671 4,522,678
Lyondell Petrochemical Co.................................. 39,100 852,869
Manor Care, Inc............................................ 31,800 1,037,475
Martin Marietta Materials, Inc............................. 10,436 337,866
Masco Corp................................................. 41,700 1,740,975
Mattel, Inc................................................ 52,750 1,786,906
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Nabisco Holdings Corp. Class A.......................... 36,400 $ 1,451,450
National Service Industries Inc......................... 7,000 340,813
Nextel Communications, Inc. Class A (b)................. 54,500 1,032,094
Octel Communications Corp. (b).......................... 10,800 253,125
Old Republic International Corp......................... 12,850 389,516
Peco Energy Co.......................................... 89,100 1,871,100
Pentair, Inc............................................ 18,900 621,337
Pharmacia & Upjohn, Inc................................. 45,500 1,581,125
Philip Morris Companies, Inc............................ 100,800 4,473,000
Raytheon Co............................................. 12,700 647,700
Regions Financial Corp.................................. 9,200 290,950
Reynolds & Reynolds Co. Class A......................... 12,900 203,175
Schering Plough Corp.................................... 62,600 2,996,975
Seagate Technology, Inc. (b)............................ 15,000 527,812
Timken Co............................................... 24,800 881,950
Trinity Industries, Inc................................. 6,600 209,550
Tyson Foods, Inc. Class A............................... 72,500 1,386,562
UCAR International, Inc. (b)............................ 700 32,025
Ultramar Diamond Shamrock Corp.......................... 40,590 1,324,249
US Bancorp.............................................. 21,800 1,397,925
Vencor, Inc. (b)........................................ 18,700 790,075
Viad Corp............................................... 35,000 673,750
Westvaco Corp........................................... 8,550 268,791
Witco Corp.............................................. 3,300 125,194
Xerox Corp.............................................. 72,100 5,686,888
York International Corp................................. 22,200 1,021,200
360 Communications Co. (b).............................. 10,600 181,525
-----------
Total U.S. Equities (Cost $81,714,881).................. 108,088,389
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 56.00%
U.S. CORPORATE BONDS -- 8.18%
AirTouch Communications
7.500%, due 07/15/06................................... $2,000,000 $ 2,032,738
Capital One Bank 6.830%, due 05/17/99................... 2,000,000 2,008,096
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02............................ 1,360,000 1,349,705
Chase Manhattan Credit Card Master Trust 96-4A 6.730%,
due 02/15/03........................................... 2,000,000 2,019,060
Chrysler Financial Corp. MTN
6.500%, due 08/21/97................................... 1,000,000 1,001,192
Comcast Cable Communications 144-A 8.500%, due 05/01/27. 2,000,000 2,156,320
CSX Transportation, Inc. 144-A
6.950%, due 05/01/27................................... 1,600,000 1,614,099
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
02/25/02............................................... 2,000,000 2,004,340
Donaldson Lufkin & Jenrette FRN
6.700%, due 06/30/00................................... 840,000 840,000
Eastman Chemical Co.
7.600%, due 02/01/27................................... 2,380,000 2,358,749
GE Capital Management Services, Inc.
94-7 Class A12 6.000%, due 02/25/09.................... 1,270,601 1,199,485
Lockheed Martin Corp.
7.700%, due 06/15/08................................... 2,000,000 2,089,916
News America Holdings
7.750%, due 01/20/24................................... 1,000,000 948,816
Time Warner, Inc. 9.150%, due 02/01/23.................. 1,500,000 1,655,499
-----------
23,278,015
-----------
</TABLE>
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9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
INTERNATIONAL DOLLAR BONDS -- 7.59%
Bangkok Bank 144-A
8.250%, due 03/15/16.................................. $ 3,700,000 $ 3,699,260
Credit Suisse-London 144-A
7.900%, due 05/01/07.................................. 2,170,000 2,230,764
Den Danske Bank 144-A
7.400%, due 06/15/10.................................. 1,400,000 1,410,681
Empresa Nacional Electric
7.875%, due 02/01/27.................................. 2,335,000 2,354,885
International Bank for Reconstruction & Development
6.375%, due 07/21/05.................................. 1,500,000 1,470,171
LKB Baden-Wuerttemberg Finance
8.125%, due 01/27/00.................................. 1,780,000 1,845,673
Montell Finance Co. 144-A
8.100%, due 03/15/27.................................. 1,610,000 1,653,879
Petroliam Nasional
7.125%, due 08/15/05.................................. 1,500,000 1,499,376
Province of Quebec
7.500%, due 07/15/23.................................. 750,000 737,760
Ras Laffan Liquefied Natural Gas Co. Ltd. 144-A 8.294%,
due 03/15/14.......................................... 1,735,000 1,813,936
Skandinaviska Enskilda Banken 144-A 6.625%, due
03/29/49.............................................. 2,000,000 1,979,600
Southern Investments UK
6.800%, due 12/01/06.................................. 930,000 908,517
-----------
21,604,502
-----------
MORTGAGE-BACKED SECURITIES -- 2.25%
Independent National Mortgage Corp.
7.145%, due 02/25/26.................................. 1,876,156 1,879,552
7.000%, due 03/25/26.................................. 1,344,251 1,340,299
Morgan Stanley Capital, Inc.
6.830%, due 10/15/06.................................. 1,250,000 1,253,665
Vanderbilt Mortgage Finance
6.975%, due 08/07/11.................................. 1,925,000 1,930,414
-----------
6,403,930
-----------
U.S. GOVERNMENT AGENCIES -- 16.93%
Federal Home Loan Mortgage Corp.
7.500%, due 01/15/23.................................. 1,023,663 977,977
0.000%, due 04/15/27 principal only................... 2,497,000 1,482,049
Federal Home Loan Mortgage Corp. Gold
6.500%, due 12/01/03 TBA.............................. 2,180,000 2,152,070
8.000%, due 05/01/23.................................. 795,363 813,508
9.000%, due 03/01/24.................................. 399,511 425,667
9.000%, due 04/01/25.................................. 1,201,673 1,268,516
9.500%, due 04/01/25.................................. 1,281,693 1,372,614
Federal National Mortgage Association
6.500%, due 05/25/08.................................. 1,705,842 1,676,194
6.500%, due 08/25/08.................................. 1,945,894 1,906,781
8.000%, due 12/18/11.................................. 1,000,000 1,043,071
6.500%, due 12/25/23.................................. 2,000,000 1,916,348
6.500%, due 04/01/26.................................. 586,130 560,672
6.500%, due 05/01/26.................................. 2,064,982 1,975,290
6.500%, due 12/01/26 TBA.............................. 8,000,000 7,652,520
7.500%, due 12/01/26 TBA.............................. 5,595,000 5,607,253
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Federal National Mortgage Association Strips
8.000%, due 07/01/24 interest only..................... $ 9,671 $ 3,139
0.000%, due 07/01/26 principal only.................... 5,478 3,660
0.000%, due 04/01/27 principal only.................... 4,270,755 2,831,489
Government National Mortgage Association
11.000%, due 09/15/15.................................. 312,435 346,999
8.000%, due 08/15/22................................... 993,405 1,014,826
8.000%, due 11/15/22................................... 2,207,891 2,271,500
7.500%, due 08/15/23................................... 1,079,758 1,082,461
7.500%, due 09/15/23................................... 1,115,920 1,118,713
7.000%, due 12/15/23................................... 1,354,532 1,338,224
9.000%, due 07/15/24................................... 136,907 144,565
8.500%, due 11/15/24................................... 173,216 179,874
8.500%, due 01/15/25................................... 309,204 321,089
9.000%, due 05/15/25................................... 389,027 410,788
7.500%, due 06/15/25................................... 2,026,365 2,035,889
8.000%, due 09/15/26................................... 4,149,445 4,238,919
-----------
48,172,665
-----------
U.S. GOVERNMENT OBLIGATIONS-- 21.05%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01................................... 3,635,000 3,671,350
6.250%, due 10/31/01................................... 12,860,000 12,803,738
7.000%, due 07/15/06................................... 8,230,000 8,466,613
8.125%, due 05/15/21................................... 14,420,000 16,497,388
U.S. Treasury Principal Strips
0.000%, due 08/15/03................................... 7,230,000 4,892,396
0.000%, due 11/15/04................................... 15,985,000 9,903,986
0.000%, due 05/15/08................................... 5,245,000 2,543,143
0.000%, due 02/15/19................................... 4,900,000 1,095,248
-----------
59,873,862
-----------
Total U.S. Bonds (Cost $157,642,385).................... 159,332,974
-----------
Short-Term Investments--12.44%
U.S. GOVERNMENT OBLIGATIONS-- 0.48%
U.S. Treasury Bill 5.360%, due 11/13/97................. 1,400,000 1,372,962
-----------
COMMERCIAL PAPER -- 11.96%
American Stores Co.
5.830%, due 07/23/97................................... 1,000,000 996,437
Case Credit Corp. 5.760%, due 07/21/97.................. 1,000,000 996,800
Crown Cork & Seal Co.
5.800%, due 07/09/97................................... 1,500,000 1,498,067
5.770%, due 07/15/97................................... 1,700,000 1,696,185
CSX Corp.
5.780%, due 07/09/97................................... 2,500,000 2,496,789
5.800%, due 07/22/97................................... 1,000,000 996,617
Cummins Engine Company, Inc.
6.500%, due 07/01/97................................... 500,000 500,000
Enron Oil & Gas 6.520%, due 07/01/97.................... 7,176,000 7,176,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................... 1,500,000 1,497,592
5.850%, due 08/11/97................................... 2,500,000 2,483,344
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Marriott Corp. 5.770%, due 07/08/97.................... $1,000,000 $ 998,878
Norfolk Southern Corp.
5.770%, due 07/10/97.................................. 1,000,000 998,558
5.780%, due 07/18/97.................................. 1,500,000 1,495,906
Occidental Petroleum
5.800%, due 08/13/97.................................. 1,750,000 1,737,876
Sundstrand Corp.
5.800%, due 07/09/97.................................. 1,200,000 1,198,453
5.850%, due 07/15/97.................................. 1,000,000 997,725
Tenneco, Inc.
5.780%, due 07/17/97.................................. 1,750,000 1,745,504
5.800%, due 07/23/97.................................. 1,000,000 996,455
Textron Financial Corp.
6.400%, due 07/01/97.................................. 3,500,000 3,500,000
------------
34,007,186
------------
Total Short-Term Investments
(Cost $35,379,046).................................... 35,380,148
------------
Total Investments
(Cost $274,736,312)--106.43% (a)...................... 302,801,511
------------
Liabilities, less cash and other
assets-- (6.43%)...................................... (18,291,697)
------------
Net Assets--100%....................................... $284,509,814
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $274,855,422; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $29,429,449
Gross unrealized depreciation................................ (1,483,360)
-----------
Net unrealized appreciation................................ $27,946,089
===========
</TABLE>
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1997.
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144-A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1997,
the value of these securities amounted to $16,558,539 or 5.82% of net
assets.
FUTURES CONTRACTS (NOTE 4)
The U.S. Balanced Fund had the following open futures contracts as of June 30,
1997:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN/(LOSS)
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST RATE FUTURES BUY
CONTRACTS
5 Year U.S. Treasury Note,
55 contracts.............. September 1997 $ 5,776,272 $ 5,823,985 $ 47,713
10 Year U.S. Treasury Note,
49 contracts.............. September 1997 5,243,368 5,285,875 42,507
30 Year U.S. Treasury Bond,
44 contracts.............. September 1997 4,797,455 4,886,750 89,295
INDEX FUTURES SALE
CONTRACTS
Standard & Poor's 500,
63 contracts.............. September 1997 26,671,770 28,042,875 (1,371,105)
-----------
Total.................... $(1,191,590)
===========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1997 was $1,372,962.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $274,736,312) (Note 1)............... $302,801,511
Receivables:
Investment securities sold...................................... 8,232,355
Dividends....................................................... 232,210
Interest........................................................ 1,792,937
Fund shares sold................................................ 806,039
Variation margin (Note 4)....................................... 154,131
Other assets..................................................... 42,136
------------
TOTAL ASSETS.................................................. 314,061,319
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 27,505,092
Fund shares redeemed............................................ 194,098
Due to custodian bank........................................... 1,596,904
Investment advisory fees (Note 2)............................... 203,965
Accrued expenses................................................ 51,446
------------
TOTAL LIABILITIES............................................. 29,551,505
------------
NET ASSETS........................................................ $284,509,814
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $244,115,671
Accumulated undistributed net investment income.................. 3,271,123
Accumulated net realized gain.................................... 10,249,411
Net unrealized appreciation...................................... 26,873,609
------------
NET ASSETS.................................................... $284,509,814
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $282,859,904 and 22,583,464 shares is-
sued and outstanding) (Note 6)................................. $ 12.53
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 80 shares issued and outstanding) (Note 6).......... $ 12.53
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,648,910 and 132,351 shares issued and outstanding) (Note 6). $ 12.46
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $10,015,932
Dividends......................................................... 1,832,510
-----------
TOTAL INCOME................................................... 11,848,442
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,775,454
Administration.................................................... 131,904
Custodian......................................................... 79,580
Distribution (Note 5)............................................. 6,675
Other............................................................. 260,939
-----------
TOTAL EXPENSES................................................. 2,254,552
Expenses waived by Advisor (Note 2)............................ (215,473)
-----------
NET EXPENSES................................................... 2,039,079
-----------
NET INVESTMENT INCOME ......................................... 9,809,363
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 19,028,392
Futures contracts................................................ (2,961,151)
-----------
Net realized gain.............................................. 16,067,241
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 11,790,507
Futures contracts................................................ (1,255,734)
-----------
Change in net unrealized appreciation or depreciation.......... 10,534,773
-----------
Net realized and unrealized gain.................................. 26,602,014
-----------
Net increase in net assets resulting from operations.............. $36,411,377
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 9,809,363 $ 8,308,870
Net realized gain................................. 16,067,241 8,233,205
Change in net unrealized appreciation or deprecia-
tion............................................. 10,534,773 8,676,412
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 36,411,377 25,218,487
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.................................. (7,953,731) (7,711,341)
SwissKey Class................................... (43,714) (9,781)
Distributions from net realized gain:
Brinson Class I.................................. (10,324,917) (9,885,505)
SwissKey Class................................... (65,778) (992)
------------ ------------
Total distributions to shareholders................ (18,388,140) (17,607,619)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 80,528,530 81,710,433
Shares issued on reinvestment of distributions.... 18,312,423 17,593,608
Shares redeemed................................... (60,962,669) (36,030,444)
------------ ------------
Net increase in net assets resulting from capital
share transactions (Note 6)...................... 37,878,284 63,273,597
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 55,901,521 70,884,465
------------ ------------
NET ASSETS:
Beginning of year................................. 228,608,293 157,723,828
------------ ------------
End of year (including accumulated undistributed
net investment income of $3,271,123 and
$1,459,205, respectively)........................ $284,509,814 $228,608,293
============ ============
</TABLE>
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>
YEAR YEAR DECEMBER 30, 1994*
ENDED ENDED THROUGH
BRINSON CLASS I JUNE 30, 1997 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 opera-
tions:
Net investment income......... 0.47 0.44 0.23
Net realized and unrealized
gain......................... 1.29 1.04 1.16
-------- -------- --------
Total income from investment
operations................. 1.76 1.48 1.39
-------- -------- --------
Less distributions:
Distributions from net invest-
ment income.................. (0.40) (0.43) (0.16)
Distributions from net real-
ized gain.................... (0.54) (0.57) --
-------- -------- --------
Total distributions......... (0.94) (1.00) (0.16)
-------- -------- --------
Net asset value, end of period.. $ 12.53 $ 11.71 $ 11.23
======== ======== ========
Total return (non-annualized)... 15.50% 13.52% 13.91%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $282,860 $227,829 $157,724
Ratio of expenses to average
net assets:
Before expense reimbursement.. 0.88% 1.01% 1.06%**
After expense reimbursement... 0.80% 0.80% 0.80%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 3.78% 3.76% 4.36%**
After expense reimbursement... 3.86% 3.97% 4.63%**
Portfolio turnover rate........ 329% 240% 196%
Average commission rate paid
per share..................... $0.0441 $ 0.0481 N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 11.67 $ 11.38
------- -------
Income from investment operations:
Net investment income........................... 0.38 0.42
Net realized and unrealized gain................ 1.31 0.86
------- -------
Total income from investment operations....... 1.69 1.28
------- -------
Less distributions:
Distributions from net investment income........ (0.36) (0.42)
Distributions from net realized gain............ (0.54) (0.57)
------- -------
Total distributions........................... (0.90) (0.99)
------- -------
Net asset value, end of period.................... $ 12.46 $ 11.67
======= =======
Total return (non-annualized)..................... 14.99% 11.54%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $ 1,649 $ 779
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.38% 1.51%**
After expense reimbursement..................... 1.30% 1.30%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 3.28% 3.26%**
After expense reimbursement..................... 3.36% 3.47%**
Portfolio turnover rate.......................... 329% 240%
Average commission rate paid per share........... $0.0441 $0.0481
</TABLE>
*Commencement of SwissKey Class
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
U.S EQUITY FUND
- --------------------------------------------------------------------------------
The U.S. Equity Fund is an actively managed portfolio that invests in common
stocks of U.S. corporations. The Fund is diversified by issue and industry; it
is typically 70% invested in large capitalization stocks, with the remaining
30% in intermediate and small capitalization stocks. Investment strategies
emphasize stock selection with attention to the management of factor and
industry exposures.
For the period July 31, 1995 to June 30, 1997, the SwissKey U.S. Equity Fund
provided an annualized return of 29.85% compared to its benchmark, the Wilshire
5000 Index, return of 26.44%. For the year ended June 30, 1997, the Fund
returned 31.28%, while the benchmark returned 29.32%. The total return of the
SwissKey U.S. Equity Fund was 16.54% for the first six months of 1997, compared
to the 17.65% return for the Wilshire 5000 Index. The following paragraphs
review the sources of returns in the first half of 1997.
Market exposure (average beta of 0.99) detracted modestly from Fund relative
performance in the strong equity market environment which characterized the
first half of 1997. Conversely, other broad factor positions added to results.
The most significant of these was a higher than benchmark exposure to the
strongly performing traditional value measures of earnings-price, book-price,
and yield coupled with an underweighting in growth issues. Also positive was an
underweighting in stocks ranked high in price and earnings momentum. Some offset
to the favorable contribution of these factors was the underweight in foreign
income. Large, multinational issues have been among the best market performers
so far this year.
Industry weightings had a fairly neutral influence upon performance in the first
half. On the positive side, the Fund's low exposure to telephone and electric
utilities continued to benefit results. We strongly believe that a combination
of new technology, intensifying competition and the easing of regulatory
barriers will meaningfully pressure future profitability of the traditional
telephone and electric utilities. Another positive was the underweighting in
several of the basic industries, particularly chemicals. Chemical product
pricing is suffering as rapid capacity growth outstrips demand, particularly in
many developing countries. In addition, the underweight in autos and overweight
in health care contributed favorably to results. Offsetting these gains were
several adverse industry positions including the Fund overweighting in pollution
control stocks. Waste stream volume growth has been lackluster and landfill
tipping fees continue under pressure. Consumer industry weightings were also a
negative due to an underweight in beverages and an overweight in tobacco.
Finally, the underweighting in the miscellaneous finance group, which includes
brokerage and investment management firms, detracted from performance.
The stock specific influence upon the Fund's active return was negative for the
first six months. Among large capitalization issues, the best performers were
Xerox, Schering Plough, Corning, Gannett and CIGNA while the worst were
Pharmacia & Upjohn, Chase Manhattan, Burlington Northern Santa Fe, Enron and
Rhone Poulenc Rorer. In the intermediate capitalization segment of the Fund, the
strongest contributors were Timken, U.S. Bancorp, Nextel Communications, Coca-
Cola Enterprises and Interpublic Group, while the weakest were Tyson Foods,
Allergan, York International, Harnischfeger and Informix.
- --------------------------------------------------------------------------------
18
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
Total Return
6 months 1 year 7/31/95*
ended ended to
6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
SwissKey U.S. Equity Fund 16.54% 31.28% 29.85%
- --------------------------------------------------------------------------------
Wilshire 5000 Index 17.65 29.32 26.44
- --------------------------------------------------------------------------------
* Inception date of the SwissKey U.S. Equity Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Equity Fund and the Wilshire 5000 Index if you had invested $10,000 on July 31,
1995, and had reinvested all your income dividends and capital gain
distributions through June 30, 1997. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SwissKey U.S. Equity Fund
vs. Wilshire 5000 Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
SwissKey U.S. Equity Fund Wilshire 5000 Index
<TABLE>
<CAPTION>
<S> <C> <C>
7/31/95 10,000 10,000
9/30/95 10,570 10,483
12/31/95 11,335 10,994
3/31/96 12,194 11,612
6/30/96 12,570 12,123
9/30/96 12,966 12,466
12/31/96 14,157 13,326
3/31/97 14,260 13,412
6/30/97 16,499 15,677
</TABLE>
$16,499 SwissKey U.S. Equity Fund
$15,677 Wilshire 5,000 Index
7/31/95 = $10,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
19
<PAGE>
U.S. Equity Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- -------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals................................................... 2.13%
Housing/Paper............................................... 4.38
Metals...................................................... 0.59
------
7.10
Capital Investments
Capital Goods............................................... 7.24
Technology.................................................. 9.75
------
16.99
Consumer
Autos/Durables.............................................. 3.04
Discretionary............................................... 4.52
Health: Drugs............................................... 7.08
Health: Non-Drugs........................................... 3.50
Non-Durables................................................ 9.70
Retail/Apparel.............................................. 4.24
------
32.08
Energy........................................................ 4.14
Financial
Banks....................................................... 7.17
Non-Banks................................................... 7.50
------
14.67
Transportation................................................ 5.49
Utilities..................................................... 6.00
Services/Miscellaneous........................................ 7.93
------
Total U.S. Equities......................................... 94.40*
------
SHORT-TERM INVESTMENTS........................................ 6.76*
------
TOTAL INVESTMENTS........................................... 101.16
------
LIABILITIES, LESS CASH AND
OTHER ASSETS................................................ (1.16)
------
NET ASSETS.................................................... 100.00%
======
</TABLE>
* The Fund held a long position in stock index futures on June 30, 1997 which
increased U.S. equity exposure from 94.40% to 99.65% and reduced exposure to
Short-Term Investments from 6.76% to 1.51%.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Top Ten U.S. Equity Holdings
As of June 30, 1997
Percent of
Net Assets
- ------------------------------------------------------------------------------
<S> <C> <C>
1. Xerox Corp 4.98%
2. Chase Manhattan Corp 4.22
3. Lockheed Martin Corp 3.96
4. Philip Morris Companies, Inc 3.92
5. Aon Corp 3.26
6. CIGNA Corp 3.21
7. Goodyear Tire & Rubber Co 2.93
8. Burlington Northern Santa Fe 2.92
9. Federal Express Corp 2.69
10. Citicorp 2.65
- -------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
U.S. Equities -- 94.40%
Aetna Life & Casualty Co.................................. 46,000 $ 4,709,250
Allergan, Inc............................................. 119,700 3,807,956
Alza Corp. (b)............................................ 116,700 3,384,300
Aon Corp.................................................. 234,650 12,143,137
Automatic Data Processing, Inc............................ 114,000 5,358,000
Beckman Instruments, Inc.................................. 34,000 1,640,500
Birmingham Steel Corp..................................... 46,800 725,400
Boston Technology, Inc. (b)............................... 43,600 1,288,925
Browning-Ferris Industries, Inc........................... 88,500 2,942,625
Burlington Northern Santa Fe.............................. 121,200 10,892,850
Centerior Energy Co....................................... 110,500 1,236,219
Champion Enterprises, Inc. (b)............................ 55,100 826,500
Champion International Corp............................... 4,000 221,000
Chase Manhattan Corp...................................... 162,200 15,743,537
CIGNA Corp................................................ 67,500 11,981,250
Circuit City Stores, Inc.................................. 172,600 6,138,087
Citicorp.................................................. 82,000 9,886,125
CMS Energy Corp........................................... 128,100 4,515,525
Coca-Cola Enterprises, Inc................................ 94,200 2,166,600
Comerica, Inc............................................. 32,100 2,182,800
Comverse Technology, Inc. (b)............................. 21,600 1,123,200
Corning, Inc.............................................. 149,200 8,299,250
Covance, Inc.............................................. 58,750 1,134,609
CPC International, Inc.................................... 51,100 4,717,169
CVS Corp.................................................. 74,200 3,802,750
Dial Corp................................................. 67,700 1,057,813
Eastman Chemical Co....................................... 79,000 5,016,500
EMC Corp./Mass. (b)....................................... 222,100 8,661,900
Enron Corp................................................ 225,300 9,195,056
Entergy Corp.............................................. 13,400 366,825
Federal Express Corp. (b)................................. 173,700 10,031,175
Federated Department Stores (b)........................... 66,200 2,300,450
FileNet Corp. (b)......................................... 23,800 345,100
First American Corp.-Tenn................................. 30,600 1,174,275
First Bank System, Inc.................................... 23,700 2,023,388
First Data Corp........................................... 193,830 8,516,406
First of America Bank Corp................................ 22,450 1,027,088
First Security Corp....................................... 38,600 1,054,263
Fleetwood Enterprises, Inc................................ 23,000 685,688
Food Lion, Inc. Class A................................... 213,800 1,530,006
Forest Laboratories, Inc. (b)............................. 43,700 1,810,819
Gannett Co., Inc.......................................... 76,500 7,554,375
General Instrument Corp. (b).............................. 266,200 6,655,000
Genzyme Corp. (b)......................................... 47,200 1,309,800
Geon Co................................................... 32,300 654,075
Goodyear Tire & Rubber Co................................. 172,400 10,915,075
Harnischfeger Industries, Inc............................. 77,400 3,212,100
Health Care and Retirement Corp. (b)...................... 73,950 2,468,081
Hibernia Corp. Class A.................................... 64,900 904,544
Informix Corp. (b)........................................ 62,400 561,600
Interpublic Group of Companies, Inc....................... 50,700 3,108,544
James River Corp. of Virginia............................. 92,100 3,407,700
Kroger Co. (b)............................................ 63,700 1,847,300
Lockheed Martin Corp...................................... 142,626 14,770,705
Lyondell Petrochemical Co................................. 127,700 2,785,456
Manor Care, Inc........................................... 104,000 3,393,000
Martin Marietta Materials, Inc............................ 34,257 1,109,070
Masco Corp................................................ 136,100 5,682,175
Mattel, Inc............................................... 169,275 5,734,191
Nabisco Holdings Corp. Class A............................ 119,000 4,745,125
National Service Industries Inc........................... 22,800 1,110,075
Nextel Communications, Inc. Class A (b)................... 178,000 3,370,875
Octel Communications Corp. (b)............................ 38,700 907,031
Old Republic International Corp........................... 42,050 1,274,641
Peco Energy Co............................................ 271,500 5,701,500
Pentair, Inc.............................................. 61,800 2,031,675
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
Pharmacia & Upjohn,
Inc.................... 148,700 $ 5,167,325
Philip Morris Companies,
Inc.................... 329,600 14,626,000
Raytheon Co............. 41,400 2,111,400
Regions Financial Corp.. 30,000 948,750
Reynolds & Reynolds Co.
Class A................ 41,800 658,350
Schering Plough Corp.... 204,900 9,809,587
Seagate Technology, Inc.
(b).................... 56,100 1,974,019
Timken Co............... 79,300 2,820,106
Trinity Industries,
Inc.................... 25,200 800,100
Tyson Foods, Inc. Class
A...................... 237,700 4,546,012
UCAR International, Inc.
(b).................... 2,900 132,675
Ultramar Diamond
Shamrock Corp.......... 132,918 4,336,450
US Bancorp.............. 71,100 4,559,287
Vencor, Inc. (b)........ 61,100 2,581,475
Viad Corp............... 114,500 2,204,125
Westvaco Corp........... 27,900 877,106
Witco Corp.............. 14,300 542,506
Xerox Corp.............. 235,700 18,590,838
York International
Corp................... 72,800 3,348,800
360 Communications Co.
(b).................... 34,633 593,090
------------
Total U.S. Equities
(Cost $293,837,346).... 352,106,030
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C> <C>
Short-Term Investments -- 6.76%
U.S. GOVERNMENT OBLIGATIONS --
0.19%
U.S. Treasury Bill
5.368%, due 11/13/97... $ 710,000 $ 696,288
------------
COMMERCIAL PAPER -- 6.57%
Case Credit Corp.
6.250%, due 07/07/97... 1,000,000 998,958
5.760%, due 07/21/97... 500,000 498,400
Crown Cork & Seal Co.
5.800%, due 07/09/97... 500,000 499,356
5.770%, due 07/15/97... 500,000 498,878
CSX Corp. 5.780%, due
07/09/97............... 500,000 499,358
Cummins Engine Company,
Inc. 6.500%, due
07/01/97............... 2,500,000 2,500,000
Enron Oil & Gas 6.520%,
due 07/01/97........... 5,524,000 5,524,000
Hughes Electronics Corp.
5.780%, due 07/11/97... 500,000 499,197
5.850%, due 08/11/97... 500,000 496,669
Marriott Corp. 5.770%,
due 07/08/97........... 500,000 499,439
Norfolk Southern Corp.
5.770%,
due 07/10/97........... 500,000 499,279
Occidental Petroleum
5.800%,
due 08/13/97........... 500,000 496,536
Sundstrand Corp.
5.800%, due 07/09/97... 500,000 499,356
5.850%, due 07/15/97... 500,000 498,862
Tenneco, Inc. 5.780%,
due 07/17/97........... 500,000 498,716
Textron Financial Corp.
6.400%,
due 07/01/97........... 9,500,000 9,500,000
------------
24,507,004
------------
Total Short-Term
Investments
(Cost $25,202,710)..... 25,203,292
------------
Total Investments
(Cost $319,040,056) --
101.16% (a)............ 377,309,322
------------
Liabilities, less cash
and other assets--
(1.16%)................ (4,319,862)
------------
Net Assets -- 100%...... $372,989,460
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
21
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $319,163,004; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $60,885,827
Gross unrealized depreciation................................ (2,739,509)
-----------
Net unrealized appreciation................................ $58,146,318
===========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS (NOTE 4)
The U.S. Equity Fund had the following open index futures contracts as of June
30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Index Futures Buy Contracts
Standard & Poor's 500, 44
contracts.................. September 1997 $19,350,765 $19,585,500 $234,735
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1997 was $696,288.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $319,040,056) (Note 1) .............. $377,309,322
Cash............................................................. 423,747
Receivables:
Investment securities sold...................................... 1,645,118
Dividends....................................................... 555,543
Fund shares sold................................................ 1,181,693
Other assets..................................................... 39,163
------------
TOTAL ASSETS.................................................. 381,154,586
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 6,850,007
Fund shares redeemed............................................ 885,591
Investment advisory fees (Note 2)............................... 224,739
Variation margin (Note 4)....................................... 147,926
Accrued expenses................................................ 56,863
------------
TOTAL LIABILITIES............................................. 8,165,126
------------
NET ASSETS........................................................ $372,989,460
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $298,910,691
Accumulated undistributed net investment income.................. 679,544
Accumulated net realized gain.................................... 14,895,224
Net unrealized appreciation...................................... 58,504,001
------------
NET ASSETS.................................................... $372,989,460
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $337,949,448 and 19,159,533 shares is-
sued and outstanding) (Note 6)................................. $ 17.64
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 57 shares issued and outstanding) (Note 6).......... $ 17.64
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $35,039,012 and 1,992,413 shares issued
and outstanding) (Note 6)...................................... $ 17.59
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 3,429,477
Interest.......................................................... 545,249
-----------
TOTAL INCOME................................................... 3,974,726
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,423,666
Administration.................................................... 89,029
Distribution (Note 5)............................................. 73,831
Custodian......................................................... 72,024
Other............................................................. 236,863
-----------
TOTAL EXPENSES................................................. 1,895,413
Expenses waived by Advisor (Note 2)............................ (189,305)
-----------
NET EXPENSES................................................... 1,706,108
-----------
NET INVESTMENT INCOME.......................................... 2,268,618
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments...................................................... 19,441,498
Futures contracts................................................ 2,138,520
-----------
Net realized gain ............................................. 21,580,018
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 40,649,230
Futures contracts ............................................... 237,510
-----------
Change in net unrealized appreciation or depreciation.......... 40,886,740
-----------
Net realized and unrealized gain ................................. 62,466,758
-----------
Net increase in net assets resulting from operations.............. $64,735,376
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 2,268,618 $ 1,333,171
Net realized gain ................................ 21,580,018 7,826,393
Change in net unrealized appreciation or deprecia-
tion ............................................ 40,886,740 13,357,238
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 64,735,376 22,516,802
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................. (1,717,943) (1,233,245)
SwissKey Class.................................. (87,137) (17,809)
Distributions from net realized gain:
Brinson Class I................................. (12,393,329) (1,764,213)
SwissKey Class.................................. (838,501) (2,611)
------------ ------------
Total distributions to shareholders............... (15,036,910) (3,017,878)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 212,394,882 71,976,805
Shares issued on reinvestment of distributions.... 14,138,565 2,944,272
Shares redeemed................................... (34,971,198) (5,264,717)
------------ ------------
Net increase in net assets resulting from capital
share transactions (Note 6)...................... 191,562,249 69,656,360
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 241,260,715 89,155,284
------------ ------------
NET ASSETS:
Beginning of year................................. 131,728,745 42,573,461
------------ ------------
End of year (including accumulated undistributed
net investment income of $679,544 and $216,006,
respectively).................................... $372,989,460 $131,728,745
============ ============
</TABLE>
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>
YEAR ENDED JUNE 30, FEBRUARY 22, 1994*
--------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 14.59 $ 11.53 $ 9.65 $10.00
-------- -------- ------- ------
Income from investment opera-
tions:
Net investment income........ 0.15 0.17 0.16 0.05
Net realized and unrealized
gain (loss)................. 4.27 3.31 1.89 (0.36)
-------- -------- ------- ------
Total income (loss) from
investment operations..... 4.42 3.48 2.05 (0.31)
-------- -------- ------- ------
Less distributions:
Distributions from net in-
vestment income............. (0.14) (0.17) (0.14) (0.04)
Distributions from net real-
ized gain................... (1.23) (0.25) (0.03) --
-------- -------- ------- ------
Total distributions........ (1.37) (0.42) (0.17) (0.04)
-------- -------- ------- ------
Net asset value, end of period. $ 17.64 $ 14.59 $ 11.53 $ 9.65
======== ======== ======= ======
Total return (non-annualized).. 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data
Net assets, end of period (in
000s)........................ $337,949 $126,342 $42,573 $8,200
Ratio of expenses to average
net assets:
Before expense reimbursement. 0.89% 1.14% 1.70% 5.40% **
After expense reimbursement.. 0.80% 0.80% 0.80% 0.80% **
Ratio of net investment income
to average net assets:
Before expense reimbursement. 1.06% 1.13% 1.09% (2.82)%**
After expense reimbursement.. 1.15% 1.47% 1.99% 1.78% **
Portfolio turnover rate....... 43% 36% 33% 9%
Average commission rate paid
per share.................... $ 0.0422 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 14.58 $ 11.94
------- -------
Income from investment operations:
Net investment income........................... 0.11 0.10
Net realized and unrealized gain................ 4.22 2.92
------- -------
Total income from investment operations....... 4.33 3.02
------- -------
Less distributions:
Distributions from net investment income........ (0.09) (0.13)
Distributions from net realized gain............ (1.23) (0.25)
------- -------
Total distributions........................... (1.32) (0.38)
------- -------
Net asset value, end of period.................... $ 17.59 $ 14.58
======= =======
Total return (non-annualized)..................... 31.28% 25.70%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $35,039 $ 5,387
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.41% 1.66%**
After expense reimbursement..................... 1.32% 1.32%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 0.54% 0.61%**
After expense reimbursement..................... 0.63% 0.95%**
Portfolio turnover rate.......................... 43% 36%
Average commission rate paid per share........... $0.0422 $0.0457
</TABLE>
*Commencement of SwissKey Class
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
U.S. BOND FUND
The U.S. Bond Fund is an actively managed diversified portfolio of U.S. dollar-
denominated investment-grade fixed income securities. Our goal for the Fund is
to achieve a total return superior to that of an unmanaged market index.
Macroeconomic and monetary analysis are the key elements in our strategy. We
develop expectations about the returns on U.S. bonds based on the divergence of
current market yields from our estimates of equilibrium yields. Relative value
analysis serves as the basis of both our sector and individual security
selection.
The SwissKey U.S. Bond Fund produced an annualized return of 6.09% since its
inception on August 31, 1995 compared to the Salomon Brothers Broad Investment
Grade (BIG) Bond Index return of 6.62%. For the year ended June 30, 1997, the
Fund produced a total return of 7.91% compared to the Benchmark return of 8.15%.
In the first half of 1997, the Fund returned 2.58% compared to the Benchmark
return of 3.06%.
The first quarter of 1997 in the U.S. was characterized by unusually strong
rates of real economic growth, heightened fears of inflation, rising market
interest rates and a 25 basis point hike in the Federal Reserve's overnight
funds target rate. In the second quarter, economic activity slowed, Fed policy
held steady and market interest rates declined. Over the full semi-annual period
there was a net increase in yields on U.S. fixed income securities of about 10
to 20 basis points.
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- --------------------------------------------------------------------------------
U.S. BONDS
<TABLE>
<CAPTION>
<S> <C>
Corporate Bonds
Asset-Backed.......................................................... 3.84%
CMO................................................................... 2.60
Consumer.............................................................. 2.18
Financial............................................................. 8.22
Industrial............................................................ 3.93
Telecommunications.................................................... 0.40
Transportation........................................................ 1.48
------
Total U.S. Corporate Bonds.................................... 22.65
U.S. Government Agencies................................................ 28.68
U.S. Government Obligations............................................. 37.26
International Dollar Bonds.............................................. 6.05
------
Total U.S. Bonds.............................................. 94.64
------
SHORT-TERM INVESTMENTS.................................................. 14.42
------
TOTAL INVESTMENTS............................................. 109.06
LIABILITIES, LESS CASH
AND OTHER ASSETS...................................................... (9.06)
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
U.S. BOND FUND
- --------------------------------------------------------------------------------
Total Return
6 months 1 year Annualized
ended ended 8/31/95* to
6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
SwissKey U.S. Bond Fund 2.58% 7.91% 6.09%
- --------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade (BIG)
Bond Index 3.06 8.15 6.62
- --------------------------------------------------------------------------------
* Inception date of the SwissKey U.S. Bond Fund.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if
you had invested $10,000 on August 31, 1995, and had reinvested all your income
dividends and capital gain distributions through June 30, 1997. No adjustment
has been made for any income taxes payable by shareholders on income dividends
and capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors may
realize a gain or loss upon redemption.
SwissKey U.S. Bond Fund
vs. Salomon Brothers BIG Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey U.S. Bond Salomon Brothers BIG
Fund Bond Fund
- ------- ------------------------------------------------------------------------
<S> <C> <C>
8/31/95 $ 10,000 $ 10,000
9/30/95 10,080 10,094
12/31/95 10,529 10,532
3/31/96 10,284 10,350
6/30/96 10,324 10,400
9/30/96 10,491 10,594
12/31/96 10,861 10,914
3/31/97 10,731 10,857
6/30/97 11,141 11,248
8/31/95=$10,000 Data through 6/30/97
</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.
- --------------------------------------------------------------------------------
29
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- ---------
<S> <C> <C>
Bonds -- 94.64%
U.S. CORPORATE BONDS -- 22.65%
Aetna Services Inc. 6.970%, due 08/15/36.................... $235,000 $ 237,332
BellSouth Savings & Employee ESOP
9.125%, due 07/01/03....................................... 88,949 92,634
Capital One Bank 6.830%, due 05/17/99....................... 359,000 360,453
Chase Mortgage Finance Corp. 93-J1 Class 1A5 6.625%, due
08/25/09................................................... 70,026 66,997
Ches Pot Tel MD 8.000%, due 10/15/29........................ 87,000 94,158
Citicorp Mortgage Securities, Inc. 94-9 Class A8 5.750%, due
06/25/09................................................... 91,612 77,402
Comcast Cable Communications 144-A
8.500%, due 05/01/27....................................... 300,000 323,448
Countrywide Funding Corp. FRN
6.360%, due 12/01/03....................................... 250,000 238,799
CS First Boston Mortgage Securities Corp. 97-C1 7.150%, due
06/20/29................................................... 245,000 248,675
CSX Transportation, Inc. 144-A
6.950%, due 05/01/27....................................... 350,000 353,084
Dayton Hudson Credit Card Master Trust 95-1A 6.100%, due
02/25/02................................................... 218,000 218,473
Eastman Chemical Co. 7.600%, due 02/01/27................... 223,000 221,009
First Bank Corporate Card Master Trust 97-1A 6.400%, due
02/15/03................................................... 155,000 153,405
GE Capital Management Services, Inc. 94-7 Class A12 6.000%,
due 02/25/09............................................... 178,678 168,678
GMAC 9.625%, due 12/15/01................................... 294,000 325,311
Hanson Overseas BV 6.750%, due 09/15/05..................... 100,000 97,476
Interamer Development Bank
6.800%, due 10/15/25....................................... 100,000 95,100
Lehman Brothers Holdings
7.250%, due 04/15/03....................................... 225,000 226,083
Lockheed Martin Corp. 7.700%, due 06/15/08.................. 282,000 294,678
MBNA Global Capital Securities FRN
6.659%, due 02/01/27....................................... 90,000 88,936
News America Holdings 7.750%, due 01/20/24.................. 358,000 339,676
Premier Auto Trust
96-3A 6.500%, due 03/06/00................................. 190,000 191,244
96-4A 6.400%, due 10/06/01................................. 350,000 350,616
Salomon, Inc. 6.750%, due 02/15/03.......................... 300,000 293,990
Thrift Financial Corp. 11.250%, due 01/01/16................ 54,270 58,634
Time Warner, Inc. 9.150%, due 02/01/23...................... 75,000 82,775
Time Warner Entertainment, Inc.
8.375%, due 03/15/23....................................... 94,000 96,346
---------
5,395,412
---------
INTERNATIONAL DOLLAR BONDS -- 6.05%
Bayerische Landesbank 6.850%, due 07/19/01.................. 188,000 189,357
Empresa Nacional Electric
7.875%, due 02/01/27....................................... 394,000 397,355
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- ---------
<S> <C> <C>
Province of Quebec
7.500%, due 07/15/23....................................... $200,000 $ 196,736
Repsol International Finance
7.000%, due 08/01/05....................................... 200,000 200,717
Republic of South Africa 9.625%, due 12/15/99............... 71,000 75,029
Royal Bank of Scotland 7.375%, due 04/29/49................. 80,000 79,730
Skandinaviska Enskilda Banken 144-A
6.625%, due 03/29/49....................................... 305,000 301,889
---------
1,440,813
---------
U.S. GOVERNMENT AGENCIES -- 28.68%
Federal Home Loan Mortgage Corp.
5.800%, due 08/15/19....................................... 661,000 621,856
7.500%, due 01/15/23....................................... 139,328 133,110
7.238%, due 05/01/26....................................... 51,187 52,721
0.000%, due 04/15/27 principal only........................ 300,000 178,060
Federal Home Loan Mortgage Corp. Gold
6.000%, due 06/01/03....................................... 108,489 105,302
6.500%, due 12/01/03 TBA................................... 300,000 296,156
8.000%, due 11/01/22....................................... 212,105 216,944
9.000%, due 03/01/24....................................... 172,791 184,104
9.000%, due 04/01/25....................................... 410,527 433,362
9.500%, due 04/01/25....................................... 53,394 57,182
Federal National Mortgage Association
6.500%, due 12/01/03 TBA................................... 800,000 759,500
6.500%, due 12/01/03 Balloon TBA........................... 200,000 197,375
6.500%, due 04/25/08....................................... 105,383 101,005
6.500%, due 05/25/08....................................... 132,160 129,863
8.000%, due 12/18/11....................................... 100,000 104,307
9.000%, due 08/01/21....................................... 33,735 35,825
8.500%, due 07/01/22....................................... 25,508 26,843
8.500%, due 12/01/25....................................... 334,233 346,558
6.500%, due 02/01/26....................................... 128,409 122,831
6.500%, due 04/01/26....................................... 423,606 405,207
7.500%, due 12/01/26 TBA................................... 460,000 461,007
6.070%, due 08/01/29 TBA................................... 530,000 523,706
Federal National Mortgage Association Strips
7.500%, due 05/01/23 interest only......................... 188,272 63,317
0.000%, due 07/01/26 principal only........................ 185,521 123,958
0.000%, due 04/01/27 principal only........................ 458,215 303,795
Government National Mortgage Association
10.000%, due 09/15/00...................................... 3,212 3,406
10.000%, due 05/15/01...................................... 6,249 6,626
9.000%, due 11/15/04....................................... 20,543 21,500
9.000%, due 12/15/17....................................... 64,649 69,391
8.000%, due 08/15/22....................................... 89,260 91,185
7.500%, due 12/15/22....................................... 397,800 401,475
7.500%, due 06/15/25....................................... 128,896 129,501
7.000%, due 07/15/25....................................... 127,437 125,219
---------
6,832,197
---------
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
--------- -----------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-- 37.26%
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98................................... $ 153,000 $ 152,044
6.250%, due 10/31/01................................... 525,000 522,703
7.000%, due 07/15/06................................... 940,000 967,025
8.125%, due 05/15/21................................... 1,370,000 1,567,366
6.000%, due 02/15/26................................... 1,812,000 1,621,175
U.S. Treasury Principal Strips
0.000%, due 05/15/03................................... 1,915,000 1,317,577
0.000%, due 08/15/03................................... 1,305,000 883,067
0.000%, due 11/15/04................................... 2,153,000 1,333,956
0.000%, due 05/15/08................................... 1,055,000 511,538
-----------
8,876,451
-----------
Total U.S. Bonds (Cost $22,347,621)..................... 22,544,873
-----------
Short-Term Investments-- 14.42%
COMMERCIAL PAPER -- 14.42%
American Stores Co. 5.830%, due 07/23/97................ 500,000 498,219
Case Credit Corp. 5.760%, due 07/21/97.................. 250,000 249,200
Crown Cork & Seal Co.
5.770%, due 07/15/97................................... 500,000 498,878
CSX Corp. 5.780%, due 07/09/97.......................... 500,000 499,358
Enron Oil & Gas 6.520%, due 07/01/97.................... 143,000 143,000
Hughes Electronics Corp.
5.780%, due 07/11/97................................... 500,000 499,197
Norfolk Southern Corp.
5.770%, due 07/10/97................................... 500,000 499,279
Occidental Petroleum 5.800%, due 08/13/97............... 250,000 248,268
Sundstrand Corp. 5.800%, due 07/09/97................... 300,000 299,613
-----------
Total Short-Term Investments
(Cost $3,435,012)...................................... 3,435,012
-----------
Total Investments
(Cost $25,782,633) -- 109.06% (a)...................... 25,979,885
-----------
Liabilities, less cash and other
assets -- (9.06%)...................................... (2,159,180)
-----------
Net Assets -- 100%...................................... $23,820,705
===========
</TABLE>
(a) Aggregate cost for federal income tax purposes was $25,786,476; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation........... $219,233
Gross unrealized de-
preciation........... (25,824)
--------
Net unrealized ap-
preciation........... $193,409
========
</TABLE>
FRN: Floating rate note---The rate disclosed is that in effect at June 30,
1997.
MTN: Medium Term Note
TBA: Security is subject to delayed delivery.
144-A: Security exempt from registration under Rule 144-A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1997,
the value of these securities amounted to $978,421 or 4.11% of net assets.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $25,782,633) (Note 1)................ $25,979,885
Cash............................................................. 46,542
Receivables:
Investment securities sold...................................... 980,757
Interest........................................................ 250,445
Fund shares sold................................................ 1,025
Other assets..................................................... 28,677
-----------
TOTAL ASSETS.................................................. 27,287,331
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 3,358,346
Fund shares redeemed............................................ 29,387
Investment advisory fees (Note 2)............................... 29,369
Accrued expenses................................................ 49,524
-----------
TOTAL LIABILITIES............................................. 3,466,626
-----------
NET ASSETS........................................................ $23,820,705
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $23,420,309
Accumulated undistributed net investment income.................. 271,841
Accumulated net realized loss.................................... (68,697)
Net unrealized appreciation...................................... 197,252
-----------
NET ASSETS.................................................... $23,820,705
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $22,420,622 and 2,189,278 shares issued
and outstanding) (Note 6)...................................... $ 10.24
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 98 shares issued and outstanding) (Note 6).......... $ 10.24
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,399,083 and 136,949 shares issued and outstanding) (Note 6). $ 10.22
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $ 921,854
----------
TOTAL INCOME.................................................... 921,854
----------
EXPENSES:
Advisory (Note 2).................................................. 67,835
Accounting......................................................... 38,182
Registration....................................................... 37,673
Transfer Agent..................................................... 35,540
Professional....................................................... 33,928
Distribution (Note 5).............................................. 4,104
Other.............................................................. 10,538
----------
TOTAL EXPENSES.................................................. 227,800
Expenses waived and reimbursed by Advisor (Note 2).............. (142,178)
----------
NET EXPENSES.................................................... 85,622
----------
NET INVESTMENT INCOME .......................................... 836,232
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss.................................................. (36,166)
Change in net unrealized appreciation or depreciation.............. 343,515
----------
Net realized and unrealized gain................................... 307,349
----------
Net increase in net assets resulting from operations............... $1,143,581
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED AUGUST 31, 1995*
JUNE 30, THROUGH
1997 JUNE 30, 1996
OPERATIONS: ----------- ----------------
<S> <C> <C>
Net investment income........................... $ 836,232 $ 456,231
Net realized loss............................... (36,166) (11,035)
Change in net unrealized appreciation or depre-
ciation........................................ 343,515 (146,263)
----------- -----------
Net increase in net assets resulting from opera-
tions.......................................... 1,143,581 298,933
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................ (598,393) (350,335)
SwissKey Class................................. (31,712) (13,132)
Distributions in excess of net realized gain:
Brinson Class I................................ (675) (23,071)
SwissKey Class................................. (39) (268)
----------- -----------
Total distributions to shareholders............. (630,819) (386,806)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................... 16,583,813 10,200,031
Shares issued on reinvestment of distributions.. 461,917 386,807
Shares redeemed................................. (3,420,321) (867,431)
----------- -----------
Net increase in net assets resulting from capi-
tal share transactions (Note 6)................ 13,625,409 9,719,407
----------- -----------
TOTAL INCREASE IN NET ASSETS................. 14,138,171 9,631,534
----------- -----------
NET ASSETS:
Beginning of period............................. 9,682,534 51,000
----------- -----------
End of period (including accumulated undistrib-
uted net investment
income of $271,841 and $90,190, respectively).. $23,820,705 $ 9,682,534
=========== ===========
</TABLE>
*Commencement of investment operations
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>
AUGUST 31, 1995*
YEAR ENDED THROUGH
BRINSON CLASS I JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............ $ 9.93 $10.00
------- ------
Income from investment operations:
Net investment income......................... 0.51*** 0.50
Net realized and unrealized gain (loss)....... 0.32 (0.14)
------- ------
Total income from investment operations..... 0.83 0.36
------- ------
Less distributions:
Distributions from net investment income...... (0.52) (0.40)
Distributions in excess of net realized gain.. -- (0.03)
------- ------
Total distributions......................... (0.52) (0.43)
------- ------
Net asset value, end of period.................. $ 10.24 $ 9.93
======= ======
Total return (non-annualized)................... 8.45% 3.60%
Ratios/Supplemental data
Net assets, end of period (in 000s)............ $22,421 $9,047
Ratio of expenses to average net assets:
Before expense reimbursement.................. 1.65% 3.63%**
After expense reimbursement................... 0.60% 0.60%**
Ratio of net investment income to average net
assets:
Before expense reimbursement.................. 5.14% 3.00%**
After expense reimbursement................... 6.19% 6.03%**
Portfolio turnover rate........................ 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<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>
AUGUST 31, 1995*
YEAR ENDED THROUGH JUNE 30,
SWISSKEY CLASS JUNE 30, 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............ $ 9.92 $10.00
------ ------
Income from investment operations:
Net investment income......................... 0.46*** 0.46
Net realized and unrealized gain (loss)....... 0.32 (0.13)
------ ------
Total income from investment operations..... 0.78 0.33
------ ------
Less distributions:
Distributions from net investment income...... (0.48) (0.38)
Distributions in excess of net realized gain.. -- (0.03)
------ ------
Total distributions......................... (0.48) (0.41)
------ ------
Net asset value, end of period.................. $10.22 $ 9.92
====== ======
Total return (non-annualized)................... 7.91% 3.24%
Ratios/Supplemental data
Net assets, end of period (in 000s)............ $1,399 $ 636
Ratio of expenses to average net assets:
Before expense reimbursement.................. 2.12% 4.10%**
After expense reimbursement................... 1.07% 1.07%**
Ratio of net investment income to average net
assets:
Before expense reimbursement.................. 4.67% 2.53%**
After expense reimbursement................... 5.72% 5.56%**
Portfolio turnover rate........................ 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<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. Effective June 30, 1997, each Fund has three
classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey
Class. There are an unlimited number of shares of each class with par value of
$0.001 authorized. Each share represents an identical interest in the
investments of the Funds and has the same rights. The following is a summary of
significant accounting policies consistently followed by the U.S. Balanced
Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively the
"Funds") in the preparation of their financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which the most recent bid price or market
quotations are not readily available, including restricted securities which are
subject to limitations on their sale, are valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees. Equity
securities traded over-the-counter are valued at the most recent bid price.
Debt securities are valued at the most recent bid price by using market
quotations or independent services. Futures contracts are valued at the
settlement price established each day on the exchange on which they are traded.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
C.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1997,
therefore, no federal income tax provision was required.
E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses. Amounts equal to 15.05% and 38.95% of the
amount taxable as ordinary income qualify for the dividends received deduction
available to corporate shareholders for the U.S. Balanced Fund and the U.S.
Equity Fund, respectively.
F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
G.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
37
<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 that total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the year
ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES WAIVED
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES AND/OR REIMBURSED
-------- --------------- --------------- -------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,775,454 $215,473
U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,423,666 189,305
U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 67,835 142,178
</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 for the year ended June 30, 1997, were $7,300, $4,998 and
$3,828 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund,
respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1997, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund.................................... $809,073,589 $785,163,972
U.S. Equity Fund...................................... 226,474,872 84,130,110
U.S. Bond Fund........................................ 66,672,483 53,682,174
</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 PLANS
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the SwissKey Class of shares and,
effective June 30, 1997, the Brinson Class N shares. Annual fees under the
SwissKey Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47%
of the average daily net assets of the SwissKey Class of the U.S. Balanced
Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. Annual fees under the
Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of
the Brinson Class N of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond
Fund.
- --------------------------------------------------------------------------------
38
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. BALANCED FUND
---------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................. 6,578,157 $ 78,728,712 6,944,846 $80,934,038
Brinson Class N................. 80 1,000 -- --
SwissKey Class.................. 148,317 1,798,818 67,290 776,395
---------- ------------ --------- -----------
Total Sales................... 6,726,554 $ 80,528,530 7,012,136 $81,710,433
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I................. 1,541,262 $ 18,266,191 1,540,774 $17,588,758
Brinson Class N................. -- -- -- --
SwissKey Class.................. 3,904 46,232 422 4,850
---------- ------------ --------- -----------
Total Dividend Reinvestment... 1,545,166 $ 18,312,423 1,541,196 $17,593,608
========== ============ ========= ===========
Redemptions:
Brinson Class I................. 4,988,208 $ 59,912,281 3,073,501 $36,019,481
Brinson Class N................. -- -- -- --
SwissKey Class.................. 86,625 1,050,388 957 10,963
---------- ------------ --------- -----------
Total Redemptions............. 5,074,833 $ 60,962,669 3,074,458 $36,030,444
========== ============ ========= ===========
<CAPTION>
U.S. EQUITY FUND
---------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................. 11,551,336 $183,660,431 5,125,613 $66,685,850
Brinson Class N................. 57 1,000 -- --
SwissKey Class.................. 1,834,556 28,733,451 375,655 5,290,955
---------- ------------ --------- -----------
Total Sales................... 13,385,949 $212,394,882 5,501,268 $71,976,805
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I................. 907,559 $ 13,745,444 222,497 $ 2,935,334
Brinson Class N................. -- -- -- --
SwissKey Class.................. 25,905 393,121 644 8,938
---------- ------------ --------- -----------
Total Dividend Reinvestment... 933,464 $ 14,138,565 223,141 $ 2,944,272
========== ============ ========= ===========
Redemptions:
Brinson Class I................. 1,959,184 $ 31,250,336 380,602 $ 5,174,675
Brinson Class N................. -- -- -- --
SwissKey Class.................. 237,473 3,720,862 6,874 90,042
---------- ------------ --------- -----------
Total Redemptions............. 2,196,657 $ 34,971,198 387,476 $ 5,264,717
========== ============ ========= ===========
<CAPTION>
U.S. BOND FUND
---------------------------------------------
YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................. 1,521,821 $ 15,371,166 953,454 $ 9,550,552
Brinson Class N................. 98 1,000 -- --
SwissKey Class.................. 119,951 1,211,647 63,717 649,479
---------- ------------ --------- -----------
Total Sales................... 1,641,870 $ 16,583,813 1,017,171 $10,200,031
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I................. 44,351 $ 449,362 37,309 $ 373,407
Brinson Class N................. -- -- -- --
SwissKey Class.................. 1,239 12,555 1,362 13,400
---------- ------------ --------- -----------
Total Dividend Reinvestment... 45,590 $ 461,917 38,671 $ 386,807
========== ============ ========= ===========
Redemptions:
Brinson Class I................. 288,064 $ 2,929,252 84,593 $ 856,547
Brinson Class N................. -- -- -- --
SwissKey Class.................. 48,365 491,069 1,055 10,884
---------- ------------ --------- -----------
Total Redemptions............. 336,429 $ 3,420,321 85,648 $ 867,431
========== ============ ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
39
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--U.S. Balanced
Fund, U.S. Equity Fund and U.S. Bond Fund as of June 30, 1997, the related
statements of operations for the year then ended and changes in net assets and
the financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund at June
30, 1997, the results of their operations for the year then ended and the
changes in their net assets and the financial highlights for the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 8, 1997
- --------------------------------------------------------------------------------
40
<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>
[SWISSKEY LOGO]
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY N .
http://networth.galt.com/swisskey
<PAGE>
Swisskey Non-U.S. Equity Fund
Annual Report
June 30, 1997
Your Key to Performance
--------------------------
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Secretary
E. Thomas McFarlan Carolyn M. Burke, CPA
President Treasurer
Thomas J. Digenan, CFA, CPA Catherine E. Macrae
Vice President Assistant Secretary
- --------------------------------------------------------------------------------
1
<PAGE>
The Fund's Advisor -- Brinson Partners, Inc.
- --------------------------------------------------------------------------------
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation. Brinson Partners continues as the name used within North
America, while SBC Brinson is the name used outside North America. We are a
global investment management organization with over $75 billion in
institutional assets under discretionary active management. We are also the
investment manager for SBC Private Banking mutual fund assets which total $50
billion. In addition, we act as an investment advisor to SBC Private Banking.
The division manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. Our organization employs over 590 people in offices in Chicago,
Basel, Frankfurt, Geneva, London, Melbourne, New York, Paris, Singapore,
Sydney, Tokyo and Zurich.
Brinson Partners, Inc., an established U.S.-based leader in the investment
business located in Chicago, acts as the headquarters of our world-wide
investment management process. The firm began managing international securities
and venture capital in the early to mid-1970s. Brinson Partners, Inc. pioneered
the movement to the active management of global portfolios in the early 1980s
for U.S. clients.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment
markets and their interrelationships. Portfolio structure is focused upon both
risk and return considerations in the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
- --------------------------------------------------------------------------------
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter......................................................... 4
Global Economic and Market Highlights...................................... 5
Non-U.S. Equity Fund....................................................... 6
Schedule of Investments.................................................... 9
Financial Statements.......................................................14
Financial Highlights.......................................................17
Notes to Financial Statements..............................................19
Report of Independent Auditors.............................................22
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
August 20, 1997
Dear Shareholder:
We appreciate the confidence you have placed in us and are pleased to present
you with the June 30, 1997 Annual Report for the Non-U.S. Equity Fund. This
Report presents our current global economic and market outlook, as well as the
Fund's recent investment strategies and performance. To summarize this
information:
For the period from July 31, 1995 to June 30, 1997, the Fund provided an
annualized total return of 18.37%. In the first half of 1997, the Fund returned
13.80%.
Market Strategy
The Fund continues to hold a 5.0% strategic cash position reflecting our view
that, with very few exceptions, non-U.S. equity markets are modestly attractive.
The Japanese equity market, which is the largest component of the index, remains
somewhat more overpriced than most of the other non-U.S. markets. Given our
valuation analyses and fundamental considerations, we are underweight in Japan
by 3.0%.
Currency Strategy
Currency strategy is largely neutral except for the sterling and Hong Kong
dollar underweights. Sterling is overvalued by 20%; its strength is
unsustainable. The riskiness of the Hong Kong dollar continues to support a
strategy which minimizes exposure.
We look forward to the challenges ahead and, as always, welcome your thoughts
and comments. Please visit our website at http://networth.galt.com/swisskey.
Sincerely,
/s/ Raoul Weil /s/ Raymond Simon
Raoul Weil Raymond Simon
Managing Director Executive Director
Private Banking Private Banking
- --------------------------------------------------------------------------------
4
<PAGE>
Global Economic and Market Highlights
- --------------------------------------------------------------------------------
Fiscal restraint in continental Europe, caused by the drive to monetary union
(EMU), has amplified the economic slowdown, resulting in persistently high
unemployment. These economies are hindered by more structurally rigid labor
markets than in the U.S. and Asia. As yet, governments seem unwilling to take
the hard measures necessary to free up wages and encourage labor mobility and
flexibility.
Apart from some temporary yen strengthening in the second quarter, a weaker
currency has aided the Japanese economy. Export-oriented industries in
particular have recovered significantly from the prolonged recession brought on
by the bursting of the "bubble" at the start of the 1990s. The hike in the
consumption tax from 3% to 5% at the start of April had caused a spurt in
spending in the first quarter. However, now that it is in place, there has been
some softening in demand, particularly for big ticket items, which is likely to
adversely affect domestically-oriented firms.
The currency turmoil in Southeast Asia is drawing attention to some of the
weaknesses of those economies. In Thailand, which was the initial casualty, the
crisis was precipitated by a bad bank loan problem. These problems in the
banking system prevented the central bank from increasing rates sufficiently to
maintain the peg to a strengthening U.S. dollar.
<TABLE>
<CAPTION>
Non-U.S. Equity Environment
6 months 1 year 7/31/95*
Major Markets ended ended to
Total Return in U.S. Dollar Hedged Terms 6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Japan 10.34% 0.16% 16.80%
U.K. 12.04 26.27 18.14
Germany 33.62 48.75 32.17
France 24.72 38.71 28.31
Canada 13.72 35.08 24.59
Netherlands 37.77 62.07 48.28
Australia 12.64 21.32 11.58
- --------------------------------------------------------------------------------
6 months 1 year 7/31/95*
Major Currencies ended ended to
Percent Change Relative to U.S. Dollars 6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
Yen 1.43% -4.15% -12.78%
Pound -2.75 7.11 2.07
Deutschemark -11.56 -12.65 -11.44
Canadian Dollar -0.65 -1.01 -0.27
- --------------------------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey Class Non-U.S. Equity Fund.
Returns in excess of 1 year are average annualized returns.
- --------------------------------------------------------------------------------
5
<PAGE>
Non-U.S. Equity Fund
- --------------------------------------------------------------------------------
The Non-U.S. Equity Fund invests in the common stocks of companies headquartered
outside the U.S. We believe that in a non-U.S. investment program the country
allocation decision is the most important. Country assessments are developed by
the non-U.S. strategy team in Chicago working with our investment teams in
Basel, Frankfurt, London, Paris, Singapore, Sydney and Tokyo. Currency
strategies are separately developed and coordinated with market allocations. Our
industry strategies and individual security selections are determined by
fundamental research.
Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has
earned an annualized return of 18.37% versus 10.81% for the benchmark, the
Morgan Stanley Capital International Non-U.S. Equity (Free) Index. For the year
ended June 30, 1997, the Fund returned 19.32% while the benchmark returned
13.64%. For the first half of 1997, the SwissKey Non-U.S. Equity Fund returned
13.80% outperforming the 11.21% return of the benchmark.
In the first half of the year, the best performing markets in dollar-hedged
terms were Switzerland, the Netherlands and Spain, followed by Germany, Finland
and Sweden, each growing over 30%. In aggregate, the non-U.S. markets were very
strong, gaining 17.76% in dollar-hedged terms. At the opposite end of the
spectrum, Malaysia experienced a steep decline, down 12.34%, followed by
Singapore's loss of 3.79%; notably, these were the only markets to decline.
Japan's 10.34% hedged increase was relatively subdued, the fourth weakest in the
year-to-date period.
Market allocation had a somewhat negative impact on returns. The value added
from underweighting Japan and Southeast Asia, as from overweighting continental
Europe, was offset by holding strategic cash, underweighting Switzerland and
overweighting New Zealand.
Currency management had a highly significant positive impact on performance,
accounting for an important portion of the value added by the Fund. Defensive
strategies that focused on holding the U.S. dollar, while maintaining minimal
exposure to the core European currencies and the yen, continued to prove highly
successful for the first half of the year. This was a period when the DM-bloc
currencies fell considerably: the Belgian franc, the Dutch guilder, the French
franc and the DM, all losing over 12%.
Overall stock selection was very beneficial. In particular, Japanese stock
selection added substantial value, while stock selection in several other
markets (the Netherlands, Germany, France and Finland) also made a positive
contribution.
================================================================================
6
<PAGE>
Non-U.S. Equity Fund
- --------------------------------------------------------------------------------
Total Return
6 months 1 year 7/31/95*
ended ended to
6/30/97 6/30/97 6/30/97
- --------------------------------------------------------------------------------
SwissKey Non-U.S. Equity Fund 13.80% 19.32% 18.37%
MSCI Non-U.S. Equity (Free) Index** 11.21 13.64 10.81
- --------------------------------------------------------------------------------
* Inception date of the SwissKey Non-U.S. Equity Fund.
** Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Non-
U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through June 30, 1997. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
SwissKey Non-U.S. Equity Fund
vs. MSCI Non-U.S. Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
$13,815 ====== SwissKey Non-U.S. Equity Fund
$12,174 ------ MSCI Non-U.S. Equity (Free) Index
<TABLE>
SwissKey Non-U.S. MSCI Non-U.S.
Equity Fund Equity (Free) Index
- --------------------------------------------------------------------------------
<S> <C> <C>
7/31/95 $10,000.00 $10,000.00
9/30/95 $10,302.00 $ 9,817.00
12/31/95 $10,858.00 $10,220.00
3/31/96 $11,158.00 $10,538.00
6/30/96 $11,578.00 $10,713.00
9/30/96 $11,630.00 $10,727.00
12/31/96 $12,104.00 $10,947.00
3/31/97 $12,328.00 $10,775.00
6/30/97 $13,815.00 $12,174.00
</TABLE>
7/31/95 = $10,000 Data through 6/30/97
Fund returns are net of all fees and costs, while the Index returns are
based solely on market returns without deduction for fees or transaction costs
for rebalancing.
- --------------------------------------------------------------------------------
7
<PAGE>
Non-U.S. Equity Fund
Industry Diversification
As a Percent of Net Assets
As of June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NON-U.S. EQUITIES
Aerospace & Military......................................... 0.13%
Airlines..................................................... 0.55
Appliances & Household Durables.............................. 2.52
Automobiles.................................................. 2.47
Banking...................................................... 11.10
Beverages & Tobacco.......................................... 1.74
Broadcasting & Publishing.................................... 1.43
Building Materials........................................... 1.66
Business & Public Service.................................... 3.95
Chemicals.................................................... 4.10
Construction................................................. 1.70
Data Processing.............................................. 1.21
Electric Components.......................................... 1.52
Electronics.................................................. 4.06
Energy....................................................... 6.57
Financial Services........................................... 1.27
Food & House Products........................................ 3.33
Forest Products.............................................. 1.88
Gold Mining.................................................. 0.07
Health & Personal Care....................................... 5.38
Industrial Components........................................ 2.01
Insurance.................................................... 4.42
Leisure & Tourism............................................ 0.56
Machinery & Engineering...................................... 1.09
Merchandising................................................ 4.17
Metals-Steel................................................. 1.84
Miscellaneous Materials...................................... 0.66
Multi-Industry............................................... 4.54
Non-Ferrous Metals........................................... 2.00
Real Estate.................................................. 0.91
Recreation................................................... 0.82
Shipping..................................................... 0.52
Telecommunications........................................... 5.80
Textiles & Apparel........................................... 0.19
Transportation............................................... 0.95
Utilities.................................................... 4.51
Wholesale & International Trade.............................. 0.27
------
Total Non-U.S. Equities.............................. 91.90*
------
SHORT-TERM INVESTMENTS....................................... 8.31*
------
TOTAL INVESTMENTS.................................... 100.21
LIABILITIES, LESS CASH
AND OTHER ASSETS..................................... (0.21)
------
NET ASSETS........................................... 100.00%
======
</TABLE>
Market and Currency Strategy
As of June 30, 1997
Portfolio
------------------------
Market Currency
Strategy Strategy Index
- ---------------------------------------------------
U.S. Dollar 0.0% 5.9% 0.0%
Japan 28.7 31.7 31.7
Australia 4.8 2.7 2.7
Belgium 3.1 1.1 1.1
Canada 2.8 4.5 4.5
Finland 0.7 0.7 0.7
France 4.5 6.4 6.4
Germany 8.6 8.1 8.1
Hong Kong 1.4 0.4 3.6
Italy 3.3 3.3 2.9
Malaysia 2.8 2.0 2.0
Netherlands 5.5 4.8 4.8
New Zealand 3.2 3.2 0.3
Spain 2.2 2.2 2.3
Sweden 0.0 2.3 2.3
Switzerland 2.4 6.2 6.2
U.K. 18.8 13.3 17.3
Cash Reserves 5.0 0.0 0.0
Other Markets 2.2 1.2 3.1
- ---------------------------------------------------
100.0% 100.0% 100.0%
Top Ten Non-U.S. Equity Holdings
As of June 30, 1997
Percent of
Net Assets
- -------------------------------------------------
1. Royal Dutch Petroleum Co. 1.46%
2. Glaxo Wellcome PLC 1.24
3. Matsushita Electric Industrial Co. 1.20
4. Toray Industries, Inc. 1.17
5. Telecom Corp. of New Zealand Ltd. 1.15
6. General Electric Co. PLC 1.06
7. British Telecommunications PLC 0.99
8. Sankyo Co. Ltd. 0.98
9. Lloyds TSB Group PLC 0.96
10. British Petroleum Co. PLC 0.94
- -------------------------------------------------
* The Fund held a long position in Topix futures on June 30, 1997 which
increased Japanese equity exposure from 25.76% to 26.72% and decreased the
Fund's exposure to Short-Term Investments from 8.31% to 7.35%
- --------------------------------------------------------------------------------
8
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Non-U.S. Equities -- 91.90%
AUSTRALIA -- 4.72%
Amcor Ltd................................................. 118,700 $ 782,583
Boral Ltd................................................. 202,000 631,080
Brambles Industries Ltd................................... 29,000 569,045
Broken Hill Proprietary Co. Ltd........................... 261,270 3,813,662
Coca-Cola Amatil Ltd...................................... 37,000 476,790
CSR Ltd................................................... 152,000 584,195
David Jones Ltd........................................... 505,600 700,770
Lend Lease Corp. Ltd...................................... 34,578 725,362
M.I.M. Holdings Ltd....................................... 346,840 509,310
National Australia Bank Ltd............................... 185,448 2,635,641
News Corp. Ltd............................................ 387,257 1,842,340
News Corp. Ltd. Preferred................................. 95,000 371,528
Pacific Dunlop Ltd........................................ 242,700 712,775
Qantas Airways Ltd........................................ 249,010 578,329
Rio Tinto Ltd............................................. 94,209 1,593,724
Santos Ltd................................................ 73,900 308,387
Westpac Banking Corp. Ltd................................. 323,851 1,933,750
WMC Ltd................................................... 167,700 1,049,099
Woolworth's Ltd........................................... 124,000 404,118
------------
20,222,488
------------
BELGIUM -- 3.03%
Delhaize-Le Lion S.A...................................... 16,200 851,683
Electrabel S.A............................................ 8,965 1,922,675
Fortis AG................................................. 723 161
Fortis AG Strip (b)....................................... 8,833 1,825,569
General de Banque S.A..................................... 2,000 770,515
Groupe Bruxelles Lambert S.A.............................. 5,230 877,243
Kredietbank NV............................................ 3,286 1,325,369
Petrofina S.A............................................. 4,775 1,809,718
Societe Generale de Belgique.............................. 8,428 787,707
Solvay S.A. Class A....................................... 1,503 886,331
Tractebel................................................. 2,350 980,528
Tractebel Warrants "99" (b)............................... 1,350 14,495
Union Miniere Group S.A. (b).............................. 10,070 943,975
------------
12,995,969
------------
CANADA -- 2.92%
Alcan Aluminium Ltd....................................... 24,300 829,610
Bank of Montreal.......................................... 22,000 859,524
Barrick Gold Corp......................................... 13,600 296,231
BCE, Inc.................................................. 27,000 751,522
Canadian National Railway Co.............................. 16,900 737,446
Canadian Pacific Ltd...................................... 55,600 1,583,850
Hudson's Bay Co........................................... 23,000 516,816
Imperial Oil Ltd.......................................... 20,000 1,025,660
MacMillan Bloedel Ltd..................................... 33,300 457,404
Moore Corp. Ltd........................................... 21,800 429,806
Noranda, Inc.............................................. 25,100 541,262
Northern Telecom Ltd...................................... 8,400 757,741
NOVA Corp................................................. 35,000 299,362
Royal Bank of Canada...................................... 24,700 1,119,879
Seagram Co. Ltd........................................... 21,300 856,879
Thomson Corp.............................................. 34,900 804,451
TransCanada Pipelines Ltd................................. 33,100 665,791
------------
12,533,234
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
FINLAND -- 0.69%
Merita Ltd. Class A....................................... 94,500 $ 314,745
Nokia Ab Class A.......................................... 19,200 1,433,845
Outokumpu Class A......................................... 16,200 321,243
Pohjola Insurance Group Class B........................... 3,900 115,629
Sampo Insurance Co. Ltd. Class A.......................... 1,700 165,281
The Rauma Group........................................... 693 15,877
UPM-Kymmene Corp.......................................... 24,900 575,257
------------
2,941,877
------------
FRANCE -- 5.90%
Accor S.A................................................. 6,695 1,003,509
Alcatel Alsthom........................................... 9,725 1,219,145
AXA UAP................................................... 19,551 1,217,150
AXA UAP Rights (b)........................................ 10,752 41,755
Banque Nationale de Paris................................. 21,930 904,692
Cie Bancaire S.A.......................................... 6,688 854,369
Cie de Saint Gobain....................................... 10,613 1,549,198
Cie de Suez............................................... 162,880 400,889
Cie Generale des Eaux..................................... 7,964 1,021,443
Cie Generale des Eaux Warrants "01" (b)................... 13,864 8,312
Colas..................................................... 3,077 406,179
Dexia France.............................................. 9,050 881,724
Elf Aquitaine S.A......................................... 15,334 1,655,894
Groupe Danone............................................. 6,100 1,008,874
Lafarge S.A............................................... 9,000 560,296
Lagardere S.C.A........................................... 20,800 604,762
LVMH...................................................... 3,715 999,779
Michelin Class B.......................................... 21,550 1,295,349
Pechiney S.A. Class A..................................... 21,893 863,265
Peugeot S.A............................................... 12,280 1,188,050
Rhone-Poulenc Class A..................................... 31,230 1,276,648
SEITA..................................................... 23,700 750,843
Societe Generale.......................................... 11,203 1,251,775
Suez Lyonnaise des Eaux S.A............................... 9,600 968,012
Thomson CSF............................................... 21,700 559,595
Total S.A. Class B........................................ 13,595 1,375,478
Usinor Sacilor............................................ 79,900 1,442,582
------------
25,309,567
------------
GERMANY -- 8.90%
Allianz AG Holding........................................ 15,730 3,362,461
BASF AG................................................... 42,880 1,583,455
Bayer AG.................................................. 56,790 2,189,997
Bayerische Motoren Werke AG............................... 2,000 1,650,407
Commerzbank AG............................................ 46,940 1,341,451
Daimler-Benz AG........................................... 22,450 1,828,104
Deutsche Bank AG.......................................... 45,567 2,677,643
Deutsche Telekom AG....................................... 112,550 2,767,570
Henkel KGaA-Vorzug AG..................................... 17,950 1,011,529
Hochtief AG............................................... 13,400 599,793
Hoechst AG................................................ 18,580 787,939
M.A.N. AG................................................. 3,040 947,274
Mannesmann AG............................................. 3,607 1,612,449
Metro AG.................................................. 13,208 1,440,101
Muenchener Rueckver AG.................................... 792 2,245,197
Muenchener Rueckver AG Warrants "98" (b).................. 12 4,304
Preussag AG............................................... 4,469 1,315,619
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
RWE AG.................................................. 32,200 $ 1,385,860
Schering AG............................................. 18,592 1,992,991
Siemens AG.............................................. 23,500 1,408,571
Thyssen AG.............................................. 7,150 1,721,235
Veba AG................................................. 37,688 2,130,304
Volkswagen AG........................................... 2,850 2,162,114
------------
38,166,368
------------
HONG KONG -- 1.39%
Cheung Kong Holdings Ltd................................ 58,000 572,716
China Light & Power Co. Ltd............................. 111,000 628,980
Guoco Group Ltd......................................... 68,000 358,112
Hang Seng Bank Ltd...................................... 45,500 648,968
Hong Kong Telecommunications Ltd........................ 193,200 461,348
Hutchison Whampoa Ltd................................... 123,000 1,063,725
Jardine Matheson Holdings ADR (c)....................... 45,200 320,920
New World Development Co. Ltd........................... 77,000 459,179
Sun Hung Kai Properties Ltd............................. 39,000 469,422
Swire Pacific Ltd. Class A.............................. 63,000 567,198
Wharf (Holdings) Ltd.................................... 98,000 425,025
------------
5,975,593
------------
ITALY -- 3.24%
Assicurazioni Generali.................................. 74,250 1,348,413
Banca Commerciale Italiana.............................. 198,000 409,615
Credito Italiano Spa.................................... 502,000 917,555
Danieli & Co. Savings (Risp)............................ 129,100 451,452
Edison Spa.............................................. 79,600 395,544
ENI ADR (c)............................................. 22,100 1,256,938
ENI Spa................................................. 165,000 933,368
Fiat Spa-Priv........................................... 551,200 1,017,201
INA-Istituto Nazionale delle Assicurazioni.............. 310,100 472,030
Istituto Mobilaire Italiano Spa......................... 79,100 711,272
Italgas Spa............................................. 107,300 346,841
La Rinascente Spa....................................... 68,900 382,463
La Rinascente Spa Rights (b)............................ 159,200 7,111
La Rinascente Spa RNC................................... 90,300 219,448
La Rinascente Spa RNC Rights (b)........................ 159,200 25,917
La Rinascente Spa Warrants "99" (b)..................... 2,800 1,382
Mediobanca Spa.......................................... 34,600 209,857
Montedison Spa (b)...................................... 1,408,280 928,646
SAI-Savings (Risp)...................................... 83,000 255,610
Telecom Italia Mobile Spa............................... 214,000 691,743
Telecom Italia Mobile Spa RNC........................... 600,000 1,071,995
Telecom Italia Spa...................................... 130,000 388,892
Telecom Italia Spa RNC.................................. 732,300 1,448,245
------------
13,891,538
------------
JAPAN -- 25.76%
Amada Co. Ltd........................................... 173,000 1,526,960
Asahi Glass Co. Ltd..................................... 204,000 2,032,334
Bank of Tokyo-Mitsubishi, Ltd........................... 187,000 3,758,630
Canon, Inc.............................................. 139,000 3,789,915
Canon Sales Co., Inc.................................... 58,200 1,357,983
Citizen Watch Co. Ltd................................... 157,000 1,212,864
Dai Nippon Printing Co. Ltd............................. 158,000 3,576,160
Daiichi Pharmaceutical Co. Ltd.......................... 113,000 1,994,757
Daikin Industries Ltd................................... 170,000 1,545,049
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Daiwa House Industry Co. Ltd.............................. 85,000 $ 1,039,937
Fanuc..................................................... 68,100 2,618,544
Fujitsu................................................... 101,000 1,403,391
Hitachi Ltd............................................... 337,000 3,769,641
Honda Motor Co............................................ 43,000 1,296,426
Inax...................................................... 177,000 1,327,152
Isetan.................................................... 58,000 719,741
Ito Yokado Co. Ltd........................................ 65,000 3,777,419
Kaneka Corp............................................... 158,000 991,383
Keio Teito Electric Railway............................... 193,000 919,208
Kinki Nippon Railway...................................... 195,000 1,192,869
Kirin Brewery Co. Ltd..................................... 184,000 1,913,484
Kokuyo.................................................... 56,000 1,517,085
Kuraray Co. Ltd........................................... 202,000 2,012,409
Kyocera Corp.............................................. 21,000 1,670,017
Maeda Road Construction................................... 34,000 292,668
Marui Co. Ltd............................................. 90,000 1,675,260
Matsushita Electric Industrial Co......................... 255,000 5,147,689
Mitsubishi Paper Mills.................................... 211,000 826,077
NGK Insulators............................................ 275,000 3,028,052
Nintendo Corp. Ltd........................................ 15,500 1,300,358
Nippon Denso Co. Ltd...................................... 82,000 1,963,471
Nippon Meat Packers, Inc.................................. 108,000 1,396,836
Nippon Steel Co........................................... 132,000 422,197
Okumura................................................... 173,000 917,688
Osaka Gas Co.............................................. 330,000 948,790
Sankyo Co. Ltd............................................ 125,000 4,205,628
Sanwa Bank Ltd............................................ 83,000 1,233,068
Secom..................................................... 40,000 2,939,789
Seino Transportation...................................... 114,000 1,235,340
Sekisui House Ltd......................................... 331,000 3,355,414
Shinmaywa Industries Ltd.................................. 72,000 507,769
Sony Corp................................................. 38,600 3,369,868
Sumitomo Bank............................................. 181,000 2,973,696
Sumitomo Chemical Co...................................... 20,000 90,710
Sumitomo Electric Industries.............................. 140,000 2,349,034
Sumitomo Trust & Banking.................................. 95,000 1,021,148
Takeda Chemical Industries................................ 106,000 2,982,784
TDK Corp.................................................. 30,000 2,204,841
Tokio Marine & Fire Insurance Co.......................... 154,000 2,018,701
Tokyo Electric Power...................................... 44,500 937,211
Tokyo Steel Mfg........................................... 123,700 1,383,693
Tonen Corp................................................ 123,000 1,483,352
Toray Industries, Inc..................................... 702,000 5,012,095
Toshiba Corp.............................................. 397,000 2,556,926
Toyo Suisan Kaisha........................................ 93,000 950,887
Toyota Motor Corp......................................... 44,000 1,299,659
Yamazaki Baking Co. Ltd................................... 81,000 1,429,870
------------
110,423,927
------------
MALAYSIA -- 1.63%
Hume Industries (Malaysia) Bhd............................ 70,000 321,712
Kuala Lumpur Kepong Bhd................................... 182,000 450,673
Land & General Holdings Bhd............................... 211,500 243,007
Malayan Banking Bhd....................................... 90,000 944,929
Malaysia International Shipping Bhd (Frgn.)............... 126,000 326,981
Nestle (Malaysia) Bhd..................................... 30,000 224,643
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
MALAYSIA (CONTINUED)
New Straits Times Press Bhd.............................. 24,000 $ 140,729
Perusahaan Otomobil Nasional Bhd......................... 35,000 163,629
Public Bank Bhd (Frgn.).................................. 194,998 304,395
Resorts World Bhd........................................ 134,000 403,487
Rothmans of Pall Mall Bhd................................ 20,000 196,513
Sime Darby Bhd........................................... 219,000 728,843
Telekom Malaysia Bhd..................................... 171,000 799,445
Tenaga Nasional Bhd...................................... 207,000 1,008,756
UMW Holdings Bhd......................................... 36,000 169,731
United Engineers Ltd..................................... 51,000 367,750
YTL Corp. Bhd............................................ 55,000 169,968
YTL Power International Bhd (b).......................... 4,900 6,174
------------
6,971,365
------------
NETHERLANDS -- 5.66%
ABN AMRO Holdings NV..................................... 102,046 1,906,233
Akzo Nobel NV............................................ 3,400 466,799
DSM NV................................................... 6,450 642,926
Elsevier NV.............................................. 89,800 1,503,313
Heineken NV.............................................. 3,700 632,624
Hoogovens NV............................................. 10,900 608,615
ING Groep NV............................................. 69,233 3,197,870
KLM Royal Dutch Air Lines NV............................. 34,300 1,059,128
KPN NV................................................... 55,248 2,171,233
Philips Electronics NV................................... 32,000 2,296,330
Royal Dutch Petroleum Co................................. 119,720 6,238,663
Royal Dutch Petroleum Co. NY Shares (c).................. 20,800 1,131,000
Unilever NV.............................................. 11,440 2,412,601
------------
24,267,335
------------
NEW ZEALAND -- 3.33%
Brierley Investments Ltd................................. 2,405,600 2,347,945
Carter Holt Harvey Ltd................................... 829,600 2,142,376
Fletcher Challenge Building.............................. 286,572 860,477
Fletcher Challenge Energy................................ 315,692 952,194
Fletcher Challenge Forest Ltd............................ 546,445 792,615
Fletcher Challenge Paper................................. 568,984 1,376,798
Telecom Corp. of New Zealand Ltd......................... 970,200 4,932,017
Telecom Corp. of New Zealand ADS (c)..................... 21,000 855,750
------------
14,260,172
------------
SINGAPORE -- 1.47%
City Developments Ltd.................................... 51,000 499,371
DBS Land Ltd............................................. 82,000 259,225
Development Bank of Singapore Ltd........................ 63,000 793,118
Fraser & Neave Ltd....................................... 13,000 92,740
Hotel Properties Ltd..................................... 155,000 263,428
Keppel Corp. Ltd. (b).................................... 36,750 163,213
Oversea-Chinese Banking Corp. Ltd........................ 113,400 1,173,815
Singapore Airlines Ltd. (Frgn.).......................... 80,000 716,184
Singapore Press Holdings Ltd. (Frgn.).................... 37,000 745,279
Singapore Telecommunications, Ltd........................ 290,000 535,459
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
United Overseas Bank Ltd. (Frgn.)......................... 81,000 $ 832,774
Wing Tai Holdings Ltd..................................... 78,000 224,759
------------
6,299,365
------------
SPAIN -- 2.30%
Acerinox S.A.............................................. 1,900 356,694
Banco Bilbao-Vizcaya S.A.................................. 12,300 1,001,095
Banco Central Hispanoamericano............................ 14,830 543,508
Banco Popular Espanol S.A................................. 2,680 657,836
Banco Santander S.A....................................... 29,400 907,568
Empresa Nacional de Electridad S.A........................ 17,500 1,471,918
Fomento de Construcciones y Contratas S.A................. 4,000 511,049
Gas Natural SDG S.A....................................... 2,800 612,851
Iberdrola S.A............................................. 61,900 782,852
Mapfre Corp............................................... 5,200 277,201
Repsol S.A................................................ 13,800 584,579
Repsol S.A. ADR (c)....................................... 7,700 326,769
Telefonica de Espana...................................... 42,300 1,225,253
Vallehermosa S.A.......................................... 10,000 270,279
Viscofan Envolturas Celulosicas S.A....................... 14,400 337,309
------------
9,866,761
------------
SWITZERLAND -- 2.08%
ABB AG (Bearer)........................................... 315 477,502
Alusuisse-Lonza Holding AG (Reg.)......................... 350 362,988
Ciba Specialty Chemicals AG (Reg.)........................ 1,267 117,323
CS Holdings AG (Reg.)..................................... 3,878 498,748
Nestle S.A. (Reg.)........................................ 1,305 1,724,007
Novartis AG (Reg.)........................................ 1,603 2,566,295
Roche Holding AG (Gen.)................................... 184 1,666,589
Swiss Reinsurance Co. (Reg.).............................. 250 354,105
UBS (Bearer).............................................. 400 458,193
Zurich Versicherungs (Reg.)............................... 1,741 693,821
------------
8,919,571
------------
UNITED KINGDOM -- 18.88%
Abbey National PLC........................................ 101,000 1,378,381
Bass PLC.................................................. 61,500 750,262
B.A.T. Industries PLC..................................... 353,000 3,157,818
BG PLC.................................................... 711,300 2,604,410
Booker PLC................................................ 74,500 338,495
British Energy PLC........................................ 620,000 1,511,692
British Petroleum Co. PLC................................. 324,534 4,034,732
British Steel PLC......................................... 789,000 1,963,144
British Telecommunications PLC............................ 574,200 4,262,182
BTR PLC................................................... 183,000 625,888
Centrica PLC.............................................. 706,300 858,116
Charter PLC............................................... 88,914 1,180,143
Coats Viyella PLC......................................... 392,100 822,245
FKI PLC................................................... 440,625 1,246,671
General Electric Co. PLC.................................. 757,700 4,527,158
Glaxo Wellcome PLC........................................ 256,500 5,304,173
Grand Metropolitan PLC.................................... 116,700 1,122,620
Guinness PLC.............................................. 257,200 2,516,994
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Hanson PLC................................................ 156,312 $ 775,251
Hillsdown Holdings PLC.................................... 501,900 1,415,862
House of Fraser PLC....................................... 536,800 1,424,975
HSBC Holdings PLC......................................... 111,000 3,414,887
Imperial Chemical Industries PLC.......................... 36,000 499,692
Inchcape PLC.............................................. 173,000 814,829
Legal & General Group PLC................................. 244,000 1,652,792
Lloyds TSB Group PLC...................................... 400,185 4,109,414
Marks & Spencer PLC....................................... 292,900 2,427,631
Mirror Group PLC.......................................... 230,600 721,525
National Westminster Bank PLC............................. 102,500 1,377,528
Northern Foods PLC........................................ 292,000 967,097
Peninsular & Oriental Steam Navigation Co................. 189,700 1,888,002
Reckitt & Colman PLC...................................... 55,746 832,224
Redland PLC............................................... 86,600 490,039
Reuters Holdings PLC...................................... 112,000 1,179,928
Rio Tinto PLC............................................. 109,800 1,912,386
RJB Mining PLC............................................ 205,000 1,228,260
Royal & Sun Alliance Insurance Group PLC.................. 274,149 2,025,833
Sainsbury (J.) PLC........................................ 222,000 1,344,895
Scottish Hydro-Electric PLC............................... 117,800 813,631
Sears PLC................................................. 657,700 744,339
Sedgwick Group PLC........................................ 429,000 878,206
SmithKline Beecham PLC.................................... 127,800 2,351,384
Smurfit (Jefferson) Group PLC............................. 390,000 1,122,909
Tesco PLC................................................. 196,900 1,215,776
Thames Water PLC.......................................... 133,600 1,534,226
Unilever PLC.............................................. 28,200 806,787
Vodafone Group PLC........................................ 182,500 889,948
Williams PLC.............................................. 227,000 1,227,844
Yorkshire Water PLC....................................... 94,400 617,445
------------
80,910,669
------------
Total Non-U.S. Equities
(Cost $344,810,576)...................................... 393,955,799
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
Short-Term Investments -- 8.31%
<S> <C> <C>
COMMERCIAL PAPER -- 8.31%
American Stores Co.
5.830%, due 07/23/97.................................. $1,500,000 $ 1,499,146
Case Credit Corp.
6.250%, due 07/07/97.................................. 2,000,000 1,997,916
5.760%, due 07/21/97.................................. 1,250,000 1,246,000
Crown Cork & Seal Co.
5.800%, due 07/09/97.................................. 1,500,000 1,498,067
CSX Corp. 5.780%, due 07/09/97......................... 2,000,000 1,997,431
Cummins Engine Company, Inc.
6.500%, due 07/01/97.................................. 2,500,000 2,500,000
Enron Oil & Gas 6.520%, due 07/01/97................... 2,183,000 2,183,000
Hughes Electronics Corp.
5.780%, due 07/11/97.................................. 1,000,000 998,395
5.850%, due 08/11/97.................................. 3,000,000 2,980,012
Marriott Corp. 5.770%, due 07/08/97.................... 1,000,000 998,878
Norfolk Southern Corp.
5.780%, due 07/18/97.................................. 1,500,000 1,495,906
Occidental Petroleum
5.800%, due 08/13/97.................................. 1,750,000 1,737,876
Sundstrand Corp.
5.800%, due 07/09/97.................................. 2,000,000 1,997,422
5.850%, due 07/15/97.................................. 1,000,000 997,725
Tenneco, Inc.
5.780%, due 07/17/97.................................. 1,500,000 1,496,147
5.800%, due 07/23/97.................................. 2,000,000 1,992,911
Textron Financial Corp.
6.400%, due 07/01/97.................................. 8,000,000 8,000,000
------------
Total Short-Term Investments
(Cost $35,616,832).................................... 35,616,832
------------
Total Investments
(Cost $380,427,408) -- 100.21% (a).................... 429,572,631
------------
Liabilities, less cash and other
assets -- (0.21%)..................................... (920,308)
------------
Net Assets -- 100%..................................... $428,652,323
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $381,041,356; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $58,108,348
Gross unrealized depreciation................................ (9,577,073)
-----------
Net unrealized appreciation................................ $48,531,275
===========
</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 June 30, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Canadian Dollar......... 08/22/97 7,100,000 $ 5,163,674 $ (134,833)
Dutch Guilder........... 08/22/97 12,700,000 6,506,548 (231,329)
French Franc............ 08/22/97 82,000,000 14,016,830 (405,811)
German Mark............. 08/22/97 5,500,000 3,168,659 (87,835)
Japanese Yen............ 08/22/97 3,025,000,000 26,643,827 1,619,521
Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 (139,252)
Swedish Krona........... 08/22/97 65,000,000 8,424,229 (359,555)
Swiss Franc............. 08/22/97 21,600,000 14,912,081 (52,213)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar....... 08/22/97 18,800,000 14,092,320 495,907
Belgian Franc........... 08/22/97 235,000,000 6,560,714 205,614
British Pounds.......... 08/22/97 8,750,000 14,538,989 (569,527)
Dutch Guilder........... 08/22/97 19,700,000 10,092,834 337,621
French Franc............ 08/22/97 82,000,000 14,016,830 409,757
German Mark............. 08/22/97 8,800,000 5,069,855 157,972
Hong Kong Dollar........ 08/22/97 25,800,000 3,327,727 (1,613)
Japanese Yen............ 08/22/97 1,150,000,000 10,129,058 (466,880)
Spanish Peseta.......... 08/22/97 665,000,000 4,524,143 80,228
-----------
Total................. $ 857,772
===========
FUTURES CONTRACTS (NOTE 5)
The Non-U.S. Equity Fund had the following open index futures contracts as of
June 30, 1997:
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Topix, 30 contracts..... September 1997 $ 4,009,756 $ 4,117,382 $ 107,626
===========
</TABLE>
The segregated cash pledged to cover margin requirements for the open positions
at June 30, 1997 was $1,019,494.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $380,427,408) (Note 1)............... $429,572,631
Cash............................................................. 879,934
Foreign currency, at value (Cost $2,612,014)..................... 3,192,987
Receivables:
Investment securities sold...................................... 5,328,950
Dividends....................................................... 2,962,324
Fund shares sold................................................ 127,682
Variation margin (Note 5)....................................... 107,626
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 857,772
Other assets..................................................... 56,372
------------
TOTAL ASSETS.................................................. 443,086,278
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 12,332,011
Fund shares redeemed............................................ 1,596,751
Investment advisory fees (Note 2)............................... 378,079
Accrued expenses................................................ 127,114
------------
TOTAL LIABILITIES............................................. 14,433,955
------------
NET ASSETS........................................................ $428,652,323
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $356,332,425
Accumulated undistributed net investment income.................. 1,777,930
Accumulated net realized gain.................................... 19,814,253
Net unrealized appreciation...................................... 50,727,715
------------
NET ASSETS.................................................... $428,652,323
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $420,854,653 and 33,436,374 shares is-
sued and outstanding) (Note 7)................................. $ 12.59
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,000 and 79 shares issued and outstanding) (Note 7).......... $ 12.59
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $7,796,670 and 624,388 shares issued
and outstanding) (Note 7)...................................... $ 12.49
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,127,372 for foreign taxes withheld)......... $ 7,182,900
Interest......................................................... 1,394,180
-----------
TOTAL INCOME.................................................. 8,577,080
-----------
EXPENSES:
Advisory (Note 2)................................................ 2,420,667
Custodian........................................................ 116,023
Distribution (Note 6)............................................ 24,209
Other............................................................ 486,426
-----------
TOTAL EXPENSES................................................ 3,047,325
-----------
NET INVESTMENT INCOME ........................................ 5,529,755
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 13,830,230
Futures contracts............................................... (371,505)
Foreign currency transactions................................... 10,962,774
-----------
Net realized gain............................................. 24,421,499
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency ............................... 36,478,339
Futures contracts .............................................. 87,477
Forward contracts............................................... (1,207,773)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 33,687
-----------
Change in net unrealized appreciation or depreciation......... 35,391,730
-----------
Net realized and unrealized gain.................................. 59,813,229
-----------
Net increase in net assets resulting from operations.............. $65,342,984
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED YEAR
JUNE 30, ENDED
1997 JUNE 30, 1996
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 5,529,755 $ 3,265,964
Net realized gain................................. 24,421,499 22,260,813
Change in net unrealized appreciation or deprecia-
tion ............................................ 35,391,730 10,918,989
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 65,342,984 36,445,766
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I ................................. (4,371,883) (3,057,609)
SwissKey Class................................... (40,369) (8,629)
Distributions from net realized gain:
Brinson Class I.................................. (12,209,010) (8,632,717)
SwissKey Class................................... (94,152) (14,731)
------------ ------------
Total distributions to shareholders............... (16,715,414) (11,713,686)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 232,045,893 86,752,018
Shares issued on reinvestment of distributions.... 16,204,754 10,473,903
Shares redeemed................................... (81,854,223) (56,648,208)
------------ ------------
Net increase in net assets resulting from capital
share transactions (Note 7)...................... 166,396,424 40,577,713
------------ ------------
TOTAL INCREASE IN NET ASSETS.................... 215,023,994 65,309,793
------------ ------------
NET ASSETS:
Beginning of year................................. 213,628,329 148,318,536
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,777,930 and $785,599,
respectively).................................... $428,652,323 $213,628,329
============ ============
</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>
YEAR ENDED JUNE 30, AUGUST 31, 1993*
----------------------------- THROUGH
BRINSON CLASS I 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------
Income from investment opera-
tions:
Net investment income....... 0.18 0.18 0.15 0.10
Net realized and unrealized
gain (loss)................ 1.97 2.05 (0.16) (0.34)
-------- -------- -------- -------
Total income (loss) from
investment operations.... 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------
Less distributions:
Distributions from net in-
vestment income............ (0.17) (0.18) -- (0.07)
Distributions from net real-
ized gain.................. (0.56) (0.56) -- --
-------- -------- -------- -------
Total distributions....... (0.73) (0.74) -- (0.07)
-------- -------- -------- -------
Net asset value, end of peri-
od........................... $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== =======
Total return (non-annualized). 20.27% 23.64% (0.10)% (2.45)%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $420,855 $212,366 $148,319 $71,544
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 1.00% 1.20% 1.23% 1.60%**
After expense reimbursement. N/A 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reimburse-
ment....................... 1.83% 1.67% 1.93% 1.28%**
After expense reimbursement. N/A 1.87% 2.16% 1.88%**
Portfolio turnover rate...... 25% 20% 14% 12%
Average commission rate paid
per share................... $ 0.0245 $ 0.0219 N/A N/A
</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>
YEAR JULY 31, 1995*
ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 11.12 $ 10.26
------- -------
Income from investment operations:
Net investment income........................... 0.11 0.12
Net realized and unrealized gain................ 1.93 1.45
------- -------
Total income from investment operations....... 2.04 1.57
------- -------
Less distributions:
Distributions from net investment income........ (0.11) (0.15)
Distributions from net realized gain............ (0.56) (0.56)
------- -------
Total distributions........................... (0.67) (0.71)
------- -------
Net asset value, end of period.................... $ 12.49 $ 11.12
======= =======
Total return (non-annualized)..................... 19.32% 15.78%
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $ 7,797 $ 1,262
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.81% 2.04%**
After expense reimbursement..................... N/A 1.84%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 1.02% 0.83%**
After expense reimbursement..................... N/A 1.03%**
Portfolio turnover rate.......................... 25% 20%
Average commission rate paid per share........... $0.0245 $0.0219
</TABLE>
* Commencement of SwissKey Class
** Annualized
N/A = Not applicable
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. Effective June 30, 1997, the Fund has three
classes of shares outstanding, Brinson Class I, Brinson Class N and SwissKey
Class. There are an unlimited number of shares of each class with par value of
$0.001 authorized. Each share of the Fund represents an identical interest in
the investments of the Fund and has the same rights. The following is a summary
of significant accounting policies consistently followed by the Non-U.S. Equity
Fund (the "Fund") in the preparation of its financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward foreign currency contracts are valued daily using quoted
forward exchange rates. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the year ended June 30, 1997, therefore,
no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its
net investment income on a semi-annual basis and net capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing tax treatments for foreign
currency transactions. Differences in dividends per share between the classes
are due to distribution expenses.
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the SwissKey Class.
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
19
<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 that total annualized expenses exceed a
specified percentage of the Fund's average daily net assets. The expense cap is
1.00%, 1.25% and 1.84% of the average daily net assets of the Brinson Class I,
Brinson Class N and SwissKey Class, respectively. Investment advisory fees and
other transactions with affiliates for the year ended June 30, 1997 were as
follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY
FEE FEES
-------- ----------
<S> <C> <C>
Non-U.S. Equity Fund........................................ 0.80% $2,420,667
</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 $5,780.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1997, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ -----------
<S> <C> <C>
Non-U.S. Equity Fund................................... $223,917,155 $69,621,954
</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 year ended June 30, 1997,
was the Fund's custodian.
5.FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such contracts to hedge a portion of
its portfolio. Risks of entering into futures contracts include the possibility
that there may be an illiquid market or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Fund, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.DISTRIBUTION PLANS
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the SwissKey Class and, effective June 30,
1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, shall not exceed 0.84% of the average daily net
assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall
not exceed 0.25% of the average daily net assets of the Brinson Class N.
- --------------------------------------------------------------------------------
20
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
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7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------- ---------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 19,910,853 $225,344,857 8,044,119 $85,398,213
Brinson Class N.................. 79 1,000 -- --
SwissKey Class................... 590,377 6,700,036 125,829 1,353,805
---------- ------------ --------- -----------
Total Sales................... 20,501,309 $232,045,893 8,169,948 $86,752,018
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 1,461,013 $ 16,110,105 998,992 $10,452,496
Brinson Class N.................. -- -- -- --
SwissKey Class................... 8,477 94,649 2,042 21,407
---------- ------------ --------- -----------
Total Dividend Reinvestment... 1,469,490 $ 16,204,754 1,001,034 $10,473,903
========== ============ ========= ===========
Redemptions:
Brinson Class I.................. 6,945,571 $ 80,838,515 5,347,882 $56,492,091
Brinson Class N.................. -- -- -- --
SwissKey Class................... 87,985 1,015,708 14,352 156,117
---------- ------------ --------- -----------
Total Redemptions............. 7,033,556 $ 81,854,223 5,362,234 $56,648,208
========== ============ ========= ===========
</TABLE>
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21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
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The Board of Trustees and Shareholders
The Brinson Funds--Non-U.S. Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of
June 30, 1997, the related statements of operations for the year then ended and
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Non-U.S. Equity Fund at June 30, 1997, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 8, 1997
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22
<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.
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<PAGE>
[LOGO OF SWISS KEY FUNDS]
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY .
http://networth.galt.com/swisskey
