<PAGE>
--------------------------
The Brinson Funds
Brinson Global Fund
Brinson Global Equity Fund
Brinson Global Bond Fund
Semi-Annual Report
December 31, 1997
[LOGO]
Global Institutional Asset Management
--------------------------
<PAGE>
Trustees and Officers
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[LOGO]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
Catherine E. Macrae
Assistant Secretary
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1
<PAGE>
The Funds' Advisor--Brinson Partners, Inc.
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[LOGO]
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation (SBC) and manages assets of over $140 billion. We have $90
billion of discretionary institutional assets with active management mandates
and we are the investment manager for SBC Private Banking mutual fund assets
which total over $50 billion. In addition, we act as an investment advisor to
SBC Private Banking. Our organization manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. We employ over 590 people in offices in
Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York,
Paris, Singapore, Sydney, Tokyo and Zurich.
Brinson Partners, an established U.S.-based leader in the investment field
located in Chicago, acts as the headquarters of our worldwide investment
management process. Brinson Partners pioneered the movement to the active
management of global portfolios in the early 1980s for U.S. clients. Private
market and venture capital investing was established in the 1970s and today we
represent a major worldwide presence in this asset class.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
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2
<PAGE>
Table of Contents
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[LOGO]
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter.......................................................... 4
Global Economic and Market Highlights....................................... 6
Global Fund................................................................. 7
Schedule of Investments................................................. 11
Financial Statements.................................................... 20
Financial Highlights.................................................... 23
Global Equity Fund.......................................................... 26
Schedule of Investments................................................. 30
Financial Statements.................................................... 36
Financial Highlights.................................................... 39
Global Bond Fund............................................................ 42
Schedule of Investments................................................. 45
Financial Statements.................................................... 49
Financial Highlights.................................................... 52
The Brinson Funds--Notes to Financial Statements............................ 55
</TABLE>
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3
<PAGE>
Shareholder Letter
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[LOGO]
February 20, 1998
Dear Shareholder:
We are very pleased to present the December 31, 1997 Semi-Annual Report for the
Global Fund, Global Equity Fund and Global Bond Fund. Within this Report, we
will focus on the current global economic outlook as well as our current
strategies and performance updates for the three Global Funds.
Swiss Bank Corporation announced on December 8, 1997, their intention to merge
with Union Bank of Switzerland into a single global financial institution. As
part of this merger, Brinson Partners and UBS Asset Management will be combined
into Brinson. Brinson will be the Institutional Asset Management Division of the
new organization with assets under management in excess of $340 billion and will
provide investment advisory services for the Private Banking Division with
assets over $400 billion. The Consumer & Corporate Banking Division and Brinson
combined will manage assets in excess of $940 billion.
We are excited about the formation of Brinson and the additional resources we
will bring together to further the tradition of delivering value-added
investment performance and the highest level of professional client service.
The Brinson Global Fund, the Brinson Global Equity Fund and the Brinson Global
Bond Fund are all actively managed Funds that provide integrated asset
management across and within security markets. The investment process is
strategic in nature and is driven by deviations of market price from fundamental
value. This philosophy offers the greatest potential for achieving enhanced,
long-term returns while controlling risk.
Brinson Global Fund
Since its inception on August 31, 1992, the Brinson Global Fund has produced an
annualized total return of 11.30% compared to the return of 13.13% of its
benchmark, the Global Securities Markets Mutual Fund Index (GSMI). The Brinson
Global Fund achieved this performance with a volatility of 5.37%, below the
benchmark volatility of 6.87%.
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4
<PAGE>
Shareholder Letter
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[LOGO]
Brinson Global Equity Fund
The Brinson Global Equity Fund has provided an annualized return of 11.17% since
its performance inception on January 31, 1994. This is compared to a 12.48%
return for the benchmark, the MSCI World Equity (Free) Index. This performance
was achieved with volatility of 8.76%, below the benchmark volatility of 10.41%.
Brinson Global Bond Fund
The Brinson Global Bond Fund has provided an annualized return of 6.84% since
its performance inception on July 31, 1993. Over the same period, the return of
the Fund's benchmark, the Salomon World Government Bond Index, was 6.46%. This
performance was achieved with volatility of 4.20%, below the 5.35% volatility of
the benchmark.
Each of our Funds employs the same value-oriented investment philosophy applied
across the global spectrum. Each Fund also uses the resources of our entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is focused
upon both risk and return considerations in the context of full investment
cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent. The Report that follows highlights the investment
characteristics of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/S/ Gary P. Brinson
Gary P. Brinson, CFA
President and Chief Investment Officer
Brinson Partners, Inc.
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5
<PAGE>
Global Economic and Market Highlights
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While financial markets seem to be signaling that the worst of the crisis in
Asia has passed, those economies still have substantial problems to overcome
before they are recovered. Substantial amounts of foreign currency borrowing
will require rescheduling or forgiveness, and excess capacity will need to be
worked off. The Japanese, as particularly important lenders to these Asian
borrowers, will remain vulnerable.
The adverse impact on the U.S. from the Asian crisis is likely to remain
relatively limited. Because non-Japan Asia represents a small portion of U.S.
trade, direct effects, such as a drop in real growth due to a collapse in
exports, are not expected to be sizable. The economy remains strong, as
evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and
3.8%, respectively.
Continental European economies continue to benefit from weaker currencies
although the expansions have not been terribly strong. While output growth is
moderate, there has been no discernible improvement in the high unemployment
rates. Sterling remains strong on concerns of a weak euro and hikes in short-
term rates by the Bank of England.
Global Environment
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 8/31/92*
Major Markets ended ended ended ended to
Total Return in U.S. Dollars 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Equity 11.60% 31.29% 29.49% 19.28% 19.81%
Non-U.S. Equities (currency unhedged) -8.22 2.07 6.90 11.67 9.68
Non-U.S. Equities (currency hedged) -1.40 16.12 14.32 13.22 13.15
U.S. Bonds 6.37 9.62 10.43 7.54 7.34
Non-U.S. Bonds (currency unhedged) -1.18 -4.26 6.01 7.77 6.09
Non-U.S. Bonds (currency hedged) 6.12 11.07 13.57 9.78 10.03
U.S. Cash Equivalents 2.60 5.18 5.30 4.54 4.44
- ----------------------------------------------------------------------------------------------------
6 months 1 year 3 years 5 years 8/31/92*
Major Currencies ended ended ended ended to
Percent Change Relative to U.S. Dollars 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------
Yen -11.99% -10.73% -8.45% -0.81% -1.00%
Pound -1.14 -3.85 1.69 1.68 -3.43
Deutschemark -3.08 -14.29 -4.83 -2.07 -4.49
Canadian Dollar -3.60 -4.22 -0.66 -2.34 -3.30
- ----------------------------------------------------------------------------------------------------
* Inception date of the Brinson Global Fund
</TABLE>
All total returns in excess of 1 year are average annualized returns.
6
<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. The Fund is actively managed within
an asset allocation framework, involving value-based market, currency and
individual security selection. Our senior asset allocation, equity and fixed
income professionals form the investment team for the Fund, supported by a
globally integrated market analysis system. Security selection within each
market is based on the fundamental research of our analytical teams in our
offices worldwide.
The Brinson Global Fund has provided an annualized return of 11.30% since its
inception on August 31, 1992, while its benchmark, the GSMI Mutual Fund Index
returned 13.13%. The Fund performance over this period was achieved with an
annualized volatility of 5.37%, below the benchmark volatility of 6.87%. For the
year ended December 31, 1997, the Fund returned 11.00%, underperforming the
benchmark return of 14.30%. Contributing positively to performance was security
selection in the Japanese equity market and the emerging debt and equity
markets. Currency risk hedge was a substantial contributor to added value in
1997. The primary negative contributor was the underweight in most equity
markets and the overweight in bonds.
Bond returns were the highest in Australia, Italy and the U.K. The U.S. bond
market return of 9.62% was in the middle of the pack. The peripheral European
bond markets performed well, as spreads over German yields declined
substantially due to the market's anticipation of a single currency.
The U.S. equity market return of about 30% was outdone by many of the European
markets which were driven by a combination of lower interest rates and the
anticipation of a profits recovery. Southeast Asian equity markets stood in
stark contrast with local currency losses ranging from 10% to 60% for the year.
The emerging debt and equity markets failed to produce the spectacular gains of
prior years. Emerging debt posted a total return of 13.02% while emerging equity
declined by 14.84%. Returns in the high yield bond market, at about 12.63%, not
surprisingly fell between equity and bond returns.
Currency risk hedges were beneficial during the year, as the overpriced Japanese
yen depreciated against the U.S. dollar. The risk hedges also benefited from
interest rates in the U.S. exceeding rates in the overpriced currencies.
Asset allocation strategy continues to underweight equity markets, as prices
remain in excess of fundamental values. Bond markets, apart from Japan, remain
overweight as they provide the most attractive relative value. Emerging market
debt is also overweight, with a small overweight in emerging market equity and a
small underweight in high yield bonds. Exchange rate changes during the year
have reduced the magnitude of overpricing and led to reductions in many of the
risk hedges.
7
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 8/31/92*
ended ended ended ended to
12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global Fund 1.95% 11.00% 16.26% 11.38% 11.30%
GSMI Mutual Fund Index** 3.26 14.30 17.28 13.37 13.13
- --------------------------------------------------------------------------------
</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 if you had invested $1,000,000 on August 31,
1992, and had reinvested all your income dividends and capital gain
distributions through December 31, 1997. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
Brinson Global Fund
vs. GSMI Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
8
<PAGE>
Global Fund
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Asset Allocation
As of December 31, 1997 (Unaudited)
<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 5.3 2.3
Other Equities 16.7 14.7
Emerging Markets Equities 3.0 4.0
Dollar Bonds 21.0 30.5
U.S. Bonds 19.0 26.5
International $ Bonds 2.0 4.0
High Yield Bonds 3.0 2.5
Non-U.S. Bonds 9.0 18.0
Japan Bonds 2.5 0.0
Other Bonds 6.5 18.0
Emerging Markets Debt 2.0 5.0
Cash Equivalents 0.0 0.0
- -----------------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------------------------
<S> <C>
1. Lockheed Martin Corp. 1.09%
2. Xerox Corp. 1.05
3. Philip Morris Companies, Inc. 1.00
4. CIGNA Corp. 0.89
5. Aon Corp. 0.88
6. Schering Plough Corp. 0.78
7. Burlington Northern Santa Fe Corp. 0.76
8. Federal Express Corp. 0.74
9. Goodyear Tire & Rubber Co. 0.72
10. Automatic Data Processing, Inc. 0.63
- --------------------------------------------------------------------
</TABLE>
Currency Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. 66.0% 72.2%
Japan 7.8 3.8
U.K. 5.4 2.2
Continental Europe 14.6 14.6
Canada 1.5 1.5
Emerging Markets 3.0 4.0
Other 1.7 1.7
- -----------------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------------------------
<S> <C>
1. Glaxo Wellcome PLC 0.30%
2. Royal Dutch Petroleum Co. 0.25
3. Telecom Corp. of New Zealand Ltd. 0.24
4. Lloyds TSB Group PLC 0.23
5. Novartis AG(Reg.) 0.22
6. B.A.T. Industries PLC 0.22
7. Allianz AG 0.19
8. British Petroleum Co. PLC 0.19
9. British Telecommunications PLC 0.17
10. Roche Holding AG (Gen.) 0.15
- --------------------------------------------------------------------
</TABLE>
9
<PAGE>
Global Fund
- --------------------------------------
Industry Diversification
As a Percentage of Net Assets
As of December 31, 1997 (Unaudited)
- --------------------------------------
<TABLE>
<CAPTION>
U.S. EQUITIES
<S> <C>
Energy........................ 1.04%
------
Capital Investment
Capital Goods................ 1.82
Technology................... 2.22
------
4.04
------
Basic Industries
Chemicals.................... 0.54
Housing/Paper................ 1.31
Metals....................... 0.23
------
2.08
------
Consumer
Non-Durables................. 2.50
Retail/Apparel............... 1.32
Autos/Durables............... 1.01
Discretionary................ 0.94
Health: Drugs................ 2.09
Health: Non-Drugs............ 1.10
------
8.96
------
Financial
Banks........................ 2.03
Non-Banks.................... 1.80
------
3.83
------
Utilities
Electric..................... 1.59
Telephone.................... 0.28
------
1.87
------
Transportation................ 1.59
Services/Misc................. 2.43
Post Venture.................. 1.30
------
Total U.S. Equities....... 27.14*
------
NON-U.S. EQUITIES
Aerospace & Military.......... 0.03%
Airlines...................... 0.06
Appliances & Household........ 0.33
Automobiles................... 0.53
Banking....................... 2.04
Beverages & Tobacco........... 0.44
Broadcasting & Publishing..... 0.35
Building Materials............ 0.22
Business & Public Service..... 0.62
Chemicals..................... 0.49
Construction.................. 0.15
Data Processing............... 0.15
Electric Components........... 0.26
Electronics................... 0.59
Energy........................ 1.35
Financial Services............ 0.35
Food & House Products......... 0.61
Forest Products............... 0.23
Gold Mining................... 0.01
Health; Drugs................. 0.29
Health; Non-Drugs............. 0.91
Industrial Components......... 0.26
Insurance..................... 1.08
Leisure & Tourism............. 0.13
Machinery & Engineering....... 0.05
Merchandising................. 0.82
Metals--Steel................. 0.25
Miscellaneous Materials....... 0.06
Miscellaneous Services........ 0.02
Multi-Industry................ 0.88
Non-Ferrous Metals............ 0.32
Real Estate................... 0.15
Recreation.................... 0.08
Retail/Apparel................ 0.09
Shipping...................... 0.01
Telecommunications............ 1.43
Textiles & Apparel............ 0.03
Transportation................ 0.18
Utilities..................... 0.85
Wholesale & International
Trade........................ 0.09
------
Total Non-U.S. Equities... 16.79
------
EMERGING MARKETS EQUITIES..... 3.37
------
U.S. BONDS
Corporate Bonds
Asset-Backed................. 2.04
CMO.......................... 0.64
Consumer..................... 1.52
Financial.................... 3.03
Industrial................... 0.03
Transportation............... 0.67
------
7.93
------
U.S. Government Agencies...... 7.33
U.S. Government Obligations... 5.13
International Dollar Bonds.... 4.10
------
Total U.S. Bonds.......... 24.49*
------
HIGH YIELD BONDS.............. 2.64
------
NON-U.S.BONDS
Foreign Financial Bonds...... 0.56
Foreign Government Bonds..... 15.87
------
Total Non-U.S.Bonds....... 16.43
------
EMERGING MARKETS DEBT......... 5.24
------
SHORT-TERM INVESTMENTS........ 16.74*
------
TOTAL INVESTMENTS......... 112.84
LIABILITIES, LESS CASH
AND OTHER ASSETS............. (12.84)
------
NET ASSETS.................... 100.00%
======
</TABLE>
* The Fund held a long position in U.S. Treasury futures on December 31, 1997
which increased U.S. bond exposure from 24.49% to 28.17%. The Fund held a short
position in stock index futures on December 31, 1997 which reduced U.S. equity
exposure from 27.14% to 23.09%. These adjustments result in a net increase in
the Fund's exposure to Short-Term Investments from 16.74% to 17.11%.
10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Equities -- 47.30%
U.S. EQUITIES -- 27.14%
Allergan, Inc........................................ 52,400 $ 1,758,675
Alza Corp. (b)....................................... 51,100 1,625,619
American Home Products Corp.......................... 40,900 3,128,850
Aon Corp............................................. 97,899 5,739,300
Automatic Data Processing, Inc....................... 67,000 4,112,125
Baxter International, Inc............................ 66,100 3,333,919
Beckman Instruments, Inc............................. 20,800 832,000
Biogen, Inc. (b)..................................... 20,000 727,500
Birmingham Steel Corp................................ 20,500 322,875
Boston Technology, Inc. (b).......................... 20,400 512,550
Briggs & Stratton Corp............................... 3,500 169,969
Brinson Post-Venture Fund (b)........................ 423,765 8,502,119
Burlington Northern Santa Fe Corp.................... 53,700 4,990,744
Champion Enterprises, Inc. (b)....................... 33,100 680,619
Champion International Corp.......................... 2,700 122,344
Chase Manhattan Corp................................. 27,400 3,000,300
CIGNA Corp........................................... 33,400 5,780,287
Circuit City Stores-Circuit City Group............... 75,500 2,684,969
Citicorp............................................. 24,800 3,135,650
CMS Energy Corp...................................... 65,900 2,903,719
Comerica, Inc........................................ 14,000 1,263,500
Commscope, Inc. (b).................................. 38,833 521,818
Comverse Technology, Inc. (b)........................ 10,100 393,900
Corning, Inc......................................... 110,200 4,091,175
Covance, Inc. (b).................................... 25,672 510,231
CPC International, Inc............................... 22,400 2,419,200
Crown Cork & Seal Co., Inc........................... 24,300 1,218,037
CVS Corp............................................. 32,400 2,075,625
Dial Corp............................................ 26,400 549,450
Eastman Chemical Co.................................. 28,200 1,679,662
Echlin, Inc.......................................... 14,300 517,481
EMC Corp. (b)........................................ 146,100 4,008,619
Enron Corp........................................... 68,500 2,847,031
Entergy Corp......................................... 133,400 3,993,662
Federal Express Corp. (b)............................ 79,300 4,842,256
First American Corp. of Tennessee.................... 13,400 666,650
First Data Corp...................................... 123,530 3,613,252
First Security Corp.................................. 16,850 705,594
FirstEnergy Corp..................................... 40,005 1,160,145
Fleetwood Enterprises, Inc........................... 15,300 649,294
Food Lion, Inc. Class A.............................. 108,700 917,156
Forest Laboratories, Inc. (b)........................ 23,500 1,158,844
Fort James Corp...................................... 59,700 2,283,525
Gannett Co., Inc..................................... 50,700 3,133,894
General Semiconductor, Inc. (b)...................... 26,450 305,828
Genzyme Corp......................................... 20,600 571,650
Geon Co.............................................. 14,100 329,587
Goodyear Tire & Rubber Co............................ 73,400 4,670,075
Harnischfeger Industries, Inc........................ 38,800 1,370,125
Health Care and Retirement Corp. (b)................. 25,600 1,030,400
Hibernia Corp........................................ 28,400 534,275
Informix Corp. (b)................................... 26,800 127,300
Interpublic Group of Companies, Inc.................. 33,350 1,661,247
Kimberly Clark Corp.................................. 60,900 3,003,131
Lear Corp. (b)....................................... 22,000 1,045,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Lockheed Martin Corp................................. 72,523 $ 7,143,515
Lyondell Petrochemical Co............................ 55,800 1,478,700
Manor Care, Inc...................................... 38,198 1,336,930
Martin Marietta Materials, Inc....................... 15,000 548,437
Masco Corp........................................... 59,600 3,032,150
Nabisco Holdings Corp................................ 52,000 2,518,750
National Service Industries, Inc..................... 10,000 495,625
Nextel Communications, Inc. (b)...................... 69,800 1,814,800
NextLevel Systems, Inc. (b).......................... 116,500 2,082,437
Old Republic International Corp...................... 9,596 356,851
Peco Energy Co....................................... 152,500 3,698,125
Pentair, Inc......................................... 27,096 973,762
Pharmacia & UpJohn, Inc.............................. 27,600 1,010,850
Philip Morris Companies, Inc......................... 144,200 6,534,062
Raytheon Co., Class B................................ 60,500 3,055,250
Regions Financial Corp............................... 13,100 552,656
Reynolds & Reynolds Co............................... 49,800 918,188
Schering Plough Corp................................. 81,500 5,063,188
Seagate Technology, Inc. (b)......................... 45,600 877,800
Sears, Roebuck and Co................................ 5,700 257,925
Timken Co............................................ 14,400 495,000
Tyson Foods, Inc., Class A........................... 103,998 2,131,959
Ultramar Diamond Shamrock Corp....................... 58,108 1,852,193
US Bancorp........................................... 34,960 3,913,335
Vencor, Inc. (b)..................................... 52,200 1,275,638
Viad Corp............................................ 50,100 967,556
Westvaco Corp........................................ 12,198 383,475
Witco Corp........................................... 8,300 338,744
Xerox Corp........................................... 93,000 6,864,563
York International Corp.............................. 31,800 1,258,088
------------
Total U.S. Equities ................................. 177,163,304
------------
NON-U.S. EQUITIES -- 16.79%
AUSTRALIA -- 0.84%
Amcor Ltd............................................ 23,770 104,548
Boral Ltd............................................ 69,240 175,053
Brambles Industries Ltd.............................. 12,590 249,801
Broken Hill Proprietary Co., Ltd..................... 84,200 781,824
Coca-Cola Amatil Ltd................................. 14,270 106,615
CSR Ltd.............................................. 42,930 145,461
David Jones Ltd...................................... 182,010 205,174
Lend Lease Corp., Ltd................................ 11,596 226,679
Mayne Nickless Ltd................................... 20,000 105,690
M.I.M. Holdings Ltd.................................. 88,056 53,935
National Australia Bank Ltd.......................... 58,467 816,423
News Corp. Ltd....................................... 122,030 673,492
News Corp. Ltd., Preferred........................... 27,886 137,987
Pacific Dunlop Ltd................................... 85,210 180,450
Rio Tinto Ltd........................................ 31,145 363,326
Qantas Airways Ltd................................... 81,435 144,120
Santos Ltd........................................... 16,610 68,402
Telstra Corp., Ltd. (b).............................. 33,000 69,669
Westpac Banking Corp., Ltd........................... 93,408 597,449
WMC Ltd.............................................. 52,840 184,204
Woolworth's Ltd...................................... 30,790 102,922
------------
5,493,224
------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ -------------
<S> <C> <C>
BELGIUM -- 0.66%
Delhaize-Le Lion S.A............................... 8,420 $ 427,238
Electrabel S.A..................................... 3,330 770,238
Fortis AG.......................................... 216 29
Fortis AG Strip (b)................................ 2,943 614,002
Generale de Banque S.A............................. 770 335,113
Groupe Bruxelles Lambert S.A....................... 1,670 241,591
Kredietbank NV..................................... 800 335,754
Kredietbank VVPR................................... 25 10,492
Petrofina S.A...................................... 1,525 562,856
Societe Generale de Belgique....................... 2,433 222,609
Solvay S.A., Class A............................... 4,890 307,514
Tractebel.......................................... 3,875 337,811
Tractebel Warrants "99" (b)........................ 605 1,551
Union Miniere Group S.A. (b)....................... 2,255 156,416
------------
4,323,214
------------
CANADA -- 0.59%
Agrium, Inc........................................ 9,500 115,506
Alcan Aluminum Ltd................................. 7,250 199,602
Bank of Montreal................................... 5,290 234,170
Barrick Gold Corp.................................. 4,200 78,213
Canadian National Railway Co....................... 5,150 242,188
Canadian Pacific Ltd............................... 15,650 421,022
Hudson's Bay Co.................................... 6,400 142,436
Imasco, Ltd........................................ 3,000 105,863
Imperial Oil Ltd................................... 5,720 367,717
Magna International Inc., Class A.................. 1,800 112,696
Moore Corp., Ltd................................... 5,800 87,136
Newbridge Networks Corp. (b)....................... 2,200 76,941
Noranda, Inc....................................... 7,440 127,890
Northern Telecom Ltd............................... 1,290 114,614
NOVA Corp.......................................... 19,520 185,502
Potash Corporation of Saskatchewan, Inc............ 2,200 183,013
Royal Bank of Canada............................... 6,250 330,166
Seagram Co., Ltd................................... 4,290 138,643
TELUS Corp......................................... 10,300 228,153
TransCanada Pipelines Ltd.......................... 10,020 223,351
Westcoast Energy, Inc.............................. 5,000 115,296
------------
3,830,118
------------
FINLAND -- 0.13%
Cultor Oyj......................................... 1,200 65,226
Merita Ltd., Class A............................... 19,550 106,982
Metsa Serla Oyj, Class B........................... 5,000 39,022
Nokia Oyj, Class A Preferred....................... 5,250 373,092
Outokumpu Oyj, Class A............................. 4,480 54,707
Pohjola Insurance Group, Class B................... 350 12,983
Sampo Insurance Co., Ltd., Series A................ 1,520 50,241
The Rauma Group.................................... 200 3,122
UPM-Kymmene Corp................................... 6,870 137,508
------------
842,883
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ -------------
<S> <C> <C>
FRANCE -- 0.93%
Accor S.A.......................................... 1,092 $ 203,116
Alcatel Alsthom.................................... 1,932 245,675
AXA-UAP............................................ 4,058 314,131
AXA-UAP Rights (b)................................. 4,328 4,245
Banque Nationale de Paris.......................... 4,620 245,668
Cie Bancaire S.A................................... 331 53,644
Cie de Saint Gobain................................ 2,267 322,188
Cie Financiere de Paribas.......................... 2,500 217,337
Cie Generale des Eaux.............................. 2,444 341,250
Cie Generale des Eaux Warrants "01" (b)............ 4,224 2,872
Dexia France....................................... 1,899 220,014
Elf Aquitaine S.A.................................. 3,194 371,642
France Telecom S.A. (b)............................ 9,400 341,094
Groupe Danone...................................... 800 142,952
Lafarge S.A........................................ 1,880 123,406
Lagardere S.C.A.................................... 6,600 218,318
Lyonnaise des Eaux S.A............................. 2,771 306,814
Michelin, Class B.................................. 4,449 224,077
Pechiney S.A., Class A............................. 4,884 192,892
Peugeot S.A........................................ 2,480 312,886
Pinault-Printemps-Redoute S.A...................... 350 186,810
Rhone-Poulenc, Class A............................. 6,944 311,187
SEITA.............................................. 6,810 244,508
Societe Generale................................... 2,295 312,816
Thomson CSF........................................ 6,900 217,575
Total S.A., Class B................................ 2,886 314,217
Usinor Sacilor..................................... 5,980 86,380
------------
6,077,714
------------
GERMANY -- 1.81%
Allianz AG Holding................................. 4,810 1,241,221
BASF AG............................................ 7,530 268,854
Bayer AG........................................... 16,990 630,712
Bayerische Motoren Werke AG........................ 590 441,327
Commerzbank AG..................................... 14,340 558,256
Continental AG..................................... 14,400 324,342
Daimler-Benz AG.................................... 6,750 476,753
Deutsche Bank AG................................... 13,611 952,263
Deutsche Telekom AG................................ 51,930 961,720
Henkel KGaA-Vorzug AG, Preferred................... 5,290 330,974
Hochtief AG........................................ 3,500 144,041
Hoechst AG......................................... 5,910 204,768
M.A.N. AG.......................................... 750 216,687
Mannesmann AG...................................... 897 450,471
Metro AG........................................... 9,608 340,910
Muenchener Rueckver AG............................. 2,410 916,768
Muenchener Rueckver AG Warrants "98" (b)........... 2 1,212
Preussag AG........................................ 1,322 406,577
RWE AG............................................. 9,820 527,017
Schering AG........................................ 5,405 521,533
Siemens AG......................................... 10,700 645,654
Veba AG............................................ 11,339 772,497
Volkswagen AG...................................... 860 480,674
------------
11,815,231
------------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
HONG KONG -- 0.18%
Cheung Kong Holdings Ltd........................... 38,000 $ 248,887
China Light & Power Co., Ltd....................... 18,500 102,665
Citic Pacific Ltd.................................. 17,000 67,574
Hang Seng Bank Ltd................................. 9,700 93,576
Hong Kong and China Gas Co., Ltd................... 79,000 152,933
Hong Kong Telecommunications Ltd................... 81,000 166,736
Hutchison Whampoa Ltd.............................. 26,000 163,077
Sun Hung Kai Properties Ltd........................ 15,000 104,536
Swire Pacific Ltd., Class A........................ 11,500 63,077
------------
1,163,061
------------
ITALY -- 0.82%
Aeroporti Di Roma Spa (b).......................... 3,000 31,136
Assicurazioni Generali............................. 21,380 525,416
Banca Commerciale Italiana......................... 55,000 191,312
Credito Italiano Spa............................... 97,000 299,276
Danieli & Co. Savings (Risp)....................... 43,000 154,679
Edison Spa......................................... 22,200 134,351
ENI ADR (c)........................................ 7,600 433,675
ENI Spa............................................ 76,000 431,142
Fiat Spa-Priv Preferred............................ 185,600 283,431
INA-Istituto Nazionale delle Assicurazioni......... 87,000 176,406
Instituto Mobiliare Italiano Spa................... 28,800 342,072
Italgas Spa........................................ 35,800 147,813
La Rinascente Spa.................................. 32,040 239,206
La Rinascente Spa RNC.............................. 27,200 101,536
La Rinascente Spa Warrants "99" (b)................ 1,400 1,694
Mediobanca Spa..................................... 11,000 86,417
Montedison Spa..................................... 331,700 298,109
SAI-Savings (Risp)................................. 24,500 108,085
Telecom Italia Mobile Spa.......................... 60,000 277,085
Telecom Italia Mobile Spa RNC...................... 161,500 459,458
Telecom Italia Spa................................. 26,666 170,428
Telecom Italia Spa RNC............................. 110,081 485,638
------------
5,378,365
------------
JAPAN -- 2.73%
Amada Co., Ltd..................................... 40,000 149,202
Asahi Glass Co., Ltd............................... 22,000 104,903
Bank of Tokyo-Mitsubishi, Ltd...................... 32,000 442,992
Canon, Inc......................................... 30,000 701,404
Canon Sales Co., Inc............................... 12,000 137,512
Citizen Watch Co., Ltd............................. 34,000 228,802
Dai Nippon Printing Co., Ltd....................... 36,000 678,331
Daiichi Pharmaceutical Co., Ltd.................... 30,000 339,166
Daikin Industries Ltd.............................. 36,000 136,220
Daiwa House Industry Co., Ltd...................... 18,000 95,520
Fanuc.............................................. 15,900 604,084
Fujitsu............................................ 24,000 258,412
Hitachi Ltd........................................ 75,000 536,435
Honda Motor Co..................................... 10,000 368,391
Hoya Corp.......................................... 4,000 126,130
Inax............................................... 26,000 75,785
Ito Yokado Co., Ltd................................ 15,000 767,160
Kaneka Corp........................................ 36,000 163,076
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Keio Teito Electric Railway............................ 41,000 $ 157,347
Kinki Nippon Railway................................... 45,000 241,223
Kirin Brewery Co., Ltd................................. 43,000 314,170
Kokuyo................................................. 11,000 190,348
Kuraray Co., Ltd....................................... 46,000 382,080
Kyocera Corp........................................... 4,000 182,119
Marui Co., Ltd......................................... 20,000 312,248
Matsushita Electric Industrial Co...................... 57,000 837,301
Mitsubishi Paper Mills................................. 39,000 54,889
NGK Insulators......................................... 64,000 570,967
Nintendo Co., Ltd...................................... 2,900 285,484
Nippon Denso Co., Ltd.................................. 19,000 343,396
Nippon Meat Packers, Inc............................... 25,000 342,242
Nippon Steel Co........................................ 27,000 40,077
Okumura................................................ 37,000 88,214
Osaka Gas Co........................................... 69,000 158,139
Sankyo Co., Ltd........................................ 29,000 657,950
Secom Co., Ltd......................................... 10,000 641,415
Seino Transportation................................... 25,000 125,168
Sekisui House Ltd...................................... 56,000 361,346
Shinmaywa Industries Ltd............................... 13,000 31,994
Sony Corp.............................................. 9,200 820,765
Sumitomo Bank.......................................... 41,000 469,833
Sumitomo Chemical Co................................... 36,000 83,061
Sumitomo Electric Industries........................... 32,000 438,070
Takeda Chemical Industries............................. 22,000 629,417
TDK Corp............................................... 7,000 529,744
Tokio Marine & Fire Insurance Co....................... 36,000 409,767
Tokyo Electric Power................................... 9,900 181,211
Tokyo Steel Mfg........................................ 19,000 64,441
Tonen Corp............................................. 26,000 140,773
Toray Industries, Inc.................................. 132,000 593,886
Toshiba Corp........................................... 93,000 388,379
Toyo Suisan Kaisha..................................... 22,000 152,955
Toyota Motor Corp...................................... 19,000 546,510
Yamazaki Baking Co., Ltd............................... 17,000 166,045
-----------
17,846,499
-----------
MALAYSIA -- 0.25%
Hume Industries (Malaysia) Bhd......................... 35,000 36,686
Kuala Lumpur Kepong Bhd................................ 90,500 194,136
Land & General Holdings Bhd............................ 73,000 13,503
Malayan Banking Bhd.................................... 39,000 113,218
Malaysia International Shipping Bhd (Frgn.)............ 32,000 46,859
Nestle (Malaysia) Bhd.................................. 22,000 101,734
New Straits Times Press Bhd............................ 33,000 40,863
Perusahaan Otomobil Nasional Bhd....................... 22,000 21,477
Petronas Gas Bhd....................................... 26,000 59,114
Public Bank Bhd........................................ 27,600 8,580
Public Bank Bhd (Frgn.)................................ 78,000 26,852
Public Bank Bhd Rights (b)............................. 4,600 248
Public Bank Bhd Rights (Frgn.) (b)..................... 13,000 668
Resorts World Bhd...................................... 30,000 50,482
Rothmans of Pall Mall Bhd.............................. 24,000 186,513
Sime Darby Bhd......................................... 127,000 122,024
Telekom Malaysia Bhd................................... 93,000 274,759
Tenaga Nasional Bhd.................................... 110,000 234,554
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
UMW Holdings Bhd........................................... 15,000 $ 11,368
United Engineers Bhd....................................... 33,000 27,468
YTL Corp. Bhd.............................................. 42,000 56,647
YTL Power International Bhd (b)............................ 1,400 1,075
-----------
1,628,828
-----------
NETHERLANDS -- 0.81%
ABN AMRO Holdings NV....................................... 22,202 432,585
Akzo Nobel NV.............................................. 760 131,059
Elsevier NV................................................ 26,480 428,424
Heineken NV................................................ 1,850 322,128
Hoogovens NV............................................... 2,360 96,737
ING Groep NV............................................... 12,962 546,024
KLM Royal Dutch Air Lines NV............................... 3,492 129,187
KPN NV..................................................... 13,020 543,329
Philips Electronics NV..................................... 6,850 410,872
Royal Dutch Petroleum Co................................... 29,420 1,615,176
Royal Dutch Petroleum Co., NY Shares (c)................... 700 37,931
Unilever NV................................................ 9,600 591,920
-----------
5,285,372
-----------
NEW ZEALAND -- 0.57%
Brierley Investments Ltd................................... 756,530 540,360
Carter Holt Harvey Ltd..................................... 261,110 403,326
Fletcher Challenge Building................................ 86,775 177,374
Fletcher Challenge Energy.................................. 95,405 334,072
Fletcher Challenge Forests Ltd............................. 185,585 154,110
Fletcher Challenge Paper................................... 171,640 224,260
Lion Nathan Ltd............................................ 64,000 143,456
Telecom Corp. of New Zealand Ltd........................... 326,830 1,584,748
Telecom Corp. of New Zealand Ltd. ADS (c).................. 3,800 147,250
-----------
3,708,956
-----------
SINGAPORE -- 0.35%
City Developments Ltd...................................... 31,000 143,501
DBS Land Ltd............................................... 58,000 88,807
Development Bank of Singapore Ltd.......................... 28,000 239,288
Elec & Eltek International Co., Ltd........................ 12,100 55,418
Fraser & Neave Ltd......................................... 12,000 51,988
Hotel Properties Ltd....................................... 102,000 66,588
Keppel Corp., Ltd.......................................... 33,000 94,789
Keppel Land Ltd............................................ 35,000 48,190
NatSteel Ltd............................................... 25,000 33,828
Oversea-Chinese Banking Corp., Ltd......................... 43,000 250,089
Singapore Airlines Ltd. (Frgn.)............................ 50,000 326,410
Singapore Press Holdings Ltd. (Frgn.)...................... 11,000 137,745
Singapore Telecommunications, Ltd.......................... 221,000 411,834
United Overseas Bank Ltd. (Frgn.).......................... 48,000 266,350
Venture Manufacturing (Singapore) Ltd...................... 20,000 55,786
Wing Tai Holdings Ltd...................................... 38,000 44,427
-----------
2,315,038
-----------
SPAIN -- 0.50%
Acerinox S.A............................................... 370 54,789
Banco Bilbao-Vizcaya S.A................................... 11,720 379,081
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Banco Central Hispanoamericano.............................. 9,840 $ 239,512
Banco Popular Espanol S.A................................... 3,200 223,593
Banco Santander S.A......................................... 9,480 316,580
Empresa National de Electridad S.A.......................... 21,640 384,045
Fomento de Contrucciones y Contratas S.A.................... 4,400 167,432
Gas Natural SDG S.A......................................... 4,140 214,578
Iberdrola S.A............................................... 22,910 301,368
Mapfre Corp................................................. 3,860 102,312
Repsol S.A.................................................. 5,110 217,918
Repsol S.A. ADR (c)......................................... 1,000 42,563
Tabacalera S.A.............................................. 500 40,513
Telefonica de Espana........................................ 13,640 389,280
Vallehermoso S.A............................................ 3,470 106,317
Viscofan Envolturas Celulosicas S.A......................... 3,110 78,046
-----------
3,257,927
-----------
SWEDEN -- 0.33%
ABB AB, A Shares............................................ 9,400 111,360
Astra AB, A Shares.......................................... 21,800 377,776
Electrolux AB, B Shares..................................... 1,500 104,164
Hennes & Mauritz AB, B Shares............................... 5,200 229,375
Nordbanken Holding AB....................................... 50,400 285,202
Securitas AB, B Shares...................................... 3,700 111,915
Skanska AB, B Shares........................................ 2,800 114,864
Svenska Handelsbanken, A Shares............................. 4,500 155,679
Swedish Match AB............................................ 39,000 130,252
Telefonaktiebolaget LM Ericsson, B Shares................... 7,600 285,912
Volvo AB, B Shares.......................................... 8,100 217,440
-----------
2,123,939
-----------
SWITZERLAND -- 0.87%
ABB AG (Bearer)............................................. 105 132,096
CS Holdings AG (Reg.)....................................... 3,579 554,541
Holderbank Financiere Glarus, B Shares...................... 205 167,531
Nestle S.A. (Reg.).......................................... 460 690,347
Novartis AG (Reg.).......................................... 896 1,455,862
Roche Holding AG (Gen.)..................................... 101 1,004,391
Sairgroup (b)............................................... 113 154,943
Schweizerische Lebensversicherungs-und
Rentenastalt............................................... 245 192,661
Sulzer AG................................................... 194 123,162
Swiss Reinsurance Co. (Reg.)................................ 255 477,622
UBS (Bearer)................................................ 261 377,919
Zurich Versicherungs (Reg.)................................. 702 334,973
-----------
5,666,048
-----------
UNITED KINGDOM -- 4.42%
Abbey National PLC.......................................... 31,620 567,625
Barclays PLC................................................ 15,000 399,342
Bass PLC.................................................... 19,070 296,365
B.A.T. Industries PLC....................................... 156,484 1,426,444
BG PLC...................................................... 166,864 752,296
Billiton PLC (b)............................................ 122,000 313,155
Booker PLC.................................................. 72,220 380,262
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------- ------------
<S> <C> <C>
British Energy PLC................................... 78,630 $ 547,273
British Petroleum Co. PLC............................ 93,091 1,225,385
British Sky Broadcating Group PLC.................... 42,000 315,130
British Steel PLC.................................... 116,470 250,092
British Telecommunications PLC....................... 142,980 1,125,725
BTR PLC.............................................. 61,420 185,953
Cable & Wireless PLC................................. 27,000 237,680
Cadbury Schweppes PLC................................ 56,000 565,298
Centrica PLC (b)..................................... 131,430 193,550
Charter PLC.......................................... 29,846 367,826
Coats Viyella PLC.................................... 123,860 185,459
Diageo PLC........................................... 65,150 599,777
FKI PLC.............................................. 158,500 498,124
General Electric Co. PLC............................. 139,550 905,841
Glaxo Wellcome PLC................................... 82,600 1,957,120
Greenalls Group PLC.................................. 32,000 230,621
Hanson PLC........................................... 53,102 237,332
Hillsdown Holdings PLC............................... 163,520 398,206
House of Fraser PLC.................................. 174,400 576,790
HSBC Holdings PLC.................................... 36,050 925,348
Inchcape PLC......................................... 87,470 234,597
Legal & General Group PLC............................ 79,400 695,036
Lloyds TSB Group PLC................................. 118,409 1,533,326
Marks & Spencer PLC.................................. 95,040 936,717
Mirror Group PLC..................................... 165,450 530,856
National Westminster Bank PLC........................ 33,380 555,830
Northern Foods PLC................................... 95,040 412,843
Peninsular & Oriental Steam Navigation Co............ 61,040 695,519
Reckitt & Colman PLC................................. 17,938 281,872
Reuters Holdings PLC................................. 36,530 399,711
Rio Tinto PLC........................................ 35,580 438,493
RJB Mining PLC....................................... 86,570 180,903
Royal & Sun Alliance Insurance Group PLC............. 52,943 534,003
Scottish Hydro-Electric PLC.......................... 37,480 309,584
Sears PLC............................................ 220,480 192,274
Sedgwick Group PLC................................... 146,360 341,968
SmithKline Beecham PLC............................... 86,180 883,425
Smurfit (Jefferson) Group PLC........................ 132,647 368,858
Tate & Lyle PLC...................................... 41,000 337,984
Tesco PLC............................................ 63,197 514,727
Thames Water PLC..................................... 43,210 644,506
The Great Universal Stores PLC....................... 51,000 643,636
Unilever PLC......................................... 36,040 308,957
Vodafone Group PLC................................... 86,090 621,859
Williams PLC......................................... 99,010 550,644
------------
28,812,147
------------
Total Non-U.S.Equities............................... 109,568,564
------------
EMERGING MARKETS EQUITIES -- 3.37%
Brinson Emerging Markets Equity
Fund (b)............................................ 2,402,916 22,017,923
------------
Total Equities (Cost $270,775,791)................... 308,749,791
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Bonds -- 48.80%
U.S. BONDS -- 24.49%
U.S. CORPORATE BONDS -- 7.93%
Aetna Services Inc. 6.970%, due 08/15/36.............. $ 265,000 $ 277,655
Aid-Israel
Series 10-Z, 0.000%, due 02/15/03.................... 6,720,000 4,989,533
Asset Securitization Corp.
7.210%, due 10/13/26................................. 2,310,000 2,411,876
Associates Corp. N.A.
6.450%, due 10/15/01................................. 480,000 483,416
Bank of America
FRN 6.110%, due 09/24/98............................. 2,000,000 1,999,156
Bellsouth Savings & Employee
ESOP 9.125%, due 07/01/03............................ 278,657 289,255
Capital One Bank
6.830%, due 05/17/99................................. 1,946,000 1,959,490
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02.......................... 1,000,000 1,001,570
Chase Manhattan Credit Card Trust
96-4A 6.730%, due 02/15/03........................... 1,050,000 1,060,059
Chemical Master Credit Card Trust
95-2A 6.230%, due 06/15/03........................... 1,430,000 1,438,852
Ches Pot Tel MD
8.000%, due 10/15/29................................. 98,000 116,730
Choice Credit Card
7.200%, due 03/15/98................................. 1,000,000 1,001,460
Chrysler Financial Corp.
4.220%, due 03/02/99................................. 1,192 1,182
7.400%, due 08/01/2097............................... 252,000 268,859
Citicorp
6.200%, due 11/10/00................................. 500,000 498,934
Coca-Cola Enterprises
6.375%, due 08/01/01................................. 550,000 553,936
Comcast Cable Communications
144A 8.500%, due 05/01/27............................ 1,720,000 2,028,819
Continental Airlines, Inc.
97-4A 6.900%, due 01/02/18........................... 1,850,000 1,849,722
CS First Boston Mortgage Securities Corp. 97-C1
7.150%, due 08/20/06................................. 1,465,000 1,524,230
Dayton Hudson Credit Card Master Trust 95-1A 6.100%,
due 02/25/02......................................... 132,000 132,115
Donaldson Lufkin & Jenrette
FRN 6.700%, due 06/30/00............................. 600,000 607,359
First National Bank of Chicago
Series E, 7.000%, due 05/08/00....................... 1,000,000 1,015,000
Ford Credit Grantor Trust
95-B 5.900%, due 10/15/00............................ 70,140 70,063
GE Capital Mtg. Services, Inc.
94-7 Class A12, 6.000%, due 02/25/09................. 1,637,884 1,594,234
General Motors Acceptance Corp.
6.375%, due 12/01/01................................. 500,000 502,194
9.625%, due 12/15/01................................. 331,000 369,814
GreenTree Financial Corp.
97-6 6.870%, due 01/15/29............................ 2,315,000 2,371,972
Lehman Brothers Holdings
7.250%, due 04/15/03................................. 1,250,000 1,290,470
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -----------
<S> <C> <C>
Lockheed Martin Corp.
7.700%, due 06/15/08................................ $ 148,000 $ 160,758
MBNA Global Capital Securities
FRN 6.550%, due 02/01/27............................ 1,100,000 1,010,386
Nationsbanc Asset Securities, Inc.
Series 1997-1, 6.375%, due 09/20/27................. 2,605,000 2,605,000
News America Holdings
7.750%, due 12/01/45................................ 1,877,000 1,954,160
Premier Auto Trust
96-4A Class A4, 6.400%, due 10/06/01................ 455,000 457,521
96-3A 6.500%, due 03/06/00.......................... 215,000 215,772
Prudential Home Mortgage Securities
94-3 A10, 6.500%, due 02/25/24...................... 1,000,000 960,700
Residential Asset Securitization Trust
97-A 11 P4, 7.000%, due 12/25/27.................... 200,000 200,625
Salomon, Inc.
6.500%, due 03/01/00................................ 2,520,000 2,533,414
6.750%, due 02/15/03................................ 550,000 557,808
Standard Credit Card Trust
95-1A 8.250%, due 01/01/07.......................... 500,000 553,740
Thrift Financial Corp.
11.250%, due 01/01/16............................... 84,445 91,074
Time Warner, Inc.
7.570%, due 02/01/24................................ 2,165,000 2,269,349
Time Warner Entertainment, Inc.
8.375%, due 03/15/23................................ 1,206,000 1,375,811
Turner Broadcasting
7.400%, due 02/01/04................................ 1,000,000 1,033,092
UCFC Home Equity Loan
97-C, Class A8, FRN 6.325%, due 09/15/27............ 1,573,947 1,572,640
Union Pacific
6.250%, due 03/15/99................................ 1,000,000 1,002,803
WMX Technologies, Inc.
7.000%, due 10/15/06................................ 1,500,000 1,523,497
-----------
51,786,105
-----------
INTERNATIONAL DOLLAR BONDS -- 4.10%
Abbey National PLC
7.350%, Resettable Perpetual Preferred.............. 250,000 259,942
ABN AMRO Bank NV (Chicago)
6.625%, due 10/31/01................................ 250,000 253,725
AT&T Corp.
8.250%, due 01/11/00................................ 945,000 982,777
Banca Commercial Italian
8.250%, due 07/15/07................................ 450,000 493,865
Banco Bilbao Vizcaya International Finance
7.000%, due 12/01/25................................ 2,200,000 2,175,862
Banco Santiago S.A.
7.000%, due 07/18/07................................ 2,000,000 2,005,432
Banque Centrale de Tunisie
8.250%, due 09/19/27................................ 1,750,000 1,592,833
Banque Paribas, Sub. Notes
6.875%, due 03/01/09................................ 175,000 174,239
Bayerische Landesbank
6.850%, due 07/19/01................................ 212,000 217,627
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -----------
<S> <C> <C>
Credit Suisse--London
144A 7.900%, Resettable Perpetual Preferred........ $ 2,600,000 $ 2,743,265
Den Danske Bank
144A 7.400%, due 06/15/10.......................... 2,050,000 2,138,896
DR Investments
144A 7.450%, due 05/15/07.......................... 320,000 338,218
Empresa Nacional Electric
7.875%, due 02/01/27............................... 316,000 334,590
Hanson PLC Notes
6.750%, due 09/15/05............................... 290,000 296,407
International Telecom Satellite
8.125%, due 02/28/05............................... 335,000 368,506
Japanese Development Bank
8.375%, due 02/15/01............................... 970,000 1,030,452
Korea Development Bank
7.125%, due 09/17/01............................... 200,000 170,240
LKB Baden-Wuerttemberg Finance NV
8.125%, due 01/27/00............................... 350,000 363,675
Pan Pacific Industry PLC
144A 0.000%, due 04/28/07.......................... 2,130,000 1,051,202
Petroliam Nasional
7.125%, due 08/15/05............................... 420,000 396,345
Poland Non-U.S. Global Regd
FRN 6.940%, due 10/27/24........................... 300,000 289,125
Province of Quebec
7.500%, due 07/15/23............................... 325,000 350,428
Ras Laffan Liquified Natural Gas Co. Ltd. 144A
8.294%, due 03/15/14............................... 1,910,000 1,797,321
Repsol International Finance
7.000%, due 08/01/05............................... 735,000 771,860
Republic of South Africa
9.625%, due 12/15/99............................... 1,079,000 1,116,765
Royal Bank of Scotland
7.375%, Resettable Perpetual Preferred............. 690,000 716,362
Skandinaviska Enskilda Banken
144A 6.625%, Resettable Perpetual Preferred........ 500,000 502,000
Sociedad Quimica y Minera de Chiles SA, 144A 7.700%,
due 09/15/06....................................... 1,500,000 1,559,369
Southern Investments UK
6.800%, due 12/01/06............................... 1,625,000 1,637,787
Swedbank
144A FRN 7.664%, Resettable Perpetual Preferred.... 270,000 274,050
Telstra Corp. Ltd.
6.500%, due 11/28/05............................... 350,000 351,226
-----------
26,754,391
-----------
U.S. GOVERNMENT AGENCIES -- 7.33%
Federal Home Loan Mortgage Corp.
6.200%, due 08/15/07............................... 700,000 690,375
6.200%, due 12/15/08............................... 700,000 690,703
7.000%, due 10/15/13............................... 2,275,469 2,323,850
6.500%, due 05/15/21............................... 1,248,829 1,248,891
7.500%, due 01/15/23............................... 787,978 827,440
7.000%, due 01/15/25............................... 1,100,000 1,095,267
7.238%, due 05/01/26............................... 334,042 345,941
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -------------
<S> <C> <C>
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22.............................. $ 144,007 $ 149,002
8.000%, due 05/01/23.............................. 1,496,337 1,548,242
9.000%, due 03/01/24.............................. 1,056,907 1,141,428
9.500%, due 04/01/25.............................. 48,223 51,509
Federal National Mortgage Association
5.000%, due 06/01/01.............................. 1,412,398 1,366,862
6.540%, due 09/18/02.............................. 4,690,000 4,743,020
6.220%, due 03/13/06.............................. 1,700,000 1,716,563
8.000%, due 02/25/07.............................. 1,635,000 1,697,272
6.500%, due 05/25/08.............................. 909,485 907,748
6.500%, due 12/01/11 TBA.......................... 435,000 435,272
8.000%, due 05/25/21.............................. 1,610,000 1,684,266
9.000%, due 08/01/21.............................. 278,492 299,176
8.000%, due 05/01/22.............................. 116,793 120,880
8.500%, due 07/01/22.............................. 668,918 708,591
7.500%, due 07/25/22.............................. 2,154,635 2,257,934
6.500%, due 12/15/23.............................. 2,610,000 2,601,791
9.000%, due 02/01/25.............................. 1,885 2,003
6.500%, due 04/01/26.............................. 1,543,380 1,523,124
6.500%, due 12/01/26 TBA.......................... 5,000,000 4,934,375
6.730%, due 04/25/27 FRN.......................... 1,561,566 1,571,621
6.175%, due 10/01/27.............................. 1,381,103 1,379,308
6.500%, due 12/01/27.............................. 2,608,650 2,574,411
Federal National Mortgage Association Strip
0.00%, due 04/01/27, principal only............... 2,733,923 2,076,141
Government National Mortgage Association
10.000%, due 09/15/00............................. 3,022 3,217
10.000%, due 05/15/01............................. 5,907 6,290
9.000%, due 11/15/04.............................. 17,025 17,893
8.500%, due 05/15/21.............................. 49,980 52,494
8.000%, due 08/15/22.............................. 524,142 543,470
8.000%, due 12/15/22.............................. 1,475,029 1,538,190
8.000%, due 11/15/22.............................. 431,844 450,335
7.500%, due 11/15/24.............................. 2,477,404 2,543,402
------------
47,868,297
------------
U.S. GOVERNMENT OBLIGATIONS -- 5.13%
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98.............................. 172,000 171,731
6.000%, due 06/30/99.............................. 13,740,000 13,808,700
5.875%, due 08/31/99.............................. 9,185,000 9,213,703
7.750%, due 11/30/99.............................. 215,000 222,928
6.625%, due 07/31/01.............................. 930,000 956,448
6.250%, due 08/31/02.............................. 2,975,000 3,036,359
6.000%, due 02/15/26.............................. 5,875,000 5,867,656
U.S. Treasury Strip
0.000%, due 02/15/03, principal only.............. 225,000 168,237
------------
33,445,762
------------
Total U.S. Bonds................................... 159,854,555
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------
<S> <C> <C>
HIGH YIELD BONDS -- 2.64%
Brinson High Yield Fund (b)........................ 1,231,792 17,201,354
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -------------
<S> <C> <C>
NON - U.S. BONDS--16.43%
AUSTRALIA -- 1.17%
Government of Australia
7.00%, due 04/15/00 ..........................AUD 2,300,000 $ 1,550,958
9.75%, due 03/15/02.............................. 3,400,000 2,550,377
10.00%, due 10/15/07............................. 1,200,000 1,013,253
Queensland Treasury Global Notes
8.00%, due 05/14/03.............................. 3,500,000 2,504,390
------------
7,618,978
------------
CANADA -- 2.00%
Government of Canada
7.50%, due 09/01/00...........................CAD 3,380,000 2,487,043
6.50%, due 06/01/04.............................. 500,000 367,658
8.75%, due 12/01/05.............................. 2,600,000 2,179,977
7.00%, due 12/01/06.............................. 4,270,000 3,271,081
4.25%, due 12/01/21 (d).......................... 6,060,000 4,699,348
------------
13,005,107
------------
DENMARK -- 1.88%
Kingdom of Denmark
9.00%, due 11/15/98...........................DKK 3,200,000 485,417
9.00%, due 11/15/00.............................. 13,600,000 2,203,242
6.00%, due 11/15/02.............................. 10,000,000 1,520,869
7.00%, due 12/15/04.............................. 8,200,000 1,305,313
8.00%, due 03/15/06.............................. 40,000,000 6,767,532
------------
12,282,373
------------
FRANCE -- 0.65%
Government of France (OAT)
9.50%, due 01/25/01.......................... FRF 10,300,000 1,950,939
7.50%, due 04/25/05.............................. 9,300,000 1,767,711
8.50%, due 12/26/12.............................. 2,500,000 538,149
------------
4,256,799
------------
GERMANY -- 4.06%
Bundesrepublik Deutschland
7.000%, due 09/20/99..........................DEM 13,700,000 7,971,158
8.500%, due 08/21/00............................. 2,180,000 1,333,509
9.000%, due 01/22/01............................. 2,500,000 1,565,402
8.375%, due 05/21/01............................. 1,580,000 980,635
7.250%, due 10/21/02............................. 4,500,000 2,760,163
6.750%, due 04/22/03............................. 4,900,000 2,955,915
6.750%, due 07/15/04............................. 6,300,000 3,830,243
6.250%, due 01/04/24............................. 2,500,000 1,460,848
Treuhandanstalt
6.250% due 03/04/04.............................. 6,200,000 3,669,451
------------
26,527,324
------------
ITALY -- 0.86%
Republic of Italy (BTP)
9.50%, due 12/01/99...........................ITL 1,900,000,000 1,155,335
10.50%, due 04/01/00............................. 995,000,000 627,485
12.00%, due 09/01/02............................. 1,700,000,000 1,223,139
9.00%, due 10/01/03.............................. 900,000,000 600,407
8.50%, due 04/01/04.............................. 3,100,000,000 2,030,022
------------
5,636,388
------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
NETHERLANDS -- 1.44%
Government of Netherlands
6.25%, due 07/15/98...............................NLG 1,400,000 $ 698,515
8.50%, due 03/15/01.................................. 5,600,000 3,070,843
8.75%, due 09/15/01.................................. 700,000 391,314
6.50%, due 04/15/03.................................. 1,100,000 580,847
7.25%, due 10/01/04.................................. 3,200,000 1,763,133
8.25%, due 02/15/07.................................. 4,815,000 2,865,534
-----------
9,370,186
-----------
SPAIN -- 1.06%
Government of Spain
6.75%, due 04/15/00...............................ESP 415,000,000 2,847,578
7.90%, due 02/28/02.................................. 140,000,000 1,016,796
8.00%, due 05/30/04.................................. 300,000,000 2,250,689
10.00%, due 02/28/05................................. 100,000,000 832,057
-----------
6,947,120
-----------
SWEDEN -- 0.50%
Government of Sweden
5.50%, due 04/12/02...............................SEK 6,500,000 817,321
10.25%, due 05/05/03................................. 16,300,000 2,475,362
-----------
3,292,683
-----------
UNITED KINGDOM -- 2.81%
UK Treasury
8.00%, due 06/10/03...............................GBP 2,590,000 4,549,280
6.75%, due 11/26/04.................................. 380,000 637,762
8.50%, due 12/07/05.................................. 4,570,000 8,485,330
8.50%, due 07/16/07.................................. 1,200,000 2,266,351
7.25%, due 12/07/07.................................. 1,200,000 2,114,563
8.75%, due 08/25/17.................................. 130,000 272,193
-----------
18,325,479
-----------
Total Non-U.S. Bonds.................................. 107,262,437
-----------
EMERGING MARKETS DEBT -- 5.24% SHARES
-----------
Brinson Emerging Markets Debt
Fund (b)............................................. 1,692,314 34,231,280
-----------
Total Bonds (Cost $307,234,717)....................... 318,549,626
-----------
Short-Term Investments -- 16.74%
FACE
U.S. GOVERNMENT OBLIGATIONS -- 0.25% AMOUNT
-----------
U.S. Treasury Bill 5.420%, due 05/28/98............... $ 1,630,000 1,595,361
-----------
CERTIFICATES OF DEPOSIT -- 0.92%
Canadian Imperial Bank
5.940%, due 10/23/98................................. 3,000,000 2,998,614
Societe General
6.000%, due 10/20/98................................. 3,000,000 2,997,715
-----------
5,996,329
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
COMMERCIAL PAPER -- 15.57%
Bausch & Lomb Inc.
7.750%, due 01/02/98................................. $ 2,290,000 $ 2,289,507
6.750%, due 01/05/98................................. 15,000,000 14,991,562
Case Credit Corp.
6.110%, due 01/20/98................................. 2,800,000 2,790,971
6.030%, due 03/10/98................................. 1,000,000 988,610
6.020%, due 03/13/98................................. 1,500,000 1,482,191
ConAgra, Inc.
5.900%, due 01/23/98................................. 5,000,000 4,982,792
CSX Corp.
5.700%, due 01/05/98................................. 5,000,000 4,997,625
Cummins Engine Co., Inc.
7.000%, due 01/02/98................................. 6,175,000 6,175,000
General American Tranportation Corp.
7.500%, due 01/07/98................................. 682,000 681,147
GTE Corp.
6.120%, due 02/20/98................................. 1,500,000 1,487,250
6.020%, due 03/02/98................................. 1,500,000 1,484,950
ITT Industries, Inc.
7.250%, due 01/02/98................................. 10,000,000 9,997,986
6.250%, due 01/06/98................................. 1,909,000 1,907,674
Marriott Corp.
6.050%, due 02/09/98................................. 2,000,000 1,986,892
Nabisco, Inc.
6.100%, due 01/07/98................................. 5,000,000 4,995,764
6.120%, due 01/16/98................................. 2,500,000 2,493,625
Occidental Petroleum Corp.
6.900%, due 01/12/98................................. 5,000,000 4,990,417
6.000%, due 01/16/98................................. 2,500,000 2,493,750
Praxair, Inc.
6.550%, due 01/02/98................................. 1,000,000 999,818
5.750%, due 01/05/98................................. 5,000,000 4,997,604
Rite Aid Corp.
5.850%, due 01/20/98................................. 5,000,000 4,985,375
Safeway, Inc.
5.920%, due 01/22/98................................. 1,500,000 1,494,820
Solutia, Inc.
7.000%, due 01/02/98................................. 7,915,000 7,915,000
Tupperware, Corp.
7.050%, due 01/02/98................................. 4,590,000 4,590,000
Ultramar Diamond Shamrock Corp.
6.000%, due 01/06/98................................. 5,000,000 4,996,667
Vastar Resources, Inc.
7.100%, due 01/02/98................................. 451,000 450,911
------------
101,647,908
------------
Total Short-Term Investments
(Cost $109,239,959).................................. 109,239,598
------------
Total Investments
(Cost $687,250,467) -- 112.84% (a)................... 736,539,015
------------
Liabilities, less cash and other assets--(12.84%)..... (83,850,246)
------------
Net Assets -- 100%.................................... $652,688,769
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $687,250,467; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $75,270,262
Gross unrealized depreciation................................ (25,981,714)
-----------
Net unrealized appreciation............................... $49,288,548
===========
</TABLE>
(b) Non-income producing security
(c) Denominated in U.S. dollars.
(d) Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating rate note---The rate disclosed is that in effect at December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $12,433,140 or 1.90% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Fund had the following open forward currency contracts as of
December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar........... 2/5/98 7,300,000 $ 4,760,414 $ (529,176)
Belgian Franc............... 2/5/98 176,000,000 4,759,921 (176,965)
British Pound............... 2/5/98 2,000,000 3,285,151 (54,849)
Canadian Dollar............. 2/5/98 9,700,000 6,785,684 (31,600)
Danish Kroner............... 2/5/98 17,000,000 2,487,249 (13,486)
Dutch Guilder............... 2/5/98 7,300,000 3,608,752 (70,412)
French Franc................ 2/5/98 27,900,000 4,647,297 67,820
German Mark................. 2/5/98 8,500,000 4,736,986 (33,472)
Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (14,258)
Japanese Yen................ 2/5/98 4,950,000,000 38,269,152 (5,018,981)
Spanish Peseta.............. 2/5/98 165,000,000 1,083,559 (7,855)
Swiss Franc................. 2/5/98 8,700,000 5,989,384 59,237
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar........... 2/5/98 20,900,000 13,629,131 1,304,887
Belgian Franc............... 2/5/98 176,000,000 4,759,921 (51,899)
British Pound............... 2/5/98 23,000,000 37,779,238 126,402
Canadian Dollar............. 2/5/98 19,800,000 13,851,191 527,685
Danish Kroner............... 2/5/98 86,600,000 12,670,340 (76,941)
Dutch Guilder............... 2/5/98 17,600,000 8,700,553 10,137
German Mark................. 2/5/98 41,700,000 23,239,095 (97,035)
Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (57,429)
Japanese Yen................ 2/5/98 3,600,000,000 27,832,111 2,710,530
Spanish Peseta.............. 2/5/98 840,000,000 5,516,299 227,585
-----------
Total...................... $(1,200,075)
===========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Fund had the following open futures contracts as of December 31,
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 Note,182
contracts..................... March 1998 $19,709,740 $19,769,750 $ 60,010
10 year U.S. Treasury Note, 9
contracts..................... March 1998 1,002,723 1,009,406 6,683
30 year U.S. Treasury Bonds, 27
contracts..................... March 1998 3,258,765 3,252,656 (6,109)
INDEX FUTURES SALES CONTRACTS
Standard & Poor's 500,108 con-
tracts........................ March 1998 26,240,844 26,435,700 (194,856)
---------
Total......................... $(134,272)
=========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1997 was $1,595,361.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $613,477,833)....................... $654,586,339
Affiliated issuers (Cost $73,772,634).......................... 81,952,676
Cash........................................................... 967,618
Foreign currency, at value (Cost $1,661,900).................... 1,650,073
Receivables:
Investment securities sold..................................... 4,199,922
Dividends...................................................... 566,826
Interest....................................................... 5,279,895
Fund shares sold............................................... 2,750
Other assets.................................................... 68,200
------------
TOTAL ASSETS................................................. 749,274,299
------------
LIABILITIES:
Payables:
Securities loaned (Note 6)..................................... 79,523,767
Investment securities purchased................................ 15,247,486
Fund shares redeemed........................................... 63,989
Investment advisory fees (Note 2).............................. 451,581
Accrued expenses............................................... 98,632
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 1,200,075
------------
TOTAL LIABILITIES............................................ 96,585,530
------------
NET ASSETS....................................................... $652,688,769
============
NET ASSETS CONSIST OF:
Paid in capital (Note 8)........................................ $606,550,960
Accumulated distribution in excess of net investment income..... (19,500,419)
Accumulated net realized gain................................... 17,760,003
Net unrealized appreciation..................................... 47,878,225
------------
NET ASSETS................................................... $652,688,769
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $624,336,530 and 51,450,863 shares is-
sued and outstanding) (Note 8)................................ $ 12.13
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,019 and 84 shares issued and outstanding) (Note 8)......... $ 12.13
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $28,351,220 and 2,346,083 shares is-
sued and outstanding) (Note 8)................................ $ 12.08
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $10,982 for foreign taxes withheld; including
securities lending income of $73,183)........................... $ 9,386,734
Dividends (net of $135,273 for foreign taxes withheld)........... 2,639,326
-----------
TOTAL INCOME.................................................. 12,026,060
-----------
EXPENSES:
Advisory (Note 2)................................................ 2,635,060
Administration................................................... 247,037
Distribution (Note 7)............................................ 92,076
Custodian........................................................ 74,111
Other............................................................ 164,286
-----------
TOTAL EXPENSES................................................ 3,212,570
-----------
NET INVESTMENT INCOME ........................................ 8,813,490
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 20,050,524
Futures contracts............................................... (874,722)
Foreign currency transactions................................... 4,235,588
-----------
Net realized gain............................................. 23,411,390
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ (14,119,807)
Futures contracts............................................... 158,670
Forward contracts............................................... (7,317,967)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. (43,884)
-----------
Change in net unrealized appreciation or depreciation......... (21,322,988)
-----------
Net realized and unrealized gain................................. 2,088,402
-----------
Net increase in net assets resulting from operations............. $10,901,892
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1997 ENDED
(UNAUDITED) JUNE 30, 1997
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................ $ 8,813,490 $ 16,194,760
Net realized gain............................ 23,411,390 43,268,043
Change in net unrealized appreciation or de-
preciation.................................. (21,322,988) 35,756,888
------------ -------------
Net increase in net assets resulting from op-
erations.................................... 10,901,892 95,219,691
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
Brinson Class I.............................. (26,359,274) (23,918,105)
Brinson Class N.............................. (40) --
SwissKey Class............................... (989,891) (742,228)
Distributions from net realized gain
Brinson Class I.............................. (33,973,096) (25,579,684)
Brinson Class N.............................. (53) --
SwissKey Class............................... (1,492,307) (848,410)
------------ -------------
Total distributions to shareholders........... (62,814,661) (51,088,427)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................. 102,712,225 192,297,100
Shares issued on reinvestment of distribu-
tions....................................... 56,902,593 49,580,585
Shares redeemed.............................. (67,984,082) (145,001,283)
------------ -------------
Net increase in net assets resulting from
capital share transactions (Note 8)......... 91,630,736 96,876,402
------------ -------------
TOTAL INCREASE IN NET ASSETS.............. 39,717,967 141,007,666
------------ -------------
NET ASSETS:
Beginning of year............................ 612,970,802 471,963,136
------------ -------------
End of year (including accumulated undistrib-
uted net investment income of ($19,500,419)
and ($964,704), respectively)............... $652,688,769 $ 612,970,802
============ =============
</TABLE>
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>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30, AUGUST 31, 1992*
1997 -------------------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 1994 JUNE 30, 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income. 0.24** 0.38 0.44 0.43 0.33 0.26
Net realized and
unrealized gain
(loss)............... -- 1.79 1.37 0.86 (0.23) 0.81
-------- -------- -------- -------- -------- --------
Total income from
investment
operations......... 0.24 2.17 1.81 1.29 0.10 1.07
-------- -------- -------- -------- -------- --------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.54) (0.61) (0.62) (0.27) (0.27) (0.20)
Distributions from and
in excess of net
realized gain........ (0.70) (0.65) (0.32) (0.10) (0.27) --
-------- -------- -------- -------- -------- --------
Total distributions. (1.24) (1.26) (0.94) (0.37) (0.54) (0.20)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period................. $ 12.13 $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
======== ======== ======== ======== ======== ========
Total return (non-
annualized)............ 1.95% 18.79% 16.38% 12.57% 0.77% 10.76%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $624,337 $586,667 $457,933 $365,678 $278,859 $191,389
Ratio of expenses to
average net
assets:
Before expense reim-
bursement............ 0.95%*** 0.99% 1.04% 1.09% 1.14% 1.35%***
After expense reim-
bursement............ N/A N/A N/A N/A 1.10% 1.05%***
Ratio of net investment
income to
average net assets:
Before expense reim-
bursement............ 3.60%*** 3.03% 3.69% 4.27% 3.21% 3.26%***
After expense reim-
bursement............ N/A N/A N/A N/A 3.25% 3.56%***
Portfolio turnover
rate.................. 57% 150% 142% 238% 231% 149%
Average commission rate
paid per share........ $ 0.0352 $ 0.0326 $ 0.0291 N/A N/A N/A
</TABLE>
*Commencement of investment operations
**The net investment income per share was determined by using average shares
outstanding throughout the period.
***Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- -----------------------------------------------
<S> <C>
Net asset value, beginning
of period.................. $ 13.13
-------
Income from investment op-
erations: 0.00
Net investment income..... 0.22**
Net realized and
unrealized gain.......... 0.00
-------
Total income from in-
vestment operations.... 0.22
-------
Less distributions:
Distributions from and in
excess of net investment
income................... (0.52)
Distributions from net re-
alized gain.............. (0.70)
-------
Total distributions..... (1.22)
-------
Net asset value, end of pe-
riod....................... $ 12.13
=======
Total return (non-
annualized)................ 1.79%
Ratios/Supplemental Data:
Net assets, end of period
(in 000s)................. $ 1
Ratio of expenses to aver-
age net assets............ 1.20%***
Ratio of net investment in-
come to average net as-
sets...................... 3.35%***
Portfolio turnover rate.... 57%
Average commission rate
paid per share............ $0.0352
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** The net investment income per share was determined by using average shares
outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 13.05 $ 12.18 $ 11.60
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.19** 0.34 0.39
Net realized and unrealized
gain......................... -- 1.75 1.10
------- ------- -------
Total income from investment
operations................. 0.19 2.09 1.49
------- ------- -------
Less distributions:
Distributions from and in
excess of net investment
income....................... (0.46) (0.57) (0.59)
Distributions from net real-
ized gain.................... (0.70) (0.65) (0.32)
------- ------- -------
Total distributions......... (1.16) (1.22) (0.91)
------- ------- -------
Net asset value, end of period.. $ 12.08 $ 13.05 $ 12.18
======= ======= =======
Total return (non-annualized)... 1.58% 18.13% 13.24%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $28,351 $26,303 $14,030
Ratio of expenses to average
net assets.................... 1.60%*** 1.64% 1.69%***
Ratio of net investment income
to average net assets......... 2.94%*** 2.38% 3.04%***
Portfolio turnover rate........ 57% 150% 142%
Average commission rate paid
per share..................... $0.0352 $0.0326 $0.0291
</TABLE>
* Commencement of SwissKey Class
** The net investment income per share was determined by using average shares
outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<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 our offices worldwide.
The Brinson Global Equity Fund has provided an annualized return of 11.17% since
its inception on January 31, 1994, below the 12.48% return for the benchmark
MSCI World Equity (Free) Index. Over this period, the Brinson Global Equity Fund
experienced annualized volatility of 8.76%, below the volatility of the
benchmark which was 10.41%. For the year ended December 31, 1997, the Fund
returned 10.72%, compared to the benchmark return of 15.92%.
Since inception, the Fund's largest contributor to performance has been currency
allocation. For 1997, currency allocation made an important positive
contribution to Fund performance. Market allocation strategies, notable for a
U.S. equity market underweight and a cash risk hedge, detracted from
performance. Security selection also reduced performance; with very strong stock
selection in Japan more than offset by poor results in the U.S.
As global equity markets in aggregate were strong in 1997, holding cash cost
performance. Returns varied considerably, however, double-digit rises in Europe
and North America contrasted sharply with very weak markets in the Pacific
region. Despite a return of 34.1% for the MSCI U.S. component, the U.S. equity
market was not the strongest developed market during 1997. Nine markets in the
global equity index outperformed the U.S. market, led by Switzerland and
Denmark, gaining U.S. dollar-hedged returns of 63.5% and 59.5% respectively. The
performance of the MSCI World Equity (Free) Index was muted by the weakness of
Japan, Southeast Asia, New Zealand and Australia. The worst performing market in
1997 was Malaysia, which declined 52.1% in U.S. dollar-hedged terms.
Currency strategies contributed substantially to the performance of the Fund
relative to the MSCI World Equity (Free) benchmark. At the start of the year,
the Fund maintained a significant underweight to the Japanese yen and to the
core European currencies. This position was gradually pared down and by the end
of March was relatively neutral. In October, a small underweight of the yen was
reinstated, increasing the size of the U.S. dollar overweight. For the full
year, the U.S. dollar overweight and yen underweight made the greatest positive
impact on returns.
Japan stock selection made a very large positive contribution, benefiting from
overweights of blue chip multinationals and other defensive securities, while
avoiding all but the highest quality banks and financials. The U.S. equity
portion of the Fund was hurt by its underexposure to large capitalization and
consumer products issues, as companies with well-known brand names and stable
cash flows outperformed.
26
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 1/31/94*
ended ended ended to
12/31/97 12/31/97 12/31/97 12/31/97
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Global Equity Fund -1.68% 10.72% 16.53% 11.17%
MSCI World Equity (Free) Index 0.36 15.92 17.00 12.48
- -------------------------------------------------------------------------------
</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 if you had invested
$1,000,000 on January 31, 1994, and had reinvested all your income dividends and
capital gain distributions through December 31, 1997. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future results.
Share price and return will vary with market conditions; investors may realize a
gain or loss upon redemption.
Brinson Global Equity Fund
vs. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
<TABLE>
<CAPTION>
Brinson MSCI
Global World Equity
Equity (Free)
Fund Index
- -----------------------------------------
<S> <C> <C>
1/31/94 1000000 1000000
2/28/94 978000 986865.04
3/31/94 935000 944348.6
4/30/94 957000 974077.96
5/31/94 964000 976963.08
6/30/94 953025.45 974100.89
7/31/94 967084.84 992749.02
8/31/94 1008258.75 1022750.51
9/30/94 981144.22 995748.08
10/31/94 983152.7 1024395.72
11/30/94 957042.42 980244.75
12/31/94 956520.48 989551.08
1/31/95 942319.75 975024.82
2/28/95 957534.82 989499.12
3/31/95 965649.52 1037236.46
4/30/95 991007.96 1073521.14
5/31/95 1004194.35 1083208.08
6/30/95 1010801.91 1082850.85
7/31/95 1057638.4 1137066.07
8/31/95 1075010.24 1111688.18
9/30/95 1094425.83 1144525.61
10/31/95 1092382.08 1126745.62
11/30/95 1131213.25 1166017.6
12/31/95 1166323.79 1200235.52
1/31/96 1201269.82 1222675.9
2/29/96 1206730.14 1230112.18
3/31/96 1227479.34 1250534.13
4/30/96 1261333.31 1279914.41
5/31/96 1264609.5 1280938.52
6/30/96 1270202.14 1287765.26
7/31/96 1229582.02 1242254.73
8/31/96 1251538.84 1256945.32
9/30/96 1293256.8 1306231.22
10/31/96 1297648.16 1315223.21
11/30/96 1363518.63 1389368.21
12/31/96 1367687.97 1367286.33
1/31/97 1379695.76 1384047.1
2/28/97 1398908.24 1399822.12
3/31/97 1392904.34 1371806.69
4/30/97 1401309.8 1416807.77
5/31/97 1484163.59 1504478.53
6/30/97 1540252.63 1579321.39
7/31/97 1590950.6 1652215.67
8/31/97 1517317.83 1540395.72
9/30/97 1582500.93 1624143.99
10/31/97 1496797.22 1538888.9
11/30/97 1495590.13 1565803.25
12/31/97 1514304.17 1584936.86
</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.
27
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
Market Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------------------------------
<S> <C> <C>
U.S. 49.8% 34.3%
Japan 12.0 5.6
Australia 1.3 2.7
Belgium 0.6 1.8
Canada 2.5 1.6
France 3.8 3.7
Germany 4.7 4.5
Hong Kong 1.3 0.5
Italy 1.9 2.3
Malaysia 0.4 0.8
Netherlands 2.7 2.4
New Zealand 0.1 1.9
Spain 1.3 1.3
Sweden 1.2 0.9
Switzerland 3.7 2.6
U.K. 10.3 11.8
Other Markets 2.4 1.3
Cash Reserves 0.0 20.0
- --------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------------------
<S> <C>
1. Lockheed Martin Corp. 2.02%
2. Xerox Corp. 1.95
3. Philip Morris Companies, Inc. 1.84
4. Aon Corp. 1.64
5. CIGNA Corp. 1.63
6. Schering Plough Corp. 1.44
7. Burlington Northern Santa Fe Corp. 1.41
8. Goodyear Tire & Rubber Co. 1.36
9. Federal Express Corp. 1.36
10. Automatic Data Processing, Inc. 1.17
- ----------------------------------------------------------------
</TABLE>
Currency Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------------------------------
<S> <C> <C>
U.S. 49.8% 57.4%
Japan 12.0 8.0
Australia 1.3 1.3
Belgium 0.6 0.6
Canada 2.5 2.5
France 3.8 3.8
Germany 4.7 4.7
Hong Kong 1.3 --
Italy 1.9 1.9
Malaysia 0.4 0.4
Netherlands 2.7 2.7
New Zealand 0.1 1.9
Spain 1.3 1.3
Sweden 1.2 1.2
Switzerland 3.7 3.7
U.K. 10.3 6.3
Other Markets 2.4 2.3
- --------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------------------
<S> <C>
1. Glaxo Wellcome PLC 0.77%
2. Telecom Corp. of New Zealand Ltd. 0.75
3. Royal Dutch Petroleum Co. 0.71
4. Novartis AG(Reg.) 0.67
5. Lloyds TSB Group PLC 0.61
6. B.A.T. Industries PLC 0.56
7. Allianz AG 0.53
8. British Petroleum Co. PLC 0.48
9. Roche Holding AG (Gen.) 0.46
10. British Telecommunications PLC 0.44
</TABLE>
28
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------
<S> <C>
U.S. EQUITIES
Energy........................... 1.93%
Capital Investment
Capital Goods................... 3.37
Technology...................... 4.11
------
7.48
Basic Industries
Chemicals....................... 1.00
Housing/Paper................... 2.43
Metals.......................... 0.42
------
3.85
------
Consumer
Non-Durables.................... 4.62
Retail/Apparel.................. 2.43
Autos/Durables.................. 1.87
Descretionary................... 1.74
Health: Drugs................... 3.86
Health: Non-Drugs............... 2.04
------
16.56
Financial
Banks........................... 3.74
Non-Banks....................... 3.33
------
7.07
Utilities
Electric........................ 2.93
Telephone....................... 0.51
------
3.44
Transportation................... 2.93
Services/Misc.................... 4.49
------
Total U.S. Equities.......... 47.75*
------
NON-U.S. EQUITIES
Aerospace & Military............. 0.09
Airplanes........................ 0.17
Appliances & Household........... 0.75
Autos/Durables................... 1.42
Banking.......................... 5.34
Beverages and Tobacco............ 1.14
Broadcasting & Publishing........ 0.80
Building Materials............... 0.63
Business & Public Service........ 1.47
Chemicals........................ 1.24
Construction..................... 0.36
Data Processing.................. 0.31
Electric Components.............. 0.46
Electronics...................... 1.61
Energy........................... 3.82
Financial Services............... 1.01
Food & House Products............ 1.59
Forest Products.................. 0.57
Gold Mining...................... 0.03
Health: Drugs.................... 0.72
Health: Non-Drugs................ 2.51
Industrial Components............ 0.58
Insurance........................ 2.92
Leisure & Tourism................ 0.25
Machinery & Engineering.......... 0.08
Merchandising.................... 2.03
Metals--Steel.................... 0.70
Miscellaneous Materials.......... 0.17
Miscellaneous Services........... 0.05
Multi-Industry................... 2.38
Non-Ferrous Metals............... 0.84
Real Estate...................... 0.49
Recreation....................... 0.17
Retail & Apparel................. 0.28
Shipping......................... 0.02
Telecommunications............... 3.94
Textiles &Apparel................ 0.08
Transportation................... 0.42
Utilities........................ 2.01
Wholesale & International Trade.. 0.24
------
Total Non-U.S. Equities...... 43.69
------
SHORT-TERM INVESTMENTS........... 8.78*
------
TOTAL INVESTMENTS............ 100.22
------
LIABILITIES LESS CASH
AND OTHER ASSETS................ (0.22)
------
NET ASSETS................... 100.00%
======
- ------------------------------------------
</TABLE>
* The Fund held a short position in stock index futures on December 31, 1997
which reduced U.S. Equity exposure from 47.75% to 33.35%. This adjustment
results in an increase in the Fund's exposure to Short-Term Investments from
8.78% to 23.18%.
29
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Equities -- 91.44%
U. S. EQUITIES -- 47.75%
Allergan, Inc............................................... 12,100 $ 406,106
Alza Corp. (b).............................................. 11,800 375,387
American Home Products Corp................................. 9,500 726,750
Aon Corp.................................................... 22,750 1,333,719
Automatic Data Processing, Inc.............................. 15,500 951,312
Baxter International, Inc................................... 15,300 771,694
Beckman Instruments, Inc.................................... 4,600 184,000
Biogen, Inc. (b)............................................ 4,600 167,325
Birmingham Steel Corp....................................... 4,700 74,025
Boston Technology, Inc. (b)................................. 4,500 113,062
Briggs & Stratton Corp...................................... 600 29,137
Burlington Northern Santa Fe Corp........................... 12,400 1,152,425
Champion Enterprises, Inc. (b).............................. 7,600 156,275
Champion International Corp................................. 600 27,187
Chase Manhattan Corp........................................ 6,400 700,800
CIGNA Corp.................................................. 7,700 1,332,581
Circuit City Stores-Circuit City Group...................... 17,400 618,787
Citicorp.................................................... 5,700 720,694
CMS Energy Corp............................................. 15,200 669,750
Comerica, Inc............................................... 3,200 288,800
Commscope, Inc. (b)......................................... 8,933 120,037
Comverse Technology, Inc. (b)............................... 2,300 89,700
Corning, Inc................................................ 25,200 935,550
Covance, Inc. (b)........................................... 5,900 117,262
CPC International, Inc...................................... 5,200 561,600
Crown Cork & Seal Co., Inc.................................. 5,600 280,700
CVS Corp.................................................... 7,500 480,469
Dial Corp................................................... 6,100 126,956
Eastman Chemical Co......................................... 6,500 387,156
Echlin, Inc................................................. 3,300 119,419
EMC Corp. (b)............................................... 33,800 927,387
Enron Corp.................................................. 15,800 656,687
Entergy Corp................................................ 30,900 925,069
Federal Express Corp. (b)................................... 18,100 1,105,231
First American Corp. of Tennessee........................... 3,100 154,225
First Data Corp............................................. 28,604 836,667
First Security Corp......................................... 3,900 163,312
FirstEnergy Corp............................................ 9,227 267,583
Fleetwood Enterprises, Inc.................................. 3,600 152,775
Food Lion, Inc. Class A..................................... 23,500 198,281
Forest Laboratories, Inc. (b)............................... 5,400 266,287
Fort James Corp............................................. 13,800 527,850
Gannett Co., Inc............................................ 11,800 729,388
General Semiconductor, Inc. (b)............................. 7,425 85,852
Genzyme Corp................................................ 4,800 133,200
Geon Co..................................................... 3,200 74,800
Goodyear Tire & Rubber Co................................... 17,400 1,107,075
Harnischfeger Industries, Inc............................... 9,000 317,813
Health Care and Retirement Corp. (b)........................ 5,350 215,338
Hibernia Corp............................................... 6,600 124,163
Informix Corp. (b).......................................... 6,300 29,925
Interpublic Group of Companies, Inc......................... 7,650 381,066
Kimberly Clark Corp......................................... 14,100 695,306
Lear Corp. (b).............................................. 5,100 242,250
Lockheed Martin Corp........................................ 16,751 1,649,974
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Lyondell Petrochemical Co................................... 12,900 $ 341,850
Manor Care, Inc............................................. 9,100 318,500
Martin Marietta Materials, Inc.............................. 3,435 125,592
Masco Corp.................................................. 13,700 696,988
Nabisco Holdings Corp....................................... 12,000 581,250
National Service Industries, Inc............................ 2,300 113,994
Nextel Communications, Inc. (b)............................. 16,300 423,800
NextLevel Systems, Inc. (b)................................. 26,900 480,838
Old Republic International Corp............................. 2,450 91,109
Peco Energy Co.............................................. 35,100 851,175
Pentair, Inc................................................ 6,200 222,813
Pharmacia & UpJohn, Inc..................................... 6,300 230,738
Philip Morris Companies, Inc................................ 33,200 1,504,375
Raytheon Co., Class B....................................... 13,900 701,950
Regions Financial Corp...................................... 3,000 126,563
Reynolds & Reynolds Co...................................... 11,600 213,875
Schering Plough Corp........................................ 18,900 1,174,163
Seagate Technology, Inc. (b)................................ 10,500 202,125
Sears, Roebuck and Co....................................... 1,400 63,350
Timken Co................................................... 4,000 137,500
Tyson Foods, Inc., Class A.................................. 24,000 492,000
Ultramar Diamond Shamrock Corp.............................. 13,352 425,595
US Bancorp.................................................. 8,021 897,851
Vencor, Inc. (b)............................................ 12,000 293,250
Viad Corp................................................... 11,600 224,025
Westvaco Corp............................................... 2,850 89,597
Witco Corp.................................................. 1,300 53,056
Xerox Corp.................................................. 21,600 1,594,350
York International Corp..................................... 7,300 288,806
-----------
Total U.S. Equities......................................... 38,947,247
-----------
NON-U.S. EQUITIES -- 43.69%
AUSTRALIA -- 2.35%
Amcor Ltd................................................... 8,300 36,506
Boral Ltd................................................... 21,600 54,609
Brambles Industries Ltd..................................... 5,000 99,206
Broken Hill Proprietary Co., Ltd............................ 30,050 279,024
Coca-Cola Amatil Ltd........................................ 5,200 38,850
CSR Ltd..................................................... 15,000 50,825
David Jones Ltd............................................. 53,200 59,971
Lend Lease Corp., Ltd....................................... 3,697 72,269
Mayne Nickless Ltd.......................................... 7,500 39,634
M.I.M. Holdings Ltd......................................... 32,411 19,852
National Australia Bank Ltd................................. 21,075 294,288
News Corp. Ltd.............................................. 44,040 243,060
News Corp. Ltd., Preferred.................................. 9,700 47,998
Pacific Dunlop Ltd.......................................... 25,200 53,366
Qantas Airways Ltd.......................................... 26,764 47,365
Rio Tinto Ltd............................................... 9,663 112,725
Santos Ltd.................................................. 6,000 24,709
Telstra Corp., Ltd. (b)..................................... 10,000 21,112
Westpac Banking Corp., Ltd.................................. 34,945 223,512
WMC Ltd..................................................... 16,800 58,566
Woolworth's Ltd............................................. 12,000 40,113
-----------
1,917,560
-----------
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
BELGIUM -- 1.75%
Delhaize-Le Lion S.A........................................ 2,650 $ 134,463
Electrabel S.A.............................................. 1,140 263,685
Fortis AG................................................... 88 12
Fortis AG Strip (b)......................................... 1,018 212,387
Generale de Banque S.A...................................... 220 95,746
Groupe Bruxelles Lambert S.A................................ 550 79,566
Kredietbank NV.............................................. 275 115,415
Kredietbank VVPR............................................ 11 4,617
Petrofina S.A............................................... 530 195,616
Societe Generale de Belgique................................ 750 68,622
Solvay S.A., Class A........................................ 1,550 97,474
Tractebel................................................... 1,300 113,330
Tractebel Warrants "99" (b)................................. 200 513
Union Miniere Group S.A. (b)................................ 702 48,693
-----------
1,430,139
-----------
CANADA -- 1.58%
Agrium, Inc................................................. 3,100 37,691
Alcan Aluminum Ltd.......................................... 2,500 68,828
Bank of Montreal............................................ 1,700 75,253
Barrick Gold Corp........................................... 1,500 27,933
Canadian National Railway Co................................ 1,700 79,946
Canadian Pacific Ltd........................................ 5,216 140,323
Hudson's Bay Co............................................. 2,000 44,511
Imasco, Ltd................................................. 1,200 42,345
Imperial Oil Ltd............................................ 2,000 128,572
Magna International Inc., Class A........................... 700 43,826
Moore Corp., Ltd............................................ 2,400 36,056
Newbridge Networks Corp. (b)................................ 800 27,979
Noranda, Inc................................................ 2,500 42,974
Northern Telecom Ltd........................................ 400 35,539
NOVA Corp................................................... 6,900 65,572
Potash Corporation of Saskatchewan, Inc..................... 700 58,231
Royal Bank of Canada........................................ 2,000 105,653
Seagram Co., Ltd............................................ 1,400 45,245
TELUS Corp.................................................. 3,300 73,098
TransCanada Pipelines Ltd................................... 3,400 75,788
Westcoast Energy, Inc....................................... 1,600 36,895
-----------
1,292,258
-----------
FINLAND -- 0.34%
Cultor Oyj.................................................. 300 16,306
Merita Ltd., Class A........................................ 7,000 38,306
Metsa Serla Oyj, Class B.................................... 1,800 14,048
Nokia Oyj, Class A Preferred................................ 1,800 127,917
Outokumpu Oyj, Class A...................................... 1,500 18,317
Sampo Insurance Co., Ltd., Series A......................... 400 13,001
The Rauma Group............................................. 83 1,296
UPM-Kymmene Corp............................................ 2,200 44,035
-----------
273,226
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
FRANCE -- 2.75%
Accor S.A................................................... 408 $ 75,843
Alcatel Alsthom............................................. 696 88,472
AXA-UAP..................................................... 1,441 111,587
AXA-UAP Rights (b).......................................... 1,291 1,267
Banque Nationale de Paris................................... 1,610 85,612
Cie Bancaire S.A............................................ 23 3,728
Cie de Saint Gobain......................................... 916 130,183
Cie Financiere de Paribas................................... 900 78,241
Cie Generale des Eaux....................................... 928 129,609
Cie Generale des Eaux Warrants "01" (b)..................... 1,771 1,204
Dexia France................................................ 677 78,465
Elf Aquitaine S.A........................................... 1,213 141,082
France Telecom S.A. (b)..................................... 3,100 112,488
Groupe Danone............................................... 250 44,673
Lafarge S.A................................................. 675 44,308
Lagardere S.C.A............................................. 2,250 74,427
LVMH........................................................ 1 83
Lyonnaise des Eaux S.A...................................... 1,157 128,093
Michelin, Class B........................................... 1,701 85,672
Pechiney S.A., Class A...................................... 1,775 70,113
Peugeot S.A................................................. 943 118,909
Pinault-Printemps-Redoute S.A............................... 200 106,749
Rhone-Poulenc, Class A...................................... 2,690 120,560
SEITA....................................................... 2,350 84,375
Societe Generale............................................ 903 123,116
Thomson CSF................................................. 2,325 73,313
Total S.A., Class B......................................... 1,019 110,972
Usinor Sacilor.............................................. 1,300 18,778
-----------
2,241,922
-----------
GERMANY -- 5.10%
Allianz AG Holding.......................................... 1,680 433,524
BASF AG..................................................... 2,500 89,261
Bayer AG.................................................... 6,140 227,932
Bayerische Motoren Werke AG................................. 210 157,083
Commerzbank AG.............................................. 5,050 196,596
Continental AG.............................................. 4,700 105,862
Daimler-Benz AG............................................. 2,200 155,386
Deutsche Bank AG............................................ 4,900 342,817
Deutsche Telekom AG......................................... 16,910 313,166
Henkel KGaA-Vorzug AG, Preferred............................ 1,810 113,245
Hochtief AG................................................. 1,310 53,912
Hoechst AG.................................................. 1,950 67,563
M.A.N. AG................................................... 310 89,564
Mannesmann AG............................................... 360 180,791
Metro AG.................................................... 3,118 110,633
Muenchener Rueckver AG...................................... 855 325,243
Muenchener Rueckver AG Warrants "98" (b).................... 3 1,819
Preussag AG................................................. 490 150,698
RWE AG...................................................... 3,470 186,227
Schering AG................................................. 1,910 184,297
Siemens AG.................................................. 3,770 227,487
Veba AG..................................................... 4,060 276,598
Volkswagen AG............................................... 300 167,677
-----------
4,157,381
-----------
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
HONG KONG -- 0.59%
Cheung Kong Holdings Ltd.................................... 14,000 $ 91,695
China Light & Power Co., Ltd................................ 6,500 36,071
Citic Pacific Ltd........................................... 5,000 19,875
Hang Seng Bank Ltd.......................................... 5,800 55,953
Hong Kong and China Gas Co., Ltd............................ 30,000 58,076
Hong Kong Telecommunications Ltd............................ 32,000 65,871
Hutchison Whampoa Ltd....................................... 15,000 94,083
Sun Hung Kai Properties Ltd................................. 5,000 34,845
Swire Pacific Ltd., Class A................................. 4,500 24,682
-----------
481,151
-----------
ITALY -- 2.22%
Aeroporti Di Roma Spa (b)................................... 1,000 10,379
Assicurazioni Generali...................................... 6,640 163,179
Banca Commerciale Italia.................................... 19,000 66,090
Credito Italiano Spa........................................ 35,000 107,986
Danieli & Co. Savings (Risp)................................ 16,400 58,994
Edison Spa.................................................. 6,000 36,311
ENI ADR (c)................................................. 1,700 97,006
ENI Spa..................................................... 33,000 187,206
Fiat Spa-Priv Preferred..................................... 58,300 89,030
INA-Istituto Nazionale delle Assicurazioni.................. 35,000 70,968
Instituto Mobiliare Italiano Spa............................ 9,700 115,212
Italgas Spa................................................. 13,700 56,565
La Rinascente Spa........................................... 10,600 79,138
La Rinascente Spa RNC....................................... 11,000 41,062
La Rinascente Spa Warrants "99" (b)......................... 550 666
Mediobanca Spa.............................................. 1,800 14,141
Montedison Spa.............................................. 116,560 104,756
SAI-Savings (Risp).......................................... 10,000 44,116
Telecom Italia Mobile Spa................................... 20,000 92,362
Telecom Italia Mobile Spa RNC............................... 49,000 139,402
Telecom Italia Spa.......................................... 10,111 64,622
Telecom Italia Spa RNC...................................... 38,813 171,229
-----------
1,810,420
-----------
JAPAN -- 5.85%
Amada Co., Ltd.............................................. 10,000 37,301
Asahi Glass Co., Ltd........................................ 11,000 52,451
Bank of Tokyo-Mitsubishi, Ltd............................... 9,000 124,591
Canon, Inc.................................................. 8,000 187,041
Canon Sales Co., Inc........................................ 3,000 34,378
Citizen Watch Co., Ltd...................................... 9,000 60,565
Dai Nippon Printing Co., Ltd................................ 9,000 169,583
Daiichi Pharmaceutical Co., Ltd............................. 8,000 90,444
Daikin Industries Ltd....................................... 10,000 37,839
Daiwa House Industry Co., Ltd............................... 5,000 26,533
Fanuc....................................................... 4,400 167,168
Fujitsu..................................................... 6,000 64,603
Hitachi Ltd................................................. 20,000 143,049
Honda Motor Co.............................................. 3,000 110,517
Hoya Corp................................................... 1,000 31,532
Inax........................................................ 7,000 20,404
Ito Yokado Co., Ltd......................................... 4,000 204,576
Kaneka Corp................................................. 10,000 45,299
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Keio Teito Electric Railway................................. 11,000 $ 42,215
Kinki Nippon Railway........................................ 12,000 64,326
Kirin Brewery Co., Ltd...................................... 11,000 80,369
Kokuyo...................................................... 3,000 51,913
Kuraray Co., Ltd............................................ 12,000 99,673
Kyocera Corp................................................ 1,200 54,636
Marui Co., Ltd.............................................. 5,000 78,062
Matsushita Electric Industrial Co........................... 15,000 220,342
NGK Insulators.............................................. 16,000 142,742
Nintendo Co., Ltd........................................... 800 78,754
Nippon Denso Co., Ltd....................................... 5,000 90,367
Nippon Meat Packers, Inc.................................... 6,000 82,138
Nippon Steel Co............................................. 8,000 11,875
Okumura..................................................... 10,000 23,842
Osaka Gas Co................................................ 19,000 43,545
Sankyo Co., Ltd............................................. 7,000 158,816
Secom Co., Ltd.............................................. 2,000 128,283
Seino Transportation........................................ 7,000 35,047
Sekisui House Ltd........................................... 15,000 96,789
Sony Corp................................................... 2,700 240,877
Sumitomo Bank............................................... 11,000 126,053
Sumitomo Chemical Co........................................ 12,000 27,687
Sumitomo Electric Industries................................ 8,000 109,517
Takeda Chemical Industries.................................. 6,000 171,659
TDK Corp.................................................... 2,000 151,356
Tokio Marine & Fire Insurance Co............................ 9,000 102,442
Tokyo Electric Power........................................ 2,300 42,100
Tokyo Steel Mfg............................................. 8,000 27,133
Tonen Corp.................................................. 7,000 37,900
Toray Industries, Inc....................................... 36,000 161,969
Toshiba Corp................................................ 24,000 100,227
Toyo Suisan Kaisha.......................................... 9,000 62,573
Toyota Motor Corp........................................... 6,000 172,582
Yamazaki Baking Co., Ltd.................................... 5,000 48,837
-----------
4,774,520
-----------
MALAYSIA -- 0.60%
Hume Industries (Malaysia) Bhd.............................. 13,000 13,626
Kuala Lumpur Kepong Bhd..................................... 26,000 55,774
Land & General Holdings Bhd................................. 18,000 3,330
Malayan Banking Bhd......................................... 14,600 42,384
Malaysia International Shipping Bhd (Frgn.)................. 12,000 17,572
Nestle (Malaysia) Bhd....................................... 5,000 23,121
New Straits Times Press Bhd................................. 10,000 12,383
Perusahaan Otomobil Nasional Bhd............................ 8,000 7,810
Petronas Gas Bhd............................................ 10,000 22,736
Public Bank Bhd............................................. 4,800 1,492
Public Bank Bhd (Frgn.)..................................... 13,999 4,819
Public Bank Bhd Rights (b).................................. 800 43
Public Bank Bhd Rights (Frgn.) (b).......................... 2,333 120
Resorts World Bhd........................................... 10,000 16,827
Rothmans of Pall Mall Bhd................................... 6,000 46,628
Sime Darby Bhd.............................................. 37,000 35,550
Telekom Malaysia Bhd........................................ 27,500 81,246
Tenaga Nasional Bhd......................................... 31,000 66,102
UMW Holdings Bhd............................................ 6,000 4,547
</TABLE>
- --------------------------------------------------------------------------------
32
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
MALAYSIA (CONTINUED)
United Engineers Bhd....................................... 10,000 $ 8,324
YTL Corp. Bhd.............................................. 15,000 20,231
YTL Power International Bhd (b)............................ 800 615
-----------
485,280
-----------
NETHERLANDS -- 2.24%
ABN AMRO Holdings NV....................................... 7,701 150,047
Akzo Nobel NV.............................................. 300 51,734
DSM NV..................................................... 1 23
Elsevier NV................................................ 8,700 140,759
Heineken NV................................................ 675 117,533
Hoogovens NV............................................... 786 32,231
ING Groep NV............................................... 4,458 187,814
KLM Royal Dutch Air Lines NV............................... 1,118 41,360
KPN NV..................................................... 4,317 180,140
Philips Electronics NV..................................... 2,337 140,206
Royal Dutch Petroleum Co................................... 10,475 575,084
Unilever NV................................................ 3,400 209,638
-----------
1,826,569
-----------
NEW ZEALAND -- 1.56%
Brierley Investments Ltd................................... 266,700 190,493
Carter Holt Harvey Ltd..................................... 91,600 141,491
Fletcher Challenge Building................................ 30,350 62,037
Fletcher Challenge Energy.................................. 33,950 118,880
Fletcher Challenge Forests Ltd............................. 58,095 48,242
Fletcher Challenge Paper................................... 53,600 70,032
Lion Nathan Ltd............................................ 15,000 33,623
Telecom Corp. of New Zealand Ltd. ADS (c).................. 125,700 609,500
-----------
1,274,298
-----------
SINGAPORE -- 0.72%
City Developments Ltd...................................... 7,000 32,404
DBS Land Ltd............................................... 14,000 21,436
Development Bank of Singapore Ltd.......................... 7,000 59,822
Elec & Eltek International Co., Ltd........................ 2,200 10,076
Fraser & Neave Ltd......................................... 3,000 12,997
Hotel Properties Ltd....................................... 25,000 16,320
Keppel Corp., Ltd.......................................... 7,750 22,261
Keppel Land Ltd............................................ 9,000 12,392
NatSteel Ltd............................................... 7,000 9,472
Oversea-Chinese Banking Corp. Ltd.......................... 12,600 73,282
Singapore Airlines Ltd. (Frgn.)............................ 13,000 84,866
Singapore Press Holdings Ltd. (Frgn.)...................... 3,000 37,567
Singapore Telecommunications, Ltd.......................... 61,000 113,674
United Overseas Bank Ltd. (Frgn.).......................... 13,000 72,136
Wing Tai Holdings Ltd...................................... 8,000 9,353
-----------
588,058
-----------
SPAIN -- 1.21%
Acerinox S.A............................................... 125 18,510
Banco Bilbao-Vizcaya S.A................................... 3,375 109,164
Banco Central Hispanoamericano............................. 2,550 62,069
Banco Popular Espanol S.A.................................. 1,200 83,847
Banco Santander S.A........................................ 2,700 90,165
Empresa National de Electridad S.A......................... 7,050 125,116
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Fomento de Construcciones y Contratas S.A.................. 1,500 $ 57,079
Gas Natural SDG S.A........................................ 1,200 62,197
Iberdrola S.A.............................................. 6,675 87,806
Mapfre Corp................................................ 1,200 31,807
Repsol S.A................................................. 1,725 73,563
Tabacalera S.A............................................. 200 16,205
Telefonica de Espana....................................... 4,050 115,585
Vallehermoso S.A........................................... 900 27,575
Viscofan Envolturas Celulosicas S.A........................ 1,100 27,605
-----------
988,293
-----------
SWEDEN -- 0.88%
ABB AB, A Shares........................................... 3,000 35,541
Astra AB, A Shares......................................... 7,000 121,304
Electrolux AB, B Shares.................................... 500 34,721
Hennes & Mauritz AB, B Shares.............................. 1,700 74,988
Nordbanken Holding AB...................................... 16,100 91,106
Securitas AB, B Shares..................................... 1,300 39,321
Skanska AB, B Shares....................................... 900 36,921
Svenska Handelsbanken, A Shares............................ 1,400 48,433
Swedish Match AB........................................... 22,400 74,812
Telefonaktiebolaget LM Ericsson, B Shares.................. 2,400 90,288
Volvo AB, B Shares......................................... 2,600 69,796
-----------
717,231
-----------
SWITZERLAND -- 2.54%
ABB AG (Bearer)............................................ 41 51,895
Alusuisse-Lonza Holdings AG (Reg.)......................... 1 240
CS Holdings AG (Reg.)...................................... 1,337 207,081
Holderbank Financiere Glarus, B Shares..................... 74 60,474
Nestle S.A. (Reg.)......................................... 160 240,121
Novartis AG (Reg.)......................................... 337 547,297
Roche Holding AG (Gen.).................................... 37 372,918
Sairgroup (b).............................................. 36 49,362
Schweizerische Lebensversicherungs-und Rentenastalt........ 82 64,482
Sulzer AG.................................................. 65 41,266
Swiss Reinsurance Co. (Reg.)............................... 97 181,684
UBS (Bearer)............................................... 88 126,697
Zurich Versicherungs (Reg.)................................ 266 126,808
-----------
2,070,325
-----------
UNITED KINGDOM -- 11.41%
Abbey National PLC......................................... 10,750 192,978
Barclays PLC............................................... 6,000 159,737
Bass PLC................................................... 6,100 94,800
B.A.T. Industries PLC...................................... 49,750 453,501
BG PLC..................................................... 52,709 237,633
Billiton PLC (b)........................................... 39,000 100,107
Booker PLC................................................. 23,870 125,683
British Energy PLC......................................... 25,250 175,742
British Petroleum Co. PLC.................................. 29,655 390,358
British Sky Broadcasting Group PLC......................... 13,000 97,540
British Steel PLC.......................................... 37,750 81,059
British Telecommunications PLC............................. 46,020 362,329
BTR PLC.................................................... 22,000 66,606
Cable & Wireless PLC....................................... 11,000 96,833
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Cadbury Schweppes PLC...................................... 18,000 $ 181,703
Centrica PLC (b)........................................... 44,620 65,709
Charter PLC................................................ 9,422 116,118
Coats Viyella PLC.......................................... 41,250 61,765
Diageo PLC................................................. 21,720 199,956
FKI PLC.................................................... 50,405 158,410
General Electric Co. PLC................................... 44,320 287,688
Glaxo Wellcome PLC......................................... 26,620 630,733
Greenalls Group PLC........................................ 13,000 93,690
Hanson PLC................................................. 17,750 79,331
Hillsdown Holdings PLC..................................... 52,000 126,631
House of Fraser PLC........................................ 57,250 189,342
HSBC Holdings PLC.......................................... 11,000 282,353
Inchcape PLC............................................... 26,000 69,733
Legal & General Group PLC.................................. 25,250 221,028
Lloyds TSB Group PLC....................................... 38,220 494,926
Marks & Spencer PLC........................................ 30,120 296,864
Mirror Group PLC........................................... 53,000 170,053
National Westminster Bank PLC.............................. 10,350 172,344
Northern Foods PLC......................................... 28,500 123,801
Peninsular & Oriental Steam Navigation Co.................. 19,000 216,495
Reckitt & Colman PLC....................................... 5,635 88,547
Reuters Holdings PLC....................................... 11,000 120,362
Rio Tinto PLC.............................................. 12,020 148,136
RJB Mining PLC............................................. 27,500 57,466
Royal & Sun Alliance Insurance Group PLC................... 16,779 169,239
Scottish Hydro-Electric PLC................................ 12,650 104,489
Sears PLC.................................................. 68,250 59,519
Sedgwick Group PLC......................................... 49,000 114,488
SmithKline Beecham PLC..................................... 28,350 290,614
Smurfit (Jefferson) Group PLC.............................. 41,196 114,556
Tate & Lyle PLC............................................ 14,000 115,409
Tesco PLC.................................................. 20,250 164,932
Thames Water PLC........................................... 13,500 201,362
The Great Universal Stores PLC............................. 15,750 198,770
Unilever PLC............................................... 13,000 111,444
Vodafone Group PLC......................................... 26,700 192,864
Williams PLC............................................... 32,750 182,139
-----------
9,307,915
-----------
Total Non-U.S. Equities.................................... 35,636,546
-----------
Total Equities (Cost $65,891,370).......................... 74,583,793
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Short-Term Investments -- 8.78%
U.S. GOVERNMENT OBLIGATIONS -- 0.73%
U.S. Treasury Bills 5.420%, due 05/28/98................ $ 605,000 $ 592,143
-----------
COMMERCIAL PAPER -- 8.05%
Case Credit Corp.
6.030%, due 03/10/98................................... 500,000 494,305
Nabisco, Inc.
6.700%, due 01/05/98................................... 500,000 499,628
Praxair, Inc.
6.550%, due 01/02/98................................... 2,000,000 2,000,364
Vastar Resources, Inc.
7.100%, due 01/02/98................................... 3,574,000 3,573,295
-----------
6,567,592
-----------
Total Short-Term Investments
(Cost $7,159,869)...................................... 7,159,735
-----------
Total Investments
(Cost $73,051,239) -- 100.22% (a)...................... 81,743,528
-----------
Liabilities, less cash and other
assets -- (0.22%)...................................... (181,101)
-----------
Net Assets -- 100%...................................... $81,562,427
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $73,051,239; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $13,188,118
Gross unrealized depreciation................................ (4,495,829)
-----------
Net unrealized appreciation................................ $ 8,692,289
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Equity Fund had the following open forward foreign currency
contracts as of December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollar........................ 6/3/98 1,050,000 $ 736,496 $ (5,921)
Danish Kroner.......................... 6/3/98 2,700,000 397,236 (5,839)
Dutch Guilder.......................... 6/3/98 900,000 447,937 (6,608)
French Franc........................... 6/3/98 5,100,000 855,042 (12,689)
Japanese Yen........................... 6/3/98 376,000,000 2,959,420 9,634
Swedish Krona.......................... 6/3/98 7,900,000 999,249 (17,194)
Swiss Franc............................ 6/3/98 1,600,000 1,116,321 (24,093)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar...................... 6/3/98 1,150,000 752,091 29,219
Belgian Franc.......................... 6/3/98 32,000,000 871,117 11,471
British Pound.......................... 6/3/98 2,800,000 4,573,295 78,785
German Mark............................ 6/3/98 1,000,000 560,991 9,388
Hong Kong Dollar....................... 2/5/98 3,600,000 463,395 373
Japanese Yen........................... 6/3/98 119,000,000 936,625 13,854
Swedish Krona.......................... 6/3/98 7,900,000 999,249 23,869
--------
Total............................... $104,249
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Equity Fund had the following open index futures contracts as of
December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 48 contracts...... March 1998 $ 11,916,264 $ 11,749,200 $ 167,064
</TABLE>
The market value of investments pledged to cover margin requirements for the
open positions at December 31, 1997 was $592,143.
See accompanying notes to the financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $73,051,239) (Note 1)................. $81,743,528
Cash.............................................................. 86,370
Foreign currency, at value (Cost $382,196)........................ 377,629
Receivables:
Investment securities sold....................................... 395,917
Dividends........................................................ 199,603
Fund shares sold................................................. 20,275
Variation margin (Note 5)........................................ 1,752
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 104,065
Other assets...................................................... 46,146
-----------
TOTAL ASSETS................................................... 82,975,285
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 1,259,960
Investment advisory fees (Note 2)................................ 49,655
Accrued expenses................................................. 103,243
-----------
TOTAL LIABILITIES.............................................. 1,412,858
-----------
NET ASSETS......................................................... $81,562,427
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 8).......................................... $70,388,858
Accumulated undistributed net investment income................... 163,736
Accumulated net realized gain..................................... 2,047,204
Net unrealized appreciation....................................... 8,962,629
-----------
NET ASSETS..................................................... $81,562,427
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $17,948,691 and 1,579,621 shares issued
and outstanding) (Note 8)....................................... $ 11.36
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$977 and 86 shares issued and outstanding) (Note 8)............. $ 11.36
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $63,612,759 and 5,608,122 shares issued
and outstanding) (Note 8)....................................... $ 11.34
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $66,048 for foreign taxes withheld)............ $ 816,558
Interest......................................................... 189,569
-----------
TOTAL INCOME.................................................. 1,006,127
-----------
EXPENSES:
Advisory (Note 2)................................................ 374,636
Distribution (Note 7)............................................ 254,282
Custodian........................................................ 12,878
Other............................................................ 91,731
-----------
TOTAL EXPENSES................................................ 733,527
Expenses deferred by Advisor (Note 2)......................... (12,446)
-----------
NET EXPENSES.................................................. 721,081
-----------
NET INVESTMENT INCOME ........................................ 285,046
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 6,732,546
Futures contracts............................................... (1,530,284)
Foreign currency transactions................................... (114,366)
-----------
Net realized gain............................................. 5,087,896
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ (8,123,416)
Futures contracts............................................... 470,554
Forward contracts............................................... 105,523
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 893
-----------
Change in net unrealized appreciation or depreciation......... (7,546,446)
-----------
Net realized and unrealized loss.................................. (2,458,550)
-----------
Net decrease in net assets resulting from operations.............. $(2,173,504)
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 285,046 $ 960,262
Net realized gain............................. 5,087,896 5,232,778
Change in net unrealized appreciation or
depreciation................................. (7,546,446) 10,619,517
----------- ------------
Net increase (decrease) in net assets result-
ing from operations.......................... (2,173,504) 16,812,557
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................... (148,933) (425,929)
Brinson Class N............................... (8) --
SwissKey Class................................ (308,930) (253,945)
Distributions from net realized gain:
Brinson Class I............................... (1,266,777) (3,076,886)
Brinson Class N............................... (82) --
SwissKey Class................................ (5,307,194) (3,396,000)
----------- ------------
Total distributions to shareholders........... (7,031,924) (7,152,760)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 26,867,326 42,520,630
Shares issued on reinvestment of distribu-
tions........................................ 6,217,910 6,711,937
Shares redeemed............................... (52,052,229) (9,295,598)
----------- ------------
Net increase (decrease) in net assets result-
ing from capital share transactions (Note 8). (18,966,993) 39,936,969
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.... (28,172,421) 49,596,766
----------- ------------
NET ASSETS:
Beginning of year............................. 109,734,848 60,138,082
----------- ------------
End of year (including accumulated undistrib-
uted net investment income of $163,736 and
$336,561, respectively)...................... $81,562,427 $109,734,848
=========== ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30, JANUARY 28, 1994*
DECEMBER 31, 1997 ------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.76 $ 11.57 $ 9.93 $ 9.49 $ 10.00
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income. 0.14 0.16 0.18 0.18 0.07
Net realized and
unrealized gain
(loss)............... (0.37) 2.14 2.29 0.39 (0.54)
------- ------- ------- ------- -------
Total income (loss)
from investment
operations......... (0.23) 2.30 2.47 0.57 (0.47)
------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income.... (0.12) (0.12) (0.14) (0.04) (0.04)
Distributions from and
in excess of net
realized gain........ (1.05) (0.99) (0.69) (0.09) --
------- ------- ------- ------- -------
Total distributions. (1.17) (1.11) (0.83) (0.13) (0.04)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 11.36 $ 12.76 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= ======= =======
Total return (non-
annualized)............ (1.68)% 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $17,949 $48,054 $27,126 $20,706 $20,642
Ratio of expenses to
average net assets:
Before expense
reimbursement........ 1.03%** 1.25% 1.77% 2.06% 2.65%**
After expense
reimbursement........ 1.00%** 1.00% 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense
reimbursement........ 1.18%** 1.35% 0.57% 0.71% 0.24%**
After expense
reimbursement........ 1.21%** 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover
rate.................. 26% 32% 74% 36% 21%
Average commission rate
paid per share........ $0.0308 $0.0246 $0.0288 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- -----------------------------------------------
<S> <C>
Net asset value, beginning
of period.................. $ 12.76
-------
Income from investment op-
erations:
Net investment income..... 0.06
Net realized and
unrealized gain.......... (0.31)
-------
Total loss from invest-
ment operations........ (0.25)
-------
Less distributions:
Distributions from and in
excess of net investment
income................... (0.10)
Distributions from net re-
alized gain.............. (1.05)
-------
Total distributions..... (1.15)
-------
Net asset value, end of pe-
riod....................... $ 11.36
=======
Total return (non-
annualized)................ (1.87)%
Ratios/Supplemental data
Net assets, end of period
(in 000s)................. $ 1
Ratio of expenses to aver-
age net assets:
Before expense reimburse-
ment..................... 1.28%**
After expense reimburse-
ment..................... 1.25%**
Ratio of net investment in-
come to average net as-
sets:
Before expense reimburse-
ment..................... 0.84%**
After expense reimburse-
ment..................... 0.87%**
Portfolio turnover rate.... 26%
Average commission rate
paid per share............ $0.0308
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 12.73 $ 11.57 $ 10.35
------- ------- -------
Income from investment opera-
tions:
Net investment gain (loss).... 0.02 0.08 (0.01)
Net realized and unrealized
gain (loss).................. (0.30) 2.13 1.93
------- ------- -------
Total income from investment
operations................. (0.28) 2.21 1.92
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.06) (0.06) (0.01)
Distributions from net real-
ized gain.................... (1.05) (0.99) (0.69)
------- ------- -------
Total distributions......... (1.11) (1.05) (0.70)
------- ------- -------
Net asset value, end of period.. $ 11.34 $ 12.73 $ 11.57
======= ======= =======
Total return (non-annualized)... (2.11)% 20.34% 19.25%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $63,613 $61,680 $33,012
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.78%** 2.00% 2.53%**
After expense reimbursement... 1.76%** 1.75% 1.76%**
Ratio of net investment income
(loss) to average net assets:
Before expense reimbursement.. 0.35%** 0.60% (0.19)%**
After expense reimbursement... 0.37%** 0.85% 0.58%**
Portfolio turnover rate........ 26% 32% 74%
Average commission rate paid
per share..................... $0.0308 $0.0246 $0.0288
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<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 our offices worldwide.
The Brinson Global Bond Fund has provided an annualized return of 6.84% since
its performance inception on July 31, 1993, outperforming the 6.46% return of
its benchmark, the Salomon World Government Bond Index. The Fund's annualized
volatility of 4.20% was below the benchmark volatility of 5.35% over this
period. For the year ended December 31, 1997, the Fund returned 1.63%, compared
to the benchmark return of 0.24%.
The sustained strength in global bond markets which began late in 1994 continued
during 1997 (the Salomon Index returned a total of 41.90% in dollar-hedged terms
in the three years ending December 31, 1997). In most economies inflation was
lower than had been expected at the start of the year, and investors became more
willing to believe that it would remain low (particularly in light of the
economic turmoil in Asia late in the year). In this benign environment long
yields fell, even though some central banks raised short-term interest rates.
Market allocation strategies contributed positively to relative Fund performance
in 1997. The portfolio move from a neutral to an overweight position in U.S.
bonds in February, maintained through the end of the year, had little effect
overall on performance. The Fund benefited in particular from the timing of its
exposure to Australia, from its underweighting of France, and from its
overweighting of Denmark.
Bond selection strategies within markets detracted slightly from performance
overall. Positive returns in the U.S., due to successful issue selection, were
more than offset by the impact of the short duration strategy in Japan. As bond
prices rose during the year, we lowered duration across markets (U.S. duration
was lowered from 1.3 times to equal to the index average in the middle of the
year). At the end of the year, duration was 0.5 times the index average in
Japan, 0.9 times the index in most other markets, and equal to the index in
Denmark, Sweden and the U.S.
Currency allocation was the largest source of Fund outperformance of the
benchmark in 1997. All the main non-U.S. currencies lost value against the
dollar. The Japanese yen fell by 15.2%, the Deutschemark by 16.2%, and the U.K.
pound by 2.8%. Defensive underweightings of the yen and of European currencies
in the first part of the year, and the resultant position in the U.S. dollar,
were extremely successful, while underweighting the U.K. pound detracted from
performance. The scale of most positions was sharply reduced as non-U.S.
currencies fell to and below fair value.
42
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/93*
ended ended ended to
12/31/97 12/31/97 12/31/97 12/31/97
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Global Bond Fund 1.00% 1.63% 10.15% 6.84%
Salomon World Government Bond Index 1.49 0.24 7.34 6.46
- -------------------------------------------------------------------------------
</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 if you had invested
$1,000,000 on July 31, 1993, and had reinvested all your income dividends and
capital gain distributions through December 31, 1997. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future results.
Share price and return will vary with market conditions; investors may realize a
gain or loss upon redemption.
Brinson Global Bond Fund
vs. Salomon World Government Bond Index
Wealth Value with Dividends Reinvested
[CHART REFLECTING DATA LISTED BELOW APPEARS HERE]
<TABLE>
<CAPTION>
Branson Global Salomon World
Bond Fund Index
<S> <C> <C>
7/31/93 1000000 1000000
8/31/93 1019000 1030100
9/30/93 1022009.85 1042358.19
10/31/93 1032059.11 1040586.18
11/30/93 1023014.78 1033198.02
12/31/93 1038591.13 1041928.54
1/31/94 1045817.91 1050263.97
2/28/94 1021040.39 1043437.25
3/31/94 1007619.23 1041976.44
4/30/94 1002457.25 1043122.62
5/31/94 994198.07 1033943.14
6/30/94 992146.28 1048831.92
7/31/94 999418.56 1057222.57
8/31/94 1000457.45 1053522.3
9/30/94 1001496.35 1061107.66
10/31/94 1005651.94 1078085.38
11/30/94 1003574.14 1063207.8
12/31/94 1002396.01 1066184.78
1/31/95 1012826.77 1088574.66
2/28/95 1030559.06 1116442.17
3/31/95 1044119.05 1182758.84
4/30/95 1069152.87 1204639.88
5/31/95 1106703.61 1238610.72
6/30/95 1104637.55 1245918.53
7/31/95 1122711.51 1248908.73
8/31/95 1134406.42 1205946.27
9/30/95 1148227.68 1232838.87
10/31/95 1167364.81 1241961.88
11/30/95 1190754.63 1255996.05
12/31/95 1206118.72 1269184.01
1/31/96 1212149.31 1253573.04
2/29/96 1200088.13 1247179.82
3/31/96 1204912.6 1245433.77
4/30/96 1216973.79 1240452.03
5/31/96 1220592.15 1240700.12
6/30/96 1231653.49 1250501.66
7/31/96 1243920.96 1274511.29
8/31/96 1253734.93 1279481.88
9/30/96 1274589.62 1284727.76
10/31/96 1301578.04 1308752.17
11/30/96 1326112.97 1326027.69
12/31/96 1318299.16 1315286.87
1/31/97 1297657.74 1280168.71
2/28/97 1299033.83 1270567.45
3/31/97 1279768.5 1260911.13
4/30/97 1272888.02 1249815.11
5/31/97 1310042.59 1283810.09
6/30/97 1326555.74 1299087.43
7/31/97 1321051.35 1288954.54
8/31/97 1316923.07 1288181.17
9/30/97 1343068.88 1315619.43
10/31/97 1360958.11 1342984.31
11/30/97 1343068.88 1322436.65
12/31/97 1339835.05 1318469.34
</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.
43
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
Asset Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
<S> <C> <C>
- ------------------------------------------------------------
U.S. 34.4% 40.4%
Japan 18.5 5.0
Australia 0.9 4.1
Austria 0.9 0.0
Belgium 2.4 0.0
Canada 3.3 6.2
Denmark 1.5 6.3
Finland 0.6 0.0
France 7.3 2.2
Germany 8.8 13.1
Ireland 0.4 0.0
Italy 6.7 3.2
Netherlands 2.9 5.2
Spain 2.8 3.7
Sweden 1.6 1.6
Switzerland 0.5 0.0
U.K. 6.5 9.0
- ------------------------------------------------------------
100.0% 100.0%
Currency Allocation
As of December 31, 1997 (Unaudited)
Current
Benchmark Strategy
- ------------------------------------------------------------
U.S. 34.4% 41.9%
Japan 18.5 14.5
Australia 0.9 0.9
Austria 0.9 0.9
Belgium 2.4 2.4
Canada 3.3 3.3
Denmark 1.5 1.5
Finland 0.6 0.6
France 7.3 7.3
Germany 8.8 8.8
Ireland 0.4 0.4
Italy 6.7 6.7
Netherlands 2.9 2.9
Spain 2.8 2.8
Sweden 1.6 1.6
Switzerland 0.5 0.5
U.K. 6.5 3.0
- ------------------------------------------------------------
100.0% 100.0%
</TABLE>
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. BONDS
<S> <C>
Corporate Bonds
Asset-Backed........................................... 2.54%
CMO.................................................... 2.19
Consumer............................................... 1.02
Financial.............................................. 2.67
Industrial............................................. 2.82
Transportation......................................... .35
------
11.59
------
International Dollar Bonds............................. 4.58
U.S. Government Agencies............................... 9.61
U.S. Government Obligations............................ 9.91
------
Total U.S. Bonds.................................... 35.69
------
NON-U.S. BONDS
Foreign Financial Bonds................................. 7.91
Foreign Government Bonds................................ 47.07
------
Total Non-U.S. Bonds................................ 54.98
------
SHORT-TERM INVESTMENTS.................................. 9.08
------
TOTAL INVESTMENTS................................... 99.75
CASH AND OTHER ASSETS,
LESS LIABILITIES....................................... 0.25
------
NET ASSETS.......................................... 100.00%
======
- -------------------------------------------------------
</TABLE>
44
<PAGE>
GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Bonds -- 90.67%
U.S. BONDS -- 35.69%
U.S. CORPORATE BONDS -- 11.59%
Aid Jordan
8.750%, due 09/01/19.................................. $ 193,941 $ 237,638
Bear Stearns Mortgage Securities, Inc.
96-7A4 6.000%, due 01/28/09........................... 200,000 193,578
Capital One Bank
6.830%, due 05/17/99.................................. 200,000 201,386
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02........................... 125,000 125,196
Continental Airlines, Inc. 97-4A
6.900%, due 01/02/18.................................. 210,000 209,969
Countrywide Capital, Inc.
8.000%, due 12/15/26.................................. 250,000 265,286
Donaldson Lufkin & Jenrette FRN
6.700%, due 06/30/00.................................. 375,000 379,599
First Bank Corporate Card Master Trust
97-1A 6.400%, due 02/15/03............................ 240,000 241,949
First Union Lehman Brothers
97-C2 A2 6.600%, due 05/18/07......................... 240,000 242,225
First USA Credit Card Master Trust
97-6A 6.420%, due 03/17/05............................ 240,000 242,750
Ford Credit Grantor Trust 95-B
5.900%, due 10/15/00.................................. 36,823 36,783
GE Capital Mtg. Services, Inc. 94-7
Class A12, 6.000%, due 02/25/09....................... 332,540 323,678
Lockheed Martin Corp.
7.700%, due 06/15/08.................................. 125,000 135,775
Metlife Funding
6.850%, due 05/20/08.................................. 225,000 231,830
News America Holdings
7.750%, due 12/01/45.................................. 275,000 286,305
PNC Mortgage Securities Corp.
94-3A8 7.500%, due 07/25/24........................... 190,000 196,263
Premier Auto Trust
96-3A 6.750%, due 11/06/00............................ 475,000 480,225
Prudential Home Mortgage Securities
96-7 Cl A4 6.750%, due 06/25/11....................... 150,000 150,186
93-43 A9 6.750%, due 10/25/23......................... 220,433 217,362
Residential Asset Securitization Trust
97-A 11 P4 7.000%, due 12/25/27....................... 260,000 260,813
Salomon, Inc.
6.500%, due 03/01/00.................................. 300,000 301,597
Structured Mortgage Asset Residential Trust 93-5C CI
7.150%, due 03/25/23.................................. 925,000 931,114
The Money Store 94-A3
5.525%, due 09/15/18.................................. 68,226 67,309
Time Warner, Inc.
7.570%, due 02/01/24.................................. 315,000 330,182
UCFC Home Equity Loan 97-C,
Class A8, 6.325%, FRN, due 09/15/27................... 171,081 170,939
USA Waste Services
7.000%, due 10/01/04.................................. 300,000 306,791
World Omni Automobile Lease
Securitization Trust
6.850%, due 06/25/03.................................. 255,000 256,877
-----------
7,023,605
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
INTERNATIONAL DOLLAR BONDS -- 4.58%
Banco Santiago S.A.
7.000%, due 07/18/07.................................. $ 400,000 $ 401,086
Banque Centrale de Tunisie
8.250%, due 09/19/27.................................. 400,000 364,076
DR Investments 144A
7.450%, due 05/15/07.................................. 455,000 480,903
Empresa National Electric
7.875%, due 10/01/2097................................ 500,000 484,230
Pan Pacific Industry PLC 144A
0.000%, due 04/28/07.................................. 715,000 352,868
Province of Quebec
7.500%, due 07/15/23.................................. 235,000 253,386
Republic of South Africa
9.625%, due 12/15/99.................................. 125,000 129,375
Royal Bank of Scotland 7.375%,
Resettable Perpetual Preferred........................ 300,000 311,462
-----------
2,777,386
-----------
U.S. GOVERNMENT AGENCIES -- 9.61%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13.................................. 68,215 69,666
7.500%, due 01/15/23.................................. 78,941 82,895
7.238%, due 05/01/26.................................. 56,787 58,810
Federal Home Loan Mortgage Corp. Gold 8.000%, due
05/01/23.............................................. 93,222 96,456
9.000%, due 03/01/24.................................. 264,889 286,072
9.500%, due 04/01/25.................................. 23,409 25,004
Federal National Mortgage Association
7.875%, due 02/24/05.................................. 500,000 553,431
6.220%, due 03/13/06.................................. 150,000 151,461
9.000%, due 08/01/21.................................. 24,591 26,417
8.500%, due 07/01/22.................................. 18,885 20,005
7.500%, due 05/18/25.................................. 250,000 255,318
6.500%, due 03/01/26.................................. 74,623 73,644
6.500%, due 12/01/26 TBA.............................. 2,325,000 2,294,484
6.175%, due 10/01/27.................................. 197,990 197,733
Federal National Mortgage Association Strips
8.000%, due 07/01/24 interest only.................... 1,019 237
0.000%, due 04/01/27 principal only................... 405,375 307,842
0.000%, due 07/01/27 principal only................... 169,691 126,898
Government National Mortgage Association
7.500%, due 08/15/23.................................. 108,615 111,228
7.000%, due 08/15/24.................................. 502,936 508,221
7.000%, due 07/15/25.................................. 69,491 70,077
Tennessee Valley Authority
6.375%, due 06/15/05.................................. 500,000 510,197
-----------
5,826,096
-----------
U.S. GOVERNMENT OBLIGATIONS -- 9.91%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01.................................. 730,000 750,760
7.000%, due 07/15/06.................................. 650,000 701,797
8.125%, due 05/15/21.................................. 375,000 472,500
6.000%, due 06/03/99.................................. 2,785,000 2,798,925
5.875%, due 08/31/99.................................. 385,000 386,203
</TABLE>
- --------------------------------------------------------------------------------
45
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
U.S. Treasury Principal Strip
0.000%, due 08/15/03................................. $ 1,235,000 $ 896,610
-----------
6,006,795
-----------
Total U.S. Bonds...................................... 21,633,882
-----------
NON-U.S. BONDS -- 54.98%
AUSTRALIA -- 3.78%
Government of Australia
7.000%, due 04/15/00 .............................AUD 800,000 539,464
9.750%, due 03/15/02................................. 760,000 570,084
Queensland Treasury Corp.-Global Bond
8.000%, due 05/14/03................................. 980,000 701,229
6.500%, due 06/14/05................................. 730,000 482,148
-----------
2,292,925
-----------
CANADA -- 5.75%
British Columbia
7.750%, due 06/16/03 .............................CAD 1,700,000 1,302,130
Government of Canada
4.250%, due 12/01/21 (b)............................. 1,820,000 1,411,355
Province of Ontario
7.500%, due 01/19/06................................. 1,000,000 774,451
-----------
3,487,936
-----------
DENMARK -- 5.98%
City of Copenhagen
6.250%, due 03/15/01 .............................DKK 2,400,000 363,204
Great Belt 7.000%, due 09/02/03....................... 10,650,000 1,675,873
Kingdom of Denmark....................................
8.000%, due 11/15/01................................. 5,000,000 806,364
7.000%, due 12/15/04................................. 3,500,000 557,146
7.000%, due 11/15/07................................. 1,400,000 224,453
-----------
3,627,040
-----------
FRANCE -- 2.07%
Government of France (OAT)
9.500%, due 01/25/01 .............................FRF 1,200,000 227,294
8.500%, due 04/25/23................................. 1,600,000 357,713
KFW International Finance
7.750%, due 02/17/98................................. 2,600,000 434,342
Republic of Finland
9.000%, due 08/13/03................................. 1,200,000 237,616
-----------
1,256,965
-----------
GERMANY -- 12.21%
Bundesrepublik Deutschland
6.500%, due 03/15/00 .............................DEM 2,900,000 1,687,326
6.000%, due 07/04/07................................. 1,000,000 584,172
European Economic Community
6.500%, due 03/10/00................................. 1,910,000 1,107,377
International Bank for Reconstruction & Development-
Global Bond
7.125%, due 04/12/05................................. 650,000 400,353
Kingdom of Norway
6.125%, due 05/05/98................................. 1,040,000 582,437
LKB Baden-Wuerttemberg Finance
6.500%, due 09/15/08................................. 1,300,000 775,763
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Republic of Ireland
7.250%, due 03/18/03...............................DEM 2,900,000 $ 1,770,869
Treuhandanstalt 7.125%, due 01/29/03................... 800,000 489,317
-----------
7,397,614
-----------
ITALY -- 2.68%
Bayerische Landesbank
10.750%, due 03/01/03 .............................ITL 250,000,000 174,451
Landesbank Rheinland-Pfalz
Girozentrale 8.250%, due 06/02/98..................... 750,000,000 428,438
LKB Baden-Wuerttemberg Finance
10.750%, due 04/14/03................................. 650,000,000 454,950
Republic of Italy (BTP)
7.750%, due 09/15/01.................................. 200,000,000 123,469
9.000%, due 10/01/03.................................. 350,000,000 233,492
9.500%, due 02/01/06.................................. 300,000,000 212,454
-----------
1,627,254
-----------
JAPAN -- 4.13%
International Bank for Reconstruction &
Development-Global Bond
4.500%, due 06/20/00 ..............................JPY 40,000,000 335,897
4.500%, due 03/20/03.................................. 47,000,000 419,078
4.750%, due 12/20/04.................................. 44,000,000 408,402
Republic of Austria
5.000%, due 01/22/01.................................. 130,000,000 1,123,534
Republic of Italy
3.500%, due 06/20/01.................................. 26,000,000 216,833
-----------
2,503,744
-----------
NETHERLANDS -- 4.93%
Government of Netherlands
5.750%, due 09/15/02...............................NLG 500,000 255,586
7.250%, due 10/01/04.................................. 1,500,000 826,469
7.500%, due 11/15/99.................................. 1,850,000 964,559
International Nederland GRP Verzekeringen
6.250%, due 12/28/05.................................. 1,800,000 939,714
-----------
2,986,328
-----------
SPAIN -- 3.57%
Kingdom of Spain
6.750%, due 04/15/00 ..............................ESP 100,000,000 686,163
7.900%, due 02/28/02.................................. 100,000,000 726,283
8.000%, due 05/30/04.................................. 100,000,000 750,230
-----------
2,162,676
-----------
SWEDEN -- 1.43%
Kingdom of Sweden
10.250%, due 05/05/03 .............................SEK 5,700,000 865,618
-----------
UNITED KINGDOM -- 8.45%
Abbey National
8.750%, due 05/24/04 ..............................GBP 350,000 623,046
British Gas PLC 8.125%, due 03/31/03................... 545,000 932,620
European Investment Bank 7.625%, due 12/07/06.......... 110,000 192,534
</TABLE>
- --------------------------------------------------------------------------------
46
<PAGE>
GLOBAL BOND FUND--SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
UK Treasury
10.000%, due 09/08/03..............................GBP 700,000 $ 1,339,675
7.750%, due 09/08/06.................................. 555,000 993,395
9.000%, due 10/13/08.................................. 340,000 677,273
8.000%, due 09/27/13.................................. 190,000 363,626
-----------
5,122,169
-----------
Total Non-U.S. Bonds................................... 33,330,269
-----------
Total Bonds (Cost $55,386,825)......................... 54,964,151
-----------
Short-Term Investments -- 9.08%
COMMERCIAL PAPER -- 9.08%
Case Credit Corp.
6.110%, due 01/20/98.................................. $ 500,000 498,388
6.030%, due 03/10/98.................................. 500,000 494,305
Marriott Corp. 6.050%, due 02/09/98.................... 500,000 496,723
Nabisco, Inc.
6.700%, due 01/05/98.................................. 500,000 499,628
6.120%, due 01/16/98.................................. 500,000 498,725
Praxair Inc. 6.550%, due 01/02/98...................... 1,000,000 999,818
Vastar Resources Inc. 7.100%, due 01/02/98............. 2,020,000 2,019,602
-----------
Total Short-Term Investments
(Cost $5,507,188)..................................... 5,507,189
-----------
Total Investments
(Cost $60,894,013) -- 99.75% (a)...................... 60,471,340
-----------
Cash and other assets, less
liabilities -- 0.25%.................................. 149,794
-----------
Net Assets -- 100%..................................... $60,621,134
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
47
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES T O SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $60,894,013; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 1,261,433
Gross unrealized depreciation............................... (1,684,106)
-----------
Net unrealized depreciation............................. $ (422,673)
===========
</TABLE>
(b) Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating Rate Note--The rate disclosed is that in effect December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $833,771 or 1.38% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Bond Fund had the following open forward foreign currency contracts
as of December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Austrian Schilling...... 5/28/98 6,800,000 $ 541,695 $ (2,044)
Belgian Franc........... 5/28/98 50,000,000 1,360,834 (49,762)
Canadian Dollar......... 5/28/98 2,000,000 1,402,849 (12,779)
Finnish Markka.......... 5/28/98 2,000,000 370,386 (1,292)
French Franc............ 5/28/98 17,200,000 2,882,835 (107,690)
Italian Lira............ 5/28/98 3,800,000,000 2,150,320 (82,544)
Japanese Yen............ 5/28/98 770,000,000 6,054,915 (196,608)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar....... 5/28/98 2,700,000 1,765,491 70,555
British Pound........... 5/28/98 2,200,000 3,594,184 94,776
Canadian Dollar......... 5/28/98 4,300,000 3,016,126 33,520
Danish Kroner........... 5/28/98 19,900,000 2,927,185 109,592
German Mark............. 5/28/98 4,400,000 2,467,668 92,407
Netherlands Guilder..... 5/28/98 2,800,000 1,393,236 52,821
Spanish Peseta.......... 5/28/98 74,000,000 487,642 20,042
---------
Total............... $ 20,994
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $60,894,013) (Note 1)................ $60,471,340
Cash............................................................. 81,299
Foreign currency, at value (Cost $1,438,584)..................... 1,433,395
Receivables:
Investment securities sold...................................... 962,824
Interest........................................................ 1,392,529
Fund shares sold................................................ 3,100
Net unrealized appreciation on forward foreign currency con-
tracts......................................................... 20,994
Other assets..................................................... 46,110
-----------
TOTAL ASSETS.................................................. 64,411,591
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 3,716,457
Fund shares redeemed............................................ 5,998
Investment advisory fees (Note 2)............................... 33,990
Accrued expenses................................................ 34,012
-----------
TOTAL LIABILITIES............................................. 3,790,457
-----------
NET ASSETS........................................................ $60,621,134
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 8)......................................... $61,719,136
Accumulated undistributed net investment income.................. 499,811
Accumulated net realized loss.................................... (1,167,122)
Net unrealized depreciation...................................... (430,691)
-----------
NET ASSETS.................................................... $60,621,134
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of
$56,096,121 and 6,006,282 shares issued and outstanding) (Note
8)............................................................. $ 9.34
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,009 and 108 shares issued and outstanding) (Note 8)......... $ 9.34
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$4,524,004 and 485,179 shares issued and outstanding) (Note 8). $ 9.32
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $17,423 for foreign taxes withheld).............. $1,672,363
----------
TOTAL INCOME................................................... 1,672,363
----------
EXPENSES:
Advisory (Note 2)................................................. 224,325
Professional...................................................... 23,184
Distribution (Note 7)............................................. 10,139
Other............................................................. 45,267
----------
TOTAL EXPENSES................................................. 302,915
----------
Expenses deferred by Advisor (Note 2).......................... (23,486)
----------
NET EXPENSES................................................... 279,429
----------
NET INVESTMENT INCOME.......................................... 1,392,934
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 803,295
Futures contracts................................................ 21,780
Foreign currency transactions.................................... (1,272,922)
----------
Net realized loss............................................... (447,847)
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. (234,033)
Futures contracts................................................ (12,019)
Forward contracts................................................ (116,285)
Translation of other assets and liabilities denominated in for-
eign currency................................................... (17,257)
----------
Change in net unrealized appreciation or depreciation........... (379,594)
----------
Net realized and unrealized loss.................................. (827,441)
----------
Net increase in net assets resulting from operations.............. $ 565,493
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
50
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE
(UNAUDITED) 30, 1997
----------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income.......................... $ 1,392,934 $ 2,426,764
Net realized gain (loss)....................... (447,847) 1,723,264
Change in net unrealized appreciation or depre-
ciation ...................................... (379,594) (381,459)
----------- -----------
Net increase in net assets resulting from oper-
ations........................................ 565,493 3,768,569
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income....... (1,382,269) (3,479,707)
Distributions in excess of net investment in-
come.......................................... -- (340,005)
Distributions from net realized gain........... (1,041,855) (769,789)
----------- -----------
Total distributions to shareholders*........... (2,424,124) (4,589,501)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................... 5,329,669 23,164,253
Shares issued on reinvestment of distributions. 1,730,859 3,667,961
Shares redeemed................................ (2,848,777) (12,462,273)
----------- -----------
Net increase in net assets resulting from capi-
tal share transactions (Note 8)............... 4,211,751 14,369,941
----------- -----------
TOTAL INCREASE IN NET ASSETS................ 2,353,120 13,549,009
----------- -----------
NET ASSETS:
Beginning of year.............................. 58,268,014 44,719,005
----------- -----------
End of year (including accumulated undistrib-
uted net investment income of $499,811 and
$489,146, respectively)....................... $60,621,134 $58,268,014
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net invest-
ment income
Brinson Class I............................... $(1,302,948) $(3,503,032)
Brinson Class N............................... (22) --
SwissKey Class................................ (79,299) (316,680)
Distributions from net realized gain
Brinson Class I............................... (969,902) (704,236)
Brinson Class N............................... (18) --
SwissKey Class................................ (71,935) (65,553)
----------- -----------
Total distributions to shareholders............ $(2,424,124) $(4,589,501)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
51
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30, JULY 30, 1993*
DECEMBER 31, 1997 ------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- ------- -------
Income (loss) from in-
vestment operations:
Net investment income
..................... 0.22 0.67 0.84 0.50 0.45
Net realized and
unrealized gain
(loss)............... (0.13) 0.08 0.31 0.58 (0.52)
------- ------- ------- ------- -------
Total income (loss)
from investment
operations......... 0.09 0.75 1.15 1.08 (0.07)
------- ------- ------- ------- -------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.22) (0.96) (1.40) (0.24) (0.28)
Distributions from net
realized gain........ (0.17) (0.19) (0.10) -- (0.10)
------- ------- ------- ------- -------
Total distributions. (0.39) (1.15) (1.50) (0.24) (0.38)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 9.34 $ 9.64 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= ======= =======
Total return (non-
annualized)............ 1.00 % 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $56,096 $54,157 $41,066 $51,863 $36,849
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.98 %** 1.32% 1.65% 1.43% 1.78%**
After expense reim-
bursement............ 0.90 %** 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 4.61 %** 4.90% 4.98% 5.53% 4.03%**
After expense reim-
bursement............ 4.69 %** 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover
rate.................. 93 % 235% 184% 199% 189%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
52
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- -----------------------------------------------
<S> <C>
Net asset value, beginning
of period.................. $ 9.64
------
Income from investment op-
erations:
Net investment income..... 0.21
Net realized and
unrealized loss.......... (0.13)
------
Total income from in-
vestment operations.... 0.08
------
Less distributions:
Distributions from and in
excess of net investment
income................... (0.21)
Distributions from net re-
alized gain.............. (0.17)
------
Total distributions..... (0.38)
------
Net asset value, end of pe-
riod....................... $ 9.34
======
Total return (non-
annualized)................ 0.82%
Ratios/Supplemental Data:
Net assets, end of period
(in 000s)................. $ 1
Ratio of expenses to aver-
age net assets:
Before expense reimburse-
ment..................... 1.23%**
After expense reimburse-
ment..................... 1.15%**
Ratio of net investment in-
come to average net as-
sets:
Before expense reimburse-
ment..................... 4.44%**
After expense reimburse-
ment..................... 4.52%**
Portfolio turnover rate.... 93%
</TABLE>
* Commencement of Brinson Fund Class N was June 30, 1997.
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
53
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 9.61 $10.02 $10.56
------ ------ ------
Income from investment opera-
tions:
Net investment income......... 0.21 0.62 0.78
Net realized and unrealized
gain (loss).................. (0.15) 0.10 0.15
------ ------ ------
Total income from investment
operations................. 0.06 0.72 0.93
------ ------ ------
Less distributions:
Distributions from and in
excess of net investment
income....................... (0.18) (0.94) (1.37)
Distributions from net real-
ized gain.................... (0.17) (0.19) (0.10)
------ ------ ------
Total distributions......... (0.35) (1.13) (1.47)
------ ------ ------
Net asset value, end of period.. $ 9.32 $ 9.61 $10.02
====== ====== ======
Total return (non-annualized)... 0.75% 7.20% 9.17%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $4,524 $4,110 $3,653
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.47%** 1.81% 2.14%**
After expense reimbursement... 1.39%** 1.39% 1.39%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 4.12%** 4.41% 4.49%**
After expense reimbursement... 4.20%** 4.83% 5.24%**
Portfolio turnover rate........ 93% 235% 184%
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
54
<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 Global Fund, Global Equity Fund and Global Bond Fund (each a
"Fund," collectively the "Funds") in the preparation of their financial
statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Investments in affiliated
investment companies are valued each day based on the closing net asset value
of the fund. U.S. equity securities traded over the counter are priced at the
most recent bid price. Debt securities are valued at the most recent bid price
by using market quotations or independent services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 1997, therefore, no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per
share between the classes are due to distribution expenses.
- --------------------------------------------------------------------------------
55
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I shares will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, the Funds pay the Advisor a monthly fee based on each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent that total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates, for the six
months ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES DEFERRED
-------- --------------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.35% 1.75% $2,635,060 $ --
Global Equity Fund...... 0.80 1.00 1.25 1.76 374,636 12,446
Global Bond Fund........ 0.75 0.90 1.15 1.39 224,325 23,486
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees were $5,888, $2,392 and $2,208 for the Global
Fund, Global Equity Fund and Global Bond Fund, respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by Brinson Partners, Inc. These investments represented 12.55%
of the Fund's total net assets at December 31, 1997. Activity for the six
months ended December 31, 1997 was as follows:
<TABLE>
<CAPTION>
NET NET
SALES REALIZED UNREALIZED
AFFILIATES PURCHASES PROCEEDS GAINS GAINS/(LOSSES) VALUE
- ---------- ----------- -------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Brinson Post-Venture
Fund................... $ -- $ -- -- $ 2,502,119 $ 8,502,119
Brinson High Yield Fund. 3,000,000 -- -- 2,753,354 17,201,354
Brinson Emerging Markets
Equity Fund............ 12,300,000 -- -- (4,996,711) 22,017,923
Brinson Emerging Markets
Debt Fund.............. 12,000,000 -- -- 7,921,280 34,231,280
----------- ----- ----- ----------- -----------
$27,300,000 $ -- $ -- $ 8,180,042 $81,952,676
=========== ===== ===== =========== ===========
</TABLE>
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1997, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $388,265,758 $354,100,300
Global Equity Fund.................................... 22,827,077 46,825,950
Global Bond Fund...................................... 52,650,977 51,300,135
</TABLE>
- --------------------------------------------------------------------------------
56
<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 six months ended December
31, 1997, was the Funds' custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.SECURITY LENDING: The Global Fund loaned securities to certain brokers, with
the Fund's custodian acting as the Fund's lending agent. The Fund earned
negotiated lenders' fees, which are included in interest income in the
Statement of Operations. Securities loaned are recorded at the amount of cash
collateral received. The Fund monitors the market value of securities loaned on
a daily basis and maintains collateral against the loaned securities in an
amount at least equal to 102% of the value of domestic securities loaned and
105% of the value of non-U.S. securities loaned. The cash collateral received
is invested in commercial paper. The value of loaned securities and related
collateral outstanding at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
VALUE OF LOANED VALUE OF
SECURITIES COLLATERAL
--------------- -----------
<S> <C> <C>
Global Fund......................................... $73,566,441 $79,523,767
=========== ===========
</TABLE>
7.DISTRIBUTION PLANS
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for Brinson Class N and the
SwissKey Class. Each Plan governs payments made for the expenses incurred in
the promotion and distribution of the SwissKey Class and, effective June 30,
1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily
net assets of the SwissKey Class of the Global Fund, Global Equity Fund and
Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan
shall not exceed 0.25% of the average daily net assets of the Brinson Class N
of the Global Fund, Global Equity Fund and Global Bond Fund.
- --------------------------------------------------------------------------------
57
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
---------------------- -----------------------
SHARES VALUE SHARES VALUE
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................ 7,360,093 $ 97,696,477 14,513,488 $180,787,534
Brinson Class N................ -- -- 76 1,000
SwissKey Class................. 383,268 5,015,748 932,414 11,508,566
--------- ------------ ---------- ------------
Total Sales................. 7,743,361 $102,712,225 15,445,978 $192,297,100
========= ============ ========== ============
Dividend Reinvestment:
Brinson Class I................ 4,544,864 $ 54,492,919 4,022,259 $ 48,025,771
Brinson Class N................ 8 93 -- --
SwissKey Class................. 201,931 2,409,581 130,547 1,554,814
--------- ------------ ---------- ------------
Total Dividend Reinvestment. 4,746,803 $ 56,902,593 4,152,806 $ 49,580,585
========= ============ ========== ============
Redemptions:
Brinson Class I................ 5,125,386 $ 64,663,733 11,346,380 $142,532,012
Brinson Class N................ -- -- -- --
SwissKey Class................. 254,713 3,320,349 198,888 2,469,271
--------- ------------ ---------- ------------
Total Redemptions........... 5,380,099 $ 67,984,082 11,545,268 $145,001,283
========= ============ ========== ============
<CAPTION>
GLOBAL EQUITY FUND
----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
---------------------- -----------------------
SHARES VALUE SHARES VALUE
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................ 781,871 $ 9,537,833 1,338,623 $ 15,816,109
Brinson Class N................ -- -- 78 1,000
SwissKey Class................. 1,380,824 17,329,493 2,271,465 26,703,521
--------- ------------ ---------- ------------
Total Sales................. 2,162,695 $ 26,867,326 3,610,166 $ 42,520,630
========= ============ ========== ============
Dividend Reinvestment:
Brinson Class I................ 119,737 $ 1,339,853 308,273 $ 3,485,504
Brinson Class N................ 8 90 -- --
SwissKey Class................. 436,312 4,877,967 286,226 3,226,433
--------- ------------ ---------- ------------
Total Dividend Reinvestment. 556,057 $ 6,217,910 594,499 $ 6,711,937
========= ============ ========== ============
Redemptions:
Brinson Class I................ 3,087,436 $ 38,885,545 225,435 $ 2,683,391
Brinson Class N................ -- -- -- --
SwissKey Class................. 1,054,052 13,166,684 565,431 6,612,207
--------- ------------ ---------- ------------
Total Redemptions........... 4,141,488 $ 52,052,229 790,866 $ 9,295,598
========= ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
58
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BOND FUND
----------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
------------------ ---------------------
SHARES VALUE SHARES VALUE
------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I....................... 425,982 $4,083,669 2,335,856 $22,155,311
Brinson Class N....................... -- -- 104 1,000
SwissKey Class........................ 129,575 1,246,000 103,968 1,007,942
------- ---------- --------- -----------
Total Sales........................ 555,557 $5,329,669 2,439,928 $23,164,253
======= ========== ========= ===========
Dividend Reinvestment:
Brinson Class I....................... 169,880 $1,586,679 348,609 $ 3,318,757
Brinson Class N....................... 4 39 -- --
SwissKey Class........................ 15,474 144,141 36,719 349,204
------- ---------- --------- -----------
Total Dividend Reinvestment........ 185,358 $1,730,859 385,328 $ 3,667,961
======= ========== ========= ===========
Redemptions:
Brinson Class I....................... 206,213 $1,999,170 1,159,373 $11,665,371
Brinson Class N....................... -- -- -- --
SwissKey Class........................ 87,685 849,607 77,300 796,902
------- ---------- --------- -----------
Total Redemptions.................. 293,898 $2,848,777 1,236,673 $12,462,273
======= ========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
59
<PAGE>
DISTRIBUTED BY:
FUNDS DISTRIBUTOR, INC.
60 STATE STREET
BOSTON, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
- --------------------------------------------------------------------------------
<PAGE>
The Brinson Funds
- --------------------------------------------------------------------------------
Chicago . Basel . Frankfurt . Geneva . Hong Kong . 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
Semi-Annual Report
December 31, 1997
Global Institutional Asset Management
--------------------------
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
Catherine E. Macrae
Assistant Secretary
1
<PAGE>
The Funds' Advisor--Brinson Partners, Inc.
- --------------------------------------------------------------------------------
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation (SBC) and manages assets of over $140 billion. We have $90
billion of discretionary institutional assets with active management mandates
and we are the investment manager for SBC Private Banking mutual fund assets
which total over $50 billion. In addition, we act as an investment advisor to
SBC Private Banking. Our organization manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. We employ over 590 people in offices in
Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York,
Paris, Singapore, Sydney, Tokyo and Zurich.
Brinson Partners, an established U.S.-based leader in the investment field
located in Chicago, acts as the headquarters of our worldwide investment
management process. Brinson Partners pioneered the movement to the active
management of global portfolios in the early 1980s for U.S. clients. Private
market and venture capital investing was established in the 1970s and today we
represent a major worldwide presence in this asset class.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder Letter......................................................... 4
U.S. Economic and Market Highlights........................................ 6
U.S. Balanced Fund......................................................... 7
Schedule of Investments................................................ 10
Financial Statements................................................... 14
Financial Highlights................................................... 17
U.S. Equity Fund........................................................... 20
Schedule of Investments................................................ 23
Financial Statements................................................... 25
Financial Highlights................................................... 28
U.S. Bond Fund............................................................. 31
Schedule of Investments................................................ 34
Financial Statements................................................... 36
Financial Highlights................................................... 39
The Brinson Funds--Notes to Financial Statements........................... 42
</TABLE>
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
February 20, 1998
Dear Shareholder:
We are very pleased to present the December 31, 1997 Semi-Annual Report for the
U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. Within this Report,
we'll focus on current domestic economic outlook as well as our current
strategies and performance updates for the three Domestic Funds.
Swiss Bank Corporation and Union Bank of Switzerland announced on December 8,
1997 their intention to merge into a single global financial institution. As
part of this merger, Brinson Partners and UBS Asset Management will be combined
into Brinson. Brinson will be the Institutional Asset Management Division of the
new organization with assets under management in excess of $340 billion and will
provide investment advisory services for the Private Banking Division with
assets over $400 billion. The Consumer & Corporate Banking Division and Brinson
combined will manage assets in excess of $940 billion.
We are excited about the formation of Brinson and the additional resources we
will bring together to further the tradition of delivering value-added
investment performance and the highest level of professional client service.
Brinson U.S. Balanced Fund
Since its inception on December 31, 1994, the Brinson U.S. Balanced Fund has
produced an annualized total return of 16.49%, compared to the return of 22.47%
of its benchmark, the U.S. Balanced Mutual Fund Index. The Brinson U.S. Balanced
Fund achieved this performance with a volatility of 5.13% well below the
benchmark volatility of 7.64%
Brinson U.S. Equity Fund
The Brinson U.S. Equity Fund has provided an annualized return of 22.32% since
its performance inception on February 28, 1994. This is compared to a 22.13%
return for the benchmark, the Wilshire 5000 Index. The Brinson U.S. Equity Fund
achieved this performance with a volatility of 11.26% compared to the benchmark
volatility of 11.02%.
4
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
Brinson U.S. Bond Fund
The Brinson U.S. Bond Fund has provided an annualized return of 8.04% since its
inception on August 31, 1995. This is compared to a 7.99% return for the
benchmark, the Salomon Brothers BIG Bond Index. The Brinson U.S. Bond Fund
achieved this performance with a volatility of 4.48% compared to the benchmark
volatility of 3.71%.
Each of our Funds employs the same value-oriented investment philosophy applied
across the U.S. spectrum. Each Fund also uses the resources of our entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is tailored
to specific objectives and focused upon both risk and return considerations in
the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent. The Report that follows highlights the investment
characteristics of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/S/ Gary P. Brinson
Gary P. Brinson, CFA
President and Chief Investment Officer
Brinson Partners, Inc.
5
<PAGE>
U.S. Economic and Market Highlights
- --------------------------------------------------------------------------------
Consumer price inflation in 1997 turned out to be extraordinarily tame.
Excluding the volatile food and energy components, the price level rise of 2.4%
was the lowest since 1965. Although we do not foresee a strong resurgence in
inflation, there is reason to believe that, looking forward, the risk of an
upward move is heightened. After bottoming in the early 1990s, money supply
growth has returned to levels last seen in the mid 1990s. In addition, there is
some risk that any monetary policy mistake would tend toward ease rather than
excessive tightness if the Federal Reserve reacts to Asian-induced deflation
fears.
The economy continues to expand at a relatively rapid pace. Real GDP grew during
1997 at a 3.8% rate, the best performance in almost 10 years. Strong investment
spending by businesses contributed significantly, and spending by consumers
remained solid. The economy's strength propelled the unemployment rate under 5%,
to levels last seen in the early 1970s.
The Asian crisis has yet to have a significant impact on the U.S. economy. While
the direct effects are likely to be minor, the crisis does introduce new risks.
Talk of the possible deflationary effects of depressed import prices could
induce the Federal Reserve to err on the side of monetary ease. Although the
strong rebound in money growth since the early 1990s has not produced any
resurgence in goods price inflation, the combination of this monetary expansion
and the risk from policy reactions to Asia skews the inflation risks upwards
rather than toward further disinflation.
U.S. Environment
Major Markets
One Year Ended December 31, 1997
[Bar Chart Appears Here]
Top Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1997
[Bar Chart Appears Here]
Trucking, Freight 35.78
Oil Service 31
Air Transport 15.15
Thrift Institutions 8.57
Real Property 7.91
Media 4.46
Beverages 3.15
Banks 2.76
Retail (Other) 2.1
Agriculture, Food 1.92
Salomon U.S. Treasury Benchmark Returns
One Year Ended December 31, 1997
[Bar Chart Appears Here]
Bottom Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1997
[Bar Chart Appears Here]
6
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
The U.S. Balanced Fund is an actively managed portfolio that applies our value-
based asset allocation process to U.S. stocks, bonds and cash. The Fund's
investment strategy is developed in the context of our global asset allocation
process and is based on analysis of long-term economic and market conditions.
The U.S. Balanced Fund has provided an annualized return of 16.49% since its
inception on December 31, 1994. This falls below the corresponding 22.47% return
of its benchmark, the U.S. Balanced Mutual Fund Index. The U.S. Balanced Fund
return over this time period was achieved at an annualized volatility of 5.13%,
significantly below the benchmark volatility of 7.64%. For the year ended
December 31, 1997, the U.S. Balanced Fund returned 13.22%, compared to the
benchmark return of 23.50%.
The equity underweight and bond overweight was the primary factor adversely
affecting relative performance. Security selection in the U.S. equity market
also contributed negatively to relative performance. Although inflation was
relatively stable throughout 1997, the bond market experienced rising yields
early in the year and then a substantial drop in yields from April through
December. Coming out of 1996, yields continued to firm on the back of a
strengthening domestic economy and fears of an increase in interest rates by the
Federal Reserve. These fears diminished in the second half of the year as
reported inflation remained moderate. Yields at the long end of the yield curve
declined by over 100 basis points. Bonds ended the year with yields at their
lowest levels in two years.
The equity market turned in yet another banner year, with broad market indices
showing returns of about 30%. As in the prior year, the equity market provided
strong performance during January and February. However, after a brief setback,
the market soared on the back of declining interest rates and robust earnings
expectations. The equity market appears increasingly willing to extrapolate
recent strong earnings growth into the future. At year-end, equity price gains
had driven the market to an overpricing of around 20%.
Looking forward, return expectations in stocks appear insufficient compensation
for the risks. Therefore, we have maintained a reduced exposure in the
allocation to equities, with an offsetting overweight in the allocation to
bonds. The 5% cash risk hedge is above the neutral allocation of 0%.
7
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 12/31/94*
ended ended to
12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Balanced Fund 5.89% 13.22% 16.49%
- --------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 9.84 23.50 22.47
- --------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson U.S. Balanced Fund.
**An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index.
Total return includes reinvestment of all capital gain and income distributions.
Total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested
$1,000,000 on December 31, 1994, and had reinvested all your income dividends
and capital gain distributions through December 31, 1997.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
Brinson U.S. Balanced Fund
vs. U.S. Balanced Mutual Fund Index
Wealth Value with Dividends Reinvested
[Bar Chart Appears Here]
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
8
<PAGE>
U.S. Balanced Fund
- --------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
- --------------------------------------
<TABLE>
<CAPTION>
U.S. EQUITIES
<S> <C>
Energy........................ 1.43%
Capital Investment
Capital Goods................ 2.50
Technology................... 3.05
------
5.55
Basic Industries
Chemicals.................... 0.74
Housing/Paper................ 1.80
Metals....................... 0.31
------
2.85
Consumer
Non-Durables................. 3.44
Retail/Apparel............... 1.81
Autos/Durables............... 1.39
Discretionary................ 1.30
Health: Drugs................ 2.87
Health: Non-Drugs............ 1.52
------
12.33
Financial
Banks........................ 2.78
Non-Banks.................... 2.47
------
5.25
Utilities
Electric..................... 2.18
Telephone.................... 0.38
------
2.56
Transportation................ 2.18%
Services/Misc................. 3.35
------
Total U.S. Equities....... 35.50*
U.S. BONDS
Corporate Bonds
Asset-Backed................. 1.22
CMO.......................... 0.42
Consumer..................... 1.36
Financial.................... 4.32
Industrial................... 3.05
Telecommunications........... 2.33
------
12.70
International Dollar Bonds.... 6.14
Mortgage-Backed Securities.... 4.25
U.S. Government Agencies...... 16.99
U.S. Government Obligations... 15.76
------
Total U.S. Bonds.......... 55.84*
------
SHORT-TERM INVESTMENTS........ 11.85*
------
TOTAL INVESTMENTS......... 103.19
LIABILITIES, LESS CASH
AND OTHER ASSETS............. (3.19)
------
NET ASSETS.................... 100.00%
======
</TABLE>
* The Fund held a long position in U.S. Treasury futures on December 31, 1997
which increased U.S. bond exposure from 55.84% to 59.46%. The Fund also held a
short position in stock index futures which reduced U.S. equity exposure from
35.50% to 30.00%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 11.85% to 13.73%.
Asset Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------------------------
<S> <C> <C>
U.S. Equity 65% 30%
U.S. Bonds 35 65
Cash Equivalents 0 5
- -------------------------------------------------
100% 100%
</TABLE>
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------
<S> <C>
E1. Lockheed Martin Corp. 1.50%
E2. Xerox Corp. 1.44
E3. Philip Morris Companies, Inc. 1.37
E4. Aon Corp. 1.23
E5. CIGNA Corp. 1.22
E6. Schering Plough Corp. 1.06
E7. Burlington Northern Santa Fe Corp. 1.05
E8. Federal Express Corp. 1.02
E9. Goodyear Tire & Rubber Co. 0.99
10. Automatic Data Processing, Inc. 0.86
- -------------------------------------------------
</TABLE>
9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
U.S. Equities -- 35.50%
Allergan, Inc.............................................. 32,800 $ 1,100,850
Alza Corp. (b)............................................. 32,000 1,018,000
American Home Products Corp................................ 25,700 1,966,050
Aon Corp................................................... 62,500 3,664,062
Automatic Data Processing, Inc............................. 42,000 2,577,750
Baxter International, Inc.................................. 41,500 2,093,156
Beckman Instruments, Inc................................... 12,600 504,000
Biogen, Inc. (b)........................................... 12,600 458,325
Birmingham Steel Corp...................................... 12,800 201,600
Boston Technology, Inc. (b)................................ 12,800 321,600
Briggs & Stratton Corp..................................... 1,600 77,700
Burlington Northern Santa Fe Corp.......................... 33,700 3,131,994
Champion Enterprises, Inc. (b)............................. 20,400 419,475
Champion International Corp................................ 1,700 77,031
Chase Manhattan Corp....................................... 17,200 1,883,400
CIGNA Corp................................................. 21,000 3,634,312
Circuit City Stores-Circuit City Group..................... 47,300 1,682,106
Citicorp................................................... 15,600 1,972,425
CMS Energy Corp............................................ 41,400 1,824,188
Comerica, Inc.............................................. 8,800 794,200
Commscope, Inc. (b)........................................ 24,366 327,418
Comverse Technology, Inc. (b).............................. 6,300 245,700
Corning, Inc............................................... 69,200 2,569,050
Covance, Inc. (b).......................................... 16,175 321,478
CPC International, Inc..................................... 14,000 1,512,000
Crown Cork & Seal Co., Inc................................. 15,200 761,900
CVS Corp................................................... 20,400 1,306,875
Dial Corp.................................................. 16,500 343,406
Eastman Chemical Co........................................ 17,700 1,054,256
Echlin, Inc................................................ 9,000 325,687
EMC Corp. (b).............................................. 91,600 2,513,275
Enron Corp................................................. 43,100 1,791,344
Entergy Corp............................................... 83,700 2,505,769
Federal Express Corp. (b).................................. 49,900 3,047,019
First American Corp. of Tennessee.......................... 8,400 417,900
First Data Corp............................................ 77,557 2,268,542
First Security Corp........................................ 10,550 441,781
FirstEnergy Corp........................................... 24,975 724,275
Fleetwood Enterprises, Inc................................. 9,600 407,400
Food Lion, Inc., Class A................................... 66,400 560,250
Forest Laboratories, Inc. (b).............................. 14,700 724,894
Fort James Corp............................................ 37,100 1,419,075
Gannett Co., Inc........................................... 31,800 1,965,637
General Semiconductor, Inc. (b)............................ 16,550 191,359
Genzyme Corp............................................... 12,900 357,975
Geon Co.................................................... 8,800 205,700
Goodyear Tire & Rubber Co.................................. 46,200 2,939,475
Harnischfeger Industries, Inc.............................. 24,300 858,094
Health Care and Retirement Corp. (b)....................... 15,350 617,837
Hibernia Corp.............................................. 17,800 334,862
Informix Corp. (b)......................................... 17,000 80,750
Interpublic Group of Companies, Inc........................ 20,850 1,038,591
Kimberly Clark Corp........................................ 38,600 1,903,463
Lear Corp. (b)............................................. 13,800 655,500
Lockheed Martin Corp....................................... 45,471 4,478,894
Lyondell Petrochemical Co.................................. 35,000 927,500
Manor Care, Inc............................................ 24,700 864,500
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Martin Marietta Materials, Inc......................... 9,436 $ 345,004
Masco Corp............................................. 37,400 1,902,725
Nabisco Holdings Corp.................................. 32,700 1,583,906
National Service Industries, Inc....................... 6,300 312,244
Nextel Communications, Inc. (b)........................ 44,000 1,144,000
NextLevel Systems, Inc. (b)............................ 73,000 1,304,875
Old Republic International Corp........................ 6,450 239,859
Peco Energy Co......................................... 95,600 2,318,300
Pentair, Inc........................................... 17,000 610,938
Pharmacia & UpJohn, Inc................................ 17,200 629,950
Philip Morris Companies, Inc........................... 90,400 4,096,250
Raytheon Co., Class B.................................. 38,000 1,919,000
Regions Financial Corp................................. 8,200 345,938
Reynolds & Reynolds Co................................. 31,200 575,250
Schering Plough Corp................................... 50,700 3,149,738
Seagate Technology, Inc. (b)........................... 28,600 550,550
Sears Roebuck & Co..................................... 3,900 176,475
Timken Co.............................................. 9,400 323,125
Tyson Foods, Inc., Class A............................. 65,200 1,336,600
Ultramar Diamond Shamrock Corp......................... 36,490 1,163,119
US Bancorp............................................. 21,953 2,457,364
Vencor, Inc. (b)....................................... 32,000 782,000
Viad Corp.............................................. 31,500 608,344
Westvaco Corp.......................................... 7,650 240,497
Witco Corp............................................. 5,000 204,062
Xerox Corp............................................. 58,300 4,303,269
York International Corp................................ 20,000 791,250
------------
Total U.S. Equities (Cost $82,622,420)................. 105,826,287
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Bonds -- 55.84%
U.S. CORPORATE BONDS -- 12.70%
Aid-Israel 0.000%, due 08/15/19........................ $5,162,000 $ 1,355,954
Aid-Jordan
8.750%, due 09/01/19.................................. 3,620,237 4,435,912
Archer Daniels 6.950%, due 12/15/2097.................. 1,995,000 2,021,956
Capital One Bank 6.830%, due 05/17/99.................. 2,000,000 2,013,864
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02........................... 1,360,000 1,362,135
Chase Manhattan Credit Card Trust
96-4A 6.730%, due 02/15/03............................ 2,000,000 2,019,160
Chrysler Corp. 7.400%, due 08/01/2097.................. 2,380,000 2,539,220
Comcast Cable Communications 144-A
8.500%, due 05/01/27.................................. 2,000,000 2,359,092
Dayton Hudson Credit Card Master Trust
95-1A 6.100%, due 02/25/02............................ 2,000,000 2,001,740
Donaldson Lufkin & Jenrette
FRN 6.700%, due 06/30/00.............................. 840,000 850,303
Enron Corp. 6.750%, due 08/01/09....................... 4,500,000 4,537,395
GE Capital Mtg. Services, Inc.
94-7 Class A12, 6.000%, due 02/25/09.................. 1,270,601 1,236,739
GMAC 6.375%, due 12/01/01.............................. 2,000,000 2,008,776
Lockheed Martin Corp.
7.700%, due 06/15/08.................................. 2,000,000 2,172,408
MBNA Global Capital Securities FRN
6.519%, due 02/01/27.................................. 215,000 197,485
New England Telephone & Telegraph
6.300%, due 12/16/02.................................. 1,835,000 1,838,764
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
News America Holdings
7.750%, due 12/01/45.................................. $ 1,000,000 $ 1,041,108
Residential Asset Securitization Trust
97-A 11 P4 7.000%, due 12/25/27....................... 280,000 280,875
Time Warner, Inc., 7.570%, due 02/01/24................ 1,790,000 1,876,274
USA Waste Services
6.500%, due 12/15/02.................................. 1,720,000 1,715,679
-----------
37,864,839
-----------
INTERNATIONAL DOLLAR BONDS -- 6.14%
Credit Suisse--London 144A
7.900%, Resettable Perpetual Preferred................ 2,170,000 2,289,571
Den Danske Bank 144A
7.400%, due 06/15/10.................................. 1,400,000 1,460,710
Empressa Nacional Electric
7.875%, due 02/01/2097................................ 2,335,000 2,472,366
International Bank for Reconstruction &
Development 6.375%, due 07/21/05...................... 1,500,000 1,538,438
LKB Baden-Wuerttemberg Finance NV
8.125%, due 01/27/00.................................. 1,780,000 1,849,546
Montell Finance Co. 144A
8.100%, due 03/15/27.................................. 1,610,000 1,890,022
Petroliam Nasional
7.125%, due 08/15/05.................................. 1,500,000 1,415,517
Province of Quebec
7.500%, due 07/15/23.................................. 750,000 808,680
Ras Laffan Liquefied Natural Gas Co. Ltd.
144A 8.294%, due 03/15/14............................. 1,735,000 1,632,645
Skandinaviska Enskilda Banken 144A
6.625%, Resettable Perpetual Preferred................ 2,000,000 2,008,000
Southern Investments UK
6.800%, due 12/01/06.................................. 930,000 937,318
-----------
18,302,813
-----------
MORTGAGE-BACKED SECURITIES -- 4.25%
Asset Securitization Corp. 96-D3A1B 7.210%, due
10/13/26.............................................. 2,600,000 2,714,665
Morgan Stanley Capital, Inc.
6.830%, due 10/15/06.................................. 1,227,297 1,253,082
PNC Mortgage Securities Corp.
94-3A8 7.500%, due 07/25/24........................... 1,350,000 1,394,501
Prudential Home Mortgage Securities
93-43 A9 6.750%, due 10/25/23......................... 1,387,428 1,368,102
94-3 A10 6.500%, due 02/25/24......................... 2,855,000 2,742,799
UCFC Home Equity Loan
97-Class A8 6.325%, FRN, due 09/15/27................. 1,236,672 1,235,646
Vanderbilt Mortgage Finance
97-B1A3 6.975%, due 08/07/03.......................... 1,925,000 1,978,631
-----------
12,687,426
-----------
U.S. GOVERNMENT AGENCIES -- 16.99%
Federal Home Loan Mortgage Corp.
6.500%, due 05/15/21.................................. 2,159,690 2,159,798
7.500%, due 01/15/23.................................. 1,075,979 1,129,864
0.000%, due 04/15/27 principal only................... 2,497,000 1,629,163
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23................................... $ 717,095 $ 741,969
9.000%, due 03/01/24................................... 346,379 374,079
9.500%, due 04/01/25................................... 1,030,008 1,100,177
Federal National Mortgage Association
6.540%, due 09/18/02................................... 2,415,000 2,442,302
6.959%, due 08/01/07................................... 3,065,973 3,196,277
6.789%, due 11/01/07................................... 504,259 525,377
6.500%, due 05/25/08................................... 1,491,555 1,488,706
6.500%, due 08/25/08................................... 1,550,096 1,552,577
8.000%, due 12/18/11................................... 1,000,000 1,074,974
6.500%, due 12/25/23................................... 2,000,000 1,993,710
7.000%, due 03/18/25................................... 2,190,000 2,191,778
6.500%, due 04/01/26................................... 557,317 550,002
6.500%, due 05/01/26................................... 2,007,715 1,981,364
6.500%, due 12/01/26 TBA............................... 11,545,000 11,393,472
Federal National Mortgage Association Strips
0.000%, due 04/01/27 principal only.................... 3,045,025 2,312,392
0.000%, due 07/01/27 principal only.................... 1,236,317 924,539
Government National Mortgage Association
8.000%, due 08/15/22................................... 871,861 904,010
8.000%, due 11/15/22................................... 2,018,583 2,105,019
7.500%, due 06/15/23................................... 2,900,313 2,970,103
7.500%, due 08/15/23................................... 1,031,840 1,056,669
7.500%, due 09/15/23................................... 1,052,633 1,077,963
7.000%, due 12/15/23................................... 860,100 869,638
9.000%, due 07/15/24................................... 136,239 145,690
8.500%, due 11/15/24................................... 144,212 151,467
8.500%, due 01/15/25................................... 281,633 295,803
9.000%, due 05/15/25................................... 340,348 363,959
7.500%, due 06/15/25................................... 1,885,081 1,932,416
-----------
50,635,257
-----------
U.S. GOVERNMENT OBLIGATIONS-- 15.76%
U.S. Treasury Notes and Bonds
6.000%, due 06/30/99................................... 30,805,000 30,959,025
5.875%, due 08/31/99................................... 4,520,000 4,534,125
7.750%, due 11/30/99................................... 1,110,000 1,150,931
6.625%, due 07/31/01................................... 1,660,000 1,707,207
6.250%, due 08/31/02................................... 5,500,000 5,613,438
8.125%, due 05/15/21................................... 1,195,000 1,505,700
U.S. Treasury Principal Strip
0.000%, due 08/15/03 principal only.................... 2,090,000 1,517,340
-----------
46,987,766
-----------
Total U.S. Bonds (Cost $163,017,803).................... 166,478,101
-----------
Short-Term Investments -- 11.85%
U.S. GOVERNMENT OBLIGATIONS -- 0.33%
U.S. Treasury Bill 5.42%, due 05/28/98.................. 1,015,000 993,430
-----------
COMMERCIAL PAPER -- 11.52%
Bausch & Lomb Inc., 7.750%, due 01/02/98................ 5,145,000 5,143,892
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Case Credit Corp.
6.110%, due 01/20/98................................. $1,300,000 $ 1,295,808
6.030%, due 03/10/98................................. 1,500,000 1,483,725
6.020%, due 03/13/98................................. 1,500,000 1,482,191
General American Transportation Corp. 7.500%, due
01/07/98............................................. 3,489,000 3,484,639
GTE Corp.
6.120%, due 02/20/98................................. 1,500,000 1,487,250
6.020%, due 03/02/98................................. 1,500,000 1,484,950
Marriott Corp.
6.300%, due 01/16/98................................. 2,000,000 1,994,750
6.050%, due 02/09/98................................. 2,500,000 2,483,615
Nabisco Corp. 6.120%, due 01/16/98.................... 2,000,000 1,994,900
Occidental Petroleum Corp. 6.000%, due 01/16/98....... 2,500,000 2,493,750
Praxair Corp. 6.550%, due 01/02/98.................... 6,000,000 5,998,909
Safeway, Inc.
6.700%, due 01/02/98................................. 2,000,000 1,999,628
5.920%, due 01/22/98................................. 1,500,000 1,494,820
------------
34,322,827
------------
Total Short-Term Investments
(Cost $35,315,671)................................... 35,316,257
------------
Total Investments
(Cost $280,955,894)--103.19% (a)..................... 307,620,645
------------
Liabilities, less cash and other
assets-- (3.19%)..................................... (9,510,432)
------------
Net Assets--100%...................................... $298,110,213
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $280,955,894; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $29,455,719
Gross unrealized depreciation................................ (2,790,968)
-----------
Net unrealized appreciation................................ $26,664,751
===========
</TABLE>
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $11,640,040, or 3.90% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FUTURES CONTRACTS (NOTE 4)
The U.S. Balanced Fund had the following open futures contracts as of December
31, 1997:
<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,
82 contracts............... March 1998 $8,874,678 $8,907,250 $ 32,572
10 Year U.S. Treasury Note,
4 contracts................ March 1998 445,655 448,625 2,970
30 Year U.S. Treasury Bond,
12 contracts............... March 1998 1,437,871 1,445,625 7,754
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 67
contracts.................. March 1998 16,329,119 16,399,925 (70,806)
--------
Total..................... $(27,510)
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1997 was $993,430.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $280,955,894) (Note 1)............... $307,620,645
Receivables:
Investment securities sold...................................... 4,674,233
Dividends....................................................... 160,170
Interest........................................................ 1,521,608
Fund shares sold................................................ 5,000
Other assets..................................................... 39,717
------------
TOTAL ASSETS.................................................. 314,021,373
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 15,656,125
Due to custodian bank........................................... 36,637
Investment advisory fees (Note 2)............................... 170,379
Accrued expenses................................................ 48,019
------------
TOTAL LIABILITIES............................................. 15,911,160
------------
NET ASSETS........................................................ $298,110,213
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $270,389,706
Accumulated undistributed net investment income.................. 81,662
Accumulated net realized gain.................................... 1,001,604
Net unrealized appreciation...................................... 26,637,241
------------
NET ASSETS.................................................... $298,110,213
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $296,444,401 and 24,918,886 shares is-
sued and outstanding) (Note 6)................................. $ 11.90
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,059 and 89 shares issued and outstanding) (Note 6).......... $ 11.90
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,664,753 and 140,637 shares issued and outstanding) (Note 6). $ 11.84
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $ 5,689,651
Dividends......................................................... 958,489
-----------
TOTAL INCOME................................................... 6,648,140
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,005,745
Administration.................................................... 51,918
Distribution (Note 5)............................................. 4,384
Other............................................................. 91,325
-----------
TOTAL EXPENSES................................................. 1,153,372
-----------
NET INVESTMENT INCOME ......................................... 5,494,768
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 13,452,774
Futures contracts................................................ (2,376,619)
-----------
Net realized gain.............................................. 11,076,155
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... (1,400,448)
Futures contracts................................................ 1,164,080
-----------
Change in net unrealized appreciation or depreciation.......... (236,368)
-----------
Net realized and unrealized gain.................................. 10,839,787
-----------
Net increase in net assets resulting from operations.............. $16,334,555
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 5,494,768 $ 9,809,363
Net realized gain............................. 11,076,155 16,067,241
Change in net unrealized appreciation or de-
preciation................................... (236,368) 10,534,773
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 16,334,555 36,411,377
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.............................. (8,638,019) (7,953,731)
Brinson Class N.............................. (30) --
SwissKey Class............................... (46,180) (43,714)
Distributions from net realized gain:
Brinson Class I.............................. (20,202,719) (10,324,917)
Brinson Class N.............................. (75) --
SwissKey Class............................... (121,168) (65,778)
------------ ------------
Total distributions to shareholders............ (29,008,191) (18,388,140)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 28,640,454 80,528,530
Shares issued on reinvestment of distribu-
tions........................................ 28,947,784 18,312,423
Shares redeemed............................... (31,314,203) (60,962,669)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 6)............. 26,274,035 37,878,284
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 13,600,399 55,901,521
------------ ------------
NET ASSETS:
Beginning of year............................. 284,509,814 228,608,293
------------ ------------
End of year (including accumulated undistrib-
uted net investment income of $81,662 and
$3,271,123, respectively).................... $298,110,213 $284,509,814
============ ============
</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>
SIX MONTHS ENDED YEAR YEAR DECEMBER 30, 1994*
DECEMBER 31, 1997 ENDED ENDED THROUGH
BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.53 $ 11.71 $ 11.23 $ 10.00
-------- -------- -------- --------
Income from investment
operations:
Net investment income. 0.26 0.47 0.44 0.23
Net realized and
unrealized gain...... 0.45 1.29 1.04 1.16
-------- -------- -------- --------
Total income from
investment opera-
tions.............. 0.71 1.76 1.48 1.39
-------- -------- -------- --------
Less distributions:
Distributions from net
investment income.... (0.40) (0.40) (0.43) (0.16)
Distributions from net
realized gain........ (0.94) (0.54) (0.57) --
-------- -------- -------- --------
Total distributions. (1.34) (0.94) (1.00) (0.16)
-------- -------- -------- --------
Net asset value, end of
period................. $ 11.90 $ 12.53 $ 11.71 $ 11.23
======== ======== ======== ========
Total return (non-
annualized)............ 5.89% 15.50% 13.52% 13.91%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $296,444 $282,860 $227,829 $157,724
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.80%** 0.88% 1.01% 1.06%**
After expense reim-
bursement............ N/A 0.80% 0.80% 0.80%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 3.83%** 3.78% 3.76% 4.36%**
After expense reim-
bursement............ N/A 3.86% 3.97% 4.63%**
Portfolio turnover
rate.................. 94% 329% 240% 196%
Average commission rate
paid per share........ $ 0.0536 $0.0441 $ 0.0481 N/A
</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 the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period......................... $ 12.53
-------
Income from investment operations:
Net investment income...................................... 0.25
Net realized and unrealized gain........................... 0.44
-------
Total income from investment operations.................. 0.69
-------
Less distributions:
Distributions from net investment income................... (0.38)
Distributions from net realized gain....................... (0.94)
-------
Total distributions...................................... (1.32)
-------
Net asset value, end of period............................... $ 11.90
=======
Total return (non-annualized)................................ 5.72%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement............................... 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement............................... 3.64%**
Portfolio turnover rate..................................... 94%
Average commission rate paid per share...................... $0.0536
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 12.46 $ 11.67 $ 11.38
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.23 0.38 0.42
Net realized and unrealized
gain......................... 0.45 1.31 0.86
------- ------- -------
Total income from investment
operations................. 0.68 1.69 1.28
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.36) (0.36) (0.42)
Distributions from net real-
ized gain.................... (0.94) (0.54) (0.57)
------- ------- -------
Total distributions......... (1.30) (0.90) (0.99)
------- ------- -------
Net asset value, end of period.. $ 11.84 $ 12.46 $ 11.67
======= ======= =======
Total return (non-annualized)... 5.56% 14.99% 11.54%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $ 1,665 $ 1,649 $ 779
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.30%** 1.38% 1.51%**
After expense reimbursement... N/A 1.30% 1.30%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 3.33%** 3.28% 3.26%**
After expense reimbursement... N/A 3.36% 3.47%**
Portfolio turnover rate........ 94% 329% 240%
Average commission rate paid
per share..................... $0.0536 $0.0441 $0.0481
</TABLE>
*Commencement of SwissKey Class
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
The U.S. Equity Fund is an actively managed portfolio invested in common stocks
of U.S. corporations. The portfolio is diversified by issue and industry; it is
typically 70% invested in large capitalization stocks, with the remaining 30% in
intermediate and small capitalization stocks. Investment strategies emphasize
stock selection with attention to the management of factor and industry
exposures.
Since its performance inception on February 28, 1994, the Brinson U.S. Equity
Fund has provided an annualized return of 22.32% compared to 22.13% for the
benchmark, the Wilshire 5000 Equity Index. The annualized volatility of the U.S.
Equity Fund has been 11.26% since inception, only slightly above the 11.02%
volatility for the Wilshire 5000 Equity Index. In 1997, the Brinson U.S. Equity
Fund's total return of 24.76% trailed the 31.29% return for its benchmark.
Almost all of the U.S. Equity Fund's underperformance occurred in the fourth
quarter against the backdrop of a stock market environment heavily influenced by
a "flight to quality" mentality on the part of investors. Such an environment
was precipitated by difficulties in the Southeast Asian economies. There were
indications of trouble in the region earlier in 1997, but the problems came to
the fore in the final quarter as the magnitude of credit excesses became more
apparent, future economic growth rates were revised sharply lower and currency
values in country after country plummeted. U.S. financial markets and the dollar
were viewed as a safe haven. Not surprisingly, the strongest relative
performance within the stock market was posted by the highest quality, largest
capitalization issues.
The U.S. Equity Fund was not positioned well for these fourth quarter
developments. The problem was not an unusually heavy weight in low quality,
small capitalization issues. Rather, the problem was that the Fund was minimally
weighted in those few very large, very high quality issues which have come to
dominate the market in recent years and which performed strongly in the fourth
quarter. The 20 largest U.S. stocks now account for over 30% of the total market
value of the S&P 500, and most of them are concentrated in the relatively
defensive consumer nondurable, international oil and telephone utility
industries. Our researchers recognize the strong products, capable managements
and worldwide market positions which characterize most of these companies, and
they have taken these factors into account in formulating their future estimates
of profitability and growth. However, based upon their work, we found these
stocks to be relatively overvalued throughout 1997, a mispricing that by the end
of the year was as high as we have observed since the inception of our present
organization in 1981.
As we enter 1998, our price/value discipline leads us to maintain an underweight
in such issues. More specifically, the Fund is positioned with factor
overweightings in the traditional value measures of book-price, earnings-price
and yield, and underweights in growth, size and foreign earnings. From an
industry standpoint, meaningful deviations from the benchmark include
overweightings in healthcare, defense and electric utilities. Important
underweights include energy, telephone utilities, miscellaneous finance and
semiconductor/personal computer issues.
20
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 2/28/94*
ended ended ended to
12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson U.S. Equity Fund 6.87% 24.76% 30.10% 22.32%
- --------------------------------------------------------------------------
Wilshire 5000 Index 11.60 31.29 29.49 22.13
- --------------------------------------------------------------------------
</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 December 31, 1997. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
Brinson U.S. Equity Fund
vs. Wilshire 5000 Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson
U.S. Wilshire
Equity 500
Fund Index
- -----------------------------------
<S> <C> <C>
2/28/94 1000000 1000000
6/30/94 970003 947285
12/31/94 983676 991086
6/30/95 1178023 1181470
12/31/95 1382877 1352348
6/30/96 1538200 1491255
12/31/96 1737594 1639211
6/30/97 2028487 1928453
12/31/97 2165710 2152124
</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.
21
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------
<S> <C>
U.S. EQUITIES
Energy.................... 3.80%
Capital Investment
Capital Goods............ 6.64
Technology............... 8.10
------
14.74
Basic Industries
Chemicals................ 1.97
Housing/Paper............ 4.78
Metals................... 0.83
------
7.58
Consumer
Non-Durables............. 9.11
Retail/Apparel........... 4.79
Autos/Durables........... 3.68
Discretionary............ 3.44
Health: Drugs............ 7.61
Health: Non-Drugs........ 4.02
------
32.65
Financial
Banks.................... 7.38
Non-Banks................ 6.56
------
13.94
Utilities
Electric................. 5.78
Telephone................ 1.01
------
6.79
Transportation............ 5.78
Services/Misc............. 8.86
------
Total U.S. Equities... 94.14*
------
SHORT-TERM INVESTMENTS.... 5.45*
------
TOTAL INVESTMENTS..... 99.59
------
CASH AND OTHER ASSETS,
LESS LIABILITIES......... 0.41
------
NET ASSETS................ 100.00%
======
</TABLE>
* The Fund held a long position in stock index futures on December 31, 1997
which increased U.S. Equity exposure from 94.14% to 99.64% and reduced
exposure to Short-Term Investments from 5.45% to -0.05%.
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------
<S> <C>
1. Lockheed Martin Corp. 4.02%
2. Xerox Corp. 3.86
3. Philip Morris Companies, Inc. 3.67
4. CIGNA Corp. 3.25
5. Aon Corp. 3.07
6. Schering Plough Corp. 2.85
7. Burlington Northern Santa Fe Corp. 2.80
8. Federal Express Corp. 2.65
9. Goodyear Tire & Rubber Co. 2.63
10. Automatic Data Processing, Inc. 2.31
- -------------------------------------------------------
</TABLE>
22
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
U.S. Equities -- 94.14%
Allergan, Inc............................................... 162,500 $5,453,906
Alza Corp. (b).............................................. 158,500 5,042,281
American Home Products Corp................................. 128,000 9,792,000
Aon Corp.................................................... 288,750 16,927,969
Automatic Data Processing, Inc.............................. 207,800 12,753,725
Baxter International, Inc................................... 205,000 10,339,688
Beckman Instruments, Inc.................................... 62,000 2,480,000
Biogen, Inc. (b)............................................ 62,100 2,258,888
Birmingham Steel Corp....................................... 63,700 1,003,275
Boston Technology, Inc. (b)................................. 63,300 1,590,413
Briggs & Stratton Corp...................................... 10,900 529,331
Burlington Northern Santa Fe Corp. ......................... 166,500 15,474,094
Champion Enterprises, Inc. (b).............................. 100,200 2,060,363
Champion International Corp................................. 8,500 385,156
Chase Manhattan Corp........................................ 84,900 9,296,550
CIGNA Corp.................................................. 103,600 17,929,275
Circuit City Stores-Circuit City Group...................... 234,100 8,325,181
Citicorp.................................................... 77,000 9,735,687
CMS Energy Corp............................................. 204,600 9,015,188
Comerica, Inc............................................... 43,600 3,934,900
Commscope, Inc. (b)......................................... 120,599 1,620,549
Comverse Technology, Inc. (b)............................... 31,200 1,216,800
Corning, Inc................................................ 329,600 12,236,400
Covance, Inc (b)............................................ 79,850 1,587,019
CPC International, Inc...................................... 69,400 7,495,200
Crown Cork & Seal Co., Inc.................................. 75,400 3,779,425
CVS Corp.................................................... 100,600 6,444,688
Dial Corp................................................... 81,900 1,704,544
Eastman Chemical Co......................................... 87,300 5,199,806
Echlin, Inc................................................. 44,500 1,610,344
EMC Corp. (b)............................................... 453,100 12,431,931
Enron Corp.................................................. 212,400 8,827,875
Entergy Corp................................................ 413,700 12,385,144
Federal Express Corp. (b)................................... 239,500 14,624,469
First American Corp. of Tennessee........................... 41,500 2,064,625
First Data Corp............................................. 383,230 11,209,477
First Security Corp......................................... 52,300 2,190,062
FirstEnergy Corp............................................ 123,905 3,593,245
Fleetwood Enterprises, Inc.................................. 45,100 1,913,931
Food Lion, Inc., Class A.................................... 300,900 2,538,844
Forest Laboratories, Inc. (b)............................... 72,900 3,594,881
Fort James Corp............................................. 185,100 7,080,075
Gannett Co., Inc............................................ 157,400 9,729,287
General Semiconductor, Inc. (b)............................. 82,075 948,992
Genzyme Corp................................................ 64,100 1,778,775
Geon Co..................................................... 43,700 1,021,487
Goodyear Tire & Rubber Co................................... 227,700 14,487,412
Harnischfeger Industries, Inc............................... 120,400 4,251,625
Health Care and Retirement Corp. (b)........................ 71,450 2,875,863
Hibernia Corp............................................... 88,100 1,657,381
Informix Corp. (b).......................................... 66,900 317,775
Interpublic Group of Companies, Inc......................... 103,350 5,148,122
Kimberly Clark Corp......................................... 185,400 9,142,537
Lear Corp. (b).............................................. 68,300 3,244,250
Lockheed Martin Corp........................................ 225,026 22,165,061
Lyondell Petrochemical Co................................... 173,200 4,589,800
Manor Care, Inc............................................. 113,900 3,986,500
Martin Marietta Materials, Inc.............................. 46,357 1,694,928
Masco Corp.................................................. 184,800 9,401,700
Nabisco Holdings Corp....................................... 161,500 7,822,656
National Service Industries, Inc............................ 31,000 1,536,438
Nextel Communications, Inc. (b)............................. 221,500 5,759,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
NextLevel Systems, Inc. (b)......................... 361,400 $ 6,460,025
Old Republic International Corp..................... 28,150 1,046,828
Peco Energy Co...................................... 472,900 11,467,825
Pentair, Inc........................................ 83,800 3,011,563
Pharmacia & Upjohn, Inc............................. 82,900 3,036,213
Philip Morris Companies, Inc........................ 447,300 20,268,281
Raytheon Co., Class B .............................. 187,700 9,478,850
Regions Financial Corp.............................. 40,700 1,717,031
Reynolds & Reynolds Co.............................. 154,400 2,846,750
Schering Plough Corp................................ 252,800 15,705,200
Seagate Technology, Inc. (b)........................ 141,500 2,723,875
Sears, Roebuck and Co............................... 17,200 778,300
Timken Co........................................... 40,900 1,405,938
Tyson Foods, Inc., Class A.......................... 322,500 6,611,250
Ultramar Diamond Shamrock Corp...................... 180,318 5,747,636
US Bancorp.......................................... 104,448 11,691,592
Vencor, Inc. (b).................................... 157,600 3,851,350
Viad Corp........................................... 155,600 3,005,025
Westvaco Corp....................................... 37,800 1,188,337
Witco Corp. ........................................ 25,700 1,048,881
Xerox Corp.......................................... 288,400 21,287,525
York International Corp............................. 98,700 3,904,819
------------
Total U.S. Equities
(Cost $452,651,427)................................ 519,519,887
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C> <C>
Short-Term Investments -- 5.45%
U.S. GOVERNMENT OBLIGATIONS -- 0.09%
U.S. Treasury Bill
5.420%, due 05/28/98............................... $ 495,000 $ 484,481
------------
COMMERCIAL PAPER -- 5.36%
Bausch & Lomb Inc.
7.750%, due 01/02/98 2,565,000 2,564,448
Cummins Engine Company, Inc. 7.000%, due 01/02/98... 10,000,000 9,998,056
General American Transportation Corp.
7.500%, due 01/07/98............................... 951,000 949,811
Nabisco Inc.
6.700%, due 01/05/98............................... 1,000,000 999,256
Praxair Inc.
6.550%, due 01/02/98............................... 5,000,000 4,999,090
Solutia Inc.
7.000% due 01/02/98................................ 10,083,000 10,081,039
------------
29,591,700
------------
Total Short-Term Investments
(Cost $30,076,290) 30,076,181
------------
Total Investments
(Cost $482,727,717) -- 99.59% (a).................. 549,596,068
------------
Cash and other assets,
less liabilities--0.41%............................ 2,264,881
------------
Net Assets -- 100%.................................. $551,860,949
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
23
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $482,727,717; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $78,689,103
Gross unrealized depreciation................................ (11,820,752)
-----------
Net unrealized appreciation................................ $66,868,351
===========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS (NOTE 4)
The U.S. Equity Fund had the following open index futures contracts as of
December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Standard & Poor's 500, 124
contracts................. March 1998 $29,802,893 $30,352,100 $549,207
========
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open futures positions at December 31, 1997 were
$815,000 and $484,481, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $482,727,717) (Note 1) .............. $549,596,068
Cash............................................................. 1,298,691
Receivables:
Investment securities sold...................................... 3,932,114
Dividends....................................................... 775,755
Fund shares sold................................................ 17,912,366
Other assets..................................................... 97,684
------------
TOTAL ASSETS.................................................. 573,612,678
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 19,694,740
Fund shares redeemed............................................ 1,672,529
Investment advisory fees (Note 2)............................... 302,102
Accrued expenses................................................ 82,358
------------
TOTAL LIABILITIES............................................. 21,751,729
------------
NET ASSETS........................................................ $551,860,949
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $483,976,569
Accumulated undistributed net investment income.................. 14,392
Accumulated net realized gain.................................... 452,430
Net unrealized appreciation...................................... 67,417,558
------------
NET ASSETS.................................................... $551,860,949
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $507,739,810 and 28,880,535 shares is-
sued and outstanding) (Note 6)................................. $ 17.58
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,072 and 61 shares issued and outstanding) (Note 6).......... $ 17.58
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $44,120,067 and 2,517,356 shares issued
and outstanding) (Note 6)...................................... $ 17.53
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 3,920,692
Interest.......................................................... 361,435
-----------
TOTAL INCOME................................................... 4,282,127
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,577,328
Administration.................................................... 116,010
Distribution (Note 5)............................................. 106,721
Other............................................................. 108,634
-----------
TOTAL EXPENSES................................................. 1,908,693
-----------
NET INVESTMENT INCOME.......................................... 2,373,434
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments...................................................... 15,557,861
Futures contracts................................................ 1,061,031
-----------
Net realized gain ............................................. 16,618,892
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 8,599,085
Futures contracts ............................................... 314,472
-----------
Change in net unrealized appreciation or depreciation.......... 8,913,557
-----------
Net realized and unrealized gain ................................. 25,532,449
-----------
Net increase in net assets resulting from operations.............. $27,905,883
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE
(UNAUDITED) 30, 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 2,373,434 $ 2,268,618
Net realized gain ............................ 16,618,892 21,580,018
Change in net unrealized appreciation or de-
preciation .................................. 8,913,557 40,886,740
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 27,905,883 64,735,376
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................. (2,888,381) (1,717,943)
Brinson Class N............................. (5) --
SwissKey Class.............................. (150,200) (87,137)
Distributions from net realized gain:
Brinson Class I............................. (28,383,478) (12,393,329)
Brinson Class N............................. (64) --
SwissKey Class.............................. (2,678,144) (838,501)
------------ ------------
Total distributions to shareholders........... (34,100,272) (15,036,910)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 203,834,470 212,394,882
Shares issued on reinvestment of distribu-
tions........................................ 30,526,642 14,138,565
Shares redeemed............................... (49,295,234) (34,971,198)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 6)............. 185,065,878 191,562,249
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 178,871,489 241,260,715
------------ ------------
NET ASSETS:
Beginning of year............................. 372,989,460 131,728,745
------------ ------------
End of year (including accumulated undistrib-
uted net investment income of $14,392 and
$679,544, respectively)...................... $551,860,949 $372,989,460
============ ============
</TABLE>
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>
SIX MONTHS ENDED YEAR ENDED JUNE 30, FEBRUARY 22, 1994*
DECEMBER 31, 1997 --------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 17.64 $ 14.59 $ 11.53 $ 9.65 $10.00
-------- -------- -------- ------- ------
Income from investment
operations:
Net investment income. 0.08 0.15 0.17 0.16 0.05
Net realized and
unrealized gain
(loss)............... 1.10 4.27 3.31 1.89 (0.36)
-------- -------- -------- ------- ------
Total income (loss)
from investment
operations......... 1.18 4.42 3.48 2.05 (0.31)
-------- -------- -------- ------- ------
Less distributions:
Distributions from net
investment income.... (0.11) (0.14) (0.17) (0.14) (0.04)
Distributions from net
realized gain........ (1.13) (1.23) (0.25) (0.03) --
-------- -------- -------- ------- ------
Total distributions. (1.24) (1.37) (0.42) (0.17) (0.04)
-------- -------- -------- ------- ------
Net asset value, end of
period................. $ 17.58 $ 17.64 $ 14.59 $ 11.53 $ 9.65
======== ======== ======== ======= ======
Total return (non-
annualized)............ 6.87% 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $507,740 $337,949 $126,342 $42,573 $8,200
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.80%** 0.89% 1.14% 1.70% 5.40% **
After expense reim-
bursement............ N/A 0.80% 0.80% 0.80% 0.80% **
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 1.10%** 1.06% 1.13% 1.09% (2.82)%**
After expense reim-
bursement............ N/A 1.15% 1.47% 1.99% 1.78% **
Portfolio turnover
rate.................. 19% 43% 36% 33% 9%
Average commission rate
paid per share........ $ 0.0426 $ 0.0422 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period......................... $ 17.64
-------
Income from investment operations:
Net investment income...................................... 0.08
Net realized and unrealized gain........................... 1.07
-------
Total income from investment operations.................. 1.15
-------
Less distributions:
Distributions from net investment income................... (0.09)
Distributions from net realized gain....................... (1.12)
-------
Total distributions...................................... (1.21)
-------
Net asset value, end of period............................... $ 17.58
=======
Total return (non-annualized)................................ 6.73%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement............................... 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement............................... 0.77%**
Portfolio turnover rate..................................... 19%
Average commission rate paid per share...................... $0.0426
</TABLE>
*Commencement of Brinson Class N was June 30, 1997
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 17.59 $ 14.58 $ 11.94
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.04 0.11 0.10
Net realized and unrealized
gain......................... 1.09 4.22 2.92
------- ------- -------
Total income from investment
operations................. 1.13 4.33 3.02
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.06) (0.09) (0.13)
Distributions from net real-
ized gain.................... (1.13) (1.23) (0.25)
------- ------- -------
Total distributions......... (1.19) (1.32) (0.38)
------- ------- -------
Net asset value, end of period.. $ 17.53 $ 17.59 $ 14.58
======= ======= =======
Total return (non-annualized)... 6.59% 31.28% 25.70%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $44,120 $35,039 $ 5,387
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.32%** 1.41% 1.66%**
After expense reimbursement... N/A 1.32% 1.32%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 0.57%** 0.54% 0.61%**
After expense reimbursement... N/A 0.63% 0.95%**
Portfolio turnover rate........ 19% 43% 36%
Average commission rate paid
per share..................... $0.0426 $0.0422 $0.0457
</TABLE>
*Commencement of SwissKey Class
**Annualized
N/A=Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<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. Macroeconomic and monetary
analysis are the key elements in our strategy. We develop expectations about the
returns on U.S. bonds based on the divergence of current market yields from our
estimates of equilibrium yields. Relative value analysis serves as the basis of
both our sector and individual security selection.
Since its inception on August 31, 1995, the Brinson U.S. Bond Fund has provided
an annualized return of 8.04%, compared to the 7.99% for the benchmark Salomon
Brothers Broad Investment Grade Bond Index. The Fund's annualized return
volatility since inception of 4.55% exceeds the 3.76% volatility of the
benchmark.
In 1997, the Fund's return of 9.64% slightly exceeded the benchmark return of
9.62%. The positive incremental performance in 1997 was a function of successful
duration and yield curve strategies as well as issue selection primarily within
the mortgage-backed sector. Portfolio duration was targeted at 1.3 times
benchmark duration from the beginning of 1997 until early in the third quarter,
when duration was shortened to neutral.
Following a 25 basis point increase in the overnight funds rate target in March,
Federal Reserve interest rate policy was unchanged for the balance of the year.
While short-term market interest rates generally rose in line with the overnight
funds market, long-term interest rates showed substantial declines in 1997.
Thirty-year Treasury bond yields fell by 70 basis points to end 1997 at the 5.9%
level.
Declines in reported inflation and in inflationary expectations were the major
factors associated with falling long-term interest rates. Another positive for
the bond market was the continued decline in the Federal deficits which reduced
Treasury debt supply. The good inflation performance was achieved at a time when
the underlying pace of real economic activity was quite robust. Strong job
creation led to a decline in unemployment rates to levels not seen since the
1960s.
During the year, fixed income investors responded more to the favorable
inflation data than to the risks of above-trend growth and the tight labor
market. Interest rates began the year slightly above 6.60% and moved higher well
into the second quarter in conjunction with the March Federal Reserve tightening
and Federal Reserve Chairman Greenspan's now famous "irrational exuberance"
speech. By the end of the second quarter with inflation remaining contained and
no further hints of additional Fed tightening, interest rates began a steady
decline which carried through year-end. In the final quarter of 1997 domestic
economic strength, which would typically be viewed as a negative by the fixed
income markets, was more than offset by developments in Asia. A dramatic
depreciation in the Asian equity and currency markets gave rise to concerns
about global deflation, providing further support to U.S. bond markets. The
Asian turmoil had a dual impact on the U.S. bond market as a "flight-to-quality"
provided fuel to the interest rate decline while the prospective negative
influence on the U.S. economy propelled corporate bond credit spreads to their
widest levels of the decade.
31
<PAGE>
U.S. Bond Fund
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Asset-Backed................................ 7.89%
CMO......................................... 6.89
Consumer.................................... 0.75
Financial................................... 11.68
Industrial.................................. 9.39
Telecommunications.......................... 2.21
------
Total U.S. Corporate Bonds................ 38.81
U.S. Government Agencies...................... 23.90
U.S. Government Obligations................... 20.22
International Dollar Bonds.................... 8.72
------
Total U.S. Bonds.......................... 91.65
------
SHORT-TERM INVESTMENTS........................ 6.07
------
TOTAL INVESTMENTS......................... 97.72
------
LIABILITIES, LESS CASH AND OTHER ASSETS....... 2.28
------
NET ASSETS.................................... 100.00%
======
</TABLE>
32
<PAGE>
U.S. Bond Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 8/31/95* to
12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Bond Fund 6.58% 9.64% 8.04%
Salomon Brothers Broad Investment Grade (BIG) Bond Index 6.37 9.62 7.99
- ----------------------------------------------------------------------------------------------------
</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 December 31, 1997. No
adjustment has been made for any income taxes payable by shareholders on income
dividends and capital gain distributions. Past performance is no guarantee of
future results. Share price and return will vary with market conditions;
investors may realize a gain or loss upon redemption.
Brinson U.S. Bond Fund
vs. Salomon Brothers BIG Bond Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson Salomon
U.S. Brothers
Bond BIG Bond
Fund 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 1,054,932.13 1,053,220.2
3/31/96 1,031,398.24 1,034,955.91
6/30/96 1,035,997.04 1,040,029.1
9/30/96 1,054,776.54 1,059,391.07
12/31/96 1,092,168.78 1,091,410.94
3/31/97 1,081,323.01 1,085,686.1
6/30/97 1,123,558.26 1,124,790.4
9/30/97 1,164,155.58 1,162,173.33
12/31/97 1,197,457.59 1,196,412.93
- ----------------------------------------
</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.
33
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 91.65%
U.S. CORPORATE BONDS -- 38.81%
Aetna Services, Inc. 6.970%, due 08/15/36............... $ 235,000 $ 246,223
Aid-Israel, Series 10 Z
0.000%, due 02/15/03................................... 805,000 597,704
Aid-Jordan 8.750%, due 09/01/19......................... 517,177 633,702
Bellsouth Savings & Employee ESOP
9.125%, due 07/01/03................................... 88,948 92,331
Capital One Bank 6.830%, due 05/17/99................... 359,000 361,489
Chase Mortgage Finance Corp. 93-J1
Class 1A5 6.625%, due 08/25/09......................... 68,131 66,570
Chemical Mortgage Securities, Inc. 93-1 Class A5 7.450%,
due 02/25/23........................................... 785,000 796,238
Ches Pot Tel MD 8.000%, due 10/15/29.................... 87,000 103,628
Chrysler Financial Corp.
7.400%, due 08/01/2097................................. 223,000 237,919
Citicorp Mortgage Securities, Inc. 94-9
Class A8, 5.750%, due 06/25/09......................... 91,612 82,865
Comcast Cable Communications 144A
8.500%, due 05/01/27................................... 300,000 353,864
Con Edison 6.450%, due 12/01/07......................... 300,000 299,435
Countrywide Funding Corp. FRN
6.360%, due 12/01/03................................... 250,000 248,125
CS First Boston Mortgage Securities Corp.
97-C1 7.150%, due 08/20/06............................. 245,000 254,905
Dayton Hudson Credit Card Master Trust
95-1A, 6.100%, due 02/25/02............................ 218,000 218,190
First Bank Corporate Card Master Trust
97-1A 6.400%, due 02/15/03............................. 155,000 156,259
GE Capital Mtg. Services, Inc.
94-7 Class A12, 6.000%, due 02/25/09................... 178,678 173,916
97-HE4 A7 6.735%, due 12/25/28......................... 410,000 414,981
General Motors Acceptance Corp..........................
6.375%, due 12/01/01................................... 400,000 401,755
9.625%, due 12/15/01................................... 294,000 328,475
Green Tree Financial Corp.
8.300%, due 11/15/19................................... 320,000 356,508
Hanson Overseas BV
6.750%, due 09/15/05................................... 100,000 102,209
Interamer Development Bank
6.800%, due 10/15/25................................... 100,000 105,772
Lehman Brothers Holdings
7.250%, due 04/15/03................................... 225,000 232,285
Lockheed Martin Corp.
7.700%, due 06/15/08................................... 282,000 306,310
MBNA Global Capital Securities FRN
6.550%, due 02/01/27................................... 90,000 82,668
News America Holdings
7.750%, due 12/01/45................................... 358,000 372,717
PNC Mortgage Securities Corp.
94-3A8 7.500%, due 07/25/24............................ 215,000 222,087
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Premier Auto Trust
96-3A 6.500%, due 03/06/00.............................. $ 190,000 $ 190,682
96-4A, Class A4, 6.400%, due 10/06/01................... 350,000 351,939
Prudential Home Mortgage Securities
93-43A9 6.750%, due 10/25/23............................ 293,910 289,816
94-3A10 6.500%, due 02/25/24............................ 170,000 163,319
Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 304,259
Thrift Financial Corp.
11.250%, due 01/01/16................................... 48,499 52,306
Time Warner, Inc. 7.570%, due 02/01/24................... 90,000 94,338
Time Warner Entertainment, Inc.
8.375%, due 03/15/23.................................... 94,000 107,236
UCFC Home Equity Loan 97-C, Class A8,
6.325%, FRN, due 09/15/27............................... 185,745 185,591
USA Waste Services
6.500%, due 12/15/02.................................... 400,000 398,995
USX Corp. 8.125%, due 07/15/23........................... 400,000 450,885
-----------
10,438,496
-----------
INTERNATIONAL DOLLAR BONDS -- 8.72%
Banco Santiago S.A.
7.000%, due 07/18/07.................................... 380,000 381,032
Bayerische Landesbank
6.850%, due 07/19/01.................................... 188,000 192,990
Den Danske Bank 144A
7.400%, due 06/15/10.................................... 445,000 464,297
Empressa Nacional Electric
7.875%, due 02/01/27.................................... 394,000 417,179
Province of Quebec
7.500%, due 07/15/23.................................... 200,000 215,648
Repsol International Finance
7.000%, due 08/01/05.................................... 200,000 210,030
Republic of South Africa
9.625%, due 12/15/99.................................... 71,000 73,485
Royal Bank of Scotland
7.375%, Resettable Perpetual Preferred.................. 80,000 83,056
Skandinaviska Enskilda Banken 144A
6.625%, Resettable Perpetual Preferred.................. 305,000 306,220
-----------
2,343,937
-----------
U.S. GOVERNMENT AGENCIES -- 23.90%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13.................................... 492,125 502,589
7.500%, due 01/15/23.................................... 139,328 146,306
7.000%, due 01/15/25.................................... 235,000 233,989
7.238%, due 05/01/26.................................... 38,252 39,615
Federal Home Loan Mortgage Corp.
Gold 6.000%, due 06/01/03............................... 98,672 97,531
8.000%, due 11/01/22.................................... 190,982 197,607
9.000%, due 03/01/24.................................... 148,338 160,200
9.500%, due 04/01/25.................................... 43,073 46,007
</TABLE>
- --------------------------------------------------------------------------------
34
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Federal Home Loan Mortgage Corp. Strip
0.000%, due 04/15/27 principal only..................... $ 300,000 $ 195,734
Federal National Mortgage Association
6.959%, due 08/01/07.................................... 488,562 509,325
6.500%, due 05/25/08.................................... 115,558 115,337
8.000%, due 12/18/11.................................... 100,000 107,497
8.000%, due 05/25/21.................................... 260,000 271,993
9.000%, due 08/01/21.................................... 28,894 31,040
8.500%, due 07/01/22.................................... 22,285 23,606
9.500%, due 08/01/22.................................... 134,383 143,874
8.500%, due 12/01/25.................................... 298,255 311,397
6.500%, due 02/01/26.................................... 118,416 116,862
6.500%, due 04/01/26.................................... 402,445 397,163
6.500%, due 12/01/26 TBA................................ 200,000 197,375
6.175%, due 10/01/27.................................... 511,877 511,212
6.500%, due 12/01/27.................................... 792,000 781,605
Federal National Mortgage Association Strips
7.500%, due 05/01/23 interest only...................... 175,961 44,798
0.000%, due 04/01/27 principal only..................... 608,062 461,763
Government National Mortgage Association
10.000%, due 09/15/00................................... 2,663 2,835
10.000%, due 05/15/01................................... 5,200 5,537
9.000%, due 11/15/04.................................... 15,025 15,790
9.000%, due 12/15/17.................................... 56,428 61,654
8.000%, due 08/15/22.................................... 78,467 81,361
7.500%, due 12/15/22.................................... 362,696 373,008
7.500%, due 06/15/25.................................... 118,808 121,791
7.000%, due 07/15/25.................................... 118,543 119,542
-----------
6,425,943
-----------
U.S. GOVERNMENT OBLIGATIONS -- 20.22%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01.................................... 270,000 277,678
7.000%, due 07/15/06.................................... 250,000 269,922
8.125%, due 05/15/21.................................... 325,000 409,500
6.000%, due 02/15/26.................................... 380,000 379,525
5.500%, due 11/15/98.................................... 153,000 152,761
6.000%, due 06/30/99.................................... 3,830,000 3,849,150
5.875%, due 08/31/99.................................... 100,000 100,313
-----------
5,438,849
-----------
Total U.S. Bonds (Cost $24,121,505)...................... 24,647,225
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Short-Term Investments -- 6.07%
COMMERCIAL PAPER -- 6.07%
Case Credit Corp. 6.110%, due 01/20/98.................. $ 300,000 $ 299,033
GTE Corp. 6.020%, due 03/02/98.......................... 500,000 494,983
Safeway, Inc. 5.920%, due 01/22/98...................... 183,000 182,368
Vastar Resources, Inc.
7.100%, due 01/02/98................................... 657,000 656,871
-----------
Total Short-Term Investments
(Cost $1,633,255)...................................... 1,633,255
-----------
Total Investments
(Cost $25,754,760) -- 97.72% (a)....................... 26,280,480
-----------
Cash and other assets, less liabilities -- 2.28%........ 613,309
-----------
Net Assets -- 100%...................................... $26,893,789
===========
</TABLE>
(a) Aggregate cost for federal income tax purposes was $25,754,760; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation........... $563,738
Gross unrealized de-
preciation........... (38,018)
--------
Net unrealized ap-
preciation........... $525,720
========
</TABLE>
FRN: Floating rate note -- The rate disclosed is that in effect at December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $1,124,381, or 4.18% of
net assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $25,754,760) (Note 1)................ $26,280,480
Cash............................................................. 65,136
Receivables:
Investment securities sold...................................... 908,528
Interest........................................................ 250,274
Other assets..................................................... 29,443
-----------
TOTAL ASSETS.................................................. 27,533,861
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 590,827
Investment advisory fees (Note 2)............................... 5,020
Accrued expenses................................................ 44,225
-----------
TOTAL LIABILITIES............................................. 640,072
-----------
NET ASSETS........................................................ $26,893,789
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $26,262,620
Accumulated undistributed net investment income.................. (13,078)
Accumulated net realized gain.................................... 118,527
Net unrealized appreciation...................................... 525,720
-----------
NET ASSETS.................................................... $26,893,789
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $24,948,207 and 2,409,486 shares issued
and outstanding) (Note 6)...................................... $ 10.35
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,067 and 103 shares issued and outstanding) (Note 6)......... $ 10.36
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,944,515 and 188,228 shares issued and outstanding) (Note 6). $ 10.33
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $ 844,224
----------
TOTAL INCOME.................................................... 844,224
----------
EXPENSES:
Advisory (Note 2).................................................. 65,526
Professional....................................................... 18,768
Registration....................................................... 10,791
Distribution (Note 5).............................................. 4,144
Other.............................................................. 19,950
----------
TOTAL EXPENSES.................................................. 119,179
Expenses deferred by Advisor (Note 2)........................... (36,523)
----------
NET EXPENSES.................................................... 82,656
----------
NET INVESTMENT INCOME .......................................... 761,568
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments................................... 548,792
Change in net unrealized appreciation or depreciation.............. 328,468
----------
Net realized and unrealized gain................................... 877,260
----------
Net increase in net assets resulting from operations............... $1,638,828
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
OPERATIONS: ----------------- -----------
<S> <C> <C>
Net investment income.......................... $ 761,568 $ 836,232
Net realized gain (loss)....................... 548,792 (36,166)
Change in net unrealized appreciation or depre-
ciation....................................... 328,468 343,515
----------- -----------
Net increase in net assets resulting from oper-
ations........................................ 1,638,828 1,143,581
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................... (976,512) (598,393)
Brinson Class N............................... (39) --
SwissKey Class................................ (69,936) (31,712)
Distributions from and in excess of net real-
ized gain:
Brinson Class I............................... (335,742) (675)
Brinson Class N............................... (14) --
SwissKey Class................................ (25,812) (39)
----------- -----------
Total distributions to shareholders............ (1,408,055) (630,819)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................... 4,679,580 16,583,813
Shares issued on reinvestment of distributions. 641,561 461,917
Shares redeemed................................ (2,478,830) (3,420,321)
----------- -----------
Net increase in net assets resulting from capi-
tal share transactions (Note 6)............... 2,842,311 13,625,409
----------- -----------
TOTAL INCREASE IN NET ASSETS................ 3,073,084 14,138,171
----------- -----------
NET ASSETS:
Beginning of period............................ 23,820,705 9,682,534
----------- -----------
End of period (including accumulated undistrib-
uted net investment
income of $(13,078) and $271,841, respective-
ly)........................................... $26,893,789 $23,820,705
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1997 YEAR ENDED THROUGH
BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.24 $ 9.93 $10.00
------- ------- ------
Income from investment opera-
tions:
Net investment income....... 0.30 0.51** 0.50
Net realized and unrealized
gain (loss)................ 0.37 0.32 (0.14)
------- ------- ------
Total income from invest-
ment operations.......... 0.67 0.83 0.36
------- ------- ------
Less distributions:
Distributions from net in-
vestment income............ (0.42) (0.52) (0.40)
Distributions from and in
excess of net realized
gain....................... (0.14) -- (0.03)
------- ------- ------
Total distributions....... (0.56) (0.52) (0.43)
------- ------- ------
Net asset value, end of peri-
od........................... $ 10.35 $ 10.24 $ 9.93
======= ======= ======
Total return (non-annualized). 6.58% 8.45% 3.60%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $24,948 $22,421 $9,047
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 0.88%*** 1.65% 3.63%***
After expense reimbursement. 0.60%*** 0.60% 0.60%***
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment....................... 5.56%*** 5.14% 3.00%***
After expense reimbursement. 5.84%*** 6.19% 6.03%***
Portfolio turnover rate...... 132% 410% 363%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period......................... $10.24
------
Income from investment operations:
Net investment income...................................... 0.30
Net realized and unrealized gain........................... 0.36
------
Total income from investment operations.................. 0.66
------
Less distributions:
Distributions from net investment income................... (0.40)
Distributions from net realized gain....................... (0.14)
------
Total distributions...................................... (0.54)
------
Net asset value, end of period............................... $10.36
======
Total return (non-annualized)................................ 6.52%
Ratios/Supplemental data
Net assets, end of period (in 000s)......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement............................... 1.15%**
After expense reimbursement................................ 0.85%**
Ratio of net investment income to average net assets:
Before expense reimbursement............................... 5.35%**
After expense reimbursement................................ 5.65%**
Portfolio turnover rate..................................... 132%
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1997 YEAR ENDED THROUGH JUNE 30,
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $10.22 $ 9.92 $10.00
------ ------ ------
Income from investment opera-
tions:
Net investment income....... 0.24 0.46** 0.46
Net realized and unrealized
gain (loss)................ 0.40 0.32 (0.13)
------ ------ ------
Total income from invest-
ment operations.......... 0.64 0.78 0.33
------ ------ ------
Less distributions:
Distributions from net in-
vestment income............ (0.39) (0.48) (0.38)
Distributions from and in
excess of net realized
gain....................... (0.14) -- (0.03)
------ ------ ------
Total distributions....... (0.53) (0.48) (0.41)
------ ------ ------
Net asset value, end of peri-
od........................... $10.33 $10.22 $ 9.92
====== ====== ======
Total return (non-annualized). 6.31% 7.91% 3.24%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $1,945 $1,399 $ 636
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 1.35%*** 2.12% 4.10%***
After expense reimbursement. 1.07%*** 1.07% 1.07%***
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment....................... 5.09%*** 4.67% 2.53%***
After expense reimbursement. 5.37%*** 5.72% 5.56%***
Portfolio turnover rate...... 132% 410% 363%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<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 six months ended December
31, 1997, therefore, no federal income tax provision was required.
E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses.
F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
G.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
42
<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 six
months ended December 31, 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>
U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,005,745 $ --
U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,577,328 --
U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 65,526 36,523
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees were $3,864, $3,128 and $2,024 for the U.S. Balanced
Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1997, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund.................................... $253,281,640 $257,927,118
U.S. Equity Fund...................................... 225,510,580 82,326,482
U.S. Bond Fund........................................ 33,839,825 32,178,604
</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.
- --------------------------------------------------------------------------------
43
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. BALANCED FUND
-----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 2,281,024 $ 28,309,870 6,578,157 $ 78,728,712
Brinson Class N.............. -- -- 80 1,000
SwissKey Class............... 25,739 330,584 148,317 1,798,818
---------- ------------ ---------- ------------
Total Sales................ 2,306,763 $ 28,640,454 6,726,554 $ 80,528,530
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 2,452,121 $ 28,812,427 1,541,262 $ 18,266,191
Brinson Class N.............. 9 105 -- --
SwissKey Class............... 11,570 135,252 3,904 46,232
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,463,700 $ 28,947,784 1,545,166 $ 18,312,423
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 2,397,723 $ 30,943,131 4,988,208 $ 59,912,281
Brinson Class N.............. -- -- -- --
SwissKey Class............... 29,023 371,072 86,625 1,050,388
---------- ------------ ---------- ------------
Total Redemptions.......... 2,426,746 $ 31,314,203 5,074,833 $ 60,962,669
========== ============ ========== ============
<CAPTION>
U.S. EQUITY FUND
-----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 10,354,918 $189,157,887 11,551,336 $183,660,431
Brinson Class N.............. -- -- 57 1,000
SwissKey Class............... 800,195 14,676,583 1,834,556 28,733,451
---------- ------------ ---------- ------------
Total Sales................ 11,155,113 $203,834,470 13,385,949 $212,394,882
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 1,675,362 $ 28,698,745 907,559 $ 13,745,444
Brinson Class N.............. 4 69 -- --
SwissKey Class............... 107,016 1,827,828 25,905 393,121
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 1,782,382 $ 30,526,642 933,464 $ 14,138,565
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 2,309,278 $ 42,289,711 1,959,184 $ 31,250,336
Brinson Class N.............. -- -- -- --
SwissKey Class............... 382,268 7,005,523 237,473 3,720,862
---------- ------------ ---------- ------------
Total Redemptions.......... 2,691,546 $ 49,295,234 2,196,657 $ 34,971,198
========== ============ ========== ============
<CAPTION>
U.S. BOND FUND
-----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 386,736 $ 4,064,958 1,521,821 $ 15,371,166
Brinson Class N.............. -- -- 98 1,000
SwissKey Class............... 58,318 614,622 119,951 1,211,647
---------- ------------ ---------- ------------
Total Sales................ 445,054 $ 4,679,580 1,641,870 $ 16,583,813
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 58,336 $ 599,697 44,351 $ 449,362
Brinson Class N.............. 5 53 -- --
SwissKey Class............... 4,075 41,811 1,239 12,555
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 62,416 $ 641,561 45,590 $ 461,917
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 224,864 $ 2,363,677 288,064 $ 2,929,252
Brinson Class N.............. -- -- -- --
SwissKey Class............... 11,114 115,153 48,365 491,069
---------- ------------ ---------- ------------
Total Redemptions.......... 235,978 $ 2,478,830 336,429 $ 3,420,321
========== ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
44
<PAGE>
DISTRIBUTED BY:
FUNDS DISTRIBUTOR, INC.
60 STATE STREET
BOSTON, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
- --------------------------------------------------------------------------------
<PAGE>
The Brinson Funds
- --------------------------------------------------------------------------------
Chicago . Basel . Frankfurt . Geneva . Hong Kong . 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
Semi-Annual Report
December 31, 1997
Global Institutional Asset Management
--------------------------------
<PAGE>
Trustees and Officers
- -------------------------------------------------------------------------------
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
Catherine E. Macrae
Assistant Secretary
1
<PAGE>
The Fund's Advisor -- Brinson Partners, Inc.
- --------------------------------------------------------------------------------
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation (SBC) and manages assets of over $140 billion. We have $90
billion of discretionary institutional assets with active management mandates
and we are the investment manager for SBC Private Banking mutual fund assets
which total over $50 billion. In addition, we act as an investment advisor to
SBC Private Banking. Our organization manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. We employ over 590 people in offices in
Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York,
Paris, Singapore, Sydney, Tokyo and Zurich.
Brinson Partners, an established U.S.-based leader in the investment field
located in Chicago, acts as the headquarters of our worldwide investment
management process. Brinson Partners pioneered the movement to the active
management of global portfolios in the early 1980s for U.S. clients. Private
market and venture capital investing was established in the 1970s and today we
represent a major worldwide presence in this asset class.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Shareholder Letter..................................................... 4
Global Economic and Market Highlights.................................. 5
Non-U.S. Equity Fund................................................... 6
Schedule of Investments................................................ 9
Financial Statements...................................................14
Financial Highlights...................................................17
Notes to Financial Statements..........................................20
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
February 20, 1998
Dear Shareholder:
We are very pleased to present the December 31, 1997 Semi-Annual Report for the
Brinson Non-U.S. Equity Fund. Within this Report, we will focus on the current
international economic outlook as well as our current strategy and performance
update for the Non-U.S. Equity Fund.
Swiss Bank Corporation and Union Bank of Switzerland announced on December 8,
1997 their intention to merge into a single global financial institution. As
part of this merger, Brinson Partners and UBS Asset Management will be combined
into Brinson. Brinson will be the Institutional Asset Management Division of the
new organization with assets under management in excess of $340 billion and will
provide investment advisory services for the Private Banking Division with
assets over $400 billion. The Consumer & Corporate Banking Division and Brinson
combined will manage assets in excess of $940 billion.
We are excited about the formation of Brinson and the additional resources we
will bring together to further the tradition of delivering value-added
investment performance and the highest level of professional client service.
Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund has
produced an annualized total return of 7.03% versus 6.21% for the Morgan Stanley
Capital International Non-U.S. Equity (Free) Index benchmark. This return was
achieved at an annualized volatility of 11.14%, below the benchmark volatility
of 13.04%.
Our international fund employs the same value-oriented investment philosophy
within and across the international spectrum, as do our other Funds. Each Fund
uses the resources of our entire worldwide organization. Investment performance
for our clients is maximized within and across major asset classes through a
comprehensive understanding of global investment markets and their
interrelationships. Portfolio structure is tailored to specific objectives and
focused upon both risk and return considerations in the context of full
investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent. The Report that follows highlights the investment
characteristics of the Brinson Non-U.S. Equity Fund.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/Gary P. Brinson
Gary P. Brinson
President and Chief Investment Officer
Brinson Partners, Inc.
4
<PAGE>
Global Economic and Market Highlights
- --------------------------------------------------------------------------------
While financial markets seem to be signaling that the worst of the crisis in
Asia has passed, those economies still have substantial problems to overcome
before they are recovered. Substantial amounts of foreign currency borrowing
will require rescheduling or forgiveness, and excess capacity will need to be
worked off. The Japanese, as particularly important lenders to these Asian
borrowers, will remain vulnerable.
The adverse impact on the U.S. from the Asian crisis is likely to remain
relatively limited. Because non-Japan Asia represents a small portion of U.S.
trade, direct effects, such as a drop in real growth due to a collapse in
exports, are not expected to be sizable. The economy remains strong, as
evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and
3.8%, respectively.
Continental European economies continue to benefit from weaker currencies
although the expansions have not been terribly strong. While output growth is
moderate, there has been no discernible improvement in the high unemployment
rates. Sterling remains strong on concerns of a weak euro and hikes in short-
term rates by the Bank of England.
<TABLE>
<CAPTION>
Non-U.S. Equity Environment
6 months 1 year 3 years 8/31/93*
Major Markets ended ended ended to
Total Return in U.S. Dollar Hedged Terms 12/31/97 12/31/97 12/31/97 12/31/97
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MSCI Non-US Equity (Free) Index -1.40% 16.12% 14.32% 9.78%
Japan -18.31 -9.86 -0.52 -1.19
U.K. 12.62 26.17 20.97 14.63
Germany 11.51 49.01 26.73 19.13
France 6.44 32.75 21.81 11.31
Canada 6.26 20.84 21.54 16.59
Netherlands 8.11 48.94 36.27 26.53
Australia -2.48 9.85 10.71 7.83
- -----------------------------------------------------------------------------------------
6 months 1 year 3 years 8/31/93*
Major Currencies ended ended ended to
Percent Change Relative to U.S. Dollars 12/31/97 12/31/97 12/31/97 12/31/97
- -----------------------------------------------------------------------------------------
Yen -11.99% -10.73% -8.45% -4.88%
Pound -1.14 -3.85 1.69 2.35
Deutschemark -3.08 -14.29 -4.83 -1.58
Canadian Dollar -3.60 -4.22 -0.66 -1.83
- -----------------------------------------------------------------------------------------
</TABLE>
*Inception date of the Non-U.S. Equity Fund
All total returns in excess of 1 year are average annualized total 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 jointly
developed by the non-U.S. strategy team in our offices worldwide. Currency
strategies are separately developed and coordinated with market allocations. Our
industry strategies and individual security selections are determined by
fundamental research conducted by our analysts worldwide.
Since its inception on August 31, 1993, the Non-U.S. Equity Fund has earned an
annualized return of 7.03% versus 6.21% for its benchmark, the Morgan Stanley
Capital International Non-U.S. Equity (Free) Index. This return was achieved at
an annualized volatility of 11.14%, measurably below the benchmark volatility of
13.04%. For the year ended December 31, 1997, the Fund returned 5.74%, while the
index returned 2.07%.
Since inception, market allocation and currency management have added solidly to
returns, while Japan stock selection has detracted. In 1997, market allocation
reduced performance, largely due to underweights of Switzerland and Sweden,
strategic cash and overweights of New Zealand and Australia. Although value was
added from underweights of Hong Kong, Japan and Malaysia, and from overweights
of the Netherlands, Belgium, the U.K. and Finland, these did not completely
offset the negatives.
During 1997, there was a clear split between the aggregate performance of the
European markets and that of the Pacific region. All European countries earned
double-digit returns, several in excess of 50%, building on the prior two years'
strong performance. In sharp contrast, Japan and Southeast Asia ended with
double-digit losses, New Zealand rose only 3.5% and Australia "merely" rose
9.9%.
The best performing markets in dollar-hedged terms were Switzerland (63.5%) and
Denmark (59.5%). In contrast, the worst performer was Malaysia (-52.1%). The
Southeast Asian markets reacted to a period of turmoil stemming from a currency,
banking and property crisis that placed considerable downward pressure on the
region's economy. In addition, Japan's fragile economic recovery has been
further imperiled by an unprecedented series of bankruptcies in its financial
and industrial sectors. The entry of Korea in the category of "at-risk"
countries has dealt yet another blow to Japan's economic revival.
Currency management was the second greatest positive contributor to 1997
performance, primarily due to the strength of the U.S. dollar, where the Fund
holds an overweight. With a few exceptions, the current strategy is close to
neutral, but the Fund benefited tremendously from its positions earlier in the
year, focusing on a sizable U.S. dollar overweight and underweights of the
Japanese yen and the core European currencies.
Stock selection over the past year added significantly to value, principally due
to excellent Japan stock selection, combined with good results in France and
Canada. Positive stock selection in Japan derived from the Fund's exposure to
high-quality defensive issues and multinational exporters, and its underweight
of banks and financials. A negative contribution came from Germany, due to
underweighting specific technology stocks.
6
<PAGE>
Non-U.S. Equity Fund
<TABLE>
<CAPTION>
Total Return
6 months 1 year 3 years 8/31/93*
ended ended ended to
12/31/97 12/31/97 12/31/97 12/31/97
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Non-U.S. Equity Fund -7.36% 5.74% 11.26% 7.03%
MSCI Non-U.S. Equity (Free) Index** -8.22 2.07 6.90 6.21
===================================================================================================
</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 if you had invested
$1,000,000 on August 31, 1993, and had reinvested all your income dividends and
capital gain distributions through December 31, 1997. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future results.
Share price and return will vary with market conditions; investors may realize a
gain or loss upon redemption.
Brinson Non-U.S. Equity Fund
vs. MSCI Non-U.S. Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
BRINSON MSCI
NON-EQUITY NON-US EQUITY
FUND (FREE) INDEX
<S> <C> <C>
8/31/93 1,000,000 1,000,000
12/31/93 965,500 988,754
6/30/94 975,546 1,068,786
12/31/94 974,540 1,062,773
6/30/95 974,540 1,095,524
12/31/95 1,126,102 1,187,455
6/30/96 1,204,890 1,244,668
12/31/96 1,269,637 1,271,886
6/30/97 1,449,115 1,414,421
12/31/97 1,342,508 1,298,199
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees ortransaction costs for
rebalancing.
7
<PAGE>
Non-U.S. Equity Fund
- -----------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
NON-U.S. EQUITIES
<S> <C>
Airlines..................................... 0.35%
Appliances & Household....................... 2.19
Autos/Durables............................... 3.25
Banking...................................... 11.65
Beverages & Tobacco.......................... 2.43
Broadcasting & Publishing.................... 1.90
Building Materials........................... 1.41
Business & Public Service.................... 3.66
Chemicals.................................... 2.95
Construction................................. 1.15
Data Processing.............................. 0.97
Electric Components.......................... 1.32
Electronics.................................. 3.72
Energy....................................... 7.13
Financial Services........................... 1.99
Food & House Products........................ 3.41
Forest Products.............................. 1.25
Gold Mining.................................. 0.07
Health & Personal Care....................... 6.87
Industrial Components........................ 1.75
Insurance.................................... 5.24
Leisure & Tourism............................ 0.76
Machinery & Engineering...................... 0.39
Merchandising................................ 4.68
Metals-Steel................................. 1.35
Miscellaneous Materials...................... 0.75
Miscellaneous Services....................... 0.09
Multi-Industry............................... 4.73
Non-Ferrous Metals........................... 1.69
Real Estate.................................. 0.76
Recreation................................... 0.61
Shipping..................................... 0.05
Telecommunications........................... 7.41
Textiles & Apparel........................... 0.16
Transportation............................... 1.05
Utilities.................................... 4.55
Wholesale & International Trade.............. 0.48
-------
Total Non-U.S. Equities.................. 94.17
-------
SHORT-TERM INVESTMENTS....................... 5.49
-------
TOTAL INVESTMENTS........................ 99.66
CASH AND OTHER ASSETS,
LESS LIABILITIES............................ 0.34
-------
NET ASSETS............................... 100.00%
=======
</TABLE>
- ---------------------------------------------------------------
Market and Currency Strategy
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Portfolio
---------------------
Market Currency
Strategy Strategy Index
- ---------------------------------------------------------------
<S> <C> <C> <C>
U.S. Dollar 0.0% 7.3% 0.0%
Japan 18.0 20.0 24.0
Australia 5.1 2.6 2.6
Belgium 3.6 1.2 1.2
Canada 3.2 4.9 4.9
Finland 0.8 0.7 0.7
France 7.1 7.6 7.6
Germany 8.6 9.4 9.4
Hong Kong 1.0 0.0 2.7
Italy 4.4 3.8 3.8
Malaysia 1.5 0.8 0.8
Netherlands 4.5 5.4 5.4
New Zealand 3.6 3.6 0.3
Spain 2.5 2.5 2.5
Sweden 1.8 2.5 2.5
Switzerland 5.1 7.4 7.4
U.K. 22.6 16.5 20.5
Cash Reserves 5.0 0.0 0.0
Other Markets 1.6 3.8 3.7
- ---------------------------------------------------------------
100.0% 100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------
<S> <C>
1. Glaxo Wellcome PLC 1.47%
2. Royal Dutch Petroleum Co. 1.35
3. Novartis AG (Reg.) 1.34
4. Telecom Corp. of New Zealand Ltd 1.26
5. B.A.T. Industries PLC 1.09
6. Lloyds TSB Group PLC 1.09
7. Allianz AG Holding 1.03
8. British Petroleum Co. PLC 0.95
9. Matsushita Electric Industrial Co. 0.92
10. Roche Holding AG (Gen.) 0.91
- -------------------------------------------------------
</TABLE>
8
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Non-U.S. Equities -- 94.17%
AUSTRALIA -- 4.68%
Amcor Ltd.................................................. 89,300 $ 392,769
Boral Ltd.................................................. 226,000 571,377
Brambles Industries Ltd.................................... 47,700 946,429
Broken Hill Proprietary Co., Ltd........................... 295,670 2,745,392
Coca-Cola Amatil Ltd....................................... 51,100 381,782
CSR Ltd.................................................... 162,000 548,909
David Jones Ltd............................................ 565,600 637,584
Lend Lease Corp., Ltd...................................... 38,778 758,034
Mayne Nickless Ltd......................................... 74,800 395,280
M.I.M. Holdings Ltd........................................ 322,943 197,804
National Australia Bank Ltd................................ 205,848 2,874,425
News Corp. Ltd............................................. 427,659 2,360,278
News Corp. Ltd., Preferred................................. 108,182 535,313
Pacific Dunlop Ltd......................................... 271,600 575,169
Qantas Airways Ltd......................................... 265,310 469,532
Rio Tinto Ltd.............................................. 103,810 1,211,008
Santos Ltd................................................. 60,300 248,323
Telstra Corp., Ltd. (b).................................... 102,000 215,341
Westpac Banking Corp., Ltd................................. 355,351 2,272,868
WMC Ltd.................................................... 179,500 625,749
Woolworth's Ltd............................................ 114,300 382,073
-----------
19,345,439
-----------
BELGIUM -- 3.32%...........................................
Delhaize-Le Lion S.A....................................... 21,770 1,104,629
Electrabel S.A............................................. 10,905 2,522,357
Fortis AG.................................................. 723 98
Fortis AG Strip (b)........................................ 9,603 2,003,487
Generale de Banque S.A..................................... 2,430 1,057,563
Groupe Bruxelles Lambert S.A............................... 5,690 823,146
Kredietbank NV............................................. 2,780 1,166,743
Kredietbank VVPR........................................... 76 31,896
Petrofina S.A.............................................. 4,550 1,679,341
Societe Generale de Belgique............................... 7,238 662,244
Solvay S.A., Class A....................................... 16,210 1,019,387
Tractebel.................................................. 12,650 1,102,791
Tractebel Warrants "99" (b)................................ 1,350 3,461
Union Miniere Group S.A. (b)............................... 7,750 537,570
-----------
13,714,713
-----------
CANADA -- 3.18%
Agrium, Inc................................................ 32,300 392,719
Alcan Aluminum Ltd......................................... 24,500 674,516
Bank of Montreal........................................... 18,700 827,786
Barrick Gold Corp.......................................... 15,000 279,331
Canadian National Railway Co............................... 17,000 799,455
Canadian Pacific Ltd....................................... 56,194 1,511,752
Hudson's Bay Co............................................ 20,100 447,338
Imasco, Ltd................................................ 8,900 314,059
Imperial Oil Ltd........................................... 20,200 1,298,582
Magna International Inc., Class A.......................... 6,200 388,177
Moore Corp., Ltd........................................... 20,900 313,989
Newbridge Networks Corp. (b)............................... 7,700 269,293
Noranda, Inc............................................... 25,300 434,896
Northern Telecom Ltd....................................... 4,600 408,700
NOVA Corp.................................................. 68,800 653,819
Potash Corporation of Saskatchewan, Inc.................... 7,500 623,908
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Royal Bank of Canada....................................... 21,900 $ 1,156,900
Seagram Co., Ltd........................................... 14,400 465,376
TELUS Corporation.......................................... 33,800 748,697
TransCanada Pipelines Ltd.................................. 33,400 744,504
Westcoast Energy, Inc...................................... 16,800 387,394
-----------
13,141,191
-----------
FINLAND -- 0.66%
Cultor Oyj................................................. 3,500 190,242
Merita Ltd., Class A....................................... 54,410 297,743
Metsa Serla Oyj, Class B................................... 17,090 133,376
Nokia Oyj, Class A, Preferred.............................. 17,680 1,256,433
Outokumpu Oyj, Class A..................................... 14,920 182,195
Pohjola Insurance Group, Class B........................... 790 29,304
Sampo Insurance Co., Ltd., Class A......................... 5,160 170,557
The Rauma Group............................................ 693 10,817
UPM-Kymmene Corp........................................... 22,930 458,962
-----------
2,729,629
-----------
FRANCE -- 5.57%
Accor S.A.................................................. 4,165 774,707
Alcatel Alsthom............................................ 7,305 928,910
AXA-UAP.................................................... 15,502 1,200,014
AXA-UAP Rights (b)......................................... 9,902 9,711
Banque Nationale de Paris.................................. 15,110 803,472
Cie Bancaire S.A........................................... 1,162 188,323
Cie de Saint Gobain........................................ 9,043 1,285,200
Cie Financiere de Paribas.................................. 7,800 678,092
Cie Generale des Eaux...................................... 9,734 1,359,136
Cie Generale des Eaux Warrants "01" (b).................... 13,864 9,425
Dexia France............................................... 6,640 769,295
Elf Aquitaine S.A.......................................... 12,714 1,479,355
France Telecom S.A. (b).................................... 32,500 1,179,313
Groupe Danone.............................................. 3,220 575,382
Lafarge S.A................................................ 7,690 504,784
Lagardere S.C.A............................................ 21,860 723,095
Lyonnaise des Eaux S.A..................................... 10,843 1,200,338
Michelin, Class B.......................................... 17,293 870,974
Pechiney S.A., Class A..................................... 19,385 765,604
Peugeot S.A................................................ 9,260 1,168,275
Pinault-Printemps-Redoute S.A.............................. 1,750 934,051
Rhone-Poulenc, Class A..................................... 27,230 1,220,281
SEITA...................................................... 24,930 895,093
Societe Generale........................................... 8,713 1,187,610
Thomson CSF................................................ 24,290 765,926
Total S.A., Class B........................................ 11,725 1,276,575
Usinor Sacilor............................................. 18,180 262,607
-----------
23,015,548
-----------
GERMANY -- 9.77%
Allianz AG Holding......................................... 16,480 4,252,667
BASF AG.................................................... 23,140 826,199
Bayer AG................................................... 59,750 2,218,071
Bayerische Motoren Werke AG................................ 1,990 1,488,544
Commerzbank AG............................................. 49,330 1,920,416
Continental AG............................................. 42,200 950,503
Daimler-Benz AG............................................ 22,870 1,615,311
Deutsche Bank AG........................................... 47,967 3,355,903
Deutsche Telekom AG........................................ 152,360 2,821,638
Henkel KGaA-Vorzug AG, Preferred........................... 17,780 1,112,424
Hochtief AG................................................ 13,990 575,752
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
GERMANY (CONTINUED)
Hoechst AG............................................... 18,960 $ 656,920
M.A.N. AG................................................ 3,000 866,748
Mannesmann AG............................................ 3,447 1,731,072
Metro AG................................................. 33,303 1,181,661
Muenchener Rueckver AG................................... 8,370 3,183,961
Muenchener Rueckver AG Warrants "98" (b)................. 12 7,274
Preussag AG.............................................. 4,619 1,420,559
RWE AG................................................... 33,800 1,813,970
Schering AG.............................................. 19,022 1,835,447
Siemens AG............................................... 36,770 2,218,756
Veba AG.................................................. 39,558 2,694,986
Volkswagen AG............................................ 2,920 1,632,056
-----------
40,380,838
-----------
HONG KONG -- 0.93%
Cheung Kong Holdings Ltd................................. 104,000 681,164
China Light & Power Co., Ltd............................. 58,500 324,643
Citic Pacific Ltd........................................ 54,000 214,648
Hang Seng Bank Ltd....................................... 42,000 405,175
Hong Kong and China Gas Co., Ltd......................... 257,000 497,516
Hong Kong Telecommunications Ltd......................... 237,000 487,856
Hutchison Whampoa Ltd.................................... 113,000 708,756
Sun Hung Kai Properties Ltd.............................. 54,000 376,331
Swire Pacific Ltd., Class A.............................. 31,000 170,033
-----------
3,866,122
-----------
ITALY -- 4.33%
Aeroporti Di Roma Spa (b)................................ 13,000 134,923
Assicurazioni Generali................................... 69,350 1,704,283
Banca Commerciale Italiana............................... 194,000 674,811
Credito Italiano Spa..................................... 343,500 1,059,807
Danieli & Co. Savings (Risp)............................. 141,100 507,563
Edison Spa............................................... 79,600 481,728
ENI ADR (c).............................................. 20,300 1,158,369
ENI Spa.................................................. 292,000 1,656,492
Fiat Spa-Priv Preferred.................................. 607,220 927,289
INA-Istituto Nazionale delle Assicurazioni............... 311,100 630,804
Instituto Mobiliare Italiano Spa......................... 92,000 1,092,729
Italgas Spa.............................................. 122,000 503,719
La Rinascente Spa........................................ 91,300 340,816
La Rinascente Spa RNC.................................... 101,740 759,576
La Rinascente Spa Warrants "99" (b)...................... 2,800 3,389
Mediobanca Spa........................................... 31,600 248,253
Montedison Spa........................................... 1,120,280 1,006,830
SAI-Savings (Risp)....................................... 86,000 379,401
Telecom Italia Mobile Spa................................ 210,000 969,797
Telecom Italia Mobile Spa RNC............................ 510,000 1,450,921
Telecom Italia Spa....................................... 90,666 579,467
Telecom Italia Spa RNC................................... 368,034 1,623,633
-----------
17,894,600
-----------
JAPAN -- 19.44%
Amada Co., Ltd........................................... 186,000 693,790
Asahi Glass Co., Ltd..................................... 83,000 395,770
Bank of Tokyo-Mitsubishi, Ltd............................ 152,000 2,104,211
Canon, Inc............................................... 126,000 2,945,895
Canon Sales Co., Inc..................................... 61,000 699,019
Citizen Watch Co., Ltd................................... 149,000 1,002,692
Dai Nippon Printing Co., Ltd............................. 155,000 2,920,592
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Daiichi Pharmaceutical Co., Ltd............................ 152,000 $ 1,718,439
Daikin Industries Ltd...................................... 180,000 681,100
Daiwa House Industry Co., Ltd.............................. 93,000 493,521
Fanuc...................................................... 63,700 2,420,135
Fujitsu.................................................... 98,000 1,055,182
Hitachi Ltd................................................ 313,000 2,238,723
Honda Motor Co............................................. 54,000 1,989,310
Hoya Corp.................................................. 22,000 693,713
Inax....................................................... 132,000 384,757
Ito Yokado Co., Ltd........................................ 61,000 3,119,785
Kaneka Corp................................................ 177,000 801,792
Keio Teito Electric Railway................................ 195,000 748,356
Kinki Nippon Railway....................................... 195,000 1,045,299
Kirin Brewery Co., Ltd..................................... 184,000 1,344,357
Kokuyo..................................................... 56,000 969,044
Kuraray Co., Ltd........................................... 198,000 1,644,607
Kyocera Corp............................................... 20,300 924,253
Marui Co., Ltd............................................. 90,000 1,405,114
Matsushita Electric Industrial Co.......................... 258,000 3,789,887
Mitsubishi Paper Mills..................................... 168,000 236,447
NGK Insulators............................................. 284,000 2,533,667
Nintendo Corp., Ltd........................................ 15,500 1,525,860
Nippon Denso Co., Ltd...................................... 87,000 1,572,390
Nippon Meat Packers, Inc................................... 108,000 1,478,485
Nippon Steel Co............................................ 156,000 231,555
Okumura.................................................... 203,000 483,984
Osaka Gas Co............................................... 312,000 715,062
Sankyo Co., Ltd............................................ 162,000 3,675,447
Secom Co., Ltd............................................. 40,000 2,565,660
Seino Transportation....................................... 135,000 675,908
Sekisui House Ltd.......................................... 272,000 1,755,109
Shinmaywa Industries Ltd................................... 27,000 66,449
Sony Corp.................................................. 33,500 2,988,656
Sumitomo Bank.............................................. 183,000 2,097,058
Sumitomo Chemical Co....................................... 222,000 512,209
Sumitomo Electric Industries............................... 137,000 1,875,485
Takeda Chemical Industries................................. 103,000 2,946,818
TDK Corp................................................... 28,000 2,118,977
Tokio Marine & Fire Insurance Co........................... 162,000 1,843,953
Tokyo Electric Power....................................... 41,000 750,471
Tokyo Steel Mfg............................................ 67,000 227,241
Tonen Corp................................................. 120,000 649,721
Toray Industries, Inc...................................... 581,000 2,613,997
Toshiba Corp............................................... 424,000 1,770,675
Toyo Suisan Kaisha......................................... 86,000 597,916
Toyota Motor Corp.......................................... 100,000 2,876,370
Yamazaki Baking Co., Ltd................................... 80,000 781,388
-----------
80,396,301
-----------
MALAYSIA -- 1.54%
Hume Industries (Malaysia) Bhd............................. 151,000 158,274
Kuala Lumpur Kepong Bhd.................................... 337,000 722,916
Land & General Holdings Bhd................................ 324,500 60,023
Malayan Banking Bhd........................................ 136,000 394,811
Malaysia International Shipping Bhd (Frgn.)................ 147,000 215,260
Nestle (Malaysia) Bhd...................................... 83,000 383,815
New Straits Times Press Bhd................................ 169,000 209,269
Perusahaan Otomobil Nasional Bhd........................... 102,000 99,576
Petronas Gas Bhd........................................... 139,000 316,031
Public Bank Bhd............................................ 128,400 39,914
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
MALAYSIA (CONTINUED)
Public Bank Bhd (Frgn.).................................. 204,000 $ 70,227
Public Bank Bhd Rights (b)............................... 21,400 1,155
Public Bank Bhd Rights (Frgn.) (b)....................... 34,000 1,747
Resorts World Bhd........................................ 152,000 255,774
Rothmans of Pall Mall Bhd................................ 91,000 707,193
Sime Darby Bhd........................................... 475,000 456,390
Telekom Malaysia Bhd..................................... 347,000 1,025,177
Tenaga Nasional Bhd...................................... 410,000 874,245
UMW Holdings Bhd......................................... 63,000 47,746
United Engineers Bhd..................................... 122,000 101,549
YTL Corp. Bhd............................................ 177,000 238,728
YTL Power International Bhd (b).......................... 4,900 3,764
-----------
6,383,584
-----------
NETHERLANDS -- 4.31%
ABN AMRO Holdings NV..................................... 75,352 1,468,162
Akzo Nobel NV............................................ 2,430 419,044
Elsevier NV.............................................. 88,210 1,427,163
Heineken NV.............................................. 6,310 1,098,717
Hoogovens NV............................................. 7,737 317,143
ING Groep NV............................................. 43,369 1,826,919
KLM Royal Dutch Air Lines NV............................. 11,150 412,494
KPN NV................................................... 43,716 1,824,285
Philips Electronics NV................................... 23,070 1,383,768
Royal Dutch Petroleum Co................................. 101,460 5,570,216
Unilever NV.............................................. 33,560 2,069,255
-----------
17,817,166
-----------
NEW ZEALAND -- 3.12%
Brierley Investments Ltd................................. 2,601,500 1,858,150
Carter Holt Harvey Ltd................................... 897,100 1,385,716
Fletcher Challenge Building.............................. 297,850 608,824
Fletcher Challenge Energy................................ 328,550 1,150,457
Fletcher Challenge Forests Ltd........................... 639,793 531,285
Fletcher Challenge Paper................................. 591,800 773,231
Lion Nathan Ltd.......................................... 298,000 667,967
Telecom Corp. of New Zealand Ltd......................... 1,071,500 5,195,536
Telecom Corp. of New Zealand Ltd. ADS (c)................ 19,300 747,875
-----------
12,919,041
-----------
SINGAPORE -- 1.88%
City Developments Ltd.................................... 97,000 449,021
DBS Land Ltd............................................. 184,000 281,733
Development Bank of Singapore Ltd........................ 92,000 786,231
Elec & Eltek International Co., Ltd...................... 28,600 130,988
Fraser & Neave Ltd....................................... 38,000 164,629
Hotel Properties Ltd..................................... 323,000 210,861
Keppel Corp., Ltd........................................ 106,750 306,629
Keppel Land Ltd.......................................... 115,000 158,338
NatSteel Ltd............................................. 82,000 110,956
Oversea-Chinese Banking Corp., Ltd....................... 159,400 927,074
Singapore Airlines Ltd. (Frgn.).......................... 165,000 1,077,151
Singapore Press Holdings Ltd. (Frgn.).................... 47,000 588,546
Singapore Telecommunications, Ltd........................ 767,000 1,429,306
United Overseas Bank Ltd. (Frgn.)........................ 174,000 965,519
Venture Manufacturing (Singapore) Ltd.................... 14,000 39,050
Wing Tai Holdings Ltd.................................... 126,000 147,312
-----------
7,773,344
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
SPAIN -- 2.44%
Acerinox S.A............................................... 1,050 $ 155,482
Banco Bilbao-Vizcaya, S.A.................................. 37,590 1,215,843
Banco Central Hispanoamericano............................. 27,320 664,986
Banco Popular Espanol S.A.................................. 9,880 690,342
Banco Santander S.A........................................ 29,880 997,830
Empresa National de Electridad S.A......................... 72,480 1,286,304
Fomento Construcctiones y Contratas S.A.................... 12,880 490,119
Gas Natural SDG S.A........................................ 12,220 633,368
Iberdrola S.A.............................................. 67,710 890,687
Mapfre Corp................................................ 11,420 302,695
Repsol S.A................................................. 12,710 542,022
Repsol S.A. ADR (c)........................................ 7,130 303,471
Tabacalera S.A............................................. 1,600 129,642
Telefonica de Espana....................................... 43,960 1,254,599
Vallehermoso S.A........................................... 9,210 282,185
Viscofan Envolturas Celulosicas S.A........................ 10,060 252,457
-----------
10,092,032
-----------
SWEDEN -- 1.69%
ABB AB, A Shares........................................... 30,700 363,698
AssiDoman AB............................................... 2,000 50,664
Astra AB, A Shares......................................... 71,000 1,230,371
Electrolux AB, B Shares.................................... 4,800 333,325
Hennes & Mauritz AB, B Shares.............................. 16,800 741,058
Nordbanken Holding AB...................................... 163,700 926,339
Securitas AB, B Shares..................................... 12,400 375,066
Skanska AB, B Shares....................................... 9,200 377,410
Svenska Handelsbanken, A Shares............................ 14,600 505,092
Swedish Match AB........................................... 136,000 454,213
Telefonaktiebolaget LM Ericsson, B Shares.................. 24,700 929,215
Volvo AB, B Shares......................................... 26,200 703,325
-----------
6,989,776
-----------
SWITZERLAND -- 5.03%
ABB AG (Bearer)............................................ 373 469,255
CS Holdings AG (Reg.)...................................... 12,902 1,999,076
Holderbank Financiere Glarus, B Shares..................... 722 590,034
Nestle S.A. (Reg.)......................................... 1,635 2,453,733
Novartis AG (Reg.)......................................... 3,407 5,535,849
Roche Holding AG (Gen.).................................... 379 3,768,953
Sairgroup (b).............................................. 408 559,441
Schweizerische Lebensversicherungs-und
Rentenastalt.............................................. 886 696,724
Sulzer AG.................................................. 697 442,494
Swiss Reinsurance Co. (Reg.)............................... 917 1,717,568
UBS (Bearer)............................................... 944 1,366,878
Zurich Versicherungs (Reg.)................................ 2,527 1,205,808
-----------
20,805,813
-----------
UNITED KINGDOM -- 22.28%
Abbey National PLC......................................... 100,100 1,796,941
Barclays PLC............................................... 47,000 1,251,271
Bass PLC................................................... 60,600 941,780
B.A.T. Industries PLC...................................... 495,200 4,514,040
BG PLC..................................................... 532,675 2,401,530
Billiton PLC (b)........................................... 384,000 985,668
Booker PLC................................................. 222,100 1,169,428
British Energy PLC......................................... 251,000 1,746,985
British Petroleum Co. PLC.................................. 297,069 3,910,410
British Sky Broadcating Group PLC.......................... 136,000 1,020,420
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
British Steel PLC......................................... 307,600 $ 660,499
British Telecommunications PLC............................ 454,800 3,580,778
BTR PLC................................................... 238,900 723,284
Cable & Wireless PLC...................................... 101,000 889,099
Cadbury Schweppes PLC..................................... 180,000 1,817,030
Centrica PLC (b).......................................... 414,500 610,411
Charter PLC............................................... 100,518 1,238,799
Coats Viyella PLC......................................... 441,700 661,369
Diageo PLC................................................ 209,300 1,926,834
FKI PLC................................................... 500,425 1,572,705
General Electric Co. PLC.................................. 439,800 2,854,810
Glaxo Wellcome PLC........................................ 256,200 6,070,391
Greenalls Group PLC....................................... 134,000 965,726
Hanson PLC................................................ 184,312 823,756
Hillsdown Holdings PLC.................................... 538,200 1,310,631
House of Fraser PLC....................................... 566,400 1,873,244
HSBC Holdings PLC......................................... 110,300 2,831,230
Inchcape PLC.............................................. 301,300 808,094
Legal & General Group PLC................................. 256,700 2,247,049
Lloyds TSB Group PLC...................................... 348,585 4,513,968
Marks & Spencer PLC....................................... 309,700 3,052,411
Mirror Group PLC.......................................... 535,500 1,718,182
National Westminster Bank PLC............................. 102,400 1,705,122
Northern Foods PLC........................................ 301,900 1,311,421
Peninsular & Oriental Steam Navigation Co................. 191,700 2,184,323
Reckitt & Colman PLC...................................... 54,346 853,977
Reuters Holdings PLC...................................... 115,100 1,259,424
Rio Tinto PLC............................................. 112,100 1,381,537
RJB Mining PLC............................................ 303,800 634,843
Royal & Sun Alliance Insurance Group PLC.................. 218,814 2,207,042
Scottish Hydro-Electric PLC............................... 124,400 1,027,541
Sears PLC................................................. 769,400 670,970
Sedgwick Group PLC........................................ 451,500 1,054,924
SmithKline Beecham PLC.................................... 266,600 2,732,897
Smurfit (Jefferson) Group PLC............................. 432,929 1,203,867
Tate & Lyle PLC........................................... 132,000 1,088,145
Tesco PLC................................................. 196,300 1,598,824
Thames Water PLC.......................................... 133,100 1,985,276
The Great Universal Stores PLC............................ 160,000 2,019,251
Unilever PLC.............................................. 116,600 999,566
Vodafone Group PLC........................................ 272,000 1,964,755
Williams PLC.............................................. 316,400 1,759,658
------------
92,132,136
------------
Total Non-U.S. Equities
(Cost $377,962,629)...................................... 389,397,273
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Short-Term Investments-- 5.49%
COMMERCIAL PAPER -- 5.49%
Case Credit Corp.
6.110%, due 01/20/98 $1,500,000 $ 1,495,163
6.030%, due 03/10/98 1,500,000 1,482,915
6.020%, due 03/13/98 1,500,000 1,482,191
GTE Corp.
6.120%, due 02/20/98 2,000,000 1,983,000
6.020%, due 03/02/98 1,500,000 1,484,950
Marriott Corp.
6.300%, due 01/16/98 3,000,000 2,992,125
Nabisco, Inc.
6.700%, due 01/05/98 5,000,000 4,996,278
Safeway, Inc.
6.700%, due 01/02/98 3,000,000 2,999,441
5.920%, due 01/22/98 1,500,000 1,494,820
Vastar Resources, Inc.
7.100%, due 01/02/98 2,298,000 2,297,547
------------
Total Short-Term Investments
(Cost $22,708,430) 22,708,430
------------
Total Investments
(Cost $400,671,059)--99.66% (a) 412,105,703
------------
Cash and other assets, less liabilities -- 0.34% 1,397,658
------------
Net Assets--100% $413,503,361
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $400,671,059; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $54,880,226
Gross unrealized depreciation................................ (43,445,582)
-----------
Net unrealized appreciation................................ $11,434,644
===========
</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 currency contracts as
of December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Canadian Dollar......... 2/19/98 9,200,000 $ 6,438,744 $ (245,359)
Danish Kroner........... 2/19/98 25,200,000 3,689,615 63,716
Dutch Guilder........... 2/19/98 12,700,000 6,283,614 (75,607)
French Franc............ 2/19/98 47,500,000 7,918,475 179,167
Hong Kong Dollar........ 2/19/98 15,500,000 1,993,151 13,197
Japanese Yen............ 2/19/98 2,952,000,000 22,868,948 (1,659,011)
Norwegian Krona......... 2/19/98 15,700,000 2,135,842 (7,605)
Swedish Krona........... 2/19/98 77,500,000 9,780,957 55,406
Swiss Franc............. 2/19/98 23,000,000 15,859,553 392,169
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar....... 2/19/98 12,550,000 8,186,509 1,019,749
Belgian Franc........... 2/19/98 320,000,000 8,661,289 (173,226)
British Pound........... 2/19/98 14,900,000 24,457,905 (841,405)
Dutch Guilder........... 2/19/98 5,900,000 2,919,159 (42,794)
German Mark............. 2/19/98 4,900,000 2,732,941 (42,851)
Hong Kong Dollar........ 2/19/98 44,500,000 5,722,273 (63,215)
Italian Lira............ 2/19/98 3,550,000,000 2,007,247 30,863
Japanese Yen............ 2/19/98 15,757,627 122,073 10,291
Malaysian Ringgit....... 2/19/98 9,900,000 2,541,994 978,632
Singapore Dollar........ 2/19/98 6,300,000 3,715,346 439,231
Swedish Krona........... 2/19/98 54,800,000 6,916,083 159,175
Swiss Franc............. 2/19/98 6,525,059 4,499,327 30,108
----------
Total................. $ 220,631
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $400,671,059) (Note 1)............... $412,105,703
Cash............................................................. 919,098
Foreign currency, at value (Cost $466,106)....................... 462,654
Receivables:
Investment securities sold...................................... 193,234
Dividends....................................................... 1,078,507
Fund shares sold................................................ 265,165
Variation margin (Note 5)....................................... 3,702
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 220,631
Other assets..................................................... 80,990
------------
TOTAL ASSETS.................................................. 415,329,684
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 959,539
Investment advisory fees (Note 2)............................... 273,612
Variation margin (Note 5)....................................... 436,337
Accrued expenses................................................ 156,835
------------
TOTAL LIABILITIES............................................. 1,826,323
------------
NET ASSETS........................................................ $413,503,361
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $400,607,722
Accumulated undistributed net investment income.................. 55,030
Accumulated net realized gain.................................... 1,189,903
Net unrealized appreciation...................................... 11,650,706
------------
NET ASSETS.................................................... $413,503,361
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $405,396,793 and 37,537,642 shares is-
sued and outstanding) (Note 7)................................. $ 10.80
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$929 and 86 shares issued and outstanding) (Note 7)............ $ 10.80
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $8,105,639 and 756,307 shares issued
and outstanding) (Note 7)...................................... $ 10.72
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $516,253 for foreign taxes withheld).......... $ 3,571,336
Interest........................................................ 788,825
------------
TOTAL INCOME................................................. 4,360,161
------------
EXPENSES:
Advisory (Note 2)............................................... 1,633,467
Administrative.................................................. 142,058
Custodian....................................................... 127,605
Distribution (Note 6)........................................... 34,648
Other........................................................... 130,129
------------
TOTAL EXPENSES............................................... 2,067,907
------------
NET INVESTMENT INCOME ....................................... 2,292,254
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................... 7,396,068
Futures contracts.............................................. (1,031,399)
Foreign currency transactions.................................. 821,079
------------
Net realized gain............................................ 7,185,748
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency .............................. (38,295,004)
Futures contracts ............................................. (107,626)
Forward contracts.............................................. (637,141)
Translation of other assets and liabilities denominated in for-
eign currency................................................. (37,238)
------------
Change in net unrealized appreciation or depreciation........ (39,077,009)
------------
Net realized and unrealized loss................................. (31,891,261)
------------
Net decrease in net assets resulting from operations............. $(29,599,007)
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 2,292,254 $ 5,529,755
Net realized gain............................. 7,185,748 24,421,499
Change in net unrealized appreciation or de-
preciation .................................. (39,077,009) 35,391,730
------------ ------------
Net increase (decrease) in net assets result-
ing from operations.......................... (29,599,007) 65,342,984
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I ............................. (3,973,110) (4,371,883)
Brinson Class N.............................. (8) --
SwissKey Class............................... (42,036) (40,369)
Distributions from net realized gain:
Brinson Class I.............................. (25,288,399) (12,209,010)
Brinson Class N.............................. (59) --
SwissKey Class............................... (521,640) (94,152)
------------ ------------
Total distributions to shareholders........... (29,825,252) (16,715,414)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 132,897,867 232,045,893
Shares issued on reinvestment of distribu-
tions........................................ 29,067,629 16,204,754
Shares redeemed............................... (117,690,199) (81,854,223)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 7)............. 44,275,297 166,396,424
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..... (15,148,962) 215,023,994
------------ ------------
NET ASSETS:
Beginning of year............................. 428,652,323 213,628,329
------------ ------------
End of year (including accumulated undistrib-
uted net investment income of $55,030 and
$1,777,930, respectively).................... $413,503,361 $428,652,323
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30, AUGUST 31, 1993*
DECEMBER 31, 1997 ----------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.59 $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------- -------
Income from investment
operations:
Net investment income. 0.07 0.18 0.18 0.15 0.10
Net realized and
unrealized gain
(loss)............... (1.00) 1.97 2.05 (0.16) (0.34)
-------- -------- -------- -------- -------
Total income (loss)
from investment
operations......... (0.93) 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------- -------
Less distributions:
Distributions from net
investment income.... (0.12) (0.17) (0.18) -- (0.07)
Distributions from net
realized gain........ (0.74) (0.56) (0.56) -- --
-------- -------- -------- -------- -------
Total distributions. (0.86) (0.73) (0.74) -- (0.07)
-------- -------- -------- -------- -------
Net asset value, end of
period................. $ 10.80 $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== ======== =======
Total return (non-
annualized)............ (7.36)% 20.27% 23.64% (0.10)% (2.45)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $405,397 $420,855 $212,366 $148,319 $71,544
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.00%** 1.00% 1.20% 1.23% 1.60%**
After expense reim-
bursement............ N/A N/A 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 1.14%** 1.83% 1.67% 1.93% 1.28%**
After expense reim-
bursement............ N/A N/A 1.87% 2.16% 1.88%**
Portfolio turnover
rate.................. 22% 25% 20% 14% 12%
Average commission rate
paid per share........ $ 0.0269 $ 0.0245 $ 0.0219 N/A N/A
</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 the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.......................... $ 12.59
-------
Income from investment operations:
Net investment income....................................... 0.06
Net realized and unrealized loss............................ (1.02)
-------
Total loss from investment operations..................... (0.96)
-------
Less distributions:
Distributions from net investment income.................... (0.10)
Distributions from net realized gain........................ (0.73)
-------
Total distributions....................................... (0.83)
-------
Net asset value, end of period................................ $ 10.80
=======
Total return (non-annualized)................................. (7.49)%
Ratios/Supplemental data:
Net assets, end of period (in 000s).......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................ 1.25%*
After expense reimbursement................................. N/A
Ratio of net investment income to average net assets:
Before expense reimbursement................................ 0.89%*
After expense reimbursement................................. N/A
Portfolio turnover rate...................................... 22%
Average commission rate paid per share....................... $0.0269
</TABLE>
Commencement of Brinson Class N was June 30, 1997.
* Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 12.49 $ 11.12 $ 10.26
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.00 0.11 0.12
Net realized and unrealized
gain......................... (0.98) 1.93 1.45
------- ------- -------
Total income (loss) from in-
vestment operations........ (0.98) 2.04 1.57
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.05) (0.11) (0.15)
Distributions from net real-
ized gain.................... (0.74) (0.56) (0.56)
------- ------- -------
Total distributions......... (0.79) (0.67) (0.71)
------- ------- -------
Net asset value, end of period.. $ 10.72 $ 12.49 $ 11.12
======= ======= =======
Total return (non-annualized)... (7.71)% 19.32% 15.78%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $ 8,106 $ 7,797 $ 1,262
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.84%** 1.81% 2.04%**
After expense reimbursement... N/A N/A 1.84%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 0.29%** 1.02% 0.83%**
After expense reimbursement... N/A N/A 1.03%**
Portfolio turnover rate........ 22% 25% 20%
Average commission rate paid
per share..................... $0.0269 $0.0245 $0.0219
</TABLE>
* Commencement of SwissKey Class
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund and Non-U.S. Equity Fund. The Fund has three classes of shares
outstanding, Brinson Class I, Brinson Class N, and SwissKey Class. There are an
unlimited number of shares of each class with par value of $0.001 authorized.
Each share of the Fund represents an identical interest in the investments of
the Fund and has the same rights. The following is a summary of significant
accounting policies consistently followed by the Non-U.S. Equity Fund (the
"Fund") in the preparation of its financial statements.
A.INVESTMENT VALUATION:Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward foreign currency contracts are valued daily using quoted
forward exchange rates. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION:Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS:Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME:Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E.FEDERAL INCOME TAXES:It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the six months ended December 31, 1997,
therefore, no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS:It is the policy of the Fund to distribute its
net investment income on a semi-annual basis and net capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing tax treatments for foreign
currency transactions. Differences in dividends per share between the classes
are due to distribution expenses.
G.INCOME AND EXPENSE ALLOCATION:All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the SwissKey Class.
- --------------------------------------------------------------------------------
20
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. As compensation for
these services, the Fund pays the Advisor a monthly fee based on the Fund's
average daily net assets. The Advisor has agreed to waive its fees and
reimburse the Fund to the extent total annualized expenses exceed a specified
percentage of the Fund's average daily net assets. The expense cap is 1.00%,
1.25% and 1.84% of the average daily net assets of the Brinson Class I, Brinson
Class N and SwissKey Class, respectively. Investment advisory fees and other
transactions with affiliates for the six months ended December 31, 1997, were
as follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY
FEE FEES
-------- ----------
<S> <C> <C>
Non-U.S. Equity Fund........................................ 0.80% $1,633,467
</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 $2,944.
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1997, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ -----------
<S> <C> <C>
Non-U.S. Equity Fund................................... $107,166,089 $82,459,445
</TABLE>
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Fund realizes a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the six months ended December
31, 1997, was the Fund's custodian.
5.FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such contracts to hedge a portion of
its portfolio. Risks of entering into futures contracts include the possibility
that there may be an illiquid market or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Fund, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
- --------------------------------------------------------------------------------
21
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the SwissKey Class, and effective June 30,
1997, the Brinson Class N shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, shall not exceed 0.84% of the average daily net
assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall
not exceed 0.25% of daily net assets of the Brinson Class N.
7.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 10,958,617 $130,290,326 19,910,853 $225,344,857
Brinson Class N............... -- -- 79 1,000
SwissKey Class................ 217,732 2,607,541 590,377 6,700,036
---------- ------------ ---------- ------------
Total Sales................ 11,176,349 $132,897,867 20,501,309 $232,045,893
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 2,668,222 $ 28,549,975 1,461,013 $ 16,110,105
Brinson Class N............... 7 67 -- --
SwissKey Class................ 48,737 517,587 8,477 94,649
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,716,966 $ 29,067,629 1,469,490 $ 16,204,754
========== ============ ========== ============
Redemptions:
Brinson Class I............... 9,525,571 $116,078,085 6,945,571 $ 80,838,515
Brinson Class N............... -- -- -- --
SwissKey Class................ 134,550 1,612,114 87,985 1,015,708
---------- ------------ ---------- ------------
Total Redemptions.......... 9,660,121 $117,690,199 7,033,556 $ 81,854,223
========== ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Chicago . Basel . Frankfurt . Geneva . Hong Kong . London
. Melbourne . New York
Paris . Singapore . Sydney . Tokyo . Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 .
Tel: (800) 448-2430
<PAGE>
[LOGO OF SWISS KEY FUNDS]
SWISSKEY GLOBAL FUND
SWISSKEY GLOBAL EQUITY FUND
SWISSKEY GLOBAL BOND FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
YOUR KEY TO PERFORMANCE
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<PAGE>
Trustees and Officers
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[SWISS KEY FUNDS LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
Catherine E. Macrae
Assistant Secretary
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The Fund's Advisor - Brinson Partners, Inc.
[SWISS KEY FUNDS LOGO APPEARS HERE]
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation (SBC) and manages assets of over $140 billion. We have $90
billion of discretionary institutional assets with active management mandates
and we are the investment manager for SBC Private Banking mutual fund assets
which total over $50 billion. In addition, we act as an investment advisor to
SBC Private Banking. Our organization manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. We employ over 590 people in offices in
Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York,
Paris, Singapore, Sydney, TokyoEand Zurich.
Brinson Partners, an established U.S.-based leader in the investment field
located in Chicago, acts as the headquarters of our worldwide investment
management process. Brinson Partners pioneered the movement to the active
management of global portfolios in the early 1980s for U.S. clients. Private
market and venture capital investing was established in the 1970s and today we
represent a major worldwide presence in this asset class.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
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2
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Table of Contents
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[SWISS KEY FUNDS LOGO APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter................................... 4
Global Economic and Market Highlights................ 6
Global Fund.......................................... 7
Schedule of Investments........................... 11
Financial Statements.............................. 20
Financial Highlights.............................. 23
Global Equity Fund................................... 26
Schedule of Investments........................... 30
Financial Statements.............................. 36
Financial Highlights.............................. 39
Global Bond Fund..................................... 42
Schedule of Investments........................... 45
Financial Statements.............................. 49
Financial Highlights.............................. 52
The SwissKey Funds--Notes to Financial Statements.... 55
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Shareholder Letter
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[SWISS KEY FUNDS LOGO APPEARS HERE]
February 20, 1998
Dear Shareholder:
We are very pleased to present the December 31, 1997 Semi-Annual Report for the
Global Fund, Global Equity Fund and Global Bond Fund. Within this Report, we
will focus on the current global economic outlook as well as our current
strategies and performance updates for the three Global Funds.
Swiss Bank Corporation announced on December 8, 1997 their intention to merge
with Union Bank of Switzerland into a single global financial institution. As
part of this merger, Brinson Partners and UBS Asset Management will be combined
into Brinson. Brinson will be the Institutional Asset Management Division of the
new organization with assets under management in excess of $340 billion and will
provide investment advisory services for the Private Banking Division with
assets over $400 billion. The Consumer & Corporate Banking Division and Brinson
combined will manage assets in excess of $940 billion.
We are excited about the formation of Brinson and the additional resources we
will bring together to further the tradition of delivering value-added
investment performance and the highest level of professional client service.
The SwissKey Global Fund, the SwissKey Global Equity Fund and the SwissKey
Global Bond Fund are all actively managed Funds that provide integrated asset
management across and within security markets. The investment process is
strategic in nature and is driven by deviations of market price from fundamental
value. This philosophy offers the greatest potential for achieving enhanced,
long-term returns while controlling risk.
SwissKey Global Fund
Since its inception on July 31, 1995, the SwissKey Global Fund has produced an
annualized total return of 13.50% compared to the return of 13.97% of its
benchmark, the Global Securities Markets Mutual Fund Index (GSMI). The SwissKey
Global Fund achieved this performance with a volatility of 6.05%, below the
benchmark volatility of 7.72%.
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4
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Shareholder Letter
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[SWISS KEY FUNDS LOGO APPEARS HERE]
SwissKey Global Equity Fund
The SwissKey Global Equity Fund has provided an annualized return of 15.07%
since its inception on July 31, 1995. This is compared to a 14.73% return for
the benchmark, the MSCI World Equity (Free) Index. This performance was achieved
with volatility of 8.88%, below the benchmark volatility of 10.96%.
SwissKey Global Bond Fund
The SwissKey Global Bond Fund has provided an annualized return of 7.04% since
its inception on July 31, 1995. Over the same period, the return of the Funds
benchmark, the Salomon World Government Bond Index, was 2.27%. This performance
was achieved with volatility of 4.06%, below the 5.11% volatility of the
benchmark.
Each of our Funds employs the same value-oriented investment philosophy applied
across the global spectrum. Each Fund also uses the resources of our entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is focused
upon both risk and return considerations in the context of full investment
cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent. The Report that follows highlights the investment
characteristics of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in the SwissKey Funds.
Sincerely,
/S/ Hanspeter A. Walder /S/ Raymond Simon
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Hanspeter A. Walder Raymond Simon
Executive Director Executive Director
Private Banking Private Banking
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5
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Global Economic and Market Highlights
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[SWISS KEY FUNDS LOGO APPEARS HERE]
While financial markets seem to be signaling that the worst of the crisis in
Asia has passed, those economies still have substantial problems to overcome
before they are recovered. Substantial amounts of foreign currency borrowing
will require rescheduling or forgiveness, and excess capacity will need to be
worked off. The Japanese, as particularly important lenders to these Asian
borrowers, will remain vulnerable.
The adverse impact on the U.S. from the Asian crisis is likely to remain
relatively limited. Because non-Japan Asia represents a small portion of U.S.
trade, direct effects, such as a drop in real growth due to a collapse in
exports, are not expected to be sizable. The economy remains strong, as
evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and
3.8%, respectively.
Continental European economies continue to benefit from weaker currencies
although the expansions have not been terribly strong. While output growth is
moderate, there has been no discernible improvement in the high unemployment
rates. Sterling remains strong on concerns of a weak euro and hikes in short-
term rates by the Bank of England.
<TABLE>
<CAPTION>
Global Environment
<S> <C> <C> <C>
6 months 1 year 7/31/95*
Major Markets ended ended to
Total Return in U.S. Dollars 12/31/97 12/31/97 12/31/97
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U.S. Equity 11.60% 31.29% 26.04%
Non-U.S. Equities (currency unhedged) -8.22 2.07 4.70
Non-U.S. Equities (currency hedged) -1.40 16.12 17.57
U.S. Bonds 6.37 9.62 8.21
Non-U.S. Bonds (currency unhedged) -1.18 -4.26 -0.52
Non-U.S. Bonds (currency hedged) 6.12 11.07 12.24
U.S. Cash Equivalents 2.60 5.18 5.24
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6 months 1 year 7/31/95*
Major Currencies ended ended to
Percent Change Relative to U.S. Dollars 12/31/97 12/31/97 12/31/97
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Yen -11.99% -10.73% -14.90%
Pound -1.14 -3.85 1.16
Deutschemark -3.08 -14.29 -10.35
Canadian Dollar -3.60 -4.22 1.72
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* Inception date of the SwissKey Global Fund
</TABLE>
All total returns in excess of 1 year are average annualized returns.
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6
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Global Fund
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[SWISS KEY FUNDS LOGO APPEARS HERE]
The Global Fund is diversified across the equity and fixed income markets of the
U.S. and a broad range of other countries. The Fund is actively managed within
an asset allocation framework, involving value-based market, currency and
individual security selection. Our senior asset allocation, equity and fixed
income professionals form the investment team for the Fund, supported by a
globally integrated market analysis system. Security selection within each
market is based on the fundamental research of our analytical teams in our
offices worldwide.
The SwissKey Global Fund has provided an annualized return of 13.50% since its
inception on July 31, 1995, while its benchmark, the GSMI Mutual Fund Index
returned 13.97%. The Fund performance over this period was achieved with an
annualized volatility of 6.05%, below the benchmark volatility of 7.72%. For the
year ended December 31, 1997, the Fund returned 10.20%, underperforming the
benchmark return of 14.30%. Contributing positively to performance was security
selection in the Japanese equity market and the emerging debt and equity
markets. Currency risk hedge was a substantial contributor to added value in
1997. The primary negative contributor was the underweight in most equity
markets and the overweight in bonds.
Bond returns were the highest in Australia, Italy and the U.K. The U.S. bond
market return of 9.62% was in the middle of the pack. The peripheral European
bond markets performed well, as spreads over German yields declined
substantially due to the market's anticipation of a single currency.
The U.S. equity market return of about 30% was outdone by many of the European
markets which were driven by a combination of lower interest rates and the
anticipation of a profits recovery. Southeast Asian equity markets stood in
stark contrast with local currency losses ranging from 10% to 60% for the year.
The emerging debt and equity markets failed to produce the spectacular gains of
prior years. Emerging debt posted a total return of 13.02% while emerging equity
declined by 14.84%. Returns in the high yield bond market, at about 12.63%, not
surprisingly fell between equity and bond returns.
Currency risk hedges were beneficial during the year, as the overpriced Japanese
yen depreciated against the U.S. dollar. The risk hedges also benefited from
interest rates in the U.S. exceeding rates in the overpriced currencies.
Asset allocation strategy continues to underweight equity markets, as prices
remain in excess of fundamental values. Bond markets, apart from Japan, remain
overweight as they provide the most attractive relative value. Emerging market
debt is also overweight, with a small overweight in emerging market equity and a
small underweight in high yield bonds. Exchange rate changes during the year
have reduced the magnitude of overpricing and led to reductions in many of the
risk hedges.
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7
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Global Fund
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<CAPTION>
Total Return
6 months 1 year 7/31/95*
ended ended to
12/31/97 12/31/97 12/31/97
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<S> <C> <C> <C>
SwissKey Global Fund 1.58% 10.20% 13.50%
GSMI Mutual Fund Index** 3.27 14.30 13.97
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</TABLE>
* Inception date of the SwissKey Global Fund.
** An un-managed index compiled by the Advisor, constructed as follows: 40%
Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG
Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S.
Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable
Index; and 3% High Yield Bond Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Global
Fund and the GSMI Mutual Fund Index if you had invested $10,000 on July 31,
1995, and had reinvested all your income dividends and capital gain
distributions through December 31, 1997. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SwissKey Global Fund
vs. GSMI Mutual Fund Index
Wealth Value with Dividends Reinvested
[Graph Chart Appears Here]
<TABLE>
<CAPTION>
SwissKey GSMI Mutual
Global Fund Fund Index
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<S> <C> <C>
7/31/95 10000 10000
8/31/95 10129 9965
9/30/95 10293 10232
10/31/95 10362 10168
11/30/95 10655 10472
12/31/95 10861 10665
1/31/95 11063 10839
2/29/96 11008 10870
3/31/96 11091 10963
4/30/96 11229 11152
5/31/96 11266 11235
6/30/96 11324 11258
7/31/96 11157 10962
8/31/96 11334 11139
9/30/96 11687 11505
10/31/96 11873 11620
11/30/96 12329 12109
12/31/96 12332 12001
1/31/97 12475 12177
2/28/97 12567 12234
3/31/97 12373 11965
4/30/97 12506 12208
5/31/97 13008 12825
6/30/97 13377 13284
7/31/97 13797 13813
8/31/97 13428 13306
9/30/97 13838 13883
10/31/97 13428 13435
11/30/97 13449 13555
12/31/97 13589 13718
</TABLE>
7/31/95=$10,000 Data through 12/31/97
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
8
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[SWISS KEY FUNDS LOGO APPEARS HERE]
Global Fund
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<TABLE>
<CAPTION>
Asset Allocation
As of December 31, 1997 (Unaudited)
Current
Benchmark Strategy
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<S> <C> <C>
U.S. Equity 40.0% 23.0%
Non-U.S. Equities 22.0 17.0
Japan Equities 5.3 2.3
Other Equities 16.7 14.7
Emerging Markets Equities 3.0 4.0
Dollar Bonds 21.0 30.5
U.S. Bonds 19.0 26.5
International $ Bonds 2.0 4.0
High Yield Bonds 3.0 2.5
Non-U.S. Bonds 9.0 18.0
Japan Bonds 2.5 0.0
Other Bonds 6.5 18.0
Emerging Markets Debt 2.0 5.0
Cash Equivalents 0.0 0.0
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100.0% 100.0%
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
Percent of
Net Assets
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1. Lockheed Martin Corp. 1.09%
2. Xerox Corp. 1.05
3. Philip Morris Companies, Inc. 1.00
4. CIGNA Corp. 0.89
5. Aon Corp. 0.88
6. Schering Plough Corp. 0.78
7. Burlington Northern Santa Fe Corp. 0.76
8. Federal Express Corp. 0.74
9. Goodyear Tire & Rubber Co. 0.72
10. Automatic Data Processing, Inc. 0.63
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</TABLE>
<TABLE>
<CAPTION>
Currency Allocation
As of December 31, 1997 (Unaudited)
Current
Benchmark Strategy
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<S> <C> <C>
U.S. 66.0% 72.2%
Japan 7.8 3.8
U.K. 5.4 2.2
Continental Europe 14.6 14.6
Canada 1.5 1.5
Emerging Markets 3.0 4.0
Other 1.7 1.7
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100.0% 100.0%
Top Ten Non-U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
Percent of
Net Assets
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1. Glaxo Wellcome PLC 0.30%
2. Royal Dutch Petroleum Co. 0.25
3. Telecom Corp. of New Zealand Ltd. 0.24
4. Lloyds TSB Group PLC 0.23
5. Novartis AG (Reg.) 0.22
6. B.A.T. Industries PLC 0.22
7. Allianz AG 0.19
8. British Petroleum Co. PLC 0.19
9. British Telecommunications PLC 0.17
10. Roche Holding AG (Gen.) 0.15
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</TABLE>
9
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[SWISS KEY FUNDS LOGO APPEARS HERE]
Global Fund
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Industry Diversification
As a Percentage of Net Assets
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
U.S. EQUITIES
Energy......................... 1.04%
------
Capital Investment
Capital Goods................. 1.82
Technology.................... 2.22
------
4.04
------
Basic Industries
Chemicals..................... 0.54
Housing/Paper................. 1.31
Metals........................ 0.23
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2.08
------
Consumer
Non-Durables.................. 2.50
Retail/Apparel................ 1.32
Autos/Durables................ 1.01
Discretionary................. 0.94
Health: Drugs................. 2.09
Health: Non-Drugs............. 1.10
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8.96
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Financial
Banks......................... 2.03
Non-Banks..................... 1.80
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3.83
------
Utilities
Electric...................... 1.59
Telephone..................... 0.28
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1.87
------
Transportation................. 1.59
Services/Misc.................. 2.43
Post Venture................... 1.30
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Total U.S. Equities........ 27.14*
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NON-U.S. EQUITIES
Aerospace & Military........... 0.03%
Airlines....................... 0.06
Appliances & Household......... 0.33
Automobiles.................... 0.53
Banking........................ 2.04
Beverages & Tobacco............ 0.44
Broadcasting & Publishing...... 0.35
Building Materials............. 0.22
Business & Public Service...... 0.62
Chemicals...................... 0.49
Construction................... 0.15
Data Processing................ 0.15
Electric Components............ 0.26
Electronics.................... 0.59
Energy......................... 1.35
Financial Services............. 0.35
Food & House Products.......... 0.61
Forest Products................ 0.23
Gold Mining.................... 0.01
Health: Drugs.................. 0.29
Health: Non-Drugs.............. 0.91
Industrial Components.......... 0.26
Insurance...................... 1.08
Leisure & Tourism.............. 0.13
Machinery & Engineering........ 0.05
Merchandising.................. 0.82
Metals--Steel.................. 0.25
Miscellaneous Materials........ 0.06
Miscellaneous Services......... 0.02
Multi-Industry................. 0.88
Non-Ferrous Metals............. 0.32
Real Estate.................... 0.15
Recreation..................... 0.08
Retail/Apparel................. 0.09
Shipping....................... 0.01
Telecommunications............. 1.43
Textiles & Apparel............. 0.03
Transportation................. 0.18
Utilities...................... 0.85
Wholesale & International Trade 0.09
------
Total Non-U.S. Equities.... 16.79
------
EMERGING MARKETS EQUITIES...... 3.37
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U.S. BONDS
Corporate Bonds
Asset-Backed.................. 2.04
CMO........................... 0.64
Consumer...................... 1.52
Financial..................... 3.03
Industrial.................... 0.03
Transportation................ 0.67
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7.93
------
U.S. Government Agencies....... 7.33
U.S. Government Obligations.... 5.13
International Dollar Bonds..... 4.10
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Total U.S. Bonds........... 24.49*
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HIGH YIELD BONDS............... 2.64
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NON-U.S. BONDS
Foreign Financial Bonds....... 0.56
Foreign Government Bonds...... 15.87
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Total Non-U.S. Bonds....... 16.43
------
EMERGING MARKETS DEBT.......... 5.24
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SHORT TERM INVESTMENTS......... 16.74*
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TOTAL INVESTMENTS.......... 112.84
LIABILITIES, LESS CASH AND
OTHER ASSETS.................. (12.84)
------
NET ASSETS................. 100.00%
======
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* The Fund held a long position in U.S. Treasury futures on December 31, 1997
which increased U.S. Bond exposure from 24.49% to 28.17%. The Fund held a
short position in stock index futures on December 31, 1997 which reduced U.S.
Equity exposure from 27.14% to 23.09%. These adjustments result in a net
increase in the Fund's exposure to Short-Term Investments from 16.74% to
17.11%.
10
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GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
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<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Equities -- 47.30%
U.S. EQUITIES -- 27.14%
Allergan, Inc........................................ 52,400 $ 1,758,675
Alza Corp. (b)....................................... 51,100 1,625,619
American Home Products Corp.......................... 40,900 3,128,850
Aon Corp............................................. 97,899 5,739,300
Automatic Data Processing, Inc....................... 67,000 4,112,125
Baxter International, Inc............................ 66,100 3,333,919
Beckman Instruments, Inc............................. 20,800 832,000
Biogen, Inc. (b)..................................... 20,000 727,500
Birmingham Steel Corp................................ 20,500 322,875
Boston Technology, Inc. (b).......................... 20,400 512,550
Briggs & Stratton Corp............................... 3,500 169,969
Brinson Post-Venture Fund (b)........................ 423,765 8,502,119
Burlington Northern Santa Fe Corp.................... 53,700 4,990,744
Champion Enterprises, Inc. (b)....................... 33,100 680,619
Champion International Corp.......................... 2,700 122,344
Chase Manhattan Corp................................. 27,400 3,000,300
CIGNA Corp........................................... 33,400 5,780,287
Circuit City Stores-Circuit City Group............... 75,500 2,684,969
Citicorp............................................. 24,800 3,135,650
CMS Energy Corp...................................... 65,900 2,903,719
Comerica, Inc........................................ 14,000 1,263,500
Commscope, Inc. (b).................................. 38,833 521,818
Comverse Technology, Inc. (b)........................ 10,100 393,900
Corning, Inc......................................... 110,200 4,091,175
Covance, Inc. (b).................................... 25,672 510,231
CPC International, Inc............................... 22,400 2,419,200
Crown Cork & Seal Co., Inc........................... 24,300 1,218,037
CVS Corp............................................. 32,400 2,075,625
Dial Corp............................................ 26,400 549,450
Eastman Chemical Co.................................. 28,200 1,679,662
Echlin, Inc.......................................... 14,300 517,481
EMC Corp. (b)........................................ 146,100 4,008,619
Enron Corp........................................... 68,500 2,847,031
Entergy Corp......................................... 133,400 3,993,662
Federal Express Corp. (b)............................ 79,300 4,842,256
First American Corp. of Tennessee.................... 13,400 666,650
First Data Corp...................................... 123,530 3,613,252
First Security Corp.................................. 16,850 705,594
FirstEnergy Corp..................................... 40,005 1,160,145
Fleetwood Enterprises, Inc........................... 15,300 649,294
Food Lion, Inc. Class A.............................. 108,700 917,156
Forest Laboratories, Inc. (b)........................ 23,500 1,158,844
Fort James Corp...................................... 59,700 2,283,525
Gannett Co., Inc..................................... 50,700 3,133,894
General Semiconductor, Inc. (b)...................... 26,450 305,828
Genzyme Corp......................................... 20,600 571,650
Geon Co.............................................. 14,100 329,587
Goodyear Tire & Rubber Co............................ 73,400 4,670,075
Harnischfeger Industries, Inc........................ 38,800 1,370,125
Health Care and Retirement Corp. (b)................. 25,600 1,030,400
Hibernia Corp........................................ 28,400 534,275
Informix Corp. (b)................................... 26,800 127,300
Interpublic Group of Companies, Inc.................. 33,350 1,661,247
Kimberly Clark Corp.................................. 60,900 3,003,131
Lear Corp. (b)....................................... 22,000 1,045,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Lockheed Martin Corp................................. 72,523 $ 7,143,515
Lyondell Petrochemical Co............................ 55,800 1,478,700
Manor Care, Inc...................................... 38,198 1,336,930
Martin Marietta Materials, Inc....................... 15,000 548,437
Masco Corp........................................... 59,600 3,032,150
Nabisco Holdings Corp................................ 52,000 2,518,750
National Service Industries, Inc..................... 10,000 495,625
Nextel Communications, Inc. (b)...................... 69,800 1,814,800
NextLevel Systems, Inc. (b).......................... 116,500 2,082,437
Old Republic International Corp...................... 9,596 356,851
Peco Energy Co....................................... 152,500 3,698,125
Pentair, Inc......................................... 27,096 973,762
Pharmacia & UpJohn, Inc.............................. 27,600 1,010,850
Philip Morris Companies, Inc......................... 144,200 6,534,062
Raytheon Co., Class B................................ 60,500 3,055,250
Regions Financial Corp............................... 13,100 552,656
Reynolds & Reynolds Co............................... 49,800 918,188
Schering Plough Corp................................. 81,500 5,063,188
Seagate Technology, Inc. (b)......................... 45,600 877,800
Sears, Roebuck and Co................................ 5,700 257,925
Timken Co............................................ 14,400 495,000
Tyson Foods, Inc., Class A........................... 103,998 2,131,959
Ultramar Diamond Shamrock Corp....................... 58,108 1,852,193
US Bancorp........................................... 34,960 3,913,335
Vencor, Inc. (b)..................................... 52,200 1,275,638
Viad Corp............................................ 50,100 967,556
Westvaco Corp........................................ 12,198 383,475
Witco Corp........................................... 8,300 338,744
Xerox Corp........................................... 93,000 6,864,563
York International Corp.............................. 31,800 1,258,088
------------
Total U.S. Equities ................................. 177,163,304
------------
NON-U.S. EQUITIES -- 16.79%
AUSTRALIA -- 0.84%
Amcor Ltd............................................ 23,770 104,548
Boral Ltd............................................ 69,240 175,053
Brambles Industries Ltd.............................. 12,590 249,801
Broken Hill Proprietary Co., Ltd..................... 84,200 781,824
Coca-Cola Amatil Ltd................................. 14,270 106,615
CSR Ltd.............................................. 42,930 145,461
David Jones Ltd...................................... 182,010 205,174
Lend Lease Corp., Ltd................................ 11,596 226,679
Mayne Nickless Ltd................................... 20,000 105,690
M.I.M. Holdings Ltd.................................. 88,056 53,935
National Australia Bank Ltd.......................... 58,467 816,423
News Corp. Ltd....................................... 122,030 673,492
News Corp. Ltd., Preferred........................... 27,886 137,987
Pacific Dunlop Ltd................................... 85,210 180,450
Rio Tinto Ltd........................................ 31,145 363,326
Qantas Airways Ltd................................... 81,435 144,120
Santos Ltd........................................... 16,610 68,402
Telstra Corp., Ltd. (b).............................. 33,000 69,669
Westpac Banking Corp., Ltd........................... 93,408 597,449
WMC Ltd.............................................. 52,840 184,204
Woolworth's Ltd...................................... 30,790 102,922
------------
5,493,224
------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ -------------
<S> <C> <C>
BELGIUM -- 0.66%
Delhaize-Le Lion S.A............................... 8,420 $ 427,238
Electrabel S.A..................................... 3,330 770,238
Fortis AG.......................................... 216 29
Fortis AG Strip (b)................................ 2,943 614,002
Generale de Banque S.A............................. 770 335,113
Groupe Bruxelles Lambert S.A....................... 1,670 241,591
Kredietbank NV..................................... 800 335,754
Kredietbank VVPR................................... 25 10,492
Petrofina S.A...................................... 1,525 562,856
Societe Generale de Belgique....................... 2,433 222,609
Solvay S.A., Class A............................... 4,890 307,514
Tractebel.......................................... 3,875 337,811
Tractebel Warrants "99" (b)........................ 605 1,551
Union Miniere Group S.A. (b)....................... 2,255 156,416
------------
4,323,214
------------
CANADA -- 0.59%
Agrium, Inc........................................ 9,500 115,506
Alcan Aluminum Ltd................................. 7,250 199,602
Bank of Montreal................................... 5,290 234,170
Barrick Gold Corp.................................. 4,200 78,213
Canadian National Railway Co....................... 5,150 242,188
Canadian Pacific Ltd............................... 15,650 421,022
Hudson's Bay Co.................................... 6,400 142,436
Imasco, Ltd........................................ 3,000 105,863
Imperial Oil Ltd................................... 5,720 367,717
Magna International Inc., Class A.................. 1,800 112,696
Moore Corp., Ltd................................... 5,800 87,136
Newbridge Networks Corp. (b)....................... 2,200 76,941
Noranda, Inc....................................... 7,440 127,890
Northern Telecom Ltd............................... 1,290 114,614
NOVA Corp.......................................... 19,520 185,502
Potash Corporation of Saskatchewan, Inc............ 2,200 183,013
Royal Bank of Canada............................... 6,250 330,166
Seagram Co., Ltd................................... 4,290 138,643
TELUS Corp......................................... 10,300 228,153
TransCanada Pipelines Ltd.......................... 10,020 223,351
Westcoast Energy, Inc.............................. 5,000 115,296
------------
3,830,118
------------
FINLAND -- 0.13%
Cultor Oyj......................................... 1,200 65,226
Merita Ltd., Class A............................... 19,550 106,982
Metsa Serla Oyj, Class B........................... 5,000 39,022
Nokia Oyj, Class A Preferred....................... 5,250 373,092
Outokumpu Oyj, Class A............................. 4,480 54,707
Pohjola Insurance Group, Class B................... 350 12,983
Sampo Insurance Co., Ltd., Series A................ 1,520 50,241
The Rauma Group.................................... 200 3,122
UPM-Kymmene Corp................................... 6,870 137,508
------------
842,883
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ -------------
<S> <C> <C>
FRANCE -- 0.93%
Accor S.A.......................................... 1,092 $ 203,116
Alcatel Alsthom.................................... 1,932 245,675
AXA-UAP............................................ 4,058 314,131
AXA-UAP Rights (b)................................. 4,328 4,245
Banque Nationale de Paris.......................... 4,620 245,668
Cie Bancaire S.A................................... 331 53,644
Cie de Saint Gobain................................ 2,267 322,188
Cie Financiere de Paribas.......................... 2,500 217,337
Cie Generale des Eaux.............................. 2,444 341,250
Cie Generale des Eaux Warrants "01" (b)............ 4,224 2,872
Dexia France....................................... 1,899 220,014
Elf Aquitaine S.A.................................. 3,194 371,642
France Telecom S.A. (b)............................ 9,400 341,094
Groupe Danone...................................... 800 142,952
Lafarge S.A........................................ 1,880 123,406
Lagardere S.C.A.................................... 6,600 218,318
Lyonnaise des Eaux S.A............................. 2,771 306,814
Michelin, Class B.................................. 4,449 224,077
Pechiney S.A., Class A............................. 4,884 192,892
Peugeot S.A........................................ 2,480 312,886
Pinault-Printemps-Redoute S.A...................... 350 186,810
Rhone-Poulenc, Class A............................. 6,944 311,187
SEITA.............................................. 6,810 244,508
Societe Generale................................... 2,295 312,816
Thomson CSF........................................ 6,900 217,575
Total S.A., Class B................................ 2,886 314,217
Usinor Sacilor..................................... 5,980 86,380
------------
6,077,714
------------
GERMANY -- 1.81%
Allianz AG Holding................................. 4,810 1,241,221
BASF AG............................................ 7,530 268,854
Bayer AG........................................... 16,990 630,712
Bayerische Motoren Werke AG........................ 590 441,327
Commerzbank AG..................................... 14,340 558,256
Continental AG..................................... 14,400 324,342
Daimler-Benz AG.................................... 6,750 476,753
Deutsche Bank AG................................... 13,611 952,263
Deutsche Telekom AG................................ 51,930 961,720
Henkel KGaA-Vorzug AG, Preferred................... 5,290 330,974
Hochtief AG........................................ 3,500 144,041
Hoechst AG......................................... 5,910 204,768
M.A.N. AG.......................................... 750 216,687
Mannesmann AG...................................... 897 450,471
Metro AG........................................... 9,608 340,910
Muenchener Rueckver AG............................. 2,410 916,768
Muenchener Rueckver AG Warrants "98" (b)........... 2 1,212
Preussag AG........................................ 1,322 406,577
RWE AG............................................. 9,820 527,017
Schering AG........................................ 5,405 521,533
Siemens AG......................................... 10,700 645,654
Veba AG............................................ 11,339 772,497
Volkswagen AG...................................... 860 480,674
------------
11,815,231
------------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ -------------
<S> <C> <C>
HONG KONG -- 0.18%
Cheung Kong Holdings Ltd........................... 38,000 $ 248,887
China Light & Power Co., Ltd....................... 18,500 102,665
Citic Pacific Ltd.................................. 17,000 67,574
Hang Seng Bank Ltd................................. 9,700 93,576
Hong Kong and China Gas Co., Ltd................... 79,000 152,933
Hong Kong Telecommunications Ltd................... 81,000 166,736
Hutchison Whampoa Ltd.............................. 26,000 163,077
Sun Hung Kai Properties Ltd........................ 15,000 104,536
Swire Pacific Ltd., Class A........................ 11,500 63,077
------------
1,163,061
------------
ITALY -- 0.82%
Aeroporti Di Roma Spa (b).......................... 3,000 31,136
Assicurazioni Generali............................. 21,380 525,416
Banca Commerciale Italiana......................... 55,000 191,312
Credito Italiano Spa............................... 97,000 299,276
Danieli & Co. Savings (Risp)....................... 43,000 154,679
Edison Spa......................................... 22,200 134,351
ENI ADR (c)........................................ 7,600 433,675
ENI Spa............................................ 76,000 431,142
Fiat Spa-Priv Preferred............................ 185,600 283,431
INA-Istituto Nazionale delle Assicurazioni......... 87,000 176,406
Instituto Mobiliare Italiano Spa................... 28,800 342,072
Italgas Spa........................................ 35,800 147,813
La Rinascente Spa.................................. 32,040 239,206
La Rinascente Spa RNC.............................. 27,200 101,536
La Rinascente Spa Warrants "99" (b)................ 1,400 1,694
Mediobanca Spa..................................... 11,000 86,417
Montedison Spa..................................... 331,700 298,109
SAI-Savings (Risp)................................. 24,500 108,085
Telecom Italia Mobile Spa.......................... 60,000 277,085
Telecom Italia Mobile Spa RNC...................... 161,500 459,458
Telecom Italia Spa................................. 26,666 170,428
Telecom Italia Spa RNC............................. 110,081 485,638
------------
5,378,365
------------
JAPAN -- 2.73%
Amada Co., Ltd..................................... 40,000 149,202
Asahi Glass Co., Ltd............................... 22,000 104,903
Bank of Tokyo-Mitsubishi, Ltd...................... 32,000 442,992
Canon, Inc......................................... 30,000 701,404
Canon Sales Co., Inc............................... 12,000 137,512
Citizen Watch Co., Ltd............................. 34,000 228,802
Dai Nippon Printing Co., Ltd....................... 36,000 678,331
Daiichi Pharmaceutical Co., Ltd.................... 30,000 339,166
Daikin Industries Ltd.............................. 36,000 136,220
Daiwa House Industry Co., Ltd...................... 18,000 95,520
Fanuc.............................................. 15,900 604,084
Fujitsu............................................ 24,000 258,412
Hitachi Ltd........................................ 75,000 536,435
Honda Motor Co..................................... 10,000 368,391
Hoya Corp.......................................... 4,000 126,130
Inax............................................... 26,000 75,785
Ito Yokado Co., Ltd................................ 15,000 767,160
Kaneka Corp........................................ 36,000 163,076
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------ -----------
<S> <C> <C>
Keio Teito Electric Railway............................ 41,000 $ 157,347
Kinki Nippon Railway................................... 45,000 241,223
Kirin Brewery Co., Ltd................................. 43,000 314,170
Kokuyo................................................. 11,000 190,348
Kuraray Co., Ltd....................................... 46,000 382,080
Kyocera Corp........................................... 4,000 182,119
Marui Co., Ltd......................................... 20,000 312,248
Matsushita Electric Industrial Co...................... 57,000 837,301
Mitsubishi Paper Mills................................. 39,000 54,889
NGK Insulators......................................... 64,000 570,967
Nintendo Co., Ltd...................................... 2,900 285,484
Nippon Denso Co., Ltd.................................. 19,000 343,396
Nippon Meat Packers, Inc............................... 25,000 342,242
Nippon Steel Co........................................ 27,000 40,077
Okumura................................................ 37,000 88,214
Osaka Gas Co........................................... 69,000 158,139
Sankyo Co., Ltd........................................ 29,000 657,950
Secom Co., Ltd......................................... 10,000 641,415
Seino Transportation................................... 25,000 125,168
Sekisui House Ltd...................................... 56,000 361,346
Shinmaywa Industries Ltd............................... 13,000 31,994
Sony Corp.............................................. 9,200 820,765
Sumitomo Bank.......................................... 41,000 469,833
Sumitomo Chemical Co................................... 36,000 83,061
Sumitomo Electric Industries........................... 32,000 438,070
Takeda Chemical Industries............................. 22,000 629,417
TDK Corp............................................... 7,000 529,744
Tokio Marine & Fire Insurance Co....................... 36,000 409,767
Tokyo Electric Power................................... 9,900 181,211
Tokyo Steel Mfg........................................ 19,000 64,441
Tonen Corp............................................. 26,000 140,773
Toray Industries, Inc.................................. 132,000 593,886
Toshiba Corp........................................... 93,000 388,379
Toyo Suisan Kaisha..................................... 22,000 152,955
Toyota Motor Corp...................................... 19,000 546,510
Yamazaki Baking Co., Ltd............................... 17,000 166,045
-----------
17,846,499
-----------
MALAYSIA -- 0.25%
Hume Industries (Malaysia) Bhd......................... 35,000 36,686
Kuala Lumpur Kepong Bhd................................ 90,500 194,136
Land & General Holdings Bhd............................ 73,000 13,503
Malayan Banking Bhd.................................... 39,000 113,218
Malaysia International Shipping Bhd (Frgn.)............ 32,000 46,859
Nestle (Malaysia) Bhd.................................. 22,000 101,734
New Straits Times Press Bhd............................ 33,000 40,863
Perusahaan Otomobil Nasional Bhd....................... 22,000 21,477
Petronas Gas Bhd....................................... 26,000 59,114
Public Bank Bhd........................................ 27,600 8,580
Public Bank Bhd (Frgn.)................................ 78,000 26,852
Public Bank Bhd Rights (b)............................. 4,600 248
Public Bank Bhd Rights (Frgn.) (b)..................... 13,000 668
Resorts World Bhd...................................... 30,000 50,482
Rothmans of Pall Mall Bhd.............................. 24,000 186,513
Sime Darby Bhd......................................... 127,000 122,024
Telekom Malaysia Bhd................................... 93,000 274,759
Tenaga Nasional Bhd.................................... 110,000 234,554
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
UMW Holdings Bhd........................................... 15,000 $ 11,368
United Engineers Bhd....................................... 33,000 27,468
YTL Corp. Bhd.............................................. 42,000 56,647
YTL Power International Bhd (b)............................ 1,400 1,075
-----------
1,628,828
-----------
NETHERLANDS -- 0.81%
ABN AMRO Holdings NV....................................... 22,202 432,585
Akzo Nobel NV.............................................. 760 131,059
Elsevier NV................................................ 26,480 428,424
Heineken NV................................................ 1,850 322,128
Hoogovens NV............................................... 2,360 96,737
ING Groep NV............................................... 12,962 546,024
KLM Royal Dutch Air Lines NV............................... 3,492 129,187
KPN NV..................................................... 13,020 543,329
Philips Electronics NV..................................... 6,850 410,872
Royal Dutch Petroleum Co................................... 29,420 1,615,176
Royal Dutch Petroleum Co., NY Shares (c)................... 700 37,931
Unilever NV................................................ 9,600 591,920
-----------
5,285,372
-----------
NEW ZEALAND -- 0.57%
Brierley Investments Ltd................................... 756,530 540,360
Carter Holt Harvey Ltd..................................... 261,110 403,326
Fletcher Challenge Building................................ 86,775 177,374
Fletcher Challenge Energy.................................. 95,405 334,072
Fletcher Challenge Forests Ltd............................. 185,585 154,110
Fletcher Challenge Paper................................... 171,640 224,260
Lion Nathan Ltd............................................ 64,000 143,456
Telecom Corp. of New Zealand Ltd........................... 326,830 1,584,748
Telecom Corp. of New Zealand Ltd. ADS (c).................. 3,800 147,250
-----------
3,708,956
-----------
SINGAPORE -- 0.35%
City Developments Ltd...................................... 31,000 143,501
DBS Land Ltd............................................... 58,000 88,807
Development Bank of Singapore Ltd.......................... 28,000 239,288
Elec & Eltek International Co., Ltd........................ 12,100 55,418
Fraser & Neave Ltd......................................... 12,000 51,988
Hotel Properties Ltd....................................... 102,000 66,588
Keppel Corp., Ltd.......................................... 33,000 94,789
Keppel Land Ltd............................................ 35,000 48,190
NatSteel Ltd............................................... 25,000 33,828
Oversea-Chinese Banking Corp., Ltd......................... 43,000 250,089
Singapore Airlines Ltd. (Frgn.)............................ 50,000 326,410
Singapore Press Holdings Ltd. (Frgn.)...................... 11,000 137,745
Singapore Telecommunications, Ltd.......................... 221,000 411,834
United Overseas Bank Ltd. (Frgn.).......................... 48,000 266,350
Venture Manufacturing (Singapore) Ltd...................... 20,000 55,786
Wing Tai Holdings Ltd...................................... 38,000 44,427
-----------
2,315,038
-----------
SPAIN -- 0.50%
Acerinox S.A............................................... 370 54,789
Banco Bilbao-Vizcaya S.A................................... 11,720 379,081
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
Banco Central Hispanoamericano.............................. 9,840 $ 239,512
Banco Popular Espanol S.A................................... 3,200 223,593
Banco Santander S.A......................................... 9,480 316,580
Empresa National de Electridad S.A.......................... 21,640 384,045
Fomento de Contrucciones y Contratas S.A.................... 4,400 167,432
Gas Natural SDG S.A......................................... 4,140 214,578
Iberdrola S.A............................................... 22,910 301,368
Mapfre Corp................................................. 3,860 102,312
Repsol S.A.................................................. 5,110 217,918
Repsol S.A. ADR (c)......................................... 1,000 42,563
Tabacalera S.A.............................................. 500 40,513
Telefonica de Espana........................................ 13,640 389,280
Vallehermoso S.A............................................ 3,470 106,317
Viscofan Envolturas Celulosicas S.A......................... 3,110 78,046
-----------
3,257,927
-----------
SWEDEN -- 0.33%
ABB AB, A Shares............................................ 9,400 111,360
Astra AB, A Shares.......................................... 21,800 377,776
Electrolux AB, B Shares..................................... 1,500 104,164
Hennes & Mauritz AB, B Shares............................... 5,200 229,375
Nordbanken Holding AB....................................... 50,400 285,202
Securitas AB, B Shares...................................... 3,700 111,915
Skanska AB, B Shares........................................ 2,800 114,864
Svenska Handelsbanken, A Shares............................. 4,500 155,679
Swedish Match AB............................................ 39,000 130,252
Telefonaktiebolaget LM Ericsson, B Shares................... 7,600 285,912
Volvo AB, B Shares.......................................... 8,100 217,440
-----------
2,123,939
-----------
SWITZERLAND -- 0.87%
ABB AG (Bearer)............................................. 105 132,096
CS Holdings AG (Reg.)....................................... 3,579 554,541
Holderbank Financiere Glarus, B Shares...................... 205 167,531
Nestle S.A. (Reg.).......................................... 460 690,347
Novartis AG (Reg.).......................................... 896 1,455,862
Roche Holding AG (Gen.)..................................... 101 1,004,391
Sairgroup (b)............................................... 113 154,943
Schweizerische Lebensversicherungs-und
Rentenastalt............................................... 245 192,661
Sulzer AG................................................... 194 123,162
Swiss Reinsurance Co. (Reg.)................................ 255 477,622
UBS (Bearer)................................................ 261 377,919
Zurich Versicherungs (Reg.)................................. 702 334,973
-----------
5,666,048
-----------
UNITED KINGDOM -- 4.42%
Abbey National PLC.......................................... 31,620 567,625
Barclays PLC................................................ 15,000 399,342
Bass PLC.................................................... 19,070 296,365
B.A.T. Industries PLC....................................... 156,484 1,426,444
BG PLC...................................................... 166,864 752,296
Billiton PLC (b)............................................ 122,000 313,155
Booker PLC.................................................. 72,220 380,262
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
British Energy PLC................................... 78,630 $ 547,273
British Petroleum Co. PLC............................ 93,091 1,225,385
British Sky Broadcating Group PLC.................... 42,000 315,130
British Steel PLC.................................... 116,470 250,092
British Telecommunications PLC....................... 142,980 1,125,725
BTR PLC.............................................. 61,420 185,953
Cable & Wireless PLC................................. 27,000 237,680
Cadbury Schweppes PLC................................ 56,000 565,298
Centrica PLC (b)..................................... 131,430 193,550
Charter PLC.......................................... 29,846 367,826
Coats Viyella PLC.................................... 123,860 185,459
Diageo PLC........................................... 65,150 599,777
FKI PLC.............................................. 158,500 498,124
General Electric Co. PLC............................. 139,550 905,841
Glaxo Wellcome PLC................................... 82,600 1,957,120
Greenalls Group PLC.................................. 32,000 230,621
Hanson PLC........................................... 53,102 237,332
Hillsdown Holdings PLC............................... 163,520 398,206
House of Fraser PLC.................................. 174,400 576,790
HSBC Holdings PLC.................................... 36,050 925,348
Inchcape PLC......................................... 87,470 234,597
Legal & General Group PLC............................ 79,400 695,036
Lloyds TSB Group PLC................................. 118,409 1,533,326
Marks & Spencer PLC.................................. 95,040 936,717
Mirror Group PLC..................................... 165,450 530,856
National Westminster Bank PLC........................ 33,380 555,830
Northern Foods PLC................................... 95,040 412,843
Peninsular & Oriental Steam Navigation Co............ 61,040 695,519
Reckitt & Colman PLC................................. 17,938 281,872
Reuters Holdings PLC................................. 36,530 399,711
Rio Tinto PLC........................................ 35,580 438,493
RJB Mining PLC....................................... 86,570 180,903
Royal & Sun Alliance Insurance Group PLC............. 52,943 534,003
Scottish Hydro-Electric PLC.......................... 37,480 309,584
Sears PLC............................................ 220,480 192,274
Sedgwick Group PLC................................... 146,360 341,968
SmithKline Beecham PLC............................... 86,180 883,425
Smurfit (Jefferson) Group PLC........................ 132,647 368,858
Tate & Lyle PLC...................................... 41,000 337,984
Tesco PLC............................................ 63,197 514,727
Thames Water PLC..................................... 43,210 644,506
The Great Universal Stores PLC....................... 51,000 643,636
Unilever PLC......................................... 36,040 308,957
Vodafone Group PLC................................... 86,090 621,859
Williams PLC......................................... 99,010 550,644
------------
28,812,147
------------
Total Non-U.S.Equities............................... 109,568,564
------------
EMERGING MARKETS EQUITIES -- 3.37%
Brinson Emerging Markets Equity
Fund (b)............................................ 2,402,916 22,017,923
------------
Total Equities (Cost $270,775,791)................... 308,749,791
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Bonds -- 48.80%
U.S. BONDS -- 24.49%
U.S. CORPORATE BONDS -- 7.93%
Aetna Services Inc. 6.970%, due 08/15/36.............. $ 265,000 $ 277,655
Aid-Israel
Series 10-Z, 0.000%, due 02/15/03.................... 6,720,000 4,989,533
Asset Securitization Corp.
7.210%, due 10/13/26................................. 2,310,000 2,411,876
Associates Corp. N.A.
6.450%, due 10/15/01................................. 480,000 483,416
Bank of America
FRN 6.110%, due 09/24/98............................. 2,000,000 1,999,156
Bellsouth Savings & Employee
ESOP 9.125%, due 07/01/03............................ 278,657 289,255
Capital One Bank
6.830%, due 05/17/99................................. 1,946,000 1,959,490
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02.......................... 1,000,000 1,001,570
Chase Manhattan Credit Card Trust
96-4A 6.730%, due 02/15/03........................... 1,050,000 1,060,059
Chemical Master Credit Card Trust
95-2A 6.230%, due 06/15/03........................... 1,430,000 1,438,852
Ches Pot Tel MD
8.000%, due 10/15/29................................. 98,000 116,730
Choice Credit Card
7.200%, due 03/15/98................................. 1,000,000 1,001,460
Chrysler Financial Corp.
4.220%, due 03/02/99................................. 1,192 1,182
7.400%, due 08/01/2097............................... 252,000 268,859
Citicorp
6.200%, due 11/10/00................................. 500,000 498,934
Coca-Cola Enterprises
6.375%, due 08/01/01................................. 550,000 553,936
Comcast Cable Communications
144A 8.500%, due 05/01/27............................ 1,720,000 2,028,819
Continental Airlines, Inc.
97-4A 6.900%, due 01/02/18........................... 1,850,000 1,849,722
CS First Boston Mortgage Securities Corp. 97-C1
7.150%, due 08/20/06................................. 1,465,000 1,524,230
Dayton Hudson Credit Card Master Trust 95-1A 6.100%,
due 02/25/02......................................... 132,000 132,115
Donaldson Lufkin & Jenrette
FRN 6.700%, due 06/30/00............................. 600,000 607,359
First National Bank of Chicago
Series E, 7.000%, due 05/08/00....................... 1,000,000 1,015,000
Ford Credit Grantor Trust
95-B 5.900%, due 10/15/00............................ 70,140 70,063
GE Capital Mtg. Services, Inc.
94-7 Class A12, 6.000%, due 02/25/09................. 1,637,884 1,594,234
General Motors Acceptance Corp.
6.375%, due 12/01/01................................. 500,000 502,194
9.625%, due 12/15/01................................. 331,000 369,814
GreenTree Financial Corp.
97-6 6.870%, due 01/15/29............................ 2,315,000 2,371,972
Lehman Brothers Holdings
7.250%, due 04/15/03................................. 1,250,000 1,290,470
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -----------
<S> <C> <C>
Lockheed Martin Corp.
7.700%, due 06/15/08................................ $ 148,000 $ 160,758
MBNA Global Capital Securities
FRN 6.550%, due 02/01/27............................ 1,100,000 1,010,386
Nationsbanc Asset Securities, Inc.
Series 1997-1, 6.375%, due 09/20/27................. 2,605,000 2,605,000
News America Holdings
7.750%, due 12/01/45................................ 1,877,000 1,954,160
Premier Auto Trust
96-4A Class A4, 6.400%, due 10/06/01................ 455,000 457,521
96-3A 6.500%, due 03/06/00.......................... 215,000 215,772
Prudential Home Mortgage Securities
94-3 A10, 6.500%, due 02/25/24...................... 1,000,000 960,700
Residential Asset Securitization Trust
97-A 11 P4, 7.000%, due 12/25/27.................... 200,000 200,625
Salomon, Inc.
6.500%, due 03/01/00................................ 2,520,000 2,533,414
6.750%, due 02/15/03................................ 550,000 557,808
Standard Credit Card Trust
95-1A 8.250%, due 01/01/07.......................... 500,000 553,740
Thrift Financial Corp.
11.250%, due 01/01/16............................... 84,445 91,074
Time Warner, Inc.
7.570%, due 02/01/24................................ 2,165,000 2,269,349
Time Warner Entertainment, Inc.
8.375%, due 03/15/23................................ 1,206,000 1,375,811
Turner Broadcasting
7.400%, due 02/01/04................................ 1,000,000 1,033,092
UCFC Home Equity Loan
97-C, Class A8, FRN 6.325%, due 09/15/27............ 1,573,947 1,572,640
Union Pacific
6.250%, due 03/15/99................................ 1,000,000 1,002,803
WMX Technologies, Inc.
7.000%, due 10/15/06................................ 1,500,000 1,523,497
-----------
51,786,105
-----------
INTERNATIONAL DOLLAR BONDS -- 4.10%
Abbey National PLC
7.350%, Resettable Perpetual Preferred.............. 250,000 259,942
ABN AMRO Bank NV (Chicago)
6.625%, due 10/31/01................................ 250,000 253,725
AT&T Corp.
8.250%, due 01/11/00................................ 945,000 982,777
Banca Commercial Italian
8.250%, due 07/15/07................................ 450,000 493,865
Banco Bilbao Vizcaya International Finance
7.000%, due 12/01/25................................ 2,200,000 2,175,862
Banco Santiago S.A.
7.000%, due 07/18/07................................ 2,000,000 2,005,432
Banque Centrale de Tunisie
8.250%, due 09/19/27................................ 1,750,000 1,592,833
Banque Paribas, Sub. Notes
6.875%, due 03/01/09................................ 175,000 174,239
Bayerische Landesbank
6.850%, due 07/19/01................................ 212,000 217,627
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -----------
<S> <C> <C>
Credit Suisse--London
144A 7.900%, Resettable Perpetual Preferred........ $ 2,600,000 $ 2,743,265
Den Danske Bank
144A 7.400%, due 06/15/10.......................... 2,050,000 2,138,896
DR Investments
144A 7.450%, due 05/15/07.......................... 320,000 338,218
Empresa Nacional Electric
7.875%, due 02/01/27............................... 316,000 334,590
Hanson PLC Notes
6.750%, due 09/15/05............................... 290,000 296,407
International Telecom Satellite
8.125%, due 02/28/05............................... 335,000 368,506
Japanese Development Bank
8.375%, due 02/15/01............................... 970,000 1,030,452
Korea Development Bank
7.125%, due 09/17/01............................... 200,000 170,240
LKB Baden-Wuerttemberg Finance NV
8.125%, due 01/27/00............................... 350,000 363,675
Pan Pacific Industry PLC
144A 0.000%, due 04/28/07.......................... 2,130,000 1,051,202
Petroliam Nasional
7.125%, due 08/15/05............................... 420,000 396,345
Poland Non-U.S. Global Regd
FRN 6.940%, due 10/27/24........................... 300,000 289,125
Province of Quebec
7.500%, due 07/15/23............................... 325,000 350,428
Ras Laffan Liquified Natural Gas Co. Ltd. 144A
8.294%, due 03/15/14............................... 1,910,000 1,797,321
Repsol International Finance
7.000%, due 08/01/05............................... 735,000 771,860
Republic of South Africa
9.625%, due 12/15/99............................... 1,079,000 1,116,765
Royal Bank of Scotland
7.375%, Resettable Perpetual Preferred............. 690,000 716,362
Skandinaviska Enskilda Banken
144A 6.625%, Resettable Perpetual Preferred........ 500,000 502,000
Sociedad Quimica y Minera de Chiles SA, 144A 7.700%,
due 09/15/06....................................... 1,500,000 1,559,369
Southern Investments UK
6.800%, due 12/01/06............................... 1,625,000 1,637,787
Swedbank
144A FRN 7.664%, Resettable Perpetual Preferred.... 270,000 274,050
Telstra Corp. Ltd.
6.500%, due 11/28/05............................... 350,000 351,226
-----------
26,754,391
-----------
U.S. GOVERNMENT AGENCIES -- 7.33%
Federal Home Loan Mortgage Corp.
6.200%, due 08/15/07............................... 700,000 690,375
6.200%, due 12/15/08............................... 700,000 690,703
7.000%, due 10/15/13............................... 2,275,469 2,323,850
6.500%, due 05/15/21............................... 1,248,829 1,248,891
7.500%, due 01/15/23............................... 787,978 827,440
7.000%, due 01/15/25............................... 1,100,000 1,095,267
7.238%, due 05/01/26............................... 334,042 345,941
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -------------
<S> <C> <C>
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22.............................. $ 144,007 $ 149,002
8.000%, due 05/01/23.............................. 1,496,337 1,548,242
9.000%, due 03/01/24.............................. 1,056,907 1,141,428
9.500%, due 04/01/25.............................. 48,223 51,509
Federal National Mortgage Association
5.000%, due 06/01/01.............................. 1,412,398 1,366,862
6.540%, due 09/18/02.............................. 4,690,000 4,743,020
6.220%, due 03/13/06.............................. 1,700,000 1,716,563
8.000%, due 02/25/07.............................. 1,635,000 1,697,272
6.500%, due 05/25/08.............................. 909,485 907,748
6.500%, due 12/01/11 TBA.......................... 435,000 435,272
8.000%, due 05/25/21.............................. 1,610,000 1,684,266
9.000%, due 08/01/21.............................. 278,492 299,176
8.000%, due 05/01/22.............................. 116,793 120,880
8.500%, due 07/01/22.............................. 668,918 708,591
7.500%, due 07/25/22.............................. 2,154,635 2,257,934
6.500%, due 12/15/23.............................. 2,610,000 2,601,791
9.000%, due 02/01/25.............................. 1,885 2,003
6.500%, due 04/01/26.............................. 1,543,380 1,523,124
6.500%, due 12/01/26 TBA.......................... 5,000,000 4,934,375
6.730%, due 04/25/27 FRN.......................... 1,561,566 1,571,621
6.175%, due 10/01/27.............................. 1,381,103 1,379,308
6.500%, due 12/01/27.............................. 2,608,650 2,574,411
Federal National Mortgage Association Strip
0.00%, due 04/01/27, principal only............... 2,733,923 2,076,141
Government National Mortgage Association
10.000%, due 09/15/00............................. 3,022 3,217
10.000%, due 05/15/01............................. 5,907 6,290
9.000%, due 11/15/04.............................. 17,025 17,893
8.500%, due 05/15/21.............................. 49,980 52,494
8.000%, due 08/15/22.............................. 524,142 543,470
8.000%, due 12/15/22.............................. 1,475,029 1,538,190
8.000%, due 11/15/22.............................. 431,844 450,335
7.500%, due 11/15/24.............................. 2,477,404 2,543,402
------------
47,868,297
------------
U.S. GOVERNMENT OBLIGATIONS -- 5.13%
U.S. Treasury Notes and Bonds
5.500%, due 11/15/98.............................. 172,000 171,731
6.000%, due 06/30/99.............................. 13,740,000 13,808,700
5.875%, due 08/31/99.............................. 9,185,000 9,213,703
7.750%, due 11/30/99.............................. 215,000 222,928
6.625%, due 07/31/01.............................. 930,000 956,448
6.250%, due 08/31/02.............................. 2,975,000 3,036,359
6.000%, due 02/15/26.............................. 5,875,000 5,867,656
U.S. Treasury Strip
0.000%, due 02/15/03, principal only.............. 225,000 168,237
------------
33,445,762
------------
Total U.S. Bonds................................... 159,854,555
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------
<S> <C> <C>
HIGH YIELD BONDS -- 2.64%
Brinson High Yield Fund (b)........................ 1,231,792 17,201,354
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -------------
<S> <C> <C>
NON - U.S. BONDS--16.43%
AUSTRALIA -- 1.17%
Government of Australia
7.00%, due 04/15/00 ..........................AUD 2,300,000 $ 1,550,958
9.75%, due 03/15/02.............................. 3,400,000 2,550,377
10.00%, due 10/15/07............................. 1,200,000 1,013,253
Queensland Treasury Global Notes
8.00%, due 05/14/03.............................. 3,500,000 2,504,390
------------
7,618,978
------------
CANADA -- 2.00%
Government of Canada
7.50%, due 09/01/00...........................CAD 3,380,000 2,487,043
6.50%, due 06/01/04.............................. 500,000 367,658
8.75%, due 12/01/05.............................. 2,600,000 2,179,977
7.00%, due 12/01/06.............................. 4,270,000 3,271,081
4.25%, due 12/01/21 (d).......................... 6,060,000 4,699,348
------------
13,005,107
------------
DENMARK -- 1.88%
Kingdom of Denmark
9.00%, due 11/15/98...........................DKK 3,200,000 485,417
9.00%, due 11/15/00.............................. 13,600,000 2,203,242
6.00%, due 11/15/02.............................. 10,000,000 1,520,869
7.00%, due 12/15/04.............................. 8,200,000 1,305,313
8.00%, due 03/15/06.............................. 40,000,000 6,767,532
------------
12,282,373
------------
FRANCE -- 0.65%
Government of France (OAT)
9.50%, due 01/25/01.......................... FRF 10,300,000 1,950,939
7.50%, due 04/25/05.............................. 9,300,000 1,767,711
8.50%, due 12/26/12.............................. 2,500,000 538,149
------------
4,256,799
------------
GERMANY -- 4.06%
Bundesrepublik Deutschland
7.000%, due 09/20/99..........................DEM 13,700,000 7,971,158
8.500%, due 08/21/00............................. 2,180,000 1,333,509
9.000%, due 01/22/01............................. 2,500,000 1,565,402
8.375%, due 05/21/01............................. 1,580,000 980,635
7.250%, due 10/21/02............................. 4,500,000 2,760,163
6.750%, due 04/22/03............................. 4,900,000 2,955,915
6.750%, due 07/15/04............................. 6,300,000 3,830,243
6.250%, due 01/04/24............................. 2,500,000 1,460,848
Treuhandanstalt
6.250% due 03/04/04.............................. 6,200,000 3,669,451
------------
26,527,324
------------
ITALY -- 0.86%
Republic of Italy (BTP)
9.50%, due 12/01/99...........................ITL 1,900,000,000 1,155,335
10.50%, due 04/01/00............................. 995,000,000 627,485
12.00%, due 09/01/02............................. 1,700,000,000 1,223,139
9.00%, due 10/01/03.............................. 900,000,000 600,407
8.50%, due 04/01/04.............................. 3,100,000,000 2,030,022
------------
5,636,388
------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
NETHERLANDS -- 1.44%
Government of Netherlands
6.25%, due 07/15/98...............................NLG 1,400,000 $ 698,515
8.50%, due 03/15/01.................................. 5,600,000 3,070,843
8.75%, due 09/15/01.................................. 700,000 391,314
6.50%, due 04/15/03.................................. 1,100,000 580,847
7.25%, due 10/01/04.................................. 3,200,000 1,763,133
8.25%, due 02/15/07.................................. 4,815,000 2,865,534
-----------
9,370,186
-----------
SPAIN -- 1.06%
Government of Spain
6.75%, due 04/15/00...............................ESP 415,000,000 2,847,578
7.90%, due 02/28/02.................................. 140,000,000 1,016,796
8.00%, due 05/30/04.................................. 300,000,000 2,250,689
10.00%, due 02/28/05................................. 100,000,000 832,057
-----------
6,947,120
-----------
SWEDEN -- 0.50%
Government of Sweden
5.50%, due 04/12/02...............................SEK 6,500,000 817,321
10.25%, due 05/05/03.............................. 16,300,000 2,475,362
-----------
3,292,683
-----------
UNITED KINGDOM -- 2.81%
UK Treasury
8.00%, due 06/10/03...............................GBP 2,590,000 4,549,280
6.75%, due 11/26/04.................................. 380,000 637,762
8.50%, due 12/07/05.................................. 4,570,000 8,485,330
8.50%, due 07/16/07.................................. 1,200,000 2,266,351
7.25%, due 12/07/07.................................. 1,200,000 2,114,563
8.75%, due 08/25/17.................................. 130,000 272,193
-----------
18,325,479
-----------
Total Non-U.S. Bonds.................................. 107,262,437
-----------
EMERGING MARKETS DEBT -- 5.24% SHARES
-----------
Brinson Emerging Markets Debt
Fund (b)............................................. 1,692,314 34,231,280
-----------
Total Bonds (Cost $307,234,717)....................... 318,549,626
-----------
Short-Term Investments -- 16.74%
FACE
U.S. GOVERNMENT OBLIGATIONS -- 0.25% AMOUNT
-----------
U.S. Treasury Bill 5.420%, due 05/28/98............... $ 1,630,000 1,595,361
-----------
CERTIFICATES OF DEPOSIT -- 0.92%
Canadian Imperial Bank
5.940%, due 10/23/98................................. 3,000,000 2,998,614
Societe General
6.000%, due 10/20/98................................. 3,000,000 2,997,715
-----------
5,996,329
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- ------------
<S> <C> <C>
COMMERCIAL PAPER -- 15.57%
Bausch & Lomb Inc.
7.750%, due 01/02/98................................. $ 2,290,000 $ 2,289,507
6.750%, due 01/05/98................................. 15,000,000 14,991,562
Case Credit Corp.
6.110%, due 01/20/98................................. 2,800,000 2,790,971
6.030%, due 03/10/98................................. 1,000,000 988,610
6.020%, due 03/13/98................................. 1,500,000 1,482,191
ConAgra, Inc.
5.900%, due 01/23/98................................. 5,000,000 4,982,792
CSX Corp.
5.700%, due 01/05/98................................. 5,000,000 4,997,625
Cummins Engine Co., Inc.
7.000%, due 01/02/98................................. 6,175,000 6,175,000
General American Tranportation Corp.
7.500%, due 01/07/98................................. 682,000 681,147
GTE Corp.
6.120%, due 02/20/98................................. 1,500,000 1,487,250
6.020%, due 03/02/98................................. 1,500,000 1,484,950
ITT Industries, Inc.
7.250%, due 01/02/98................................. 10,000,000 9,997,986
6.250%, due 01/06/98................................. 1,909,000 1,907,674
Marriott Corp.
6.050%, due 02/09/98................................. 2,000,000 1,986,892
Nabisco, Inc.
6.100%, due 01/07/98................................. 5,000,000 4,995,764
6.120%, due 01/16/98................................. 2,500,000 2,493,625
Occidental Petroleum Corp.
6.900%, due 01/12/98................................. 5,000,000 4,990,417
6.000%, due 01/16/98................................. 2,500,000 2,493,750
Praxair, Inc.
6.550%, due 01/02/98................................. 1,000,000 999,818
5.750%, due 01/05/98................................. 5,000,000 4,997,604
Rite Aid Corp.
5.850%, due 01/20/98................................. 5,000,000 4,985,375
Safeway, Inc.
5.920%, due 01/22/98................................. 1,500,000 1,494,820
Solutia, Inc.
7.000%, due 01/02/98................................. 7,915,000 7,915,000
Tupperware, Corp.
7.050%, due 01/02/98................................. 4,590,000 4,590,000
Ultramar Diamond Shamrock Corp.
6.000%, due 01/06/98................................. 5,000,000 4,996,667
Vastar Resources, Inc.
7.100%, due 01/02/98................................. 451,000 450,911
------------
101,647,908
------------
Total Short-Term Investments
(Cost $109,239,959).................................. 109,239,598
------------
Total Investments
(Cost $687,250,467) -- 112.84% (a)................... 736,539,015
------------
Liabilities, less cash and other assets--(12.84%)..... (83,850,246)
------------
Net Assets -- 100%.................................... $652,688,769
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $687,250,467; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $75,270,262
Gross unrealized depreciation................................ (25,981,714)
-----------
Net unrealized appreciation............................... $49,288,548
===========
</TABLE>
(b) Non-income producing security
(c) Denominated in U.S. dollars.
(d) Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating rate note---The rate disclosed is that in effect at December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $12,433,140 or 1.90% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Fund had the following open forward currency contracts as of
December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar........... 2/5/98 7,300,000 $ 4,760,414 $ (529,176)
Belgian Franc............... 2/5/98 176,000,000 4,759,921 (176,965)
British Pound............... 2/5/98 2,000,000 3,285,151 (54,849)
Canadian Dollar............. 2/5/98 9,700,000 6,785,684 (31,600)
Danish Kroner............... 2/5/98 17,000,000 2,487,249 (13,486)
Dutch Guilder............... 2/5/98 7,300,000 3,608,752 (70,412)
French Franc................ 2/5/98 27,900,000 4,647,297 67,820
German Mark................. 2/5/98 8,500,000 4,736,986 (33,472)
Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (14,258)
Japanese Yen................ 2/5/98 4,950,000,000 38,269,152 (5,018,981)
Spanish Peseta.............. 2/5/98 165,000,000 1,083,559 (7,855)
Swiss Franc................. 2/5/98 8,700,000 5,989,384 59,237
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar........... 2/5/98 20,900,000 13,629,131 1,304,887
Belgian Franc............... 2/5/98 176,000,000 4,759,921 (51,899)
British Pound............... 2/5/98 23,000,000 37,779,238 126,402
Canadian Dollar............. 2/5/98 19,800,000 13,851,191 527,685
Danish Kroner............... 2/5/98 86,600,000 12,670,340 (76,941)
Dutch Guilder............... 2/5/98 17,600,000 8,700,553 10,137
German Mark................. 2/5/98 41,700,000 23,239,095 (97,035)
Italian Lira................ 2/5/98 8,650,000,000 4,891,317 (57,429)
Japanese Yen................ 2/5/98 3,600,000,000 27,832,111 2,710,530
Spanish Peseta.............. 2/5/98 840,000,000 5,516,299 227,585
-----------
Total...................... $(1,200,075)
===========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Fund had the following open futures contracts as of December 31,
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 Note,182
contracts..................... March 1998 $19,709,740 $19,769,750 $ 60,010
10 year U.S. Treasury Note, 9
contracts..................... March 1998 1,002,723 1,009,406 6,683
30 year U.S. Treasury Bonds, 27
contracts..................... March 1998 3,258,765 3,252,656 (6,109)
INDEX FUTURES SALES CONTRACTS
Standard & Poor's 500,108 con-
tracts........................ March 1998 26,240,844 26,435,700 (194,856)
---------
Total......................... $(134,272)
=========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1997 was $1,595,361.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $613,477,833)....................... $654,586,339
Affiliated issuers (Cost $73,772,634).......................... 81,952,676
Cash........................................................... 967,618
Foreign currency, at value (Cost $1,661,900).................... 1,650,073
Receivables:
Investment securities sold..................................... 4,199,922
Dividends...................................................... 566,826
Interest....................................................... 5,279,895
Fund shares sold............................................... 2,750
Other assets.................................................... 68,200
------------
TOTAL ASSETS................................................. 749,274,299
------------
LIABILITIES:
Payables:
Securities loaned (Note 6)..................................... 79,523,767
Investment securities purchased................................ 15,247,486
Fund shares redeemed........................................... 63,989
Investment advisory fees (Note 2).............................. 451,581
Accrued expenses............................................... 98,632
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 1,200,075
------------
TOTAL LIABILITIES............................................ 96,585,530
------------
NET ASSETS....................................................... $652,688,769
============
NET ASSETS CONSIST OF:
Paid in capital (Note 8)........................................ $606,550,960
Accumulated distribution in excess of net investment income..... (19,500,419)
Accumulated net realized gain................................... 17,760,003
Net unrealized appreciation..................................... 47,878,225
------------
NET ASSETS................................................... $652,688,769
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $624,336,530 and 51,450,863 shares is-
sued and outstanding) (Note 8)................................ $ 12.13
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,019 and 84 shares issued and outstanding) (Note 8)......... $ 12.13
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $28,351,220 and 2,346,083 shares is-
sued and outstanding) (Note 8)................................ $ 12.08
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $10,982 for foreign taxes withheld; including
securities lending income of $73,183)........................... $ 9,386,734
Dividends (net of $135,273 for foreign taxes withheld)........... 2,639,326
-----------
TOTAL INCOME.................................................. 12,026,060
-----------
EXPENSES:
Advisory (Note 2)................................................ 2,635,060
Administration................................................... 247,037
Distribution (Note 7)............................................ 92,076
Custodian........................................................ 74,111
Other............................................................ 164,286
-----------
TOTAL EXPENSES................................................ 3,212,570
-----------
NET INVESTMENT INCOME ........................................ 8,813,490
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 20,050,524
Futures contracts............................................... (874,722)
Foreign currency transactions................................... 4,235,588
-----------
Net realized gain............................................. 23,411,390
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ (14,119,807)
Futures contracts............................................... 158,670
Forward contracts............................................... (7,317,967)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. (43,884)
-----------
Change in net unrealized appreciation or depreciation......... (21,322,988)
-----------
Net realized and unrealized gain................................. 2,088,402
-----------
Net increase in net assets resulting from operations............. $10,901,892
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1997 ENDED
(UNAUDITED) JUNE 30, 1997
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................ $ 8,813,490 $ 16,194,760
Net realized gain............................ 23,411,390 43,268,043
Change in net unrealized appreciation or de-
preciation.................................. (21,322,988) 35,756,888
------------ -------------
Net increase in net assets resulting from op-
erations.................................... 10,901,892 95,219,691
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
Brinson Class I.............................. (26,359,274) (23,918,105)
Brinson Class N.............................. (40) --
SwissKey Class............................... (989,891) (742,228)
Distributions from net realized gain
Brinson Class I.............................. (33,973,096) (25,579,684)
Brinson Class N.............................. (53) --
SwissKey Class............................... (1,492,307) (848,410)
------------ -------------
Total distributions to shareholders........... (62,814,661) (51,088,427)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................. 102,712,225 192,297,100
Shares issued on reinvestment of distribu-
tions....................................... 56,902,593 49,580,585
Shares redeemed.............................. (67,984,082) (145,001,283)
------------ -------------
Net increase in net assets resulting from
capital share transactions (Note 8)......... 91,630,736 96,876,402
------------ -------------
TOTAL INCREASE IN NET ASSETS.............. 39,717,967 141,007,666
------------ -------------
NET ASSETS:
Beginning of year............................ 612,970,802 471,963,136
------------ -------------
End of year (including accumulated undistrib-
uted net investment income of ($19,500,419)
and ($964,704), respectively)............... $652,688,769 $ 612,970,802
============ =============
</TABLE>
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>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30, AUGUST 31, 1992*
1997 -------------------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 1994 JUNE 30, 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income. 0.24** 0.38 0.44 0.43 0.33 0.26
Net realized and
unrealized gain
(loss)............... -- 1.79 1.37 0.86 (0.23) 0.81
-------- -------- -------- -------- -------- --------
Total income from
investment
operations......... 0.24 2.17 1.81 1.29 0.10 1.07
-------- -------- -------- -------- -------- --------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.54) (0.61) (0.62) (0.27) (0.27) (0.20)
Distributions from and
in excess of net
realized gain........ (0.70) (0.65) (0.32) (0.10) (0.27) --
-------- -------- -------- -------- -------- --------
Total distributions. (1.24) (1.26) (0.94) (0.37) (0.54) (0.20)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period................. $ 12.13 $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
======== ======== ======== ======== ======== ========
Total return (non-
annualized)............ 1.95% 18.79% 16.38% 12.57% 0.77% 10.76%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $624,337 $586,667 $457,933 $365,678 $278,859 $191,389
Ratio of expenses to
average net
assets:
Before expense reim-
bursement............ 0.95%*** 0.99% 1.04% 1.09% 1.14% 1.35%***
After expense reim-
bursement............ N/A N/A N/A N/A 1.10% 1.05%***
Ratio of net investment
income to
average net assets:
Before expense reim-
bursement............ 3.60%*** 3.03% 3.69% 4.27% 3.21% 3.26%***
After expense reim-
bursement............ N/A N/A N/A N/A 3.25% 3.56%***
Portfolio turnover
rate.................. 57% 150% 142% 238% 231% 149%
Average commission rate
paid per share........ $ 0.0352 $ 0.0326 $ 0.0291 N/A N/A N/A
</TABLE>
*Commencement of investment operations
**The net investment income per share was determined by using average shares
outstanding throughout the period.
***Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- -----------------------------------------------
<S> <C>
Net asset value, beginning
of period.................. $ 13.13
-------
Income from investment op-
erations: 0.00
Net investment income..... 0.22**
Net realized and
unrealized gain.......... 0.00
-------
Total income from in-
vestment operations.... 0.22
-------
Less distributions:
Distributions from and in
excess of net investment
income................... (0.52)
Distributions from net re-
alized gain.............. (0.70)
-------
Total distributions..... (1.22)
-------
Net asset value, end of pe-
riod....................... $ 12.13
=======
Total return (non-
annualized)................ 1.79%
Ratios/Supplemental Data:
Net assets, end of period
(in 000s)................. $ 1
Ratio of expenses to aver-
age net assets............ 1.20%***
Ratio of net investment in-
come to average net as-
sets...................... 3.35%***
Portfolio turnover rate.... 57%
Average commission rate
paid per share............ $0.0352
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** The net investment income per share was determined by using average shares
outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 13.05 $ 12.18 $ 11.60
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.19** 0.34 0.39
Net realized and unrealized
gain......................... -- 1.75 1.10
------- ------- -------
Total income from investment
operations................. 0.19 2.09 1.49
------- ------- -------
Less distributions:
Distributions from and in
excess of net investment
income....................... (0.46) (0.57) (0.59)
Distributions from net real-
ized gain.................... (0.70) (0.65) (0.32)
------- ------- -------
Total distributions......... (1.16) (1.22) (0.91)
------- ------- -------
Net asset value, end of period.. $ 12.08 $ 13.05 $ 12.18
======= ======= =======
Total return (non-annualized)... 1.58% 18.13% 13.24%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $28,351 $26,303 $14,030
Ratio of expenses to average
net assets.................... 1.60%*** 1.64% 1.69%***
Ratio of net investment income
to average net assets......... 2.94%*** 2.38% 3.04%***
Portfolio turnover rate........ 57% 150% 142%
Average commission rate paid
per share..................... $0.0352 $0.0326 $0.0291
</TABLE>
* Commencement of SwissKey Class
** The net investment income per share was determined by using average shares
outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
[SWISS KEY FUNDS LOGO APPEARS HERE]
Global Equity Fund
- --------------------------------------------------------------------------------
The Global Equity Fund is actively managed, providing a fully integrated
approach to the primary equity markets across the world. Market selection and
currency strategies are managed within a global asset allocation framework.
Industry strategies and individual security selections are based on the
fundamental research of our analytical teams in our offices worldwide.
The SwissKey Global Equity Fund has provided an annualized return of 15.07%
since its inception on July 31, 1995, exceeding the 14.73% return for the
benchmark MSCI World Equity (Free) Index. Over this period, the SwissKey Global
Equity Fund experienced annualized volatility of 8.88%, below the volatility of
the benchmark which was 10.96%. For the year ended December 31, 1997, the Fund
returned 9.86%, compared to the benchmark return of 15.92%.
Since inception, the Fund's largest contributor to performance has been currency
allocation. For 1997, currency allocation made an important positive
contribution to Fund performance. Market allocation strategies, notable for a
U.S. equity market underweight and a cash risk hedge, detracted from
performance. Security selection also reduced performance; with very strong stock
selection in Japan more than offset by poor results in the U.S.
As global equity markets in aggregate were strong in 1997, holding cash cost
performance. Returns varied considerably, however, double-digit rises in Europe
and North America contrasted sharply with very weak markets in the Pacific
region. Despite a return of 34.1% for the MSCI U.S. component, the U.S. equity
market was not the strongest developed market during 1997. Nine markets in the
global equity index outperformed the U.S. market, led by Switzerland and
Denmark, gaining U.S. dollar-hedged returns of 63.5% and 59.5% respectively. The
performance of the MSCI World Equity (Free) Index was muted by the weakness of
Japan, Southeast Asia, New Zealand and Australia. The worst performing market in
1997 was Malaysia, which declined 52.1% in U.S. dollar-hedged terms.
Currency strategies contributed substantially to the performance of the Fund
relative to the MSCI World Equity (Free) benchmark. At the start of the year,
the Fund maintained a significant underweight to the Japanese yen and to the
core European currencies. This position was gradually pared down and by the end
of March was relatively neutral. In October, a small underweight of the yen was
reinstated, increasing the size of the U.S. dollar overweight. For the full
year, the U.S. dollar overweight and yen underweight made the greatest positive
impact on returns.
Japan stock selection made a very large positive contribution, benefiting from
overweights of blue chip multinationals and other defensive securities, while
avoiding all but the highest quality banks and financials. The U.S. equity
portion of the Fund was hurt by its underexposure to large capitalization and
consumer products issues, as companies with well-known brand names and stable
cash flows outperformed.
26
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey Global Equity Fund -2.11% 9.86% 15.07%
MSCI World Equity (Free) Index 0.36 15.92 14.73
- --------------------------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey Global Equity Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Global
Equity Fund and the MSCI World Equity (Free) Index if you had invested $10,000
on July 31, 1995, and had reinvested all your income dividends and capital gain
distributions through December 31, 1997. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SwissKey Global Equity Fund
vs. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey Global MSCI World Equity
Equity Fund (Free) Index
<S> <C> <C>
7/31/95 10000 10000
9/30/95 10329 10066
12/31/95 10993 10556
3/31/96 11539 10998
6/30/96 11925 11325
9/30/96 12110 11488
12/31/96 12787 12025
3/31/97 13011 12064
6/30/97 14351 13889
9/30/97 14711 14284
12/31/97 14048 13939
</TABLE>
7/31/95=$10,000 Data through 12/31/97
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
27
<PAGE>
Global Equity Fund
- -------------------------------------------------------------------------------
[SWISSKEY LOGO APPEARS HERE]
Market Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. 49.8% 34.3%
Japan 12.0 5.6
Australia 1.3 2.7
Belgium 0.6 1.8
Canada 2.5 1.6
France 3.8 3.7
Germany 4.7 4.5
Hong Kong 1.3 0.5
Italy 1.9 2.3
Malaysia 0.4 0.8
Netherlands 2.7 2.4
New Zealand 0.1 1.9
Spain 1.3 1.3
Sweden 1.2 0.9
Switzerland 3.7 2.6
U.K. 10.3 11.8
Other Markets 2.4 1.3
Cash Reserves 0.0 20.0
- ----------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------------------------
<S> <C>
1. Lockheed Martin Corp. 2.02%
2. Xerox Corp. 1.95
3. Philip Morris Companies, Inc. 1.84
4. Aon Corp. 1.64
5. CIGNA Corp. 1.63
6. Schering Plough Corp. 1.44
7. Burlington Northern Santa Fe Corp. 1.41
8. Goodyear Tire & Rubber Co. 1.36
9. Federal Express Corp. 1.36
10. Automatic Data Processing, Inc. 1.17
- -----------------------------------------------------------------
</TABLE>
Currency Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -----------------------------------------------------------------
<S> <C> <C>
U.S. 49.8% 57.4%
Japan 12.0 8.0
Australia 1.3 1.3
Belgium 0.6 0.6
Canada 2.5 2.5
France 3.8 3.8
Germany 4.7 4.7
Hong Kong 1.3 --
Italy 1.9 1.9
Malaysia 0.4 0.4
Netherlands 2.7 2.7
New Zealand 0.1 1.9
Spain 1.3 1.3
Sweden 1.2 1.2
Switzerland 3.7 3.7
U.K. 10.3 6.3
Other Markets 2.4 2.3
- -----------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------------------------
<S> <C>
1. Glaxo Wellcome PLC 0.77%
2. Telecom Corp. of New Zealand Ltd. 0.75
3. Royal Dutch Petroleum Co. 0.71
4. Novartis AG(Reg.) 0.67
5. Lloyds TSB Group PLC 0.61
6. B.A.T. Industries PLC 0.56
7. Allianz AG 0.53
8. British Petroleum Co. PLC 0.48
9. Roche Holding AG (Gen.) 0.46
10. British Telecommunications PLC 0.44
- -----------------------------------------------------------------
</TABLE>
=================================================================
28
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Energy.................................................................. 1.93%
Capital Investment
Capital Goods...................................................... 3.37
Technology......................................................... 4.11
----
7.48
Basic Industries
Chemicals.......................................................... 1.00
Housing/Paper...................................................... 2.43
Metals............................................................. 0.42
-----
3.85
-----
Consumer
Non-Durables....................................................... 4.62
Retail/Apparel..................................................... 2.43
Autos/Durables..................................................... 1.87
Descretionary...................................................... 1.74
Health: Drugs...................................................... 3.86
Health: Non-Drugs.................................................. 2.04
-----
16.56
Financial
Banks.............................................................. 3.74
Non-Banks.......................................................... 3.33
-----
7.07
Utilities
Electric........................................................... 2.93
Telephone.......................................................... 0.51
-----
3.44
Transportation.......................................................... 2.93
Services/Misc........................................................... 4.49
-----
Total U.S. Equities................................................ 47.75*
-----
NON-U.S. EQUITIES
Aerospace & Military.................................................... 0.09
Airplanes............................................................... 0.17
Appliances & Household.................................................. 0.75
Autos/Durables.......................................................... 1.42
Banking................................................................. 5.34
Beverages and Tobacco................................................... 1.14
Broadcasting & Publishing............................................... 0.80
Building Materials...................................................... 0.63
Business & Public Service............................................... 1.47
Chemicals............................................................... 1.24
Construction............................................................ 0.36
Data Processing......................................................... 0.31
Electric Components..................................................... 0.46
Electronics............................................................. 1.61
Energy.................................................................. 3.82
Financial Services...................................................... 1.01
Food & House Products................................................... 1.59
Forest Products......................................................... 0.57
Gold Mining............................................................. 0.03
Health: Drugs........................................................... 0.72
Health: Non-Drugs....................................................... 2.51
Industrial Components................................................... 0.58
Insurance............................................................... 2.92
Leisure & Tourism....................................................... 0.25
Machinery & Engineering................................................. 0.08
Merchandising........................................................... 2.03
Metals--Steel........................................................... 0.70
Miscellaneous Materials................................................. 0.17
Miscellaneous Services.................................................. 0.05
Multi-Industry.......................................................... 2.38
Non-Ferrous Metals...................................................... 0.84
Real Estate............................................................. 0.49
Recreation.............................................................. 0.17
Retail & Apparel........................................................ 0.28
Shipping................................................................ 0.02
Telecommunications...................................................... 3.94
Textiles & Apparel...................................................... 0.08
Transportation.......................................................... 0.42
Utilities............................................................... 2.01
Wholesale & International Trade......................................... 0.24
------
Total Non-U.S. Equities............................................. 43.69
------
SHORT-TERM INVESTMENTS.................................................. 8.78*
------
TOTAL INVESTMENTS................................................... 100.22
------
LIABILITIES LESS CASH
AND OTHER ASSETS.................................................... (0.22)
------
NET ASSETS.............................................. 100.00%
======
- --------------------------------------------------------------------------------
</TABLE>
* The Fund held a short position in stock index futures on December 31, 1997
which reduced U.S. Equity exposure from 47.75% to 33.35%. This adjustment
results in an increase in the Fund's exposure to Short-Term Investments from
8.78% to 23.18%.
================================================================================
29
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Equities -- 91.44%
U.S. EQUITY -- 47.75%
Allergan, Inc............................................... 12,100 $ 406,106
Alza Corp. (b).............................................. 11,800 375,387
American Home Products Corp................................. 9,500 726,750
Aon Corp.................................................... 22,750 1,333,719
Automatic Data Processing, Inc.............................. 15,500 951,312
Baxter International, Inc................................... 15,300 771,694
Beckman Instruments, Inc.................................... 4,600 184,000
Biogen, Inc. (b)............................................ 4,600 167,325
Birmingham Steel Corp....................................... 4,700 74,025
Boston Technology, Inc. (b)................................. 4,500 113,062
Briggs & Stratton Corp...................................... 600 29,137
Burlington Northern Santa Fe Corp........................... 12,400 1,152,425
Champion Enterprises, Inc. (b).............................. 7,600 156,275
Champion International Corp................................. 600 27,187
Chase Manhattan Corp........................................ 6,400 700,800
CIGNA Corp.................................................. 7,700 1,332,581
Circuit City Stores-Circuit City Group...................... 17,400 618,787
Citicorp.................................................... 5,700 720,694
CMS Energy Corp............................................. 15,200 669,750
Comerica, Inc............................................... 3,200 288,800
Commscope, Inc. (b)......................................... 8,933 120,037
Comverse Technology, Inc. (b)............................... 2,300 89,700
Corning, Inc................................................ 25,200 935,550
Covance, Inc. (b)........................................... 5,900 117,262
CPC International, Inc...................................... 5,200 561,600
Crown Cork & Seal Co., Inc.................................. 5,600 280,700
CVS Corp.................................................... 7,500 480,469
Dial Corp................................................... 6,100 126,956
Eastman Chemical Co......................................... 6,500 387,156
Echlin, Inc................................................. 3,300 119,419
EMC Corp. (b)............................................... 33,800 927,387
Enron Corp.................................................. 15,800 656,687
Entergy Corp................................................ 30,900 925,069
Federal Express Corp. (b)................................... 18,100 1,105,231
First American Corp. of Tennessee........................... 3,100 154,225
First Data Corp............................................. 28,604 836,667
First Security Corp......................................... 3,900 163,312
FirstEnergy Corp............................................ 9,227 267,583
Fleetwood Enterprises, Inc.................................. 3,600 152,775
Food Lion, Inc. Class A..................................... 23,500 198,281
Forest Laboratories, Inc. (b)............................... 5,400 266,287
Fort James Corp............................................. 13,800 527,850
Gannett Co., Inc............................................ 11,800 729,388
General Semiconductor, Inc. (b)............................. 7,425 85,852
Genzyme Corp................................................ 4,800 133,200
Geon Co..................................................... 3,200 74,800
Goodyear Tire & Rubber Co................................... 17,400 1,107,075
Harnischfeger Industries, Inc............................... 9,000 317,813
Health Care and Retirement Corp. (b)........................ 5,350 215,338
Hibernia Corp............................................... 6,600 124,163
Informix Corp. (b).......................................... 6,300 29,925
Interpublic Group of Companies, Inc......................... 7,650 381,066
Kimberly Clark Corp......................................... 14,100 695,306
Lear Corp. (b).............................................. 5,100 242,250
Lockheed Martin Corp........................................ 16,751 1,649,974
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Lyondell Petrochemical Co................................... 12,900 $ 341,850
Manor Care, Inc............................................. 9,100 318,500
Martin Marietta Materials, Inc.............................. 3,435 125,592
Masco Corp.................................................. 13,700 696,988
Nabisco Holdings Corp....................................... 12,000 581,250
National Service Industries, Inc............................ 2,300 113,994
Nextel Communications, Inc. (b)............................. 16,300 423,800
NextLevel Systems, Inc. (b)................................. 26,900 480,838
Old Republic International Corp............................. 2,450 91,109
Peco Energy Co.............................................. 35,100 851,175
Pentair, Inc................................................ 6,200 222,813
Pharmacia & UpJohn, Inc..................................... 6,300 230,738
Philip Morris Companies, Inc................................ 33,200 1,504,375
Raytheon Co., Class B....................................... 13,900 701,950
Regions Financial Corp...................................... 3,000 126,563
Reynolds & Reynolds Co...................................... 11,600 213,875
Schering Plough Corp........................................ 18,900 1,174,163
Seagate Technology, Inc. (b)................................ 10,500 202,125
Sears, Roebuck and Co....................................... 1,400 63,350
Timken Co................................................... 4,000 137,500
Tyson Foods, Inc., Class A.................................. 24,000 492,000
Ultramar Diamond Shamrock Corp.............................. 13,352 425,595
US Bancorp.................................................. 8,021 897,851
Vencor, Inc. (b)............................................ 12,000 293,250
Viad Corp................................................... 11,600 224,025
Westvaco Corp............................................... 2,850 89,597
Witco Corp.................................................. 1,300 53,056
Xerox Corp.................................................. 21,600 1,594,350
York International Corp..................................... 7,300 288,806
-----------
Total U.S. Equities......................................... 38,947,247
-----------
NON-U.S. EQUITIES -- 43.69%
AUSTRALIA -- 2.35%
Amcor Ltd................................................... 8,300 36,506
Boral Ltd................................................... 21,600 54,609
Brambles Industries Ltd..................................... 5,000 99,206
Broken Hill Proprietary Co., Ltd............................ 30,050 279,024
Coca-Cola Amatil Ltd........................................ 5,200 38,850
CSR Ltd..................................................... 15,000 50,825
David Jones Ltd............................................. 53,200 59,971
Lend Lease Corp., Ltd....................................... 3,697 72,269
Mayne Nickless Ltd.......................................... 7,500 39,634
M.I.M. Holdings Ltd......................................... 32,411 19,852
National Australia Bank Ltd................................. 21,075 294,288
News Corp. Ltd.............................................. 44,040 243,060
News Corp. Ltd., Preferred.................................. 9,700 47,998
Pacific Dunlop Ltd.......................................... 25,200 53,366
Qantas Airways Ltd.......................................... 26,764 47,365
Rio Tinto Ltd............................................... 9,663 112,725
Santos Ltd.................................................. 6,000 24,709
Telstra Corp., Ltd. (b)..................................... 10,000 21,112
Westpac Banking Corp., Ltd.................................. 34,945 223,512
WMC Ltd..................................................... 16,800 58,566
Woolworth's Ltd............................................. 12,000 40,113
-----------
1,917,560
-----------
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
BELGIUM -- 1.75%
Delhaize-Le Lion S.A........................................ 2,650 $ 134,463
Electrabel S.A.............................................. 1,140 263,685
Fortis AG................................................... 88 12
Fortis AG Strip (b)......................................... 1,018 212,387
Generale de Banque S.A...................................... 220 95,746
Groupe Bruxelles Lambert S.A................................ 550 79,566
Kredietbank NV.............................................. 275 115,415
Kredietbank VVPR............................................ 11 4,617
Petrofina S.A............................................... 530 195,616
Societe Generale de Belgique................................ 750 68,622
Solvay S.A., Class A........................................ 1,550 97,474
Tractebel................................................... 1,300 113,330
Tractebel Warrants "99" (b)................................. 200 513
Union Miniere Group S.A. (b)................................ 702 48,693
-----------
1,430,139
-----------
CANADA -- 1.58%
Agrium, Inc................................................. 3,100 37,691
Alcan Aluminum Ltd.......................................... 2,500 68,828
Bank of Montreal............................................ 1,700 75,253
Barrick Gold Corp........................................... 1,500 27,933
Canadian National Railway Co................................ 1,700 79,946
Canadian Pacific Ltd........................................ 5,216 140,323
Hudson's Bay Co............................................. 2,000 44,511
Imasco, Ltd................................................. 1,200 42,345
Imperial Oil Ltd............................................ 2,000 128,572
Magna International Inc., Class A........................... 700 43,826
Moore Corp., Ltd............................................ 2,400 36,056
Newbridge Networks Corp. (b)................................ 800 27,979
Noranda, Inc................................................ 2,500 42,974
Northern Telecom Ltd........................................ 400 35,539
NOVA Corp................................................... 6,900 65,572
Potash Corporation of Saskatchewan, Inc..................... 700 58,231
Royal Bank of Canada........................................ 2,000 105,653
Seagram Co., Ltd............................................ 1,400 45,245
TELUS Corp.................................................. 3,300 73,098
TransCanada Pipelines Ltd................................... 3,400 75,788
Westcoast Energy, Inc....................................... 1,600 36,895
-----------
1,292,258
-----------
FINLAND -- 0.34%
Cultor Oyj.................................................. 300 16,306
Merita Ltd., Class A........................................ 7,000 38,306
Metsa Serla Oyj, Class B.................................... 1,800 14,048
Nokia Oyj, Class A Preferred................................ 1,800 127,917
Outokumpu Oyj, Class A...................................... 1,500 18,317
Sampo Insurance Co., Ltd., Series A......................... 400 13,001
The Rauma Group............................................. 83 1,296
UPM-Kymmene Corp............................................ 2,200 44,035
-----------
273,226
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
FRANCE -- 2.75%
Accor S.A................................................... 408 $ 75,843
Alcatel Alsthom............................................. 696 88,472
AXA-UAP..................................................... 1,441 111,587
AXA-UAP Rights (b).......................................... 1,291 1,267
Banque Nationale de Paris................................... 1,610 85,612
Cie Bancaire S.A............................................ 23 3,728
Cie de Saint Gobain......................................... 916 130,183
Cie Financiere de Paribas................................... 900 78,241
Cie Generale des Eaux....................................... 928 129,609
Cie Generale des Eaux Warrants "01" (b)..................... 1,771 1,204
Dexia France................................................ 677 78,465
Elf Aquitaine S.A........................................... 1,213 141,082
France Telecom S.A. (b)..................................... 3,100 112,488
Groupe Danone............................................... 250 44,673
Lafarge S.A................................................. 675 44,308
Lagardere S.C.A............................................. 2,250 74,427
LVMH........................................................ 1 83
Lyonnaise des Eaux S.A...................................... 1,157 128,093
Michelin, Class B........................................... 1,701 85,672
Pechiney S.A., Class A...................................... 1,775 70,113
Peugeot S.A................................................. 943 118,909
Pinault-Printemps-Redoute S.A............................... 200 106,749
Rhone-Poulenc, Class A...................................... 2,690 120,560
SEITA....................................................... 2,350 84,375
Societe Generale............................................ 903 123,116
Thomson CSF................................................. 2,325 73,313
Total S.A., Class B......................................... 1,019 110,972
Usinor Sacilor.............................................. 1,300 18,778
-----------
2,241,922
-----------
GERMANY -- 5.10%
Allianz AG Holding.......................................... 1,680 433,524
BASF AG..................................................... 2,500 89,261
Bayer AG.................................................... 6,140 227,932
Bayerische Motoren Werke AG................................. 210 157,083
Commerzbank AG.............................................. 5,050 196,596
Continental AG.............................................. 4,700 105,862
Daimler-Benz AG............................................. 2,200 155,386
Deutsche Bank AG............................................ 4,900 342,817
Deutsche Telekom AG......................................... 16,910 313,166
Henkel KGaA-Vorzug AG, Preferred............................ 1,810 113,245
Hochtief AG................................................. 1,310 53,912
Hoechst AG.................................................. 1,950 67,563
M.A.N. AG................................................... 310 89,564
Mannesmann AG............................................... 360 180,791
Metro AG.................................................... 3,118 110,633
Muenchener Rueckver AG...................................... 855 325,243
Muenchener Rueckver AG Warrants "98" (b).................... 3 1,819
Preussag AG................................................. 490 150,698
RWE AG...................................................... 3,470 186,227
Schering AG................................................. 1,910 184,297
Siemens AG.................................................. 3,770 227,487
Veba AG..................................................... 4,060 276,598
Volkswagen AG............................................... 300 167,677
-----------
4,157,381
-----------
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
HONG KONG -- 0.59%
Cheung Kong Holdings Ltd.................................... 14,000 $ 91,695
China Light & Power Co., Ltd................................ 6,500 36,071
Citic Pacific Ltd........................................... 5,000 19,875
Hang Seng Bank Ltd.......................................... 5,800 55,953
Hong Kong and China Gas Co., Ltd............................ 30,000 58,076
Hong Kong Telecommunications Ltd............................ 32,000 65,871
Hutchison Whampoa Ltd....................................... 15,000 94,083
Sun Hung Kai Properties Ltd................................. 5,000 34,845
Swire Pacific Ltd., Class A................................. 4,500 24,682
-----------
481,151
-----------
ITALY -- 2.22%
Aeroporti Di Roma Spa (b)................................... 1,000 10,379
Assicurazioni Generali...................................... 6,640 163,179
Banca Commerciale Italia.................................... 19,000 66,090
Credito Italiano Spa........................................ 35,000 107,986
Danieli & Co. Savings (Risp)................................ 16,400 58,994
Edison Spa.................................................. 6,000 36,311
ENI ADR (c)................................................. 1,700 97,006
ENI Spa..................................................... 33,000 187,206
Fiat Spa-Priv Preferred..................................... 58,300 89,030
INA-Istituto Nazionale delle Assicurazioni.................. 35,000 70,968
Instituto Mobiliare Italiano Spa............................ 9,700 115,212
Italgas Spa................................................. 13,700 56,565
La Rinascente Spa........................................... 10,600 79,138
La Rinascente Spa RNC....................................... 11,000 41,062
La Rinascente Spa Warrants "99" (b)......................... 550 666
Mediobanca Spa.............................................. 1,800 14,141
Montedison Spa.............................................. 116,560 104,756
SAI-Savings (Risp).......................................... 10,000 44,116
Telecom Italia Mobile Spa................................... 20,000 92,362
Telecom Italia Mobile Spa RNC............................... 49,000 139,402
Telecom Italia Spa.......................................... 10,111 64,622
Telecom Italia Spa RNC...................................... 38,813 171,229
-----------
1,810,420
-----------
JAPAN -- 5.85%
Amada Co., Ltd.............................................. 10,000 37,301
Asahi Glass Co., Ltd........................................ 11,000 52,451
Bank of Tokyo-Mitsubishi, Ltd............................... 9,000 124,591
Canon, Inc.................................................. 8,000 187,041
Canon Sales Co., Inc........................................ 3,000 34,378
Citizen Watch Co., Ltd...................................... 9,000 60,565
Dai Nippon Printing Co., Ltd................................ 9,000 169,583
Daiichi Pharmaceutical Co., Ltd............................. 8,000 90,444
Daikin Industries Ltd....................................... 10,000 37,839
Daiwa House Industry Co., Ltd............................... 5,000 26,533
Fanuc....................................................... 4,400 167,168
Fujitsu..................................................... 6,000 64,603
Hitachi Ltd................................................. 20,000 143,049
Honda Motor Co.............................................. 3,000 110,517
Hoya Corp................................................... 1,000 31,532
Inax........................................................ 7,000 20,404
Ito Yokado Co., Ltd......................................... 4,000 204,576
Kaneka Corp................................................. 10,000 45,299
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Keio Teito Electric Railway................................. 11,000 $ 42,215
Kinki Nippon Railway........................................ 12,000 64,326
Kirin Brewery Co., Ltd...................................... 11,000 80,369
Kokuyo...................................................... 3,000 51,913
Kuraray Co., Ltd............................................ 12,000 99,673
Kyocera Corp................................................ 1,200 54,636
Marui Co., Ltd.............................................. 5,000 78,062
Matsushita Electric Industrial Co........................... 15,000 220,342
NGK Insulators.............................................. 16,000 142,742
Nintendo Co., Ltd........................................... 800 78,754
Nippon Denso Co., Ltd....................................... 5,000 90,367
Nippon Meat Packers, Inc.................................... 6,000 82,138
Nippon Steel Co............................................. 8,000 11,875
Okumura..................................................... 10,000 23,842
Osaka Gas Co................................................ 19,000 43,545
Sankyo Co., Ltd............................................. 7,000 158,816
Secom Co., Ltd.............................................. 2,000 128,283
Seino Transportation........................................ 7,000 35,047
Sekisui House Ltd........................................... 15,000 96,789
Sony Corp................................................... 2,700 240,877
Sumitomo Bank............................................... 11,000 126,053
Sumitomo Chemical Co........................................ 12,000 27,687
Sumitomo Electric Industries................................ 8,000 109,517
Takeda Chemical Industries.................................. 6,000 171,659
TDK Corp.................................................... 2,000 151,356
Tokio Marine & Fire Insurance Co............................ 9,000 102,442
Tokyo Electric Power........................................ 2,300 42,100
Tokyo Steel Mfg............................................. 8,000 27,133
Tonen Corp.................................................. 7,000 37,900
Toray Industries, Inc....................................... 36,000 161,969
Toshiba Corp................................................ 24,000 100,227
Toyo Suisan Kaisha.......................................... 9,000 62,573
Toyota Motor Corp........................................... 6,000 172,582
Yamazaki Baking Co., Ltd.................................... 5,000 48,837
-----------
4,774,520
-----------
MALAYSIA -- 0.60%
Hume Industries (Malaysia) Bhd.............................. 13,000 13,626
Kuala Lumpur Kepong Bhd..................................... 26,000 55,774
Land & General Holdings Bhd................................. 18,000 3,330
Malayan Banking Bhd......................................... 14,600 42,384
Malaysia International Shipping Bhd (Frgn.)................. 12,000 17,572
Nestle (Malaysia) Bhd....................................... 5,000 23,121
New Straits Times Press Bhd................................. 10,000 12,383
Perusahaan Otomobil Nasional Bhd............................ 8,000 7,810
Petronas Gas Bhd............................................ 10,000 22,736
Public Bank Bhd............................................. 4,800 1,492
Public Bank Bhd (Frgn.)..................................... 13,999 4,819
Public Bank Bhd Rights (b).................................. 800 43
Public Bank Bhd Rights (Frgn.) (b).......................... 2,333 120
Resorts World Bhd........................................... 10,000 16,827
Rothmans of Pall Mall Bhd................................... 6,000 46,628
Sime Darby Bhd.............................................. 37,000 35,550
Telekom Malaysia Bhd........................................ 27,500 81,246
Tenaga Nasional Bhd......................................... 31,000 66,102
UMW Holdings Bhd............................................ 6,000 4,547
</TABLE>
- --------------------------------------------------------------------------------
32
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
MALAYSIA (CONTINUED)
United Engineers Bhd....................................... 10,000 $ 8,324
YTL Corp. Bhd.............................................. 15,000 20,231
YTL Power International Bhd (b)............................ 800 615
-----------
485,280
-----------
NETHERLANDS -- 2.24%
ABN AMRO Holdings NV....................................... 7,701 150,047
Akzo Nobel NV.............................................. 300 51,734
DSM NV..................................................... 1 23
Elsevier NV................................................ 8,700 140,759
Heineken NV................................................ 675 117,533
Hoogovens NV............................................... 786 32,231
ING Groep NV............................................... 4,458 187,814
KLM Royal Dutch Air Lines NV............................... 1,118 41,360
KPN NV..................................................... 4,317 180,140
Philips Electronics NV..................................... 2,337 140,206
Royal Dutch Petroleum Co................................... 10,475 575,084
Unilever NV................................................ 3,400 209,638
-----------
1,826,569
-----------
NEW ZEALAND -- 1.56%
Brierley Investments Ltd................................... 266,700 190,493
Carter Holt Harvey Ltd..................................... 91,600 141,491
Fletcher Challenge Building................................ 30,350 62,037
Fletcher Challenge Energy.................................. 33,950 118,880
Fletcher Challenge Forests Ltd............................. 58,095 48,242
Fletcher Challenge Paper................................... 53,600 70,032
Lion Nathan Ltd............................................ 15,000 33,623
Telecom Corp. of New Zealand Ltd. ADS (c).................. 125,700 609,500
-----------
1,274,298
-----------
SINGAPORE -- 0.72%
City Developments Ltd...................................... 7,000 32,404
DBS Land Ltd............................................... 14,000 21,436
Development Bank of Singapore Ltd.......................... 7,000 59,822
Elec & Eltek International Co., Ltd........................ 2,200 10,076
Fraser & Neave Ltd......................................... 3,000 12,997
Hotel Properties Ltd....................................... 25,000 16,320
Keppel Corp., Ltd.......................................... 7,750 22,261
Keppel Land Ltd............................................ 9,000 12,392
NatSteel Ltd............................................... 7,000 9,472
Oversea-Chinese Banking Corp. Ltd.......................... 12,600 73,282
Singapore Airlines Ltd. (Frgn.)............................ 13,000 84,866
Singapore Press Holdings Ltd. (Frgn.)...................... 3,000 37,567
Singapore Telecommunications, Ltd.......................... 61,000 113,674
United Overseas Bank Ltd. (Frgn.).......................... 13,000 72,136
Wing Tai Holdings Ltd...................................... 8,000 9,353
-----------
588,058
-----------
SPAIN -- 1.21%
Acerinox S.A............................................... 125 18,510
Banco Bilbao-Vizcaya S.A................................... 3,375 109,164
Banco Central Hispanoamericano............................. 2,550 62,069
Banco Popular Espanol S.A.................................. 1,200 83,847
Banco Santander S.A........................................ 2,700 90,165
Empresa National de Electridad S.A......................... 7,050 125,116
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Fomento de Construcciones y Contratas S.A.................. 1,500 $ 57,079
Gas Natural SDG S.A........................................ 1,200 62,197
Iberdrola S.A.............................................. 6,675 87,806
Mapfre Corp................................................ 1,200 31,807
Repsol S.A................................................. 1,725 73,563
Tabacalera S.A............................................. 200 16,205
Telefonica de Espana....................................... 4,050 115,585
Vallehermoso S.A........................................... 900 27,575
Viscofan Envolturas Celulosicas S.A........................ 1,100 27,605
-----------
988,293
-----------
SWEDEN -- 0.88%
ABB AB, A Shares........................................... 3,000 35,541
Astra AB, A Shares......................................... 7,000 121,304
Electrolux AB, B Shares.................................... 500 34,721
Hennes & Mauritz AB, B Shares.............................. 1,700 74,988
Nordbanken Holding AB...................................... 16,100 91,106
Securitas AB, B Shares..................................... 1,300 39,321
Skanska AB, B Shares....................................... 900 36,921
Svenska Handelsbanken, A Shares............................ 1,400 48,433
Swedish Match AB........................................... 22,400 74,812
Telefonaktiebolaget LM Ericsson, B Shares.................. 2,400 90,288
Volvo AB, B Shares......................................... 2,600 69,796
-----------
717,231
-----------
SWITZERLAND -- 2.54%
ABB AG (Bearer)............................................ 41 51,895
Alusuisse-Lonza Holdings AG (Reg.)......................... 1 240
CS Holdings AG (Reg.)...................................... 1,337 207,081
Holderbank Financiere Glarus, B Shares..................... 74 60,474
Nestle S.A. (Reg.)......................................... 160 240,121
Novartis AG (Reg.)......................................... 337 547,297
Roche Holding AG (Gen.).................................... 37 372,918
Sairgroup (b).............................................. 36 49,362
Schweizerische Lebensversicherungs-und Rentenastalt........ 82 64,482
Sulzer AG.................................................. 65 41,266
Swiss Reinsurance Co. (Reg.)............................... 97 181,684
UBS (Bearer)............................................... 88 126,697
Zurich Versicherungs (Reg.)................................ 266 126,808
-----------
2,070,325
-----------
UNITED KINGDOM -- 11.41%
Abbey National PLC......................................... 10,750 192,978
Barclays PLC............................................... 6,000 159,737
Bass PLC................................................... 6,100 94,800
B.A.T. Industries PLC...................................... 49,750 453,501
BG PLC..................................................... 52,709 237,633
Billiton PLC (b)........................................... 39,000 100,107
Booker PLC................................................. 23,870 125,683
British Energy PLC......................................... 25,250 175,742
British Petroleum Co. PLC.................................. 29,655 390,358
British Sky Broadcasting Group PLC......................... 13,000 97,540
British Steel PLC.......................................... 37,750 81,059
British Telecommunications PLC............................. 46,020 362,329
BTR PLC.................................................... 22,000 66,606
Cable & Wireless PLC....................................... 11,000 96,833
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Cadbury Schweppes PLC...................................... 18,000 $ 181,703
Centrica PLC (b)........................................... 44,620 65,709
Charter PLC................................................ 9,422 116,118
Coats Viyella PLC.......................................... 41,250 61,765
Diageo PLC................................................. 21,720 199,956
FKI PLC.................................................... 50,405 158,410
General Electric Co. PLC................................... 44,320 287,688
Glaxo Wellcome PLC......................................... 26,620 630,733
Greenalls Group PLC........................................ 13,000 93,690
Hanson PLC................................................. 17,750 79,331
Hillsdown Holdings PLC..................................... 52,000 126,631
House of Fraser PLC........................................ 57,250 189,342
HSBC Holdings PLC.......................................... 11,000 282,353
Inchcape PLC............................................... 26,000 69,733
Legal & General Group PLC.................................. 25,250 221,028
Lloyds TSB Group PLC....................................... 38,220 494,926
Marks & Spencer PLC........................................ 30,120 296,864
Mirror Group PLC........................................... 53,000 170,053
National Westminster Bank PLC.............................. 10,350 172,344
Northern Foods PLC......................................... 28,500 123,801
Peninsular & Oriental Steam Navigation Co.................. 19,000 216,495
Reckitt & Colman PLC....................................... 5,635 88,547
Reuters Holdings PLC....................................... 11,000 120,362
Rio Tinto PLC.............................................. 12,020 148,136
RJB Mining PLC............................................. 27,500 57,466
Royal & Sun Alliance Insurance Group PLC................... 16,779 169,239
Scottish Hydro-Electric PLC................................ 12,650 104,489
Sears PLC.................................................. 68,250 59,519
Sedgwick Group PLC......................................... 49,000 114,488
SmithKline Beecham PLC..................................... 28,350 290,614
Smurfit (Jefferson) Group PLC.............................. 41,196 114,556
Tate & Lyle PLC............................................ 14,000 115,409
Tesco PLC.................................................. 20,250 164,932
Thames Water PLC........................................... 13,500 201,362
The Great Universal Stores PLC............................. 15,750 198,770
Unilever PLC............................................... 13,000 111,444
Vodafone Group PLC......................................... 26,700 192,864
Williams PLC............................................... 32,750 182,139
-----------
9,307,915
-----------
Total Non-U.S. Equities.................................... 35,636,546
-----------
Total Equities (Cost $65,891,370).......................... 74,583,793
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Short-Term Investments -- 8.78%
U.S. GOVERNMENT OBLIGATIONS -- 0.73%
U.S. Treasury Bills 5.420%, due 05/28/98................ $ 605,000 $ 592,143
-----------
COMMERCIAL PAPER -- 8.05%
Case Credit Corp.
6.030%, due 03/10/98................................... 500,000 494,305
Nabisco, Inc.
6.700%, due 01/05/98................................... 500,000 499,628
Praxair, Inc.
6.550%, due 01/02/98................................... 2,000,000 2,000,364
Vastar Resources, Inc.
7.100%, due 01/02/98................................... 3,574,000 3,573,295
-----------
6,567,592
-----------
Total Short-Term Investments
(Cost $7,159,869)...................................... 7,159,735
-----------
Total Investments
(Cost $73,051,239) -- 100.22% (a)...................... 81,743,528
-----------
Liabilities, less cash and other
assets -- (0.22%)...................................... (181,101)
-----------
Net Assets -- 100%...................................... $81,562,427
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $73,051,239; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $13,188,118
Gross unrealized depreciation................................ (4,495,829)
-----------
Net unrealized appreciation................................ $ 8,692,289
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Equity Fund had the following open forward foreign currency
contracts as of December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollar........................ 6/3/98 1,050,000 $ 736,496 $ (5,921)
Danish Kroner.......................... 6/3/98 2,700,000 397,236 (5,839)
Dutch Guilder.......................... 6/3/98 900,000 447,937 (6,608)
French Franc........................... 6/3/98 5,100,000 855,042 (12,689)
Japanese Yen........................... 6/3/98 376,000,000 2,959,420 9,634
Swedish Krona.......................... 6/3/98 7,900,000 999,249 (17,194)
Swiss Franc............................ 6/3/98 1,600,000 1,116,321 (24,093)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar...................... 6/3/98 1,150,000 752,091 29,219
Belgian Franc.......................... 6/3/98 32,000,000 871,117 11,471
British Pound.......................... 6/3/98 2,800,000 4,573,295 78,785
German Mark............................ 6/3/98 1,000,000 560,991 9,388
Hong Kong Dollar....................... 2/5/98 3,600,000 463,395 373
Japanese Yen........................... 6/3/98 119,000,000 936,625 13,854
Swedish Krona.......................... 6/3/98 7,900,000 999,249 23,869
--------
Total............................... $104,249
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
The Global Equity Fund had the following open index futures contracts as of
December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 48 contracts...... March 1998 $ 11,916,264 $ 11,749,200 $ 167,064
</TABLE>
The market value of investments pledged to cover margin requirements for the
open positions at December 31, 1997 was $592,143.
See accompanying notes to the financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $73,051,239) (Note 1)................. $81,743,528
Cash.............................................................. 86,370
Foreign currency, at value (Cost $382,196)........................ 377,629
Receivables:
Investment securities sold....................................... 395,917
Dividends........................................................ 199,603
Fund shares sold................................................. 20,275
Variation margin (Note 5)........................................ 1,752
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 104,065
Other assets...................................................... 46,146
-----------
TOTAL ASSETS................................................... 82,975,285
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 1,259,960
Investment advisory fees (Note 2)................................ 49,655
Accrued expenses................................................. 103,243
-----------
TOTAL LIABILITIES.............................................. 1,412,858
-----------
NET ASSETS......................................................... $81,562,427
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 8).......................................... $70,388,858
Accumulated undistributed net investment income................... 163,736
Accumulated net realized gain..................................... 2,047,204
Net unrealized appreciation....................................... 8,962,629
-----------
NET ASSETS..................................................... $81,562,427
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $17,948,691 and 1,579,621 shares issued
and outstanding) (Note 8)....................................... $ 11.36
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$977 and 86 shares issued and outstanding) (Note 8)............. $ 11.36
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $63,612,759 and 5,608,122 shares issued
and outstanding) (Note 8)....................................... $ 11.34
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $66,048 for foreign taxes withheld)............ $ 816,558
Interest......................................................... 189,569
-----------
TOTAL INCOME.................................................. 1,006,127
-----------
EXPENSES:
Advisory (Note 2)................................................ 374,636
Distribution (Note 7)............................................ 254,282
Custodian........................................................ 12,878
Other............................................................ 91,731
-----------
TOTAL EXPENSES................................................ 733,527
Expenses deferred by Advisor (Note 2)......................... (12,446)
-----------
NET EXPENSES.................................................. 721,081
-----------
NET INVESTMENT INCOME ........................................ 285,046
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 6,732,546
Futures contracts............................................... (1,530,284)
Foreign currency transactions................................... (114,366)
-----------
Net realized gain............................................. 5,087,896
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ (8,123,416)
Futures contracts............................................... 470,554
Forward contracts............................................... 105,523
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 893
-----------
Change in net unrealized appreciation or depreciation......... (7,546,446)
-----------
Net realized and unrealized loss.................................. (2,458,550)
-----------
Net decrease in net assets resulting from operations.............. $(2,173,504)
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 285,046 $ 960,262
Net realized gain............................. 5,087,896 5,232,778
Change in net unrealized appreciation or
depreciation................................. (7,546,446) 10,619,517
----------- ------------
Net increase (decrease) in net assets result-
ing from operations.......................... (2,173,504) 16,812,557
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................... (148,933) (425,929)
Brinson Class N............................... (8) --
SwissKey Class................................ (308,930) (253,945)
Distributions from net realized gain:
Brinson Class I............................... (1,266,777) (3,076,886)
Brinson Class N............................... (82) --
SwissKey Class................................ (5,307,194) (3,396,000)
----------- ------------
Total distributions to shareholders........... (7,031,924) (7,152,760)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 26,867,326 42,520,630
Shares issued on reinvestment of distribu-
tions........................................ 6,217,910 6,711,937
Shares redeemed............................... (52,052,229) (9,295,598)
----------- ------------
Net increase (decrease) in net assets result-
ing from capital share transactions (Note 8). (18,966,993) 39,936,969
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.... (28,172,421) 49,596,766
----------- ------------
NET ASSETS:
Beginning of year............................. 109,734,848 60,138,082
----------- ------------
End of year (including accumulated undistrib-
uted net investment income of $163,736 and
$336,561, respectively)...................... $81,562,427 $109,734,848
=========== ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30, JANUARY 28, 1994*
DECEMBER 31, 1997 ------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.76 $ 11.57 $ 9.93 $ 9.49 $ 10.00
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income. 0.14 0.16 0.18 0.18 0.07
Net realized and
unrealized gain
(loss)............... (0.37) 2.14 2.29 0.39 (0.54)
------- ------- ------- ------- -------
Total income (loss)
from investment
operations......... (0.23) 2.30 2.47 0.57 (0.47)
------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income.... (0.12) (0.12) (0.14) (0.04) (0.04)
Distributions from and
in excess of net
realized gain........ (1.05) (0.99) (0.69) (0.09) --
------- ------- ------- ------- -------
Total distributions. (1.17) (1.11) (0.83) (0.13) (0.04)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 11.36 $ 12.76 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= ======= =======
Total return (non-
annualized)............ (1.68)% 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $17,949 $48,054 $27,126 $20,706 $20,642
Ratio of expenses to
average net assets:
Before expense
reimbursement........ 1.03%** 1.25% 1.77% 2.06% 2.65%**
After expense
reimbursement........ 1.00%** 1.00% 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense
reimbursement........ 1.18%** 1.35% 0.57% 0.71% 0.24%**
After expense
reimbursement........ 1.21%** 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover
rate.................. 26% 32% 74% 36% 21%
Average commission rate
paid per share........ $0.0308 $0.0246 $0.0288 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- -----------------------------------------------
<S> <C>
Net asset value, beginning
of period.................. $ 12.76
-------
Income from investment op-
erations:
Net investment income..... 0.06
Net realized and
unrealized gain.......... (0.31)
-------
Total loss from invest-
ment operations........ (0.25)
-------
Less distributions:
Distributions from and in
excess of net investment
income................... (0.10)
Distributions from net re-
alized gain.............. (1.05)
-------
Total distributions..... (1.15)
-------
Net asset value, end of pe-
riod....................... $ 11.36
=======
Total return (non-
annualized)................ (1.87)%
Ratios/Supplemental data
Net assets, end of period
(in 000s)................. $ 1
Ratio of expenses to aver-
age net assets:
Before expense reimburse-
ment..................... 1.28%**
After expense reimburse-
ment..................... 1.25%**
Ratio of net investment in-
come to average net as-
sets:
Before expense reimburse-
ment..................... 0.84%**
After expense reimburse-
ment..................... 0.87%**
Portfolio turnover rate.... 26%
Average commission rate
paid per share............ $0.0308
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 12.73 $ 11.57 $ 10.35
------- ------- -------
Income from investment opera-
tions:
Net investment gain (loss).... 0.02 0.08 (0.01)
Net realized and unrealized
gain (loss).................. (0.30) 2.13 1.93
------- ------- -------
Total income from investment
operations................. (0.28) 2.21 1.92
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.06) (0.06) (0.01)
Distributions from net real-
ized gain.................... (1.05) (0.99) (0.69)
------- ------- -------
Total distributions......... (1.11) (1.05) (0.70)
------- ------- -------
Net asset value, end of period.. $ 11.34 $ 12.73 $ 11.57
======= ======= =======
Total return (non-annualized)... (2.11)% 20.34% 19.25%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $63,613 $61,680 $33,012
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.78%** 2.00% 2.53%**
After expense reimbursement... 1.76%** 1.75% 1.76%**
Ratio of net investment income
(loss) to average net assets:
Before expense reimbursement.. 0.35%** 0.60% (0.19)%**
After expense reimbursement... 0.37%** 0.85% 0.58%**
Portfolio turnover rate........ 26% 32% 74%
Average commission rate paid
per share..................... $0.0308 $0.0246 $0.0288
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
The Global Bond Fund is actively managed, providing a fully integrated treatment
of the U.S. and other major fixed income markets across the world. This global
approach takes full advantage of relationships both within and across markets,
based on consistent analysis of macroeconomic and market conditions. Market and
currency strategies are developed in a global asset allocation framework, in
conjunction with senior fixed income professionals in our offices worldwide.
The SwissKey Global Bond Fund has provided an annualized return of 7.04% since
its inception on July 31, 1995, outperforming the 2.27% return of its benchmark,
the Salomon World Government Bond Index. The Fund's annualized volatility of
4.06% was below the benchmark volatility of 5.11% over this period. For the year
ended December 31, 1997, the Fund returned 1.17%, compared to the benchmark
return of 0.24%.
The sustained strength in global bond markets which began late in 1994 continued
during 1997 (the Salomon Index returned a total of 41.90% in dollar-hedged terms
in the three years ending December 31, 1997). In most economies inflation was
lower than had been expected at the start of the year, and investors became more
willing to believe that it would remain low (particularly in light of the
economic turmoil in Asia late in the year). In this benign environment long
yields fell, even though some central banks raised short-term interest rates.
Market allocation strategies contributed positively to relative Fund performance
in 1997. The portfolio move from a neutral to an overweight position in U.S.
bonds in February, maintained through the end of the year, had little effect
overall on performance. The Fund benefited in particular from the timing of its
exposures to Australia, from its underweighting of France, and from its
overweighting of Denmark.
Bond selection strategies within markets detracted slightly from performance
overall. Positive returns in the U.S., due to successful issue selection, were
more than offset by the impact of the short duration strategy in Japan. As bond
prices rose during the year, we lowered duration across markets (U.S. duration
was lowered from 1.3 times to equal to the index average in the middle of the
year). At the end of the year, duration was 0.5 times the index average in
Japan, 0.9 times the index in most other markets, and equal to the index in
Denmark, Sweden and the U.S.
Currency allocation was the largest source of Fund outperformance of the
benchmark in 1997. All the main non-U.S. currencies lost value against the
dollar. The Japanese yen fell by 15.2%, the Deutschemark by 16.2%, and the U.K.
pound by 2.8%. Defensive underweightings of the yen and of European currencies
in the first part of the year, and the resultant position in the U.S. dollar,
were extremely successful, while underweighting the U.K. pound detracted from
performance. The scale of most positions was sharply reduced as non-U.S.
currencies fell to and below fair value.
===============================================================================
42
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[SWISSKEY FUNDS LOGO APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
12/31/97 12/31/97 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey Global Bond Fund 0.75% 1.17% 7.04%
Salomon World Government Bond Index 1.49 0.24 2.27
- --------------------------------------------------------------------------------
</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 December 31, 1997.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
SwissKey Global Bond Fund
vs. Salomon World Government Bond Index vs.
[Graph Chart Appears Here]
Swiss Key Salomon
Global World
Bond Government
Fund Bond Index
7/31/95 10000 10000
9/30/95 10218 9871
12/31/95 10722 10162
3/31/96 10701 9972
6/30/96 10917 10013
9/30/96 11287 10287
12/31/96 11654 10531
3/31/97 11313 10096
6/30/97 11703 10402
9/30/97 11837 10534
12/31/97 11791 10557
Fund returns are ne t of all fees and costs, while the Index returns are based
solely on market re turns without deduction for fees or transaction costs for
rebalancing.
================================================================================
43
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[Swisskey Funds Logo Appears Here]
Asset Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ------------------------------------------------------------
<S> <C> <C>
U.S. 34.4% 40.4%
Japan 18.5 5.0
Australia 0.9 4.1
Austria 0.9 0.0
Belgium 2.4 0.0
Canada 3.3 6.2
Denmark 1.5 6.3
Finland 0.6 0.0
France 7.3 2.2
Germany 8.8 13.1
Ireland 0.4 0.0
Italy 6.7 3.2
Netherlands 2.9 5.2
Spain 2.8 3.7
Sweden 1.6 1.6
Switzerland 0.5 0.0
U.K. 6.5 9.0
- ------------------------------------------------------------
100.0% 100.0%
Currency Allocation
As of December 31, 1997 (Unaudited)
Current
Benchmark Strategy
- ------------------------------------------------------------
U.S. 34.4% 41.9%
Japan 18.5 14.5
Australia 0.9 0.9
Austria 0.9 0.9
Belgium 2.4 2.4
Canada 3.3 3.3
Denmark 1.5 1.5
Finland 0.6 0.6
France 7.3 7.3
Germany 8.8 8.8
Ireland 0.4 0.4
Italy 6.7 6.7
Netherlands 2.9 2.9
Spain 2.8 2.8
Sweden 1.6 1.6
Switzerland 0.5 0.5
U.K. 6.5 3.0
- ------------------------------------------------------------
100.0% 100.0%
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
- ----------------------------------------------------------------
U.S. BONDS
Corporate Bonds
Asset-Backed............................................ 2.54%
CMO..................................................... 2.19
Consumer................................................ 1.02
Financial............................................... 2.67
Industrial.............................................. 2.82
Transportation.......................................... .35
-------
11.59
-------
International Dollar Bonds.............................. 4.58
U.S. Government Agencies................................ 9.61
U.S. Government Obligations............................. 9.91
-------
Total U.S. Bonds..................................... 35.69
-------
NON-U.S. BONDS
Foreign Financial Bonds.................................. 7.91
Foreign Government Bonds................................. 47.07
-------
Total Non-U.S. Bonds................................. 54.98
-------
SHORT-TERM INVESTMENTS................................... 9.08
-------
TOTAL INVESTMENTS.................................... 99.75
CASH AND OTHER ASSETS,
LESS LIABILITIES........................................ 0.25
-------
NET ASSETS...........................................100.00%
=======
</TABLE>
- ----------------------------------------------------------------
================================================================================
44
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Bonds -- 90.67%
U.S. BONDS -- 35.69%
U.S. CORPORATE BONDS -- 11.59%
Aid Jordan
8.750%, due 09/01/19.................................. $ 193,941 $ 237,638
Bear Stearns Mortgage Securities, Inc.
96-7A4 6.000%, due 01/28/09........................... 200,000 193,578
Capital One Bank
6.830%, due 05/17/99.................................. 200,000 201,386
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02........................... 125,000 125,196
Continental Airlines, Inc. 97-4A
6.900%, due 01/02/18.................................. 210,000 209,969
Countrywide Capital, Inc.
8.000%, due 12/15/26.................................. 250,000 265,286
Donaldson Lufkin & Jenrette FRN
6.700%, due 06/30/00.................................. 375,000 379,599
First Bank Corporate Card Master Trust
97-1A 6.400%, due 02/15/03............................ 240,000 241,949
First Union Lehman Brothers
97-C2 A2 6.600%, due 05/18/07......................... 240,000 242,225
First USA Credit Card Master Trust
97-6A 6.420%, due 03/17/05............................ 240,000 242,750
Ford Credit Grantor Trust 95-B
5.900%, due 10/15/00.................................. 36,823 36,783
GE Capital Mtg. Services, Inc. 94-7
Class A12, 6.000%, due 02/25/09....................... 332,540 323,678
Lockheed Martin Corp.
7.700%, due 06/15/08.................................. 125,000 135,775
Metlife Funding
6.850%, due 05/20/08.................................. 225,000 231,830
News America Holdings
7.750%, due 12/01/45.................................. 275,000 286,305
PNC Mortgage Securities Corp.
94-3A8 7.500%, due 07/25/24........................... 190,000 196,263
Premier Auto Trust
96-3A 6.750%, due 11/06/00............................ 475,000 480,225
Prudential Home Mortgage Securities
96-7 Cl A4 6.750%, due 06/25/11....................... 150,000 150,186
93-43 A9 6.750%, due 10/25/23......................... 220,433 217,362
Residential Asset Securitization Trust
97-A 11 P4 7.000%, due 12/25/27....................... 260,000 260,813
Salomon, Inc.
6.500%, due 03/01/00.................................. 300,000 301,597
Structured Mortgage Asset Residential Trust 93-5C CI
7.150%, due 03/25/23.................................. 925,000 931,114
The Money Store 94-A3
5.525%, due 09/15/18.................................. 68,226 67,309
Time Warner, Inc.
7.570%, due 02/01/24.................................. 315,000 330,182
UCFC Home Equity Loan 97-C,
Class A8, 6.325%, FRN, due 09/15/27................... 171,081 170,939
USA Waste Services
7.000%, due 10/01/04.................................. 300,000 306,791
World Omni Automobile Lease
Securitization Trust
6.850%, due 06/25/03.................................. 255,000 256,877
-----------
7,023,605
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
INTERNATIONAL DOLLAR BONDS -- 4.58%
Banco Santiago S.A.
7.000%, due 07/18/07.................................. $ 400,000 $ 401,086
Banque Centrale de Tunisie
8.250%, due 09/19/27.................................. 400,000 364,076
DR Investments 144A
7.450%, due 05/15/07.................................. 455,000 480,903
Empresa National Electric
7.875%, due 10/01/2097................................ 500,000 484,230
Pan Pacific Industry PLC 144A
0.000%, due 04/28/07.................................. 715,000 352,868
Province of Quebec
7.500%, due 07/15/23.................................. 235,000 253,386
Republic of South Africa
9.625%, due 12/15/99.................................. 125,000 129,375
Royal Bank of Scotland 7.375%,
Resettable Perpetual Preferred........................ 300,000 311,462
-----------
2,777,386
-----------
U.S. GOVERNMENT AGENCIES -- 9.61%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13.................................. 68,215 69,666
7.500%, due 01/15/23.................................. 78,941 82,895
7.238%, due 05/01/26.................................. 56,787 58,810
Federal Home Loan Mortgage Corp. Gold 8.000%, due
05/01/23.............................................. 93,222 96,456
9.000%, due 03/01/24.................................. 264,889 286,072
9.500%, due 04/01/25.................................. 23,409 25,004
Federal National Mortgage Association
7.875%, due 02/24/05.................................. 500,000 553,431
6.220%, due 03/13/06.................................. 150,000 151,461
9.000%, due 08/01/21.................................. 24,591 26,417
8.500%, due 07/01/22.................................. 18,885 20,005
7.500%, due 05/18/25.................................. 250,000 255,318
6.500%, due 03/01/26.................................. 74,623 73,644
6.500%, due 12/01/26 TBA.............................. 2,325,000 2,294,484
6.175%, due 10/01/27.................................. 197,990 197,733
Federal National Mortgage Association Strips
8.000%, due 07/01/24 interest only.................... 1,019 237
0.000%, due 04/01/27 principal only................... 405,375 307,842
0.000%, due 07/01/27 principal only................... 169,691 126,898
Government National Mortgage Association
7.500%, due 08/15/23.................................. 108,615 111,228
7.000%, due 08/15/24.................................. 502,936 508,221
7.000%, due 07/15/25.................................. 69,491 70,077
Tennessee Valley Authority
6.375%, due 06/15/05.................................. 500,000 510,197
-----------
5,826,096
-----------
U.S. GOVERNMENT OBLIGATIONS -- 9.91%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01.................................. 730,000 750,760
7.000%, due 07/15/06.................................. 650,000 701,797
8.125%, due 05/15/21.................................. 375,000 472,500
6.000%, due 06/03/99.................................. 2,785,000 2,798,925
5.875%, due 08/31/99.................................. 385,000 386,203
</TABLE>
- --------------------------------------------------------------------------------
45
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
U.S. Treasury Principal Strip
0.000%, due 08/15/03................................. $ 1,235,000 $ 896,610
-----------
6,006,795
-----------
Total U.S. Bonds...................................... 21,633,882
-----------
NON-U.S. BONDS -- 54.98%
AUSTRALIA -- 3.78%
Government of Australia
7.000%, due 04/15/00 .............................AUD 800,000 539,464
9.750%, due 03/15/02................................. 760,000 570,084
Queensland Treasury Corp.-Global Bond
8.000%, due 05/14/03................................. 980,000 701,229
6.500%, due 06/14/05................................. 730,000 482,148
-----------
2,292,925
-----------
CANADA -- 5.75%
British Columbia
7.750%, due 06/16/03 .............................CAD 1,700,000 1,302,130
Government of Canada
4.250%, due 12/01/21 (b)............................. 1,820,000 1,411,355
Province of Ontario
7.500%, due 01/19/06................................. 1,000,000 774,451
-----------
3,487,936
-----------
DENMARK -- 5.98%
City of Copenhagen
6.250%, due 03/15/01 .............................DKK 2,400,000 363,204
Great Belt 7.000%, due 09/02/03....................... 10,650,000 1,675,873
Kingdom of Denmark....................................
8.000%, due 11/15/01................................. 5,000,000 806,364
7.000%, due 12/15/04................................. 3,500,000 557,146
7.000%, due 11/15/07................................. 1,400,000 224,453
-----------
3,627,040
-----------
FRANCE -- 2.07%
Government of France (OAT)
9.500%, due 01/25/01 .............................FRF 1,200,000 227,294
8.500%, due 04/25/23................................. 1,600,000 357,713
KFW International Finance
7.750%, due 02/17/98................................. 2,600,000 434,342
Republic of Finland
9.000%, due 08/13/03................................. 1,200,000 237,616
-----------
1,256,965
-----------
GERMANY -- 12.21%
Bundesrepublik Deutschland
6.500%, due 03/15/00 .............................DEM 2,900,000 1,687,326
6.000%, due 07/04/07................................. 1,000,000 584,172
European Economic Community
6.500%, due 03/10/00................................. 1,910,000 1,107,377
International Bank for Reconstruction & Development-
Global Bond
7.125%, due 04/12/05................................. 650,000 400,353
Kingdom of Norway
6.125%, due 05/05/98................................. 1,040,000 582,437
LKB Baden-Wuerttemberg Finance
6.500%, due 09/15/08................................. 1,300,000 775,763
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ -----------
<S> <C> <C>
Republic of Ireland
7.250%, due 03/18/03...............................DEM 2,900,000 $ 1,770,869
Treuhandanstalt 7.125%, due 01/29/03................... 800,000 489,317
-----------
7,397,614
-----------
ITALY -- 2.68%
Bayerische Landesbank
10.750%, due 03/01/03 .............................ITL 250,000,000 174,451
Landesbank Rheinland-Pfalz
Girozentrale 8.250%, due 06/02/98..................... 750,000,000 428,438
LKB Baden-Wuerttemberg Finance
10.750%, due 04/14/03................................. 650,000,000 454,950
Republic of Italy (BTP)
7.750%, due 09/15/01.................................. 200,000,000 123,469
9.000%, due 10/01/03.................................. 350,000,000 233,492
9.500%, due 02/01/06.................................. 300,000,000 212,454
-----------
1,627,254
-----------
JAPAN -- 4.13%
International Bank for Reconstruction &
Development-Global Bond
4.500%, due 06/20/00 ..............................JPY 40,000,000 335,897
4.500%, due 03/20/03.................................. 47,000,000 419,078
4.750%, due 12/20/04.................................. 44,000,000 408,402
Republic of Austria
5.000%, due 01/22/01.................................. 130,000,000 1,123,534
Republic of Italy
3.500%, due 06/20/01.................................. 26,000,000 216,833
-----------
2,503,744
-----------
NETHERLANDS -- 4.93%
Government of Netherlands
5.750%, due 09/15/02...............................NLG 500,000 255,586
7.250%, due 10/01/04.................................. 1,500,000 826,469
7.500%, due 11/15/99.................................. 1,850,000 964,559
International Nederland GRP Verzekeringen
6.250%, due 12/28/05.................................. 1,800,000 939,714
-----------
2,986,328
-----------
SPAIN -- 3.57%
Kingdom of Spain
6.750%, due 04/15/00 ..............................ESP 100,000,000 686,163
7.900%, due 02/28/02.................................. 100,000,000 726,283
8.000%, due 05/30/04.................................. 100,000,000 750,230
-----------
2,162,676
-----------
SWEDEN -- 1.43%
Kingdom of Sweden
10.250%, due 05/05/03 .............................SEK 5,700,000 865,618
-----------
UNITED KINGDOM -- 8.45%
Abbey National
8.750%, due 05/24/04 ..............................GBP 350,000 623,046
British Gas PLC 8.125%, due 03/31/03................... 545,000 932,620
European Investment Bank 7.625%, due 12/07/06.......... 110,000 192,534
</TABLE>
- --------------------------------------------------------------------------------
46
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
UK Treasury
10.000%, due 09/08/03..............................GBP 700,000 $ 1,339,675
7.750%, due 09/08/06.................................. 555,000 993,395
9.000%, due 10/13/08.................................. 340,000 677,273
8.000%, due 09/27/13.................................. 190,000 363,626
-----------
5,122,169
-----------
Total Non-U.S. Bonds................................... 33,330,269
-----------
Total Bonds (Cost $55,386,825)......................... 54,964,151
-----------
Short-Term Investments -- 9.08%
COMMERCIAL PAPER -- 9.08%
Case Credit Corp.
6.110%, due 01/20/98.................................. $ 500,000 498,388
6.030%, due 03/10/98.................................. 500,000 494,305
Marriott Corp. 6.050%, due 02/09/98.................... 500,000 496,723
Nabisco, Inc.
6.700%, due 01/05/98.................................. 500,000 499,628
6.120%, due 01/16/98.................................. 500,000 498,725
Praxair Inc. 6.550%, due 01/02/98...................... 1,000,000 999,818
Vastar Resources Inc. 7.100%, due 01/02/98............. 2,020,000 2,019,602
-----------
Total Short-Term Investments
(Cost $5,507,188)..................................... 5,507,189
-----------
Total Investments
(Cost $60,894,013) -- 99.75% (a)...................... 60,471,340
-----------
Cash and other assets, less
liabilities -- 0.25%.................................. 149,794
-----------
Net Assets -- 100%..................................... $60,621,134
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
47
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $60,894,013; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 1,261,433
Gross unrealized depreciation............................... (1,684,106)
-----------
Net unrealized depreciation............................. $ (422,673)
===========
</TABLE>
(b) Linked to Canada's retail price index. Reset semi-annually.
FRN: Floating Rate Note--The rate disclosed is that in effect December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $833,771 or 1.38% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Global Bond Fund had the following open forward foreign currency contracts
as of December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Austrian Schilling...... 5/28/98 6,800,000 $ 541,695 $ (2,044)
Belgian Franc........... 5/28/98 50,000,000 1,360,834 (49,762)
Canadian Dollar......... 5/28/98 2,000,000 1,402,849 (12,779)
Finnish Markka.......... 5/28/98 2,000,000 370,386 (1,292)
French Franc............ 5/28/98 17,200,000 2,882,835 (107,690)
Italian Lira............ 5/28/98 3,800,000,000 2,150,320 (82,544)
Japanese Yen............ 5/28/98 770,000,000 6,054,915 (196,608)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar....... 5/28/98 2,700,000 1,765,491 70,555
British Pound........... 5/28/98 2,200,000 3,594,184 94,776
Canadian Dollar......... 5/28/98 4,300,000 3,016,126 33,520
Danish Kroner........... 5/28/98 19,900,000 2,927,185 109,592
German Mark............. 5/28/98 4,400,000 2,467,668 92,407
Netherlands Guilder..... 5/28/98 2,800,000 1,393,236 52,821
Spanish Peseta.......... 5/28/98 74,000,000 487,642 20,042
---------
Total............... $ 20,994
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $60,894,013) (Note 1)................ $60,471,340
Cash............................................................. 81,299
Foreign currency, at value (Cost $1,438,584)..................... 1,433,395
Receivables:
Investment securities sold...................................... 962,824
Interest........................................................ 1,392,529
Fund shares sold................................................ 3,100
Net unrealized appreciation on forward foreign currency con-
tracts......................................................... 20,994
Other assets..................................................... 46,110
-----------
TOTAL ASSETS.................................................. 64,411,591
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 3,716,457
Fund shares redeemed............................................ 5,998
Investment advisory fees (Note 2)............................... 33,990
Accrued expenses................................................ 34,012
-----------
TOTAL LIABILITIES............................................. 3,790,457
-----------
NET ASSETS........................................................ $60,621,134
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 8)......................................... $61,719,136
Accumulated undistributed net investment income.................. 499,811
Accumulated net realized loss.................................... (1,167,122)
Net unrealized depreciation...................................... (430,691)
-----------
NET ASSETS.................................................... $60,621,134
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of
$56,096,121 and 6,006,282 shares issued and outstanding) (Note
8)............................................................. $ 9.34
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,009 and 108 shares issued and outstanding) (Note 8)......... $ 9.34
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$4,524,004 and 485,179 shares issued and outstanding) (Note 8). $ 9.32
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $17,423 for foreign taxes withheld).............. $1,672,363
----------
TOTAL INCOME................................................... 1,672,363
----------
EXPENSES:
Advisory (Note 2)................................................. 224,325
Professional...................................................... 23,184
Distribution (Note 7)............................................. 10,139
Other............................................................. 45,267
----------
TOTAL EXPENSES................................................. 302,915
----------
Expenses deferred by Advisor (Note 2).......................... (23,486)
----------
NET EXPENSES................................................... 279,429
----------
NET INVESTMENT INCOME.......................................... 1,392,934
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 803,295
Futures contracts................................................ 21,780
Foreign currency transactions.................................... (1,272,922)
----------
Net realized loss............................................... (447,847)
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. (234,033)
Futures contracts................................................ (12,019)
Forward contracts................................................ (116,285)
Translation of other assets and liabilities denominated in for-
eign currency................................................... (17,257)
----------
Change in net unrealized appreciation or depreciation........... (379,594)
----------
Net realized and unrealized loss.................................. (827,441)
----------
Net increase in net assets resulting from operations.............. $ 565,493
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
50
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE
(UNAUDITED) 30, 1997
----------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income.......................... $ 1,392,934 $ 2,426,764
Net realized gain (loss)....................... (447,847) 1,723,264
Change in net unrealized appreciation or depre-
ciation ...................................... (379,594) (381,459)
----------- -----------
Net increase in net assets resulting from oper-
ations........................................ 565,493 3,768,569
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income....... (1,382,269) (3,479,707)
Distributions in excess of net investment in-
come.......................................... -- (340,005)
Distributions from net realized gain........... (1,041,855) (769,789)
----------- -----------
Total distributions to shareholders*........... (2,424,124) (4,589,501)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................... 5,329,669 23,164,253
Shares issued on reinvestment of distributions. 1,730,859 3,667,961
Shares redeemed................................ (2,848,777) (12,462,273)
----------- -----------
Net increase in net assets resulting from capi-
tal share transactions (Note 8)............... 4,211,751 14,369,941
----------- -----------
TOTAL INCREASE IN NET ASSETS................ 2,353,120 13,549,009
----------- -----------
NET ASSETS:
Beginning of year.............................. 58,268,014 44,719,005
----------- -----------
End of year (including accumulated undistrib-
uted net investment income of $499,811 and
$489,146, respectively)....................... $60,621,134 $58,268,014
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net invest-
ment income
Brinson Class I............................... $(1,302,948) $(3,503,032)
Brinson Class N............................... (22) --
SwissKey Class................................ (79,299) (316,680)
Distributions from net realized gain
Brinson Class I............................... (969,902) (704,236)
Brinson Class N............................... (18) --
SwissKey Class................................ (71,935) (65,553)
----------- -----------
Total distributions to shareholders............ $(2,424,124) $(4,589,501)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
51
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30, JULY 30, 1993*
DECEMBER 31, 1997 ------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- ------- -------
Income (loss) from in-
vestment operations:
Net investment income
..................... 0.22 0.67 0.84 0.50 0.45
Net realized and
unrealized gain
(loss)............... (0.13) 0.08 0.31 0.58 (0.52)
------- ------- ------- ------- -------
Total income (loss)
from investment
operations......... 0.09 0.75 1.15 1.08 (0.07)
------- ------- ------- ------- -------
Less distributions:
Distributions from and
in excess of net
investment income.... (0.22) (0.96) (1.40) (0.24) (0.28)
Distributions from net
realized gain........ (0.17) (0.19) (0.10) -- (0.10)
------- ------- ------- ------- -------
Total distributions. (0.39) (1.15) (1.50) (0.24) (0.38)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 9.34 $ 9.64 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= ======= =======
Total return (non-
annualized)............ 1.00 % 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $56,096 $54,157 $41,066 $51,863 $36,849
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.98 %** 1.32% 1.65% 1.43% 1.78%**
After expense reim-
bursement............ 0.90 %** 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 4.61 %** 4.90% 4.98% 5.53% 4.03%**
After expense reim-
bursement............ 4.69 %** 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover
rate.................. 93 % 235% 184% 199% 189%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
52
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- -----------------------------------------------
<S> <C>
Net asset value, beginning
of period.................. $ 9.64
------
Income from investment op-
erations:
Net investment income..... 0.21
Net realized and
unrealized loss.......... (0.13)
------
Total income from in-
vestment operations.... 0.08
------
Less distributions:
Distributions from and in
excess of net investment
income................... (0.21)
Distributions from net re-
alized gain.............. (0.17)
------
Total distributions..... (0.38)
------
Net asset value, end of pe-
riod....................... $ 9.34
======
Total return (non-
annualized)................ 0.82%
Ratios/Supplemental Data:
Net assets, end of period
(in 000s)................. $ 1
Ratio of expenses to aver-
age net assets:
Before expense reimburse-
ment..................... 1.23%**
After expense reimburse-
ment..................... 1.15%**
Ratio of net investment in-
come to average net as-
sets:
Before expense reimburse-
ment..................... 4.44%**
After expense reimburse-
ment..................... 4.52%**
Portfolio turnover rate.... 93%
</TABLE>
* Commencement of Brinson Fund Class N was June 30, 1997.
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
53
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 9.61 $10.02 $10.56
------ ------ ------
Income from investment opera-
tions:
Net investment income......... 0.21 0.62 0.78
Net realized and unrealized
gain (loss).................. (0.15) 0.10 0.15
------ ------ ------
Total income from investment
operations................. 0.06 0.72 0.93
------ ------ ------
Less distributions:
Distributions from and in
excess of net investment
income....................... (0.18) (0.94) (1.37)
Distributions from net real-
ized gain.................... (0.17) (0.19) (0.10)
------ ------ ------
Total distributions......... (0.35) (1.13) (1.47)
------ ------ ------
Net asset value, end of period.. $ 9.32 $ 9.61 $10.02
====== ====== ======
Total return (non-annualized)... 0.75% 7.20% 9.17%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $4,524 $4,110 $3,653
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.47%** 1.81% 2.14%**
After expense reimbursement... 1.39%** 1.39% 1.39%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 4.12%** 4.41% 4.49%**
After expense reimbursement... 4.20%** 4.83% 5.24%**
Portfolio turnover rate........ 93% 235% 184%
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
54
<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 Global Fund, Global Equity Fund and Global Bond Fund (each a
"Fund," collectively the "Funds") in the preparation of their financial
statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Investments in affiliated
investment companies are valued each day based on the closing net asset value
of the fund. U.S. equity securities traded over the counter are priced at the
most recent bid price. Debt securities are valued at the most recent bid price
by using market quotations or independent services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 1997, therefore, no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per
share between the classes are due to distribution expenses.
- --------------------------------------------------------------------------------
55
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I shares will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, the Funds pay the Advisor a monthly fee based on each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent that total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates, for the six
months ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES DEFERRED
-------- --------------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.35% 1.75% $2,635,060 $ --
Global Equity Fund...... 0.80 1.00 1.25 1.76 374,636 12,446
Global Bond Fund........ 0.75 0.90 1.15 1.39 224,325 23,486
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees were $5,888, $2,392 and $2,208 for the Global
Fund, Global Equity Fund and Global Bond Fund, respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by Brinson Partners, Inc. These investments represented 12.55%
of the Fund's total net assets at December 31, 1997. Activity for the six
months ended December 31, 1997 was as follows:
<TABLE>
<CAPTION>
NET NET
SALES REALIZED UNREALIZED
AFFILIATES PURCHASES PROCEEDS GAINS GAINS/(LOSSES) VALUE
- ---------- ----------- -------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Brinson Post-Venture
Fund................... $ -- $ -- -- $ 2,502,119 $ 8,502,119
Brinson High Yield Fund. 3,000,000 -- -- 2,753,354 17,201,354
Brinson Emerging Markets
Equity Fund............ 12,300,000 -- -- (4,996,711) 22,017,923
Brinson Emerging Markets
Debt Fund.............. 12,000,000 -- -- 7,921,280 34,231,280
----------- ----- ----- ----------- -----------
$27,300,000 $ -- $ -- $ 8,180,042 $81,952,676
=========== ===== ===== =========== ===========
</TABLE>
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1997, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $388,265,758 $354,100,300
Global Equity Fund.................................... 22,827,077 46,825,950
Global Bond Fund...................................... 52,650,977 51,300,135
</TABLE>
- --------------------------------------------------------------------------------
56
<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 six months ended December
31, 1997, was the Funds' custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.SECURITY LENDING: The Global Fund loaned securities to certain brokers, with
the Fund's custodian acting as the Fund's lending agent. The Fund earned
negotiated lenders' fees, which are included in interest income in the
Statement of Operations. Securities loaned are recorded at the amount of cash
collateral received. The Fund monitors the market value of securities loaned on
a daily basis and maintains collateral against the loaned securities in an
amount at least equal to 102% of the value of domestic securities loaned and
105% of the value of non-U.S. securities loaned. The cash collateral received
is invested in commercial paper. The value of loaned securities and related
collateral outstanding at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
VALUE OF LOANED VALUE OF
SECURITIES COLLATERAL
--------------- -----------
<S> <C> <C>
Global Fund......................................... $73,566,441 $79,523,767
=========== ===========
</TABLE>
7.DISTRIBUTION PLANS
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for Brinson Class N and the
SwissKey Class. Each Plan governs payments made for the expenses incurred in
the promotion and distribution of the SwissKey Class and, effective June 30,
1997, the Brinson Class N Shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily
net assets of the SwissKey Class of the Global Fund, Global Equity Fund and
Global Bond Fund, respectively. Annual Fees under the Brinson Class N Plan
shall not exceed 0.25% of the average daily net assets of the Brinson Class N
of the Global Fund, Global Equity Fund and Global Bond Fund.
- --------------------------------------------------------------------------------
57
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
---------------------- -----------------------
SHARES VALUE SHARES VALUE
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................ 7,360,093 $ 97,696,477 14,513,488 $180,787,534
Brinson Class N................ -- -- 76 1,000
SwissKey Class................. 383,268 5,015,748 932,414 11,508,566
--------- ------------ ---------- ------------
Total Sales................. 7,743,361 $102,712,225 15,445,978 $192,297,100
========= ============ ========== ============
Dividend Reinvestment:
Brinson Class I................ 4,544,864 $ 54,492,919 4,022,259 $ 48,025,771
Brinson Class N................ 8 93 -- --
SwissKey Class................. 201,931 2,409,581 130,547 1,554,814
--------- ------------ ---------- ------------
Total Dividend Reinvestment. 4,746,803 $ 56,902,593 4,152,806 $ 49,580,585
========= ============ ========== ============
Redemptions:
Brinson Class I................ 5,125,386 $ 64,663,733 11,346,380 $142,532,012
Brinson Class N................ -- -- -- --
SwissKey Class................. 254,713 3,320,349 198,888 2,469,271
--------- ------------ ---------- ------------
Total Redemptions........... 5,380,099 $ 67,984,082 11,545,268 $145,001,283
========= ============ ========== ============
<CAPTION>
GLOBAL EQUITY FUND
----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
---------------------- -----------------------
SHARES VALUE SHARES VALUE
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................ 781,871 $ 9,537,833 1,338,623 $ 15,816,109
Brinson Class N................ -- -- 78 1,000
SwissKey Class................. 1,380,824 17,329,493 2,271,465 26,703,521
--------- ------------ ---------- ------------
Total Sales................. 2,162,695 $ 26,867,326 3,610,166 $ 42,520,630
========= ============ ========== ============
Dividend Reinvestment:
Brinson Class I................ 119,737 $ 1,339,853 308,273 $ 3,485,504
Brinson Class N................ 8 90 -- --
SwissKey Class................. 436,312 4,877,967 286,226 3,226,433
--------- ------------ ---------- ------------
Total Dividend Reinvestment. 556,057 $ 6,217,910 594,499 $ 6,711,937
========= ============ ========== ============
Redemptions:
Brinson Class I................ 3,087,436 $ 38,885,545 225,435 $ 2,683,391
Brinson Class N................ -- -- -- --
SwissKey Class................. 1,054,052 13,166,684 565,431 6,612,207
--------- ------------ ---------- ------------
Total Redemptions........... 4,141,488 $ 52,052,229 790,866 $ 9,295,598
========= ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
58
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BOND FUND
----------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
------------------ ---------------------
SHARES VALUE SHARES VALUE
------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I....................... 425,982 $4,083,669 2,335,856 $22,155,311
Brinson Class N....................... -- -- 104 1,000
SwissKey Class........................ 129,575 1,246,000 103,968 1,007,942
------- ---------- --------- -----------
Total Sales........................ 555,557 $5,329,669 2,439,928 $23,164,253
======= ========== ========= ===========
Dividend Reinvestment:
Brinson Class I....................... 169,880 $1,586,679 348,609 $ 3,318,757
Brinson Class N....................... 4 39 -- --
SwissKey Class........................ 15,474 144,141 36,719 349,204
------- ---------- --------- -----------
Total Dividend Reinvestment........ 185,358 $1,730,859 385,328 $ 3,667,961
======= ========== ========= ===========
Redemptions:
Brinson Class I....................... 206,213 $1,999,170 1,159,373 $11,665,371
Brinson Class N....................... -- -- -- --
SwissKey Class........................ 87,685 849,607 77,300 796,902
------- ---------- --------- -----------
Total Redemptions.................. 293,898 $2,848,777 1,236,673 $12,462,273
======= ========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
59
<PAGE>
DISTRIBUTED BY:
FUNDS DISTRIBUTOR, INC.
60 STATE STREET
BOSTON, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF SWISS KEY FUNDS]
10 East 50th Street, New York, New York 10022 . Tel: (800)
SWISSKEY.http://www.swisskeyfunds.com
<PAGE>
[SWISS KEY FUNDS LOGO APPEARS HERE]
SWISSKEY U.S. BALANCED FUND
SWISSKEY U.S. EQUITY FUND
SWISSKEY U.S. BOND FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
YOUR KEY TO PERFORMANCE
---------------------------
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
[SWISS KEY FUNDS LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
Catherine E. Macrae
Assistant Secretary
1
<PAGE>
The Funds' Advisor--Brinson Partners, Inc.
- --------------------------------------------------------------------------------
[SWISS KEY FUNDS LOGO APPEARS HERE]
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation (SBC) and manages assets of over $140 billion. We have $90
billion of discretionary institutional assets with active management mandates
and we are the investment manager for SBC Private Banking mutual fund assets
which total over $50 billion. In addition, we act as an investment advisor to
SBC Private Banking. Our organization manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. We employ over 590 people in offices in
Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York,
Paris, Singapore, Sydney, Tokyo and Zurich.
Brinson Partners, an established U.S.-based leader in the investment field
located in Chicago, acts as the headquarters of our worldwide investment
management process. Brinson Partners pioneered the movement to the active
management of global portfolios in the early 1980s for U.S. clients. Private
market and venture capital investing was established in the 1970s and today we
represent a major worldwide presence in this asset class.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
[SWISS KEY FUNDS LOGO APPEARS]
<TABLE>
<S> <C>
Shareholder Letter.................................. 4
U.S. Economic and Market Highlights................. 6
U.S. Balanced Fund.................................. 7
Schedule of Investments......................... 10
Financial Statements............................ 14
Financial Highlights............................ 17
U.S. Equity Fund.................................... 20
Schedule of Investments......................... 23
Financial Statements............................ 25
Financial Highlights............................ 28
U.S. Bond Fund...................................... 31
Schedule of Investments......................... 34
Financial Statements............................ 36
Financial Highlights............................ 39
The SwissKey Funds--Notes to Financial Statements... 42
</TABLE>
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
[SWISS KEY FUNDS LOGO APPEARS HERE]
February 20, 1998
Dear Shareholder:
We are very pleased to present the December 31, 1997 Semi-Annual Report for the
U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. Within this Report,
we'll focus on the current domestic economic outlook as well as our current
strategies and performance updates for the three Domestic Funds.
Swiss Bank Corporation and Union Bank of Switzerland announced on December 8,
1997 their intention to merge into a single global financial institution. As
part of this merger, Brinson Partners and UBS Asset Management will be combined
into Brinson. Brinson will be the Institutional Asset Management Division of the
new organization with assets under management in excess of $340 billion and will
provide investment advisory services for the Private Banking Division with
assets over $400 billion. The Consumer & Corporate Banking Division and Brinson
combined will manage assets in excess of $940 billion.
We are excited about the formation of Brinson and the additional resources we
will bring together to further the tradition of delivering value-added
investment performance and the highest level of professional client service.
SwissKey U.S. Balanced Fund
Since its inception on July 31, 1995, the SwissKey U.S. Balanced Fund has
produced an annualized total return of 13.33%, compared to the return of 19.67%
of its benchmark, the U.S. Balanced Mutual Fund Index. The SwissKey U.S.
Balanced Fund achieved this performance with a volatility of 5.35% well below
the benchmark volatility of 8.35%.
SwissKey U.S. Equity Fund
The SwissKey U.S. Equity Fund has provided an annualized return of 26.25% since
its inception on July 31, 1995. This is compared to a 26.04% return for the
benchmark, the Wilshire 5000 Index. The SwissKey U.S. Equity Fund achieved this
performance with a volatility of 11.47% compared to the benchmark volatility of
11.81%.
4
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
[SWISS KEY FUNDS LOGO APPEARS HERE]
SwissKey U.S. Bond Fund
The SwissKey U.S. Bond Fund has provided an annualized return of 7.53% since its
inception on August 31, 1995. This is compared to a 7.99% return for the
benchmark, the Salomon Brothers BIG Bond index. The SwissKey U.S. Bond Fund
achieved this performance with a volatility of 4.57% compared to the benchmark
volatility of 3.76%.
Each of our Funds employs the same value-oriented investment philosophy applied
across the U.S. spectrum. Each Fund also uses the resources of our entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is tailored
to specific objectives and focused upon both risk and return considerations in
the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent. The Report that follows highlights the investment
characteristics of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in the SwissKey Funds.
Sincerely,
/S/ Hanspeter A. Walder
Hanspeter A. Walder
Executive Director
Private [SWISS KEY FUNDS LOGO APPEARS HERE] Banking
/S/ Raymond Simon
Raymond Simon
Executive Director
Private [SWISS KEY FUNDS LOGO APPEARS HERE] Banking
5
<PAGE>
U.S. Economic and Market Highlights
- --------------------------------------------------------------------------------
Consumer price inflation in 1997 turned out to be extraordinarily tame.
Excluding the volatile food and energy components, the price level rise of 2.4%
was the lowest since 1965. Although we do not foresee a strong resurgence in
inflation, there is reason to believe that, looking forward, the risk of an
upward move is heightened. After bottoming in the early 1990s, money supply
growth has returned to levels last seen in the mid 1990s. In addition, there is
some risk that any monetary policy mistake would tend toward ease rather than
excessive tightness if the Federal Reserve reacts to Asian-induced deflation
fears.
The economy continues to expand at a relatively rapid pace. Real GDP grew during
1997 at a 3.8% rate, the best performance in almost 10 years. Strong investment
spending by businesses contributed significantly, and spending by consumers
remained solid. The economy's strength propelled the unemployment rate under 5%,
to levels last seen in the early 1970s.
The Asian crisis has yet to have a significant impact on the U.S. economy. While
the direct effects are likely to be minor, the crisis does introduce new risks.
Talk of the possible deflationary effects of depressed import prices could
induce the Federal Reserve to err on the side of monetary ease. Although the
strong rebound in money growth since the early 1990s has not produced any
resurgence in goods price inflation, the combination of this monetary expansion
and the risk from policy reactions to Asia skews the inflation risks upwards
rather than toward further disinflation.
U.S. Environment
Major Markets
One Year Ended December 31, 1997
[BAR CHART APPEARS HERE]
Top Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1997
[BAR CHART APPEARS HERE]
Salomon U.S. Treasury Benchmark Returns
One Year Ended December 31, 1997
[BAR CHART APPEARS HERE]
Bottom Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1997
[BAR CHART APPEARS HERE]
6
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
The U.S. Balanced Fund is an actively managed portfolio that applies our value-
based asset allocation process to U.S. stocks, bonds and cash. The Fund's
investment strategy is developed in the context of our global asset allocation
process and is based on analysis of long-term economic and market conditions.
The SwissKey U.S. Balanced Fund has provided an annualized return of 13.33%
since its inception on July 31, 1995. This falls below the corresponding 19.67%
return of its benchmark, the U.S. Balanced Mutual Fund Index. The SwissKey U.S.
Balanced Fund return over this time period was achieved at an annualized
volatility of 5.35%, significantly below the benchmark volatility of 8.35%. For
the year ended December 31, 1997, the SwissKey U.S. Balanced Fund returned
12.66%, compared to the benchmark return of 23.50%.
The equity underweight and bond overweight was the primary factor adversely
affecting relative performance. Security selection in the U.S. equity market
also contributed negatively to relative performance. Although inflation was
relatively stable throughout 1997, the bond market experienced rising yields
early in the year and then a substantial drop in yields from April through
December. Coming out of 1996, yields continued to firm on the back of a
strengthening domestic economy and fears of an increase in interest rates by the
Federal Reserve. These fears diminished in the second half of the year as
reported inflation remained moderate. Yields at the long end of the yield curve
declined by over 100 basis points. Bonds ended the year with yields at their
lowest levels in two years.
The equity market turned in yet another banner year, with broad market indices
showing returns of about 30%. As in the prior year, the equity market provided
strong performance during January and February. However, after a brief setback,
the market soared on the back of declining interest rates and robust earnings
expectations. The equity market appears increasingly willing to extrapolate
recent strong earnings growth into the future. At year-end, equity price gains
had driven the market to an overpricing of around 20%.
Looking forward, return expectations in stocks appear insufficient compensation
for the risks. Therefore, we have maintained a reduced exposure in the
allocation to equities, with an offsetting overweight in the allocation to
bonds. The 5% cash risk hedge is above the neutral allocation of 0%.
7
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey U.S. Balanced Fund 5.56% 12.66% 13.33%
- ----------------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 9.84 23.50 19.67
- ----------------------------------------------------------------------------------------
</TABLE>
* Inception date of the SwissKey U.S. Balanced Fund.
** An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond
Index.
Total return includes reinvestment of all capital gain and income distributions.
Total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Balanced Fund and the U.S. Balanced Mutual Fund Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 1997. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future results.
Share price and return will vary with market conditions; investors may realize a
gain or loss upon redemption.
SwissKey U.S. Balanced Fund
vs. U.S. Balanced Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey U.S. U.S. Balanced Fund
Balanced Fund Mutual Fund Index
- ------------------------------------------------------
<S> <C> <C>
7/31/95 $10,000 $10,000
8/31/95 $10,141 $10,104
9/30/95 $10,325 $10,387
10/31/95 $10,387 $10,368
11/30/95 $10,694 $10,710
12/31/95 $10,841 $10,876
1/31/96 $11,058 $11,091
2/29/96 $11,001 $11,152
3/31/96 $11,030 $11,203
4/30/96 $11,049 $11,354
5/31/96 $11,086 $11,554
6/30/96 $11,154 $11,544
7/31/96 $10,982 $11,150
8/31/96 $11,096 $11,376
9/30/96 $11,412 $11,839
10/31/96 $11,670 $12,040
11/30/96 $12,100 $12,628
12/31/96 $12,018 $12,496
1/31/97 $12,162 $12,948
2/28/97 $12,202 $12,949
3/31/97 $11,988 $12,531
4/30/97 $12,182 $12,949
5/31/97 $12,530 $13,588
6/30/97 $12,826 $14,050
7/31/97 $13,351 $14,886
8/31/97 $13,125 $14,477
9/30/97 $13,413 $15,107
10/31/97 $13,269 $14,855
11/30/97 $13,351 $15,196
12/31/97 $13,540 $15,433
</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.
8
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
- ---------------------------------------
<TABLE>
<CAPTION>
U.S. EQUITIES
<S> <C>
Energy........................ 1.43%
Capital Investment
Capital Goods................ 2.50
Technology................... 3.05
------
5.55
Basic Industries
Chemicals.................... 0.74
Housing/Paper................ 1.80
Metals....................... 0.31
------
2.85
Consumer
Non-Durables................. 3.44
Retail/Apparel............... 1.81
Autos/Durables............... 1.39
Discretionary................ 1.30
Health: Drugs................ 2.87
Health: Non-Drugs............ 1.52
------
12.33
Financial
Banks........................ 2.78
Non-Banks.................... 2.47
------
5.25
Utilities
Electric..................... 2.18
Telephone.................... 0.38
------
2.56
Transportation................ 2.18%
Services/Misc................. 3.35
------
Total U.S. Equities....... 35.50*
------
U.S. BONDS
Corporate Bonds
Asset-Backed................. 1.22
CMO.......................... 0.42
Consumer..................... 1.36
Financial.................... 4.32
Industrial................... 3.05
Telecommunications........... 2.33
------
12.70
International Dollar Bonds.... 6.14
Mortgage-Backed Securities.... 4.25
U.S. Government Agencies...... 16.99
U.S. Government Obligations... 15.76
------
Total U.S. Bonds.......... 55.84*
------
SHORT-TERM INVESTMENTS........ 11.85*
------
TOTAL INVESTMENTS......... 103.19
LIABILITIES, LESS CASH
AND OTHER ASSETS............. (3.19)
------
NET ASSETS.................... 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
* The Fund held a long position in U.S. Treasury futures on December 31, 1997
which increased U.S. bond exposure from 55.84% to 59.46%. The Fund also held a
short position in stock index futures which reduced U.S. equity exposure from
35.50% to 30.00%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 11.85% to 13.73%.
Asset Allocation
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ----------------------------------------
<S> <C> <C>
U.S. Equity 65% 30%
U.S. Bonds 35 65
Cash Equivalents 0 5
- ----------------------------------------
100% 100%
</TABLE>
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------
<S> <C>
1. Lockheed Martin Corp. 1.50%
2. Xerox Corp. 1.44
3. Philip Morris Companies, Inc. 1.37
4. Aon Corp. 1.23
5. CIGNA Corp. 1.22
6. Schering Plough Corp. 1.06
7. Burlington Northern Santa Fe Corp. 1.05
8. Federal Express Corp. 1.02
9. Goodyear Tire & Rubber Co. 0.99
10. Automatic Data Processing, Inc. 0.86
- ----------------------------------------------------
</TABLE>
9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
U.S. Equities -- 35.50%
Allergan, Inc.............................................. 32,800 $ 1,100,850
Alza Corp. (b)............................................. 32,000 1,018,000
American Home Products Corp................................ 25,700 1,966,050
Aon Corp................................................... 62,500 3,664,062
Automatic Data Processing, Inc............................. 42,000 2,577,750
Baxter International, Inc.................................. 41,500 2,093,156
Beckman Instruments, Inc................................... 12,600 504,000
Biogen, Inc. (b)........................................... 12,600 458,325
Birmingham Steel Corp...................................... 12,800 201,600
Boston Technology, Inc. (b)................................ 12,800 321,600
Briggs & Stratton Corp..................................... 1,600 77,700
Burlington Northern Santa Fe Corp.......................... 33,700 3,131,994
Champion Enterprises, Inc. (b)............................. 20,400 419,475
Champion International Corp................................ 1,700 77,031
Chase Manhattan Corp....................................... 17,200 1,883,400
CIGNA Corp................................................. 21,000 3,634,312
Circuit City Stores-Circuit City Group..................... 47,300 1,682,106
Citicorp................................................... 15,600 1,972,425
CMS Energy Corp............................................ 41,400 1,824,188
Comerica, Inc.............................................. 8,800 794,200
Commscope, Inc. (b)........................................ 24,366 327,418
Comverse Technology, Inc. (b).............................. 6,300 245,700
Corning, Inc............................................... 69,200 2,569,050
Covance, Inc. (b).......................................... 16,175 321,478
CPC International, Inc..................................... 14,000 1,512,000
Crown Cork & Seal Co., Inc................................. 15,200 761,900
CVS Corp................................................... 20,400 1,306,875
Dial Corp.................................................. 16,500 343,406
Eastman Chemical Co........................................ 17,700 1,054,256
Echlin, Inc................................................ 9,000 325,687
EMC Corp. (b).............................................. 91,600 2,513,275
Enron Corp................................................. 43,100 1,791,344
Entergy Corp............................................... 83,700 2,505,769
Federal Express Corp. (b).................................. 49,900 3,047,019
First American Corp. of Tennessee.......................... 8,400 417,900
First Data Corp............................................ 77,557 2,268,542
First Security Corp........................................ 10,550 441,781
FirstEnergy Corp........................................... 24,975 724,275
Fleetwood Enterprises, Inc................................. 9,600 407,400
Food Lion, Inc., Class A................................... 66,400 560,250
Forest Laboratories, Inc. (b).............................. 14,700 724,894
Fort James Corp............................................ 37,100 1,419,075
Gannett Co., Inc........................................... 31,800 1,965,637
General Semiconductor, Inc. (b)............................ 16,550 191,359
Genzyme Corp............................................... 12,900 357,975
Geon Co.................................................... 8,800 205,700
Goodyear Tire & Rubber Co.................................. 46,200 2,939,475
Harnischfeger Industries, Inc.............................. 24,300 858,094
Health Care and Retirement Corp. (b)....................... 15,350 617,837
Hibernia Corp.............................................. 17,800 334,862
Informix Corp. (b)......................................... 17,000 80,750
Interpublic Group of Companies, Inc........................ 20,850 1,038,591
Kimberly Clark Corp........................................ 38,600 1,903,463
Lear Corp. (b)............................................. 13,800 655,500
Lockheed Martin Corp....................................... 45,471 4,478,894
Lyondell Petrochemical Co.................................. 35,000 927,500
Manor Care, Inc............................................ 24,700 864,500
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Martin Marietta Materials, Inc......................... 9,436 $ 345,004
Masco Corp............................................. 37,400 1,902,725
Nabisco Holdings Corp.................................. 32,700 1,583,906
National Service Industries, Inc....................... 6,300 312,244
Nextel Communications, Inc. (b)........................ 44,000 1,144,000
NextLevel Systems, Inc. (b)............................ 73,000 1,304,875
Old Republic International Corp........................ 6,450 239,859
Peco Energy Co......................................... 95,600 2,318,300
Pentair, Inc........................................... 17,000 610,938
Pharmacia & UpJohn, Inc................................ 17,200 629,950
Philip Morris Companies, Inc........................... 90,400 4,096,250
Raytheon Co., Class B.................................. 38,000 1,919,000
Regions Financial Corp................................. 8,200 345,938
Reynolds & Reynolds Co................................. 31,200 575,250
Schering Plough Corp................................... 50,700 3,149,738
Seagate Technology, Inc. (b)........................... 28,600 550,550
Sears Roebuck & Co..................................... 3,900 176,475
Timken Co.............................................. 9,400 323,125
Tyson Foods, Inc., Class A............................. 65,200 1,336,600
Ultramar Diamond Shamrock Corp......................... 36,490 1,163,119
US Bancorp............................................. 21,953 2,457,364
Vencor, Inc. (b)....................................... 32,000 782,000
Viad Corp.............................................. 31,500 608,344
Westvaco Corp.......................................... 7,650 240,497
Witco Corp............................................. 5,000 204,062
Xerox Corp............................................. 58,300 4,303,269
York International Corp................................ 20,000 791,250
------------
Total U.S. Equities (Cost $82,622,420)................. 105,826,287
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Bonds -- 55.84%
U.S. CORPORATE BONDS -- 12.70%
Aid-Israel 0.000%, due 08/15/19........................ $5,162,000 $ 1,355,954
Aid-Jordan
8.750%, due 09/01/19.................................. 3,620,237 4,435,912
Archer Daniels 6.950%, due 12/15/2097.................. 1,995,000 2,021,956
Capital One Bank 6.830%, due 05/17/99.................. 2,000,000 2,013,864
Chase Manhattan Auto Owner Trust
96C-A4 6.150%, due 03/15/02........................... 1,360,000 1,362,135
Chase Manhattan Credit Card Trust
96-4A 6.730%, due 02/15/03............................ 2,000,000 2,019,160
Chrysler Corp. 7.400%, due 08/01/2097.................. 2,380,000 2,539,220
Comcast Cable Communications 144-A
8.500%, due 05/01/27.................................. 2,000,000 2,359,092
Dayton Hudson Credit Card Master Trust
95-1A 6.100%, due 02/25/02............................ 2,000,000 2,001,740
Donaldson Lufkin & Jenrette
FRN 6.700%, due 06/30/00.............................. 840,000 850,303
Enron Corp. 6.750%, due 08/01/09....................... 4,500,000 4,537,395
GE Capital Mtg. Services, Inc.
94-7 Class A12, 6.000%, due 02/25/09.................. 1,270,601 1,236,739
GMAC 6.375%, due 12/01/01.............................. 2,000,000 2,008,776
Lockheed Martin Corp.
7.700%, due 06/15/08.................................. 2,000,000 2,172,408
MBNA Global Capital Securities FRN
6.519%, due 02/01/27.................................. 215,000 197,485
New England Telephone & Telegraph
6.300%, due 12/16/02.................................. 1,835,000 1,838,764
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
News America Holdings
7.750%, due 12/01/45.................................. $ 1,000,000 $ 1,041,108
Residential Asset Securitization Trust
97-A 11 P4 7.000%, due 12/25/27....................... 280,000 280,875
Time Warner, Inc., 7.570%, due 02/01/24................ 1,790,000 1,876,274
USA Waste Services
6.500%, due 12/15/02.................................. 1,720,000 1,715,679
-----------
37,864,839
-----------
INTERNATIONAL DOLLAR BONDS -- 6.14%
Credit Suisse--London 144A
7.900%, Resettable Perpetual Preferred................ 2,170,000 2,289,571
Den Danske Bank 144A
7.400%, due 06/15/10.................................. 1,400,000 1,460,710
Empressa Nacional Electric
7.875%, due 02/01/2097................................ 2,335,000 2,472,366
International Bank for Reconstruction &
Development 6.375%, due 07/21/05...................... 1,500,000 1,538,438
LKB Baden-Wuerttemberg Finance NV
8.125%, due 01/27/00.................................. 1,780,000 1,849,546
Montell Finance Co. 144A
8.100%, due 03/15/27.................................. 1,610,000 1,890,022
Petroliam Nasional
7.125%, due 08/15/05.................................. 1,500,000 1,415,517
Province of Quebec
7.500%, due 07/15/23.................................. 750,000 808,680
Ras Laffan Liquefied Natural Gas Co. Ltd.
144A 8.294%, due 03/15/14............................. 1,735,000 1,632,645
Skandinaviska Enskilda Banken 144A
6.625%, Resettable Perpetual Preferred................ 2,000,000 2,008,000
Southern Investments UK
6.800%, due 12/01/06.................................. 930,000 937,318
-----------
18,302,813
-----------
MORTGAGE-BACKED SECURITIES -- 4.25%
Asset Securitization Corp. 96-D3A1B 7.210%, due
10/13/26.............................................. 2,600,000 2,714,665
Morgan Stanley Capital, Inc.
6.830%, due 10/15/06.................................. 1,227,297 1,253,082
PNC Mortgage Securities Corp.
94-3A8 7.500%, due 07/25/24........................... 1,350,000 1,394,501
Prudential Home Mortgage Securities
93-43 A9 6.750%, due 10/25/23......................... 1,387,428 1,368,102
94-3 A10 6.500%, due 02/25/24......................... 2,855,000 2,742,799
UCFC Home Equity Loan
97-Class A8 6.325%, FRN, due 09/15/27................. 1,236,672 1,235,646
Vanderbilt Mortgage Finance
97-B1A3 6.975%, due 08/07/03.......................... 1,925,000 1,978,631
-----------
12,687,426
-----------
U.S. GOVERNMENT AGENCIES -- 16.99%
Federal Home Loan Mortgage Corp.
6.500%, due 05/15/21.................................. 2,159,690 2,159,798
7.500%, due 01/15/23.................................. 1,075,979 1,129,864
0.000%, due 04/15/27 principal only................... 2,497,000 1,629,163
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23................................... $ 717,095 $ 741,969
9.000%, due 03/01/24................................... 346,379 374,079
9.500%, due 04/01/25................................... 1,030,008 1,100,177
Federal National Mortgage Association
6.540%, due 09/18/02................................... 2,415,000 2,442,302
6.959%, due 08/01/07................................... 3,065,973 3,196,277
6.789%, due 11/01/07................................... 504,259 525,377
6.500%, due 05/25/08................................... 1,491,555 1,488,706
6.500%, due 08/25/08................................... 1,550,096 1,552,577
8.000%, due 12/18/11................................... 1,000,000 1,074,974
6.500%, due 12/25/23................................... 2,000,000 1,993,710
7.000%, due 03/18/25................................... 2,190,000 2,191,778
6.500%, due 04/01/26................................... 557,317 550,002
6.500%, due 05/01/26................................... 2,007,715 1,981,364
6.500%, due 12/01/26 TBA............................... 11,545,000 11,393,472
Federal National Mortgage Association Strips
0.000%, due 04/01/27 principal only.................... 3,045,025 2,312,392
0.000%, due 07/01/27 principal only.................... 1,236,317 924,539
Government National Mortgage Association
8.000%, due 08/15/22................................... 871,861 904,010
8.000%, due 11/15/22................................... 2,018,583 2,105,019
7.500%, due 06/15/23................................... 2,900,313 2,970,103
7.500%, due 08/15/23................................... 1,031,840 1,056,669
7.500%, due 09/15/23................................... 1,052,633 1,077,963
7.000%, due 12/15/23................................... 860,100 869,638
9.000%, due 07/15/24................................... 136,239 145,690
8.500%, due 11/15/24................................... 144,212 151,467
8.500%, due 01/15/25................................... 281,633 295,803
9.000%, due 05/15/25................................... 340,348 363,959
7.500%, due 06/15/25................................... 1,885,081 1,932,416
-----------
50,635,257
-----------
U.S. GOVERNMENT OBLIGATIONS-- 15.76%
U.S. Treasury Notes and Bonds
6.000%, due 06/30/99................................... 30,805,000 30,959,025
5.875%, due 08/31/99................................... 4,520,000 4,534,125
7.750%, due 11/30/99................................... 1,110,000 1,150,931
6.625%, due 07/31/01................................... 1,660,000 1,707,207
6.250%, due 08/31/02................................... 5,500,000 5,613,438
8.125%, due 05/15/21................................... 1,195,000 1,505,700
U.S. Treasury Principal Strip
0.000%, due 08/15/03 principal only.................... 2,090,000 1,517,340
-----------
46,987,766
-----------
Total U.S. Bonds (Cost $163,017,803).................... 166,478,101
-----------
Short-Term Investments -- 11.85%
U.S. GOVERNMENT OBLIGATIONS -- 0.33%
U.S. Treasury Bill 5.42%, due 05/28/98.................. 1,015,000 993,430
-----------
COMMERCIAL PAPER -- 11.52%
Bausch & Lomb Inc., 7.750%, due 01/02/98................ 5,145,000 5,143,892
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Case Credit Corp.
6.110%, due 01/20/98................................. $1,300,000 $ 1,295,808
6.030%, due 03/10/98................................. 1,500,000 1,483,725
6.020%, due 03/13/98................................. 1,500,000 1,482,191
General American Transportation Corp. 7.500%, due
01/07/98............................................. 3,489,000 3,484,639
GTE Corp.
6.120%, due 02/20/98................................. 1,500,000 1,487,250
6.020%, due 03/02/98................................. 1,500,000 1,484,950
Marriott Corp.
6.300%, due 01/16/98................................. 2,000,000 1,994,750
6.050%, due 02/09/98................................. 2,500,000 2,483,615
Nabisco Corp. 6.120%, due 01/16/98.................... 2,000,000 1,994,900
Occidental Petroleum Corp. 6.000%, due 01/16/98....... 2,500,000 2,493,750
Praxair Corp. 6.550%, due 01/02/98.................... 6,000,000 5,998,909
Safeway, Inc.
6.700%, due 01/02/98................................. 2,000,000 1,999,628
5.920%, due 01/22/98................................. 1,500,000 1,494,820
------------
34,322,827
------------
Total Short-Term Investments
(Cost $35,315,671)................................... 35,316,257
------------
Total Investments
(Cost $280,955,894)--103.19% (a)..................... 307,620,645
------------
Liabilities, less cash and other
assets-- (3.19%)..................................... (9,510,432)
------------
Net Assets--100%...................................... $298,110,213
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $280,955,894; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $29,455,719
Gross unrealized depreciation................................ (2,790,968)
-----------
Net unrealized appreciation................................ $26,664,751
===========
</TABLE>
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $11,640,040, or 3.90% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FUTURES CONTRACTS (NOTE 4)
The U.S. Balanced Fund had the following open futures contracts as of December
31, 1997:
<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,
82 contracts............... March 1998 $8,874,678 $8,907,250 $ 32,572
10 Year U.S. Treasury Note,
4 contracts................ March 1998 445,655 448,625 2,970
30 Year U.S. Treasury Bond,
12 contracts............... March 1998 1,437,871 1,445,625 7,754
INDEX FUTURES SALE CONTRACTS
Standard & Poor's 500, 67
contracts.................. March 1998 16,329,119 16,399,925 (70,806)
--------
Total..................... $(27,510)
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1997 was $993,430.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $280,955,894) (Note 1)............... $307,620,645
Receivables:
Investment securities sold...................................... 4,674,233
Dividends....................................................... 160,170
Interest........................................................ 1,521,608
Fund shares sold................................................ 5,000
Other assets..................................................... 39,717
------------
TOTAL ASSETS.................................................. 314,021,373
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 15,656,125
Due to custodian bank........................................... 36,637
Investment advisory fees (Note 2)............................... 170,379
Accrued expenses................................................ 48,019
------------
TOTAL LIABILITIES............................................. 15,911,160
------------
NET ASSETS........................................................ $298,110,213
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $270,389,706
Accumulated undistributed net investment income.................. 81,662
Accumulated net realized gain.................................... 1,001,604
Net unrealized appreciation...................................... 26,637,241
------------
NET ASSETS.................................................... $298,110,213
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $296,444,401 and 24,918,886 shares is-
sued and outstanding) (Note 6)................................. $ 11.90
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,059 and 89 shares issued and outstanding) (Note 6).......... $ 11.90
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,664,753 and 140,637 shares issued and outstanding) (Note 6). $ 11.84
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $ 5,689,651
Dividends......................................................... 958,489
-----------
TOTAL INCOME................................................... 6,648,140
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,005,745
Administration.................................................... 51,918
Distribution (Note 5)............................................. 4,384
Other............................................................. 91,325
-----------
TOTAL EXPENSES................................................. 1,153,372
-----------
NET INVESTMENT INCOME ......................................... 5,494,768
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 13,452,774
Futures contracts................................................ (2,376,619)
-----------
Net realized gain.............................................. 11,076,155
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... (1,400,448)
Futures contracts................................................ 1,164,080
-----------
Change in net unrealized appreciation or depreciation.......... (236,368)
-----------
Net realized and unrealized gain.................................. 10,839,787
-----------
Net increase in net assets resulting from operations.............. $16,334,555
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 5,494,768 $ 9,809,363
Net realized gain............................. 11,076,155 16,067,241
Change in net unrealized appreciation or de-
preciation................................... (236,368) 10,534,773
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 16,334,555 36,411,377
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.............................. (8,638,019) (7,953,731)
Brinson Class N.............................. (30) --
SwissKey Class............................... (46,180) (43,714)
Distributions from net realized gain:
Brinson Class I.............................. (20,202,719) (10,324,917)
Brinson Class N.............................. (75) --
SwissKey Class............................... (121,168) (65,778)
------------ ------------
Total distributions to shareholders............ (29,008,191) (18,388,140)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 28,640,454 80,528,530
Shares issued on reinvestment of distribu-
tions........................................ 28,947,784 18,312,423
Shares redeemed............................... (31,314,203) (60,962,669)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 6)............. 26,274,035 37,878,284
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 13,600,399 55,901,521
------------ ------------
NET ASSETS:
Beginning of year............................. 284,509,814 228,608,293
------------ ------------
End of year (including accumulated undistrib-
uted net investment income of $81,662 and
$3,271,123, respectively).................... $298,110,213 $284,509,814
============ ============
</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>
SIX MONTHS ENDED YEAR YEAR DECEMBER 30, 1994*
DECEMBER 31, 1997 ENDED ENDED THROUGH
BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.53 $ 11.71 $ 11.23 $ 10.00
-------- -------- -------- --------
Income from investment
operations:
Net investment income. 0.26 0.47 0.44 0.23
Net realized and
unrealized gain...... 0.45 1.29 1.04 1.16
-------- -------- -------- --------
Total income from
investment opera-
tions.............. 0.71 1.76 1.48 1.39
-------- -------- -------- --------
Less distributions:
Distributions from net
investment income.... (0.40) (0.40) (0.43) (0.16)
Distributions from net
realized gain........ (0.94) (0.54) (0.57) --
-------- -------- -------- --------
Total distributions. (1.34) (0.94) (1.00) (0.16)
-------- -------- -------- --------
Net asset value, end of
period................. $ 11.90 $ 12.53 $ 11.71 $ 11.23
======== ======== ======== ========
Total return (non-
annualized)............ 5.89% 15.50% 13.52% 13.91%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $296,444 $282,860 $227,829 $157,724
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.80%** 0.88% 1.01% 1.06%**
After expense reim-
bursement............ N/A 0.80% 0.80% 0.80%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 3.83%** 3.78% 3.76% 4.36%**
After expense reim-
bursement............ N/A 3.86% 3.97% 4.63%**
Portfolio turnover
rate.................. 94% 329% 240% 196%
Average commission rate
paid per share........ $ 0.0536 $0.0441 $ 0.0481 N/A
</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 the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period......................... $ 12.53
-------
Income from investment operations:
Net investment income...................................... 0.25
Net realized and unrealized gain........................... 0.44
-------
Total income from investment operations.................. 0.69
-------
Less distributions:
Distributions from net investment income................... (0.38)
Distributions from net realized gain....................... (0.94)
-------
Total distributions...................................... (1.32)
-------
Net asset value, end of period............................... $ 11.90
=======
Total return (non-annualized)................................ 5.72%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement............................... 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement............................... 3.64%**
Portfolio turnover rate..................................... 94%
Average commission rate paid per share...................... $0.0536
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 12.46 $ 11.67 $ 11.38
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.23 0.38 0.42
Net realized and unrealized
gain......................... 0.45 1.31 0.86
------- ------- -------
Total income from investment
operations................. 0.68 1.69 1.28
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.36) (0.36) (0.42)
Distributions from net real-
ized gain.................... (0.94) (0.54) (0.57)
------- ------- -------
Total distributions......... (1.30) (0.90) (0.99)
------- ------- -------
Net asset value, end of period.. $ 11.84 $ 12.46 $ 11.67
======= ======= =======
Total return (non-annualized)... 5.56% 14.99% 11.54%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $ 1,665 $ 1,649 $ 779
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.30%** 1.38% 1.51%**
After expense reimbursement... N/A 1.30% 1.30%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 3.33%** 3.28% 3.26%**
After expense reimbursement... N/A 3.36% 3.47%**
Portfolio turnover rate........ 94% 329% 240%
Average commission rate paid
per share..................... $0.0536 $0.0441 $0.0481
</TABLE>
*Commencement of SwissKey Class
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
The U.S. Equity Fund is an actively managed portfolio invested in common stocks
of U.S. corporations. The portfolio is diversified by issue and industry; it is
typically 70% invested in large capitalization stocks, with the remaining 30% in
intermediate and small capitalization stocks. Investment strategies emphasize
stock selection with attention to the management of factor and industry
exposures.
Since its performance inception on July 31, 1995, the SwissKey U.S. Equity Fund
has provided an annualized return of 26.25% compared to 26.04% for the
benchmark, the Wilshire 5000 Index. The annualized volatility of the SwissKey
U.S. Equity Fund has been 11.47% since inception, slightly below the 11.81%
volatility for the Wilshire 5000 Equity Index. In 1997, the SwissKey U.S. Equity
Fund's total return of 24.23% trailed the 31.29% return for its benchmark.
Almost all of the U.S. Equity Fund's underperformance occurred in the fourth
quarter against the backdrop of a stock market environment heavily influenced by
a "flight to quality" mentality on the part of investors. Such an environment
was precipitated by difficulties in the Southeast Asian economies. There were
indications of trouble in the region earlier in 1997, but the problems came to
the fore in the final quarter as the magnitude of credit excesses became more
apparent, future economic growth rates were revised sharply lower and currency
values in country after country plummeted. U.S. financial markets and the dollar
were viewed as a safe haven. Not surprisingly, the strongest relative
performance within the stock market was posted by the highest quality, largest
capitalization issues.
The U.S. Equity Fund was not positioned well for these fourth quarter
developments. The problem was not an unusually heavy weight in low quality,
small capitalization issues. Rather, the problem was that the Fund was minimally
weighted in those few very large, very high quality issues which have come to
dominate the market in recent years and which performed strongly in the fourth
quarter. The 20 largest U.S. stocks now account for over 30% of the total market
value of the S&P 500, and most of them are concentrated in the relatively
defensive consumer nondurable, international oil and telephone utility
industries. Our researchers recognize the strong products, capable managements
and worldwide market positions which characterize most of these companies, and
they have taken these factors into account in formulating their future estimates
of profitability and growth. However, based upon their work, we found these
stocks to be relatively overvalued throughout 1997, a mispricing that by the end
of the year was as high as we have observed since the inception of our present
organization in 1981.
As we enter 1998, our price/value discipline leads us to maintain an underweight
in such issues. More specifically, the Fund is positioned with factor
overweightings in the traditional value measures of book-price, earnings-price
and yield, and underweights in growth, size and foreign earnings. From an
industry standpoint, meaningful deviations from the benchmark include
overweightings in healthcare, defense and electric utilities. Important
underweights include energy, telephone utilities, miscellaneous finance and
semiconductor/personal computer issues.
20
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
12/31/97 12/31/97 12/31/97
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey U.S. Equity Fund 6.59% 24.23% 26.25%
Wilshire 5000 Index 11.60 31.29 26.04
- -------------------------------------------------------------------------------------
</TABLE>
* Inception date of the SwissKey U.S. Equity Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Equity Fund and the Wilshire 5000 Index if you had invested $10,000 on July 31,
1995, and had reinvested all your income dividends and capital gain
distributions through December 31, 1997. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SwissKey U.S. Equity Fund
vs. Wilshire 5000 Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey U.S.
Equity Fund Wilshire 5000 Index
- ------------------------------------------------------
<S> <C> <C>
7/31/95 $10,000 $10,000
8/31/95 $10,184 $10,098
9/30/95 $10,570 $10,483
10/31/95 $10,528 $10,377
11/30/95 $11,122 $10,817
12/31/95 $11,335 $10,994
1/31/96 $11,790 $11,288
2/29/96 $11,971 $11,486
3/31/96 $12,194 $11,612
4/30/96 $12,418 $11,898
5/31/96 $12,615 $12,224
6/30/96 $12,570 $12,123
7/31/96 $11,958 $11,469
8/31/96 $12,415 $11,836
9/30/96 $12,966 $12,466
10/31/96 $13,242 $12,640
11/30/96 $14,156 $13,478
12/31/96 $14,157 $13,326
1/31/97 $14,663 $14,039
2/28/97 $14,757 $14,033
3/31/97 $14,260 $13,412
4/30/97 $14,691 $13,997
5/31/97 $15,759 $14,989
6/30/97 $16,499 $15,677
7/31/97 $17,756 $16,883
8/31/97 $17,053 $16,248
9/30/97 $17,812 $17,207
10/31/97 $16,865 $16,634
11/30/97 $17,193 $17,178
12/31/97 $17,587 $17,496
</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.
21
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
U.S. EQUITIES
<S> <C>
Energy.................... 3.80%
Capital Investment
Capital Goods............ 6.64
Technology............... 8.10
------
14.74
Basic Industries
Chemicals................ 1.97
Housing/Paper............ 4.78
Metals................... 0.83
------
7.58
Consumer
Non-Durables............. 9.11
Retail/Apparel........... 4.79
Autos/Durables........... 3.68
Discretionary............ 3.44
Health: Drugs............ 7.61
Health: Non-Drugs........ 4.02
------
32.65
Financial
Banks.................... 7.38
Non-Banks................ 6.56
------
13.94
Utilities
Electric................. 5.78
Telephone................ 1.01
------
6.79
Transportation............ 5.78
Services/Misc............. 8.86
------
Total U.S. Equities... 94.14*
------
SHORT-TERM INVESTMENTS.... 5.45*
------
TOTAL INVESTMENTS..... 99.59
------
CASH AND OTHER ASSETS,
LESS LIABILITIES......... 0.41
------
NET ASSETS................ 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
* The Fund held a long position in stock index futures on December 31, 1997
which increased U.S. Equity exposure from 94.14% to 99.64% and reduced exposure
to Short-Term Investments from 5.45% to -0.05%.
Top Ten U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------
<S> <C>
1. Lockheed Martin Corp. 4.02%
2. Xerox Corp. 3.86
3. Philip Morris Companies, Inc. 3.67
4. CIGNA Corp. 3.25
5. Aon Corp. 3.07
6. Schering Plough Corp. 2.85
7. Burlington Northern Santa Fe Corp. 2.80
8. Federal Express Corp. 2.65
9. Goodyear Tire & Rubber Co. 2.63
10. Automatic Data Processing, Inc. 2.31
- ----------------------------------------------------
</TABLE>
22
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
U.S. Equities -- 94.14%
Allergan, Inc............................................... 162,500 $5,453,906
Alza Corp. (b).............................................. 158,500 5,042,281
American Home Products Corp................................. 128,000 9,792,000
Aon Corp.................................................... 288,750 16,927,969
Automatic Data Processing, Inc.............................. 207,800 12,753,725
Baxter International, Inc................................... 205,000 10,339,688
Beckman Instruments, Inc.................................... 62,000 2,480,000
Biogen, Inc. (b)............................................ 62,100 2,258,888
Birmingham Steel Corp....................................... 63,700 1,003,275
Boston Technology, Inc. (b)................................. 63,300 1,590,413
Briggs & Stratton Corp...................................... 10,900 529,331
Burlington Northern Santa Fe Corp. ......................... 166,500 15,474,094
Champion Enterprises, Inc. (b).............................. 100,200 2,060,363
Champion International Corp................................. 8,500 385,156
Chase Manhattan Corp........................................ 84,900 9,296,550
CIGNA Corp.................................................. 103,600 17,929,275
Circuit City Stores-Circuit City Group...................... 234,100 8,325,181
Citicorp.................................................... 77,000 9,735,687
CMS Energy Corp............................................. 204,600 9,015,188
Comerica, Inc............................................... 43,600 3,934,900
Commscope, Inc. (b)......................................... 120,599 1,620,549
Comverse Technology, Inc. (b)............................... 31,200 1,216,800
Corning, Inc................................................ 329,600 12,236,400
Covance, Inc (b)............................................ 79,850 1,587,019
CPC International, Inc...................................... 69,400 7,495,200
Crown Cork & Seal Co., Inc.................................. 75,400 3,779,425
CVS Corp.................................................... 100,600 6,444,688
Dial Corp................................................... 81,900 1,704,544
Eastman Chemical Co......................................... 87,300 5,199,806
Echlin, Inc................................................. 44,500 1,610,344
EMC Corp. (b)............................................... 453,100 12,431,931
Enron Corp.................................................. 212,400 8,827,875
Entergy Corp................................................ 413,700 12,385,144
Federal Express Corp. (b)................................... 239,500 14,624,469
First American Corp. of Tennessee........................... 41,500 2,064,625
First Data Corp............................................. 383,230 11,209,477
First Security Corp......................................... 52,300 2,190,062
FirstEnergy Corp............................................ 123,905 3,593,245
Fleetwood Enterprises, Inc.................................. 45,100 1,913,931
Food Lion, Inc., Class A.................................... 300,900 2,538,844
Forest Laboratories, Inc. (b)............................... 72,900 3,594,881
Fort James Corp............................................. 185,100 7,080,075
Gannett Co., Inc............................................ 157,400 9,729,287
General Semiconductor, Inc. (b)............................. 82,075 948,992
Genzyme Corp................................................ 64,100 1,778,775
Geon Co..................................................... 43,700 1,021,487
Goodyear Tire & Rubber Co................................... 227,700 14,487,412
Harnischfeger Industries, Inc............................... 120,400 4,251,625
Health Care and Retirement Corp. (b)........................ 71,450 2,875,863
Hibernia Corp............................................... 88,100 1,657,381
Informix Corp. (b).......................................... 66,900 317,775
Interpublic Group of Companies, Inc......................... 103,350 5,148,122
Kimberly Clark Corp......................................... 185,400 9,142,537
Lear Corp. (b).............................................. 68,300 3,244,250
Lockheed Martin Corp........................................ 225,026 22,165,061
Lyondell Petrochemical Co................................... 173,200 4,589,800
Manor Care, Inc............................................. 113,900 3,986,500
Martin Marietta Materials, Inc.............................. 46,357 1,694,928
Masco Corp.................................................. 184,800 9,401,700
Nabisco Holdings Corp....................................... 161,500 7,822,656
National Service Industries, Inc............................ 31,000 1,536,438
Nextel Communications, Inc. (b)............................. 221,500 5,759,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
NextLevel Systems, Inc. (b)......................... 361,400 $ 6,460,025
Old Republic International Corp..................... 28,150 1,046,828
Peco Energy Co...................................... 472,900 11,467,825
Pentair, Inc........................................ 83,800 3,011,563
Pharmacia & Upjohn, Inc............................. 82,900 3,036,213
Philip Morris Companies, Inc........................ 447,300 20,268,281
Raytheon Co., Class B .............................. 187,700 9,478,850
Regions Financial Corp.............................. 40,700 1,717,031
Reynolds & Reynolds Co.............................. 154,400 2,846,750
Schering Plough Corp................................ 252,800 15,705,200
Seagate Technology, Inc. (b)........................ 141,500 2,723,875
Sears, Roebuck and Co............................... 17,200 778,300
Timken Co........................................... 40,900 1,405,938
Tyson Foods, Inc., Class A.......................... 322,500 6,611,250
Ultramar Diamond Shamrock Corp...................... 180,318 5,747,636
US Bancorp.......................................... 104,448 11,691,592
Vencor, Inc. (b).................................... 157,600 3,851,350
Viad Corp........................................... 155,600 3,005,025
Westvaco Corp....................................... 37,800 1,188,337
Witco Corp. ........................................ 25,700 1,048,881
Xerox Corp.......................................... 288,400 21,287,525
York International Corp............................. 98,700 3,904,819
------------
Total U.S. Equities
(Cost $452,651,427)................................ 519,519,887
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C> <C>
Short-Term Investments -- 5.45%
U.S. GOVERNMENT OBLIGATIONS -- 0.09%
U.S. Treasury Bill
5.420%, due 05/28/98............................... $ 495,000 $ 484,481
------------
COMMERCIAL PAPER -- 5.36%
Bausch & Lomb Inc.
7.750%, due 01/02/98 2,565,000 2,564,448
Cummins Engine Company, Inc. 7.000%, due 01/02/98... 10,000,000 9,998,056
General American Transportation Corp.
7.500%, due 01/07/98............................... 951,000 949,811
Nabisco Inc.
6.700%, due 01/05/98............................... 1,000,000 999,256
Praxair Inc.
6.550%, due 01/02/98............................... 5,000,000 4,999,090
Solutia Inc.
7.000% due 01/02/98................................ 10,083,000 10,081,039
------------
29,591,700
------------
Total Short-Term Investments
(Cost $30,076,290) 30,076,181
------------
Total Investments
(Cost $482,727,717) -- 99.59% (a).................. 549,596,068
------------
Cash and other assets,
less liabilities--0.41%............................ 2,264,881
------------
Net Assets -- 100%.................................. $551,860,949
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
23
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $482,727,717; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $78,689,103
Gross unrealized depreciation................................ (11,820,752)
-----------
Net unrealized appreciation................................ $66,868,351
===========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS (NOTE 4)
The U.S. Equity Fund had the following open index futures contracts as of
December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Standard & Poor's 500, 124
contracts................. March 1998 $29,802,893 $30,352,100 $549,207
========
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open futures positions at December 31, 1997 were
$815,000 and $484,481, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $482,727,717) (Note 1) .............. $549,596,068
Cash............................................................. 1,298,691
Receivables:
Investment securities sold...................................... 3,932,114
Dividends....................................................... 775,755
Fund shares sold................................................ 17,912,366
Other assets..................................................... 97,684
------------
TOTAL ASSETS.................................................. 573,612,678
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 19,694,740
Fund shares redeemed............................................ 1,672,529
Investment advisory fees (Note 2)............................... 302,102
Accrued expenses................................................ 82,358
------------
TOTAL LIABILITIES............................................. 21,751,729
------------
NET ASSETS........................................................ $551,860,949
============
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $483,976,569
Accumulated undistributed net investment income.................. 14,392
Accumulated net realized gain.................................... 452,430
Net unrealized appreciation...................................... 67,417,558
------------
NET ASSETS.................................................... $551,860,949
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $507,739,810 and 28,880,535 shares is-
sued and outstanding) (Note 6)................................. $ 17.58
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,072 and 61 shares issued and outstanding) (Note 6).......... $ 17.58
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $44,120,067 and 2,517,356 shares issued
and outstanding) (Note 6)...................................... $ 17.53
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 3,920,692
Interest.......................................................... 361,435
-----------
TOTAL INCOME................................................... 4,282,127
-----------
EXPENSES:
Advisory (Note 2)................................................. 1,577,328
Administration.................................................... 116,010
Distribution (Note 5)............................................. 106,721
Other............................................................. 108,634
-----------
TOTAL EXPENSES................................................. 1,908,693
-----------
NET INVESTMENT INCOME.......................................... 2,373,434
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments...................................................... 15,557,861
Futures contracts................................................ 1,061,031
-----------
Net realized gain ............................................. 16,618,892
-----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 8,599,085
Futures contracts ............................................... 314,472
-----------
Change in net unrealized appreciation or depreciation.......... 8,913,557
-----------
Net realized and unrealized gain ................................. 25,532,449
-----------
Net increase in net assets resulting from operations.............. $27,905,883
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE
(UNAUDITED) 30, 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 2,373,434 $ 2,268,618
Net realized gain ............................ 16,618,892 21,580,018
Change in net unrealized appreciation or de-
preciation .................................. 8,913,557 40,886,740
------------ ------------
Net increase in net assets resulting from op-
erations..................................... 27,905,883 64,735,376
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................. (2,888,381) (1,717,943)
Brinson Class N............................. (5) --
SwissKey Class.............................. (150,200) (87,137)
Distributions from net realized gain:
Brinson Class I............................. (28,383,478) (12,393,329)
Brinson Class N............................. (64) --
SwissKey Class.............................. (2,678,144) (838,501)
------------ ------------
Total distributions to shareholders........... (34,100,272) (15,036,910)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 203,834,470 212,394,882
Shares issued on reinvestment of distribu-
tions........................................ 30,526,642 14,138,565
Shares redeemed............................... (49,295,234) (34,971,198)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 6)............. 185,065,878 191,562,249
------------ ------------
TOTAL INCREASE IN NET ASSETS............... 178,871,489 241,260,715
------------ ------------
NET ASSETS:
Beginning of year............................. 372,989,460 131,728,745
------------ ------------
End of year (including accumulated undistrib-
uted net investment income of $14,392 and
$679,544, respectively)...................... $551,860,949 $372,989,460
============ ============
</TABLE>
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>
SIX MONTHS ENDED YEAR ENDED JUNE 30, FEBRUARY 22, 1994*
DECEMBER 31, 1997 --------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 17.64 $ 14.59 $ 11.53 $ 9.65 $10.00
-------- -------- -------- ------- ------
Income from investment
operations:
Net investment income. 0.08 0.15 0.17 0.16 0.05
Net realized and
unrealized gain
(loss)............... 1.10 4.27 3.31 1.89 (0.36)
-------- -------- -------- ------- ------
Total income (loss)
from investment
operations......... 1.18 4.42 3.48 2.05 (0.31)
-------- -------- -------- ------- ------
Less distributions:
Distributions from net
investment income.... (0.11) (0.14) (0.17) (0.14) (0.04)
Distributions from net
realized gain........ (1.13) (1.23) (0.25) (0.03) --
-------- -------- -------- ------- ------
Total distributions. (1.24) (1.37) (0.42) (0.17) (0.04)
-------- -------- -------- ------- ------
Net asset value, end of
period................. $ 17.58 $ 17.64 $ 14.59 $ 11.53 $ 9.65
======== ======== ======== ======= ======
Total return (non-
annualized)............ 6.87% 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $507,740 $337,949 $126,342 $42,573 $8,200
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 0.80%** 0.89% 1.14% 1.70% 5.40% **
After expense reim-
bursement............ N/A 0.80% 0.80% 0.80% 0.80% **
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 1.10%** 1.06% 1.13% 1.09% (2.82)%**
After expense reim-
bursement............ N/A 1.15% 1.47% 1.99% 1.78% **
Portfolio turnover
rate.................. 19% 43% 36% 33% 9%
Average commission rate
paid per share........ $ 0.0426 $ 0.0422 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997*
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period......................... $ 17.64
-------
Income from investment operations:
Net investment income...................................... 0.08
Net realized and unrealized gain........................... 1.07
-------
Total income from investment operations.................. 1.15
-------
Less distributions:
Distributions from net investment income................... (0.09)
Distributions from net realized gain....................... (1.12)
-------
Total distributions...................................... (1.21)
-------
Net asset value, end of period............................... $ 17.58
=======
Total return (non-annualized)................................ 6.73%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement............................... 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement............................... 0.77%**
Portfolio turnover rate..................................... 19%
Average commission rate paid per share...................... $0.0426
</TABLE>
*Commencement of Brinson Class N was June 30, 1997
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 17.59 $ 14.58 $ 11.94
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.04 0.11 0.10
Net realized and unrealized
gain......................... 1.09 4.22 2.92
------- ------- -------
Total income from investment
operations................. 1.13 4.33 3.02
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.06) (0.09) (0.13)
Distributions from net real-
ized gain.................... (1.13) (1.23) (0.25)
------- ------- -------
Total distributions......... (1.19) (1.32) (0.38)
------- ------- -------
Net asset value, end of period.. $ 17.53 $ 17.59 $ 14.58
======= ======= =======
Total return (non-annualized)... 6.59% 31.28% 25.70%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $44,120 $35,039 $ 5,387
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.32%** 1.41% 1.66%**
After expense reimbursement... N/A 1.32% 1.32%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 0.57%** 0.54% 0.61%**
After expense reimbursement... N/A 0.63% 0.95%**
Portfolio turnover rate........ 19% 43% 36%
Average commission rate paid
per share..................... $0.0426 $0.0422 $0.0457
</TABLE>
*Commencement of SwissKey Class
**Annualized
N/A=Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<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. Macroeconomic and monetary
analysis are the key elements in our strategy. We develop expectations about the
returns on U.S. bonds based on the divergence of current market yields from our
estimates of equilibrium yields. Relative value analysis serves as the basis of
both our sector and individual security selection.
Since its inception on August 31, 1995, the SwissKey U.S. Bond Fund has provided
an annualized return of 7.53%, compared to 7.99% for the benchmark, Salomon
Brothers Broad Investment Grade Bond Index. The Fund's annualized return
volatility since inception of 4.57% exceeds the 3.76% volatility of the
benchmark.
In 1997, the Fund's return of 9.05% slightly trailed the benchmark return of
9.62%. The performance in 1997 was a function of successful duration and yield
curve strategies as well as issue selection primarily within the mortgage-backed
sector. Portfolio duration was targeted at 1.3 times benchmark duration from the
beginning of 1997 until early in the third quarter, when duration was shortened
to neutral.
Following a 25 basis point increase in the overnight funds rate target in March,
Federal Reserve interest rate policy was unchanged for the balance of the year.
While short-term market interest rates generally rose in line with the overnight
funds market, long-term interest rates showed substantial declines in 1997.
Thirty-year Treasury bond yields fell by 70 basis points to end 1997 at the 5.9%
level. Declines in reported inflation and in inflationary expectations were the
major factors associated with falling long-term interest rates. Another positive
for the bond market was the continued decline in the Federal deficits which
reduced Treasury debt supply. The good inflation performance was achieved at a
time when the underlying pace of real economic activity was quite robust. Strong
job creation led to a decline in unemployment rates to levels not seen since the
1960s.
During the year, fixed income investors responded more to the favorable
inflation data than to the risks of above-trend growth and the tight labor
market. Interest rates began the year slightly above 6.60% and moved higher well
into the second quarter in conjunction with the March Federal Reserve tightening
and Federal Reserve Chairman Greenspan's now famous "irrational exuberance"
speech. By the end of the second quarter with inflation remaining contained and
no further hints of additional Fed tightening, interest rates began a steady
decline which carried through year-end. In the final quarter of 1997 domestic
economic strength, which would typically be viewed as a negative by the fixed
income markets, was more than offset by developments in Asia. A dramatic
depreciation in the Asian equity and currency markets gave rise to concerns
about global deflation, providing further support to U.S. bond markets. The
Asian turmoil had a dual impact on the U.S. bond market as a "flight-to-quality"
provided fuel to the interest rate decline while the prospective negative
influence on the U.S. economy propelled corporate bond credit spreads to their
widest levels of the decade.
31
<PAGE>
U.S. Bond Fund
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
U.S. BONDS
<S> <C>
Corporate Bonds
Asset-Backed.................................... 7.89%
CMO............................................. 6.89
Consumer........................................ 0.75
Financial....................................... 11.68
Industrial...................................... 9.39
Telecommunications.............................. 2.21
------
Total U.S. Corporate Bonds................... 38.81
U.S. Government Agencies......................... 23.90
U.S. Government Obligations...................... 20.22
International Dollar Bonds....................... 8.72
------
Total U.S. Bonds............................. 91.65
SHORT-TERM INVESTMENTS........................... 6.07
------
TOTAL INVESTMENTS............................ 97.72
LIABILITIES, LESS CASH AND OTHER ASSETS.......... 2.28
------
NET ASSETS....................................... 100.00%
======
- ----------------------------------------------------------
</TABLE>
32
<PAGE>
U.S. Bond Fund
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 8/31/95* to
12/31/97 12/31/97 12/31/97
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
SwissKey U.S. Bond Fund 6.31% 9.05% 7.53%
Salomon Brothers Broad Investment Grade (BIG) Bond Index 6.37 9.62 7.99
- ---------------------------------------------------------------------------------------------
</TABLE>
* Inception date of the SwissKey U.S. Bond Fund.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Bond Fund and the Salomon Brothers Broad Investment Grade (BIG) Bond Index if
you had invested $10,000 on August 31, 1995, and had reinvested all your income
dividends and capital gain distributions through December 31, 1997. No
adjustment has been made for any income taxes payable by shareholders on income
dividends and capital gain distributions. Past performance is no guarantee of
future results. Share price and return will vary with market conditions;
investors may realize a gain or loss upon redemption.
SwissKey U.S. Bond Fund
vs. Salomon Brothers BIG Bond Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey U.S.
Bond Fund Salomon Brothers BIG
- -------------------------------------------------------
<S> <C> <C>
8/31/95 $10,000 $10,000
9/30/95 $10,080 $10,094
10/31/95 $10,230 $10,229
11/30/95 $10,390 $10,389
12/31/95 $10,529 $10,532
1/31/96 $10,591 $10,604
2/29/96 $10,366 $10,425
3/31/96 $10,284 $10,350
4/30/96 $10,202 $10,273
5/31/96 $10,161 $10,268
6/30/96 $10,324 $10,400
7/31/96 $10,345 $10,428
8/31/96 $10,283 $10,413
9/30/96 $10,491 $10,594
10/31/96 $10,762 $10,832
11/30/96 $11,032 $11,011
12/31/96 $10,861 $10,914
1/31/97 $10,871 $10,956
2/28/97 $10,893 $10,968
3/31/97 $10,731 $10,857
4/30/97 $10,893 $11,012
5/31/97 $11,001 $11,116
6/30/97 $11,141 $11,248
7/31/97 $11,479 $11,553
8/31/97 $11,370 $11,453
9/30/97 $11,522 $11,622
10/31/97 $11,675 $11,788
11/30/97 $11,708 $11,843
12/31/97 $11,844 $11,964
</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.
33
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 91.65%
U.S. CORPORATE BONDS -- 38.81%
Aetna Services, Inc. 6.970%, due 08/15/36............... $ 235,000 $ 246,223
Aid-Israel, Series 10 Z
0.000%, due 02/15/03................................... 805,000 597,704
Aid-Jordan 8.750%, due 09/01/19......................... 517,177 633,702
Bellsouth Savings & Employee ESOP
9.125%, due 07/01/03................................... 88,948 92,331
Capital One Bank 6.830%, due 05/17/99................... 359,000 361,489
Chase Mortgage Finance Corp. 93-J1
Class 1A5 6.625%, due 08/25/09......................... 68,131 66,570
Chemical Mortgage Securities, Inc. 93-1 Class A5 7.450%,
due 02/25/23........................................... 785,000 796,238
Ches Pot Tel MD 8.000%, due 10/15/29.................... 87,000 103,628
Chrysler Financial Corp.
7.400%, due 08/01/2097................................. 223,000 237,919
Citicorp Mortgage Securities, Inc. 94-9
Class A8, 5.750%, due 06/25/09......................... 91,612 82,865
Comcast Cable Communications 144A
8.500%, due 05/01/27................................... 300,000 353,864
Con Edison 6.450%, due 12/01/07......................... 300,000 299,435
Countrywide Funding Corp. FRN
6.360%, due 12/01/03................................... 250,000 248,125
CS First Boston Mortgage Securities Corp.
97-C1 7.150%, due 08/20/06............................. 245,000 254,905
Dayton Hudson Credit Card Master Trust
95-1A, 6.100%, due 02/25/02............................ 218,000 218,190
First Bank Corporate Card Master Trust
97-1A 6.400%, due 02/15/03............................. 155,000 156,259
GE Capital Mtg. Services, Inc.
94-7 Class A12, 6.000%, due 02/25/09................... 178,678 173,916
97-HE4 A7 6.735%, due 12/25/28......................... 410,000 414,981
General Motors Acceptance Corp..........................
6.375%, due 12/01/01................................... 400,000 401,755
9.625%, due 12/15/01................................... 294,000 328,475
Green Tree Financial Corp.
8.300%, due 11/15/19................................... 320,000 356,508
Hanson Overseas BV
6.750%, due 09/15/05................................... 100,000 102,209
Interamer Development Bank
6.800%, due 10/15/25................................... 100,000 105,772
Lehman Brothers Holdings
7.250%, due 04/15/03................................... 225,000 232,285
Lockheed Martin Corp.
7.700%, due 06/15/08................................... 282,000 306,310
MBNA Global Capital Securities FRN
6.550%, due 02/01/27................................... 90,000 82,668
News America Holdings
7.750%, due 12/01/45................................... 358,000 372,717
PNC Mortgage Securities Corp.
94-3A8 7.500%, due 07/25/24............................ 215,000 222,087
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Premier Auto Trust
96-3A 6.500%, due 03/06/00.............................. $ 190,000 $ 190,682
96-4A, Class A4, 6.400%, due 10/06/01................... 350,000 351,939
Prudential Home Mortgage Securities
93-43A9 6.750%, due 10/25/23............................ 293,910 289,816
94-3A10 6.500%, due 02/25/24............................ 170,000 163,319
Salomon, Inc. 6.750%, due 02/15/03....................... 300,000 304,259
Thrift Financial Corp.
11.250%, due 01/01/16................................... 48,499 52,306
Time Warner, Inc. 7.570%, due 02/01/24................... 90,000 94,338
Time Warner Entertainment, Inc.
8.375%, due 03/15/23.................................... 94,000 107,236
UCFC Home Equity Loan 97-C, Class A8,
6.325%, FRN, due 09/15/27............................... 185,745 185,591
USA Waste Services
6.500%, due 12/15/02.................................... 400,000 398,995
USX Corp. 8.125%, due 07/15/23........................... 400,000 450,885
-----------
10,438,496
-----------
INTERNATIONAL DOLLAR BONDS -- 8.72%
Banco Santiago S.A.
7.000%, due 07/18/07.................................... 380,000 381,032
Bayerische Landesbank
6.850%, due 07/19/01.................................... 188,000 192,990
Den Danske Bank 144A
7.400%, due 06/15/10.................................... 445,000 464,297
Empressa Nacional Electric
7.875%, due 02/01/27.................................... 394,000 417,179
Province of Quebec
7.500%, due 07/15/23.................................... 200,000 215,648
Repsol International Finance
7.000%, due 08/01/05.................................... 200,000 210,030
Republic of South Africa
9.625%, due 12/15/99.................................... 71,000 73,485
Royal Bank of Scotland
7.375%, Resettable Perpetual Preferred.................. 80,000 83,056
Skandinaviska Enskilda Banken 144A
6.625%, Resettable Perpetual Preferred.................. 305,000 306,220
-----------
2,343,937
-----------
U.S. GOVERNMENT AGENCIES -- 23.90%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13.................................... 492,125 502,589
7.500%, due 01/15/23.................................... 139,328 146,306
7.000%, due 01/15/25.................................... 235,000 233,989
7.238%, due 05/01/26.................................... 38,252 39,615
Federal Home Loan Mortgage Corp.
Gold 6.000%, due 06/01/03............................... 98,672 97,531
8.000%, due 11/01/22.................................... 190,982 197,607
9.000%, due 03/01/24.................................... 148,338 160,200
9.500%, due 04/01/25.................................... 43,073 46,007
</TABLE>
- --------------------------------------------------------------------------------
34
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Federal Home Loan Mortgage Corp. Strip
0.000%, due 04/15/27 principal only..................... $ 300,000 $ 195,734
Federal National Mortgage Association
6.959%, due 08/01/07.................................... 488,562 509,325
6.500%, due 05/25/08.................................... 115,558 115,337
8.000%, due 12/18/11.................................... 100,000 107,497
8.000%, due 05/25/21.................................... 260,000 271,993
9.000%, due 08/01/21.................................... 28,894 31,040
8.500%, due 07/01/22.................................... 22,285 23,606
9.500%, due 08/01/22.................................... 134,383 143,874
8.500%, due 12/01/25.................................... 298,255 311,397
6.500%, due 02/01/26.................................... 118,416 116,862
6.500%, due 04/01/26.................................... 402,445 397,163
6.500%, due 12/01/26 TBA................................ 200,000 197,375
6.175%, due 10/01/27.................................... 511,877 511,212
6.500%, due 12/01/27.................................... 792,000 781,605
Federal National Mortgage Association Strips
7.500%, due 05/01/23 interest only...................... 175,961 44,798
0.000%, due 04/01/27 principal only..................... 608,062 461,763
Government National Mortgage Association
10.000%, due 09/15/00................................... 2,663 2,835
10.000%, due 05/15/01................................... 5,200 5,537
9.000%, due 11/15/04.................................... 15,025 15,790
9.000%, due 12/15/17.................................... 56,428 61,654
8.000%, due 08/15/22.................................... 78,467 81,361
7.500%, due 12/15/22.................................... 362,696 373,008
7.500%, due 06/15/25.................................... 118,808 121,791
7.000%, due 07/15/25.................................... 118,543 119,542
-----------
6,425,943
-----------
U.S. GOVERNMENT OBLIGATIONS -- 20.22%
U.S. Treasury Notes and Bonds
6.625%, due 07/31/01.................................... 270,000 277,678
7.000%, due 07/15/06.................................... 250,000 269,922
8.125%, due 05/15/21.................................... 325,000 409,500
6.000%, due 02/15/26.................................... 380,000 379,525
5.500%, due 11/15/98.................................... 153,000 152,761
6.000%, due 06/30/99.................................... 3,830,000 3,849,150
5.875%, due 08/31/99.................................... 100,000 100,313
-----------
5,438,849
-----------
Total U.S. Bonds (Cost $24,121,505)...................... 24,647,225
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Short-Term Investments -- 6.07%
COMMERCIAL PAPER -- 6.07%
Case Credit Corp. 6.110%, due 01/20/98.................. $ 300,000 $ 299,033
GTE Corp. 6.020%, due 03/02/98.......................... 500,000 494,983
Safeway, Inc. 5.920%, due 01/22/98...................... 183,000 182,368
Vastar Resources, Inc.
7.100%, due 01/02/98................................... 657,000 656,871
-----------
Total Short-Term Investments
(Cost $1,633,255)...................................... 1,633,255
-----------
Total Investments
(Cost $25,754,760) -- 97.72% (a)....................... 26,280,480
-----------
Cash and other assets, less liabilities -- 2.28%........ 613,309
-----------
Net Assets -- 100%...................................... $26,893,789
===========
</TABLE>
(a) Aggregate cost for federal income tax purposes was $25,754,760; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation........... $563,738
Gross unrealized de-
preciation........... (38,018)
--------
Net unrealized ap-
preciation........... $525,720
========
</TABLE>
FRN: Floating rate note -- The rate disclosed is that in effect at December 31,
1997.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997, the value of these securities amounted to $1,124,381, or 4.18% of
net assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $25,754,760) (Note 1)................ $26,280,480
Cash............................................................. 65,136
Receivables:
Investment securities sold...................................... 908,528
Interest........................................................ 250,274
Other assets..................................................... 29,443
-----------
TOTAL ASSETS.................................................. 27,533,861
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 590,827
Investment advisory fees (Note 2)............................... 5,020
Accrued expenses................................................ 44,225
-----------
TOTAL LIABILITIES............................................. 640,072
-----------
NET ASSETS........................................................ $26,893,789
===========
NET ASSETS CONSIST OF:
Paid in capital (Note 6)......................................... $26,262,620
Accumulated undistributed net investment income.................. (13,078)
Accumulated net realized gain.................................... 118,527
Net unrealized appreciation...................................... 525,720
-----------
NET ASSETS.................................................... $26,893,789
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $24,948,207 and 2,409,486 shares issued
and outstanding) (Note 6)...................................... $ 10.35
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,067 and 103 shares issued and outstanding) (Note 6)......... $ 10.36
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,944,515 and 188,228 shares issued and outstanding) (Note 6). $ 10.33
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $ 844,224
----------
TOTAL INCOME.................................................... 844,224
----------
EXPENSES:
Advisory (Note 2).................................................. 65,526
Professional....................................................... 18,768
Registration....................................................... 10,791
Distribution (Note 5).............................................. 4,144
Other.............................................................. 19,950
----------
TOTAL EXPENSES.................................................. 119,179
Expenses deferred by Advisor (Note 2)........................... (36,523)
----------
NET EXPENSES.................................................... 82,656
----------
NET INVESTMENT INCOME .......................................... 761,568
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments................................... 548,792
Change in net unrealized appreciation or depreciation.............. 328,468
----------
Net realized and unrealized gain................................... 877,260
----------
Net increase in net assets resulting from operations............... $1,638,828
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
SIX MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
OPERATIONS: ----------------- -----------
<S> <C> <C>
Net investment income.......................... $ 761,568 $ 836,232
Net realized gain (loss)....................... 548,792 (36,166)
Change in net unrealized appreciation or depre-
ciation....................................... 328,468 343,515
----------- -----------
Net increase in net assets resulting from oper-
ations........................................ 1,638,828 1,143,581
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................... (976,512) (598,393)
Brinson Class N............................... (39) --
SwissKey Class................................ (69,936) (31,712)
Distributions from and in excess of net real-
ized gain:
Brinson Class I............................... (335,742) (675)
Brinson Class N............................... (14) --
SwissKey Class................................ (25,812) (39)
----------- -----------
Total distributions to shareholders............ (1,408,055) (630,819)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................... 4,679,580 16,583,813
Shares issued on reinvestment of distributions. 641,561 461,917
Shares redeemed................................ (2,478,830) (3,420,321)
----------- -----------
Net increase in net assets resulting from capi-
tal share transactions (Note 6)............... 2,842,311 13,625,409
----------- -----------
TOTAL INCREASE IN NET ASSETS................ 3,073,084 14,138,171
----------- -----------
NET ASSETS:
Beginning of period............................ 23,820,705 9,682,534
----------- -----------
End of period (including accumulated undistrib-
uted net investment
income of $(13,078) and $271,841, respective-
ly)........................................... $26,893,789 $23,820,705
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1997 YEAR ENDED THROUGH
BRINSON CLASS I (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.24 $ 9.93 $10.00
------- ------- ------
Income from investment opera-
tions:
Net investment income....... 0.30 0.51** 0.50
Net realized and unrealized
gain (loss)................ 0.37 0.32 (0.14)
------- ------- ------
Total income from invest-
ment operations.......... 0.67 0.83 0.36
------- ------- ------
Less distributions:
Distributions from net in-
vestment income............ (0.42) (0.52) (0.40)
Distributions from and in
excess of net realized
gain....................... (0.14) -- (0.03)
------- ------- ------
Total distributions....... (0.56) (0.52) (0.43)
------- ------- ------
Net asset value, end of peri-
od........................... $ 10.35 $ 10.24 $ 9.93
======= ======= ======
Total return (non-annualized). 6.58% 8.45% 3.60%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $24,948 $22,421 $9,047
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 0.88%*** 1.65% 3.63%***
After expense reimbursement. 0.60%*** 0.60% 0.60%***
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment....................... 5.56%*** 5.14% 3.00%***
After expense reimbursement. 5.84%*** 6.19% 6.03%***
Portfolio turnover rate...... 132% 410% 363%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED*
DECEMBER 31, 1997
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.......................... $10.24
------
Income from investment operations:
Net investment income....................................... 0.30
Net realized and unrealized gain............................ 0.36
------
Total income from investment operations................... 0.66
------
Less distributions:
Distributions from net investment income.................... (0.40)
Distributions from net realized gain........................ (0.14)
------
Total distributions....................................... (0.54)
------
Net asset value, end of period................................ $10.36
======
Total return (non-annualized)................................. 6.52%
Ratios/Supplemental data
Net assets, end of period (in 000s).......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................ 1.15%**
After expense reimbursement................................. 0.85%**
Ratio of net investment income to average net assets:
Before expense reimbursement................................ 5.35%**
After expense reimbursement................................. 5.65%**
Portfolio turnover rate...................................... 132%
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31, 1995*
DECEMBER 31, 1997 YEAR ENDED THROUGH JUNE 30,
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $10.22 $ 9.92 $10.00
------ ------ ------
Income from investment opera-
tions:
Net investment income....... 0.24 0.46** 0.46
Net realized and unrealized
gain (loss)................ 0.40 0.32 (0.13)
------ ------ ------
Total income from invest-
ment operations.......... 0.64 0.78 0.33
------ ------ ------
Less distributions:
Distributions from net in-
vestment income............ (0.39) (0.48) (0.38)
Distributions from and in
excess of net realized
gain....................... (0.14) -- (0.03)
------ ------ ------
Total distributions....... (0.53) (0.48) (0.41)
------ ------ ------
Net asset value, end of peri-
od........................... $10.33 $10.22 $ 9.92
====== ====== ======
Total return (non-annualized). 6.31% 7.91% 3.24%
Ratios/Supplemental data
Net assets, end of period (in
000s)....................... $1,945 $1,399 $ 636
Ratio of expenses to average
net assets:
Before expense reimburse-
ment....................... 1.35%*** 2.12% 4.10%***
After expense reimbursement. 1.07%*** 1.07% 1.07%***
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment....................... 5.09%*** 4.67% 2.53%***
After expense reimbursement. 5.37%*** 5.72% 5.56%***
Portfolio turnover rate...... 132% 410% 363%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<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 six months ended December
31, 1997, therefore, no federal income tax provision was required.
E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses.
F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
G.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
42
<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 six
months ended December 31, 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>
U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,005,745 $ --
U.S. Equity Fund........ 0.70 0.80 1.05 1.32 1,577,328 --
U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 65,526 36,523
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees were $3,864, $3,128 and $2,024 for the U.S. Balanced
Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1997, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund.................................... $253,281,640 $257,927,118
U.S. Equity Fund...................................... 225,510,580 82,326,482
U.S. Bond Fund........................................ 33,839,825 32,178,604
</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.
- --------------------------------------------------------------------------------
43
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.CAPITAL TRANSACTIONS
<TABLE>
<CAPTION>
U.S. BALANCED FUND
-----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 2,281,024 $ 28,309,870 6,578,157 $ 78,728,712
Brinson Class N.............. -- -- 80 1,000
SwissKey Class............... 25,739 330,584 148,317 1,798,818
---------- ------------ ---------- ------------
Total Sales................ 2,306,763 $ 28,640,454 6,726,554 $ 80,528,530
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 2,452,121 $ 28,812,427 1,541,262 $ 18,266,191
Brinson Class N.............. 9 105 -- --
SwissKey Class............... 11,570 135,252 3,904 46,232
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,463,700 $ 28,947,784 1,545,166 $ 18,312,423
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 2,397,723 $ 30,943,131 4,988,208 $ 59,912,281
Brinson Class N.............. -- -- -- --
SwissKey Class............... 29,023 371,072 86,625 1,050,388
---------- ------------ ---------- ------------
Total Redemptions.......... 2,426,746 $ 31,314,203 5,074,833 $ 60,962,669
========== ============ ========== ============
<CAPTION>
U.S. EQUITY FUND
-----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 10,354,918 $189,157,887 11,551,336 $183,660,431
Brinson Class N.............. -- -- 57 1,000
SwissKey Class............... 800,195 14,676,583 1,834,556 28,733,451
---------- ------------ ---------- ------------
Total Sales................ 11,155,113 $203,834,470 13,385,949 $212,394,882
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 1,675,362 $ 28,698,745 907,559 $ 13,745,444
Brinson Class N.............. 4 69 -- --
SwissKey Class............... 107,016 1,827,828 25,905 393,121
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 1,782,382 $ 30,526,642 933,464 $ 14,138,565
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 2,309,278 $ 42,289,711 1,959,184 $ 31,250,336
Brinson Class N.............. -- -- -- --
SwissKey Class............... 382,268 7,005,523 237,473 3,720,862
---------- ------------ ---------- ------------
Total Redemptions.......... 2,691,546 $ 49,295,234 2,196,657 $ 34,971,198
========== ============ ========== ============
<CAPTION>
U.S. BOND FUND
-----------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 386,736 $ 4,064,958 1,521,821 $ 15,371,166
Brinson Class N.............. -- -- 98 1,000
SwissKey Class............... 58,318 614,622 119,951 1,211,647
---------- ------------ ---------- ------------
Total Sales................ 445,054 $ 4,679,580 1,641,870 $ 16,583,813
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 58,336 $ 599,697 44,351 $ 449,362
Brinson Class N.............. 5 53 -- --
SwissKey Class............... 4,075 41,811 1,239 12,555
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 62,416 $ 641,561 45,590 $ 461,917
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 224,864 $ 2,363,677 288,064 $ 2,929,252
Brinson Class N.............. -- -- -- --
SwissKey Class............... 11,114 115,153 48,365 491,069
---------- ------------ ---------- ------------
Total Redemptions.......... 235,978 $ 2,478,830 336,429 $ 3,420,321
========== ============ ========== ============
</TABLE>
Capital stock transactions were as follows:
- --------------------------------------------------------------------------------
44
<PAGE>
DISTRIBUTED BY:
FUNDS DISTRIBUTOR, INC.
60 STATE STREET
BOSTON, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF SWISSKEY FUNDS]
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY .
http://www.swisskeyfunds.com
<PAGE>
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
SWISSKEY NON-U.S. EQUITY FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
YOUR KEY TO PERFORMANCE
-----------------------------
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Vice President
E. Thomas McFarlan Carolyn M. Burke, CPA
President Secretary and Treasurer
Thomas J. Digenan, CFA, CPA Catherine E. Macrae
Vice President Assistant Secretary
- --------------------------------------------------------------------------------
1
<PAGE>
THE FUND'S ADVISOR--BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS]
Brinson Partners is the global institutional asset management division of Swiss
Bank Corporation (SBC) and manages assets of over $140 billion. We have $90
billion of discretionary institutional assets with active management mandates
and we are the investment manager for SBC Private Banking mutual fund assets
which total over $50 billion. In addition, we act as an investment advisor to
SBC Private Banking. Our organization manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. We employ over 590 people in offices in
Chicago, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New York,
Paris, Singapore, Sydney, Tokyo and Zurich.
Brinson Partners, an established U.S.-based leader in the investment field
located in Chicago, acts as the headquarters of our worldwide investment
management process. Brinson Partners pioneered the movement to the active
management of global portfolios in the early 1980s for U.S. clients. Private
market and venture capital investing was established in the 1970s and today we
represent a major worldwide presence in this asset class.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent and the flexibility to customize portfolios to meet
unique requirements.
- --------------------------------------------------------------------------------
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
Shareholder Letter................................ 4
Global Economic and Market Highlights............. 5
Non-U.S. Equity Fund.............................. 6
Schedule of Investments........................... 9
Financial Statements.............................. 14
Financial Highlights.............................. 17
Notes to Financial Statements..................... 20
- --------------------------------------------------------------------------------
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
February 20, 1998
Dear Shareholder:
We are very pleased to present the December 31, 1997 Semi-Annual Report for the
SwissKey Non-U.S. Equity Fund. Within this Report, we will focus on the current
international economic outlook as well as our current strategy and performance
update for the Non-U.S. Equity Fund.
Swiss Bank Corporation and Union Bank of Switzerland announced on December 8,
1997 their intention to merge into a single global financial institution. As
part of this merger, Brinson Partners and UBS Asset Management will be combined
into Brinson. Brinson will be the Institutional Asset Management Division of the
new organization with assets under management in excess of $340 billion and will
provide investment advisory services for the Private Banking Division with
assets over $400 billion. The Consumer & Corporate Banking Division and Brinson
combined will manage assets in excess of $940 billion.
We are excited about the formation of Brinson and the additional resources we
will bring together to further the tradition of delivering value-added
investment performance and the highest level of professional client service.
Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has
produced an annualized total return of 10.55% versus 4.70% for the Morgan
Stanley Capital International Non-U.S. Equity (Free) Index benchmark. This
return was achieved at an annualized volatility of 10.55%, below the benchmark
volatility of 11.94%.
Our international Fund employs the same value-oriented investment philosophy
within and across the international spectrum, as do our other Funds. Each Fund
uses the resources of our entire worldwide organization. Investment performance
for our clients is maximized within and across major asset classes through a
comprehensive understanding of global investment markets and their
interrelationships. Portfolio structure is tailored to specific objectives and
focused upon both risk and return considerations in the context of full
investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our best talent. The Report that follows highlights the investment
characteristics of the SwissKey Non-U.S. Equity Fund.
We very much appreciate your continued trust and the confidence you have placed
in the SwissKey Funds.
Sincerely,
/s/ Hanspeter A. Walder /s/ Raymond Simon
------------------- ----------------------
Hanspeter A. Walder Raymond Simon
Executive Director Executive Director
Private Banking Private Banking
- --------------------------------------------------------------------------------
4
<PAGE>
GLOBAL ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
While financial markets seem to be signaling that the worst of the crisis in
Asia has passed, those economies still have substantial problems to overcome
before they are recovered. Substantial amounts of foreign currency borrowing
will require rescheduling or forgiveness, and excess capacity will need to be
worked off. The Japanese, as particularly important lenders to these Asian
borrowers, will remain vulnerable.
The adverse impact on the U.S. from the Asian crisis is likely to remain
relatively limited. Because non-Japan Asia represents a small portion of U.S.
trade, direct effects, such as a drop in real growth due to a collapse in
exports, are not expected to be sizable. The economy remains strong, as
evidenced by fourth quarter and full-year annualized real GDP growth of 4.3% and
3.8%, respectively.
Continental European economies continue to benefit from weaker currencies
although the expansions have not been terribly strong. While output growth is
moderate, there has been no discernible improvement in the high unemployment
rates. Sterling remains strong on concerns of a weak euro and hikes in short-
term rates by the Bank of England.
<TABLE>
<CAPTION>
Non-U.S. Equity Environment
<S> <C> <C> <C>
6 months 1 year 7/31/95*
Major Markets ended ended to
Total Return in U.S. Dollar Hedged Terms 12/31/97 12/31/97 12/31/97
- -------------------------------------------------------------------------------------------
MSCI Non-US Equity (Free) Index -1.40% 16.12% 17.57%
Japan -18.31 -9.86 4.03
U.K. 12.62 26.17 19.89
Germany 11.51 49.01 30.51
France 6.44 32.75 25.05
Canada 6.26 20.84 21.85
Netherlands 8.11 48.94 41.16
Australia -2.48 9.85 7.96
- -------------------------------------------------------------------------------------------
6 months 1 year 7/31/95*
Major Currencies ended ended to
Percent Change Relative to U.S. Dollars 12/31/97 12/31/97 12/31/97
- -------------------------------------------------------------------------------------------
Yen -11.99% -10.73% -14.90%
Pound -1.14 -3.85 1.16
Deutschemark -3.08 -14.29 -10.35
Canadian Dollar -3.60 -4.22 -1.72
- -------------------------------------------------------------------------------------------
*Inception date of the SwissKey Non-U.S. Equity Fund
</TABLE>
All total returns in excess of 1 year are average annualized total returns
================================================================================
5
<PAGE>
NON-U.S. EQUITY FUND
- --------------------------------------------------------------------------------
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
The Non-U.S. Equity Fund invests in the common stocks of companies headquartered
outside the U.S. We believe that in a non-U.S. investment program the country
allocation decision is the most important. Country assessments are jointly
developed by the non-U.S. strategy team in our offices worldwide. Currency
strategies are separately developed and coordinated with market allocations. Our
industry strategies and individual security selections are determined by
fundamental research conducted by our analysts worldwide.
Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has
earned an annualized return of 10.55% versus 4.70% for its benchmark, the Morgan
Stanley Capital International Non-U.S. Equity (Free) Index. This return was
achieved at an annualized volatility of 10.55%, measurably below the benchmark
volatility of 11.94%. For the year ended December 31, 1997, the Fund returned
5.02%, while the index returned 2.07%.
Since inception, market allocation and currency management have added solidly to
returns, while Japan stock selection has detracted. In 1997, market allocation
reduced performance, largely due to underweights of Switzerland and Sweden,
strategic cash and overweights of New Zealand and Australia. Although value was
added from underweights of Hong Kong, Japan and Malaysia, and from overweights
of the Netherlands, Belgium, the U.K. and Finland, these did not completely
offset the negatives.
During 1997, there was a clear split between the aggregate performance of the
European markets and that of the Pacific region. All European countries earned
double-digit returns, several in excess of 50%, building on the prior two years'
strong performance. In sharp contrast, Japan and Southeast Asia ended with
double-digit losses, New Zealand rose only 3.5% and Australia "merely" rose
9.9%.
The best performing markets in dollar-hedged terms were Switzerland (63.5%) and
Denmark (59.5%). In contrast, the worst performer was Malaysia (-52.1%). The
Southeast Asian markets reacted to a period of turmoil stemming from a currency,
banking and property crisis that placed considerable downward pressure on the
region's economy. In addition, Japan's fragile economic recovery has been
further imperiled by an unprecedented series of bankruptcies in its financial
and industrial sectors. The entry of Korea in the category of "at-risk"
countries has dealt yet another blow to Japan's economic revival.
Currency management was the second greatest positive contributor to 1997
performance, primarily due to the strength of the U.S. dollar, where the Fund
holds an overweight. With a few exceptions, the current strategy is close to
neutral, but the Fund benefited tremendously from its positions earlier in the
year, focusing on a sizable U.S. dollar overweight and underweights of the
Japanese yen and the core European currencies.
Stock selection over the past year added significantly to value, principally due
to excellent Japan stock selection, combined with good results in France and
Canada. Positive stock selection in Japan derived from the Fund's exposure to
high-quality defensive issues and multinational exporters, and its underweight
of banks and financials. A negative contribution came from Germany, due to
underweighting specific technology stocks.
================================================================================
6
<PAGE>
Non-U.S. Equity Fund
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
<TABLE>
<CAPTION>
Total Return
6 months 1 year 7/31/95*
ended ended to
12/31/97 12/31/97 12/31/97
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey Non-U.S. Equity Fund -7.71% 5.02% 10.55%
MSCI Non-U.S. Equity (Free) Index** -8.22 2.07 4.70
=================================================================================================
</TABLE>
* Inception date of the SwissKey Non-U.S. Equity Fund
**Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Non-
U.S. Equity Fund and the MSCI Non-U.S. Equity (Free) Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 1997. No adjustment has been
made for any income taxes payable by shareholders on income dividends and
capital gain distributions. Past performance is no guarantee of future results.
Share price and return will vary with market conditions; investors may realize a
gain or loss upon redemption.
SwissKey Non-U.S. Equity Fund
vs. MSCI Non-U.S. Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
Swisskey Non-U.S. Equity
Equity Fund (Free) Index
<S> <C> <C>
1 7/31/95 10000 10000
2 8/31/95 10146 9632
3 9/30/95 10302 9817
4 10/31/95 10205 9563
5 11/30/95 10448 9835
6 12/31/95 10858 10220
7 1/31/96 11065 10291
8 2/29/96 11024 10320
9 3/31/96 11158 10538
10 4/30/96 11563 10848
11 5/31/96 11500 10662
12 6/30/96 11578 10713
13 7/31/96 11256 10398
14 8/31/96 11287 10443
15 9/30/96 11630 10727
16 10/31/96 11578 10654
17 11/30/96 12161 11099
18 12/31/96 12140 10947
19 1/31/97 12074 10612
20 2/28/97 12262 10770
21 3/31/97 12328 10775
22 4/30/97 12405 10844
23 5/31/97 13220 11561
24 6/30/97 13815 12174
25 7/31/97 14059 12400
26 8/31/97 13063 11468
27 9/30/97 13782 12111
28 10/31/97 12920 11200
29 11/30/97 12687 11068
30 12/31/97 12750 11174
</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.
================================================================================
<PAGE>
Non-U.S. Equity Fund
[LOGO OF SWISS KEY FUNDS APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1997 (Unaudited)
- --------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------
NON-U.S. EQUITIES
<S> <C>
Airlines...................................... 0.35%
Appliances & Household........................ 2.19
Autos/Durables................................ 3.25
Banking....................................... 11.65
Beverages & Tobacco........................... 2.43
Broadcasting & Publishing..................... 1.90
Building Materials............................ 1.41
Business & Public Service..................... 3.66
Chemicals..................................... 2.95
Construction.................................. 1.15
Data Processing............................... 0.97
Electric Components........................... 1.32
Electronics................................... 3.72
Energy........................................ 7.13
Financial Services............................ 1.99
Food & House Products......................... 3.41
Forest Products............................... 1.25
Gold Mining................................... 0.07
Health & Personal Care........................ 6.87
Industrial Components......................... 1.75
Insurance..................................... 5.24
Leisure & Tourism............................. 0.76
- --------------------------------------------------------
Machinery & Engineering....................... 0.39%
Merchandising................................. 4.68
Metals-Steel.................................. 1.35
Miscellaneous Materials....................... 0.75
Miscellaneous Services........................ 0.09
Multi-Industry................................ 4.73
Non-Ferrous Metals............................ 1.69
Real Estate................................... 0.76
Recreation.................................... 0.61
Shipping...................................... 0.05
Telecommunications............................ 7.41
Textiles & Apparel............................ 0.16
Transportation................................ 1.05
Utilities..................................... 4.55
Wholesale & International Trade............... 0.48
-----
Total Non-U.S. Equities.................. 94.17
-----
SHORT-TERM INVESTMENTS........................ 5.49
-----
TOTAL INVESTMENTS........................ 99.66
CASH AND OTHER ASSETS,
LESS LIABILITIES............................. 0.34
-----
NET ASSETS................................ 00.00%
=====
- --------------------------------------------------------
</TABLE>
Market and Currency Strategy
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Portfolio
----------------------
Market Currency
Strategy Strategy Index
- -----------------------------------------------------
<S> <C> <C> <C>
U.S. Dollar 0.0% 7.3% 0.0%
Japan 18.0 20.0 24.0
Australia 5.1 2.6 2.6
Belgium 3.6 1.2 1.2
Canada 3.2 4.9 4.9
Finland 0.8 0.7 0.7
France 7.1 7.6 7.6
Germany 8.6 9.4 9.4
Hong Kong 1.0 0.0 2.7
Italy 4.4 3.8 3.8
Malaysia 1.5 0.8 0.8
Netherlands 4.5 5.4 5.4
New Zealand 3.6 3.6 0.3
Spain 2.5 2.5 2.5
Sweden 1.8 2.5 2.5
Switzerland 5.1 7.4 7.4
U.K. 22.6 16.5 20.5
Cash Reserves 5.0 0.0 0.0
Other Markets 1.6 3.8 3.7
- -----------------------------------------------------
100.0% 100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Percent of
Net Assets
- -------------------------------------------------------
<S> <C> <C>
1. Glaxo Wellcome PLC 1.47%
2. Royal Dutch Petroleum Co. 1.35
3. Novartis AG (Reg.) 1.34
4. Telecom Corp. of New Zealand Ltd 1.26
5. B.A.T. Industries PLC 1.09
6. Lloyds TSB Group PLC 1.09
7. Allianz AG Holding 1.03
8. British Petroleum Co. PLC 0.95
9. Matsushita Electric Industrial Co. 0.92
10. Roche Holding AG (Gen.) 0.91
========================================================
</TABLE>
8
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Non-U.S. Equities -- 94.17%
AUSTRALIA -- 4.68%
Amcor Ltd.................................................. 89,300 $ 392,769
Boral Ltd.................................................. 226,000 571,377
Brambles Industries Ltd.................................... 47,700 946,429
Broken Hill Proprietary Co., Ltd........................... 295,670 2,745,392
Coca-Cola Amatil Ltd....................................... 51,100 381,782
CSR Ltd.................................................... 162,000 548,909
David Jones Ltd............................................ 565,600 637,584
Lend Lease Corp., Ltd...................................... 38,778 758,034
Mayne Nickless Ltd......................................... 74,800 395,280
M.I.M. Holdings Ltd........................................ 322,943 197,804
National Australia Bank Ltd................................ 205,848 2,874,425
News Corp. Ltd............................................. 427,659 2,360,278
News Corp. Ltd., Preferred................................. 108,182 535,313
Pacific Dunlop Ltd......................................... 271,600 575,169
Qantas Airways Ltd......................................... 265,310 469,532
Rio Tinto Ltd.............................................. 103,810 1,211,008
Santos Ltd................................................. 60,300 248,323
Telstra Corp., Ltd. (b).................................... 102,000 215,341
Westpac Banking Corp., Ltd................................. 355,351 2,272,868
WMC Ltd.................................................... 179,500 625,749
Woolworth's Ltd............................................ 114,300 382,073
-----------
19,345,439
-----------
BELGIUM -- 3.32%...........................................
Delhaize-Le Lion S.A....................................... 21,770 1,104,629
Electrabel S.A............................................. 10,905 2,522,357
Fortis AG.................................................. 723 98
Fortis AG Strip (b)........................................ 9,603 2,003,487
Generale de Banque S.A..................................... 2,430 1,057,563
Groupe Bruxelles Lambert S.A............................... 5,690 823,146
Kredietbank NV............................................. 2,780 1,166,743
Kredietbank VVPR........................................... 76 31,896
Petrofina S.A.............................................. 4,550 1,679,341
Societe Generale de Belgique............................... 7,238 662,244
Solvay S.A., Class A....................................... 16,210 1,019,387
Tractebel.................................................. 12,650 1,102,791
Tractebel Warrants "99" (b)................................ 1,350 3,461
Union Miniere Group S.A. (b)............................... 7,750 537,570
-----------
13,714,713
-----------
CANADA -- 3.18%
Agrium, Inc................................................ 32,300 392,719
Alcan Aluminum Ltd......................................... 24,500 674,516
Bank of Montreal........................................... 18,700 827,786
Barrick Gold Corp.......................................... 15,000 279,331
Canadian National Railway Co............................... 17,000 799,455
Canadian Pacific Ltd....................................... 56,194 1,511,752
Hudson's Bay Co............................................ 20,100 447,338
Imasco, Ltd................................................ 8,900 314,059
Imperial Oil Ltd........................................... 20,200 1,298,582
Magna International Inc., Class A.......................... 6,200 388,177
Moore Corp., Ltd........................................... 20,900 313,989
Newbridge Networks Corp. (b)............................... 7,700 269,293
Noranda, Inc............................................... 25,300 434,896
Northern Telecom Ltd....................................... 4,600 408,700
NOVA Corp.................................................. 68,800 653,819
Potash Corporation of Saskatchewan, Inc.................... 7,500 623,908
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Royal Bank of Canada....................................... 21,900 $ 1,156,900
Seagram Co., Ltd........................................... 14,400 465,376
TELUS Corporation.......................................... 33,800 748,697
TransCanada Pipelines Ltd.................................. 33,400 744,504
Westcoast Energy, Inc...................................... 16,800 387,394
-----------
13,141,191
-----------
FINLAND -- 0.66%
Cultor Oyj................................................. 3,500 190,242
Merita Ltd., Class A....................................... 54,410 297,743
Metsa Serla Oyj, Class B................................... 17,090 133,376
Nokia Oyj, Class A, Preferred.............................. 17,680 1,256,433
Outokumpu Oyj, Class A..................................... 14,920 182,195
Pohjola Insurance Group, Class B........................... 790 29,304
Sampo Insurance Co., Ltd., Class A......................... 5,160 170,557
The Rauma Group............................................ 693 10,817
UPM-Kymmene Corp........................................... 22,930 458,962
-----------
2,729,629
-----------
FRANCE -- 5.57%
Accor S.A.................................................. 4,165 774,707
Alcatel Alsthom............................................ 7,305 928,910
AXA-UAP.................................................... 15,502 1,200,014
AXA-UAP Rights (b)......................................... 9,902 9,711
Banque Nationale de Paris.................................. 15,110 803,472
Cie Bancaire S.A........................................... 1,162 188,323
Cie de Saint Gobain........................................ 9,043 1,285,200
Cie Financiere de Paribas.................................. 7,800 678,092
Cie Generale des Eaux...................................... 9,734 1,359,136
Cie Generale des Eaux Warrants "01" (b).................... 13,864 9,425
Dexia France............................................... 6,640 769,295
Elf Aquitaine S.A.......................................... 12,714 1,479,355
France Telecom S.A. (b).................................... 32,500 1,179,313
Groupe Danone.............................................. 3,220 575,382
Lafarge S.A................................................ 7,690 504,784
Lagardere S.C.A............................................ 21,860 723,095
Lyonnaise des Eaux S.A..................................... 10,843 1,200,338
Michelin, Class B.......................................... 17,293 870,974
Pechiney S.A., Class A..................................... 19,385 765,604
Peugeot S.A................................................ 9,260 1,168,275
Pinault-Printemps-Redoute S.A.............................. 1,750 934,051
Rhone-Poulenc, Class A..................................... 27,230 1,220,281
SEITA...................................................... 24,930 895,093
Societe Generale........................................... 8,713 1,187,610
Thomson CSF................................................ 24,290 765,926
Total S.A., Class B........................................ 11,725 1,276,575
Usinor Sacilor............................................. 18,180 262,607
-----------
23,015,548
-----------
GERMANY -- 9.77%
Allianz AG Holding......................................... 16,480 4,252,667
BASF AG.................................................... 23,140 826,199
Bayer AG................................................... 59,750 2,218,071
Bayerische Motoren Werke AG................................ 1,990 1,488,544
Commerzbank AG............................................. 49,330 1,920,416
Continental AG............................................. 42,200 950,503
Daimler-Benz AG............................................ 22,870 1,615,311
Deutsche Bank AG........................................... 47,967 3,355,903
Deutsche Telekom AG........................................ 152,360 2,821,638
Henkel KGaA-Vorzug AG, Preferred........................... 17,780 1,112,424
Hochtief AG................................................ 13,990 575,752
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
GERMANY (CONTINUED)
Hoechst AG............................................... 18,960 $ 656,920
M.A.N. AG................................................ 3,000 866,748
Mannesmann AG............................................ 3,447 1,731,072
Metro AG................................................. 33,303 1,181,661
Muenchener Rueckver AG................................... 8,370 3,183,961
Muenchener Rueckver AG Warrants "98" (b)................. 12 7,274
Preussag AG.............................................. 4,619 1,420,559
RWE AG................................................... 33,800 1,813,970
Schering AG.............................................. 19,022 1,835,447
Siemens AG............................................... 36,770 2,218,756
Veba AG.................................................. 39,558 2,694,986
Volkswagen AG............................................ 2,920 1,632,056
-----------
40,380,838
-----------
HONG KONG -- 0.93%
Cheung Kong Holdings Ltd................................. 104,000 681,164
China Light & Power Co., Ltd............................. 58,500 324,643
Citic Pacific Ltd........................................ 54,000 214,648
Hang Seng Bank Ltd....................................... 42,000 405,175
Hong Kong and China Gas Co., Ltd......................... 257,000 497,516
Hong Kong Telecommunications Ltd......................... 237,000 487,856
Hutchison Whampoa Ltd.................................... 113,000 708,756
Sun Hung Kai Properties Ltd.............................. 54,000 376,331
Swire Pacific Ltd., Class A.............................. 31,000 170,033
-----------
3,866,122
-----------
ITALY -- 4.33%
Aeroporti Di Roma Spa (b)................................ 13,000 134,923
Assicurazioni Generali................................... 69,350 1,704,283
Banca Commerciale Italiana............................... 194,000 674,811
Credito Italiano Spa..................................... 343,500 1,059,807
Danieli & Co. Savings (Risp)............................. 141,100 507,563
Edison Spa............................................... 79,600 481,728
ENI ADR (c).............................................. 20,300 1,158,369
ENI Spa.................................................. 292,000 1,656,492
Fiat Spa-Priv Preferred.................................. 607,220 927,289
INA-Istituto Nazionale delle Assicurazioni............... 311,100 630,804
Instituto Mobiliare Italiano Spa......................... 92,000 1,092,729
Italgas Spa.............................................. 122,000 503,719
La Rinascente Spa........................................ 91,300 340,816
La Rinascente Spa RNC.................................... 101,740 759,576
La Rinascente Spa Warrants "99" (b)...................... 2,800 3,389
Mediobanca Spa........................................... 31,600 248,253
Montedison Spa........................................... 1,120,280 1,006,830
SAI-Savings (Risp)....................................... 86,000 379,401
Telecom Italia Mobile Spa................................ 210,000 969,797
Telecom Italia Mobile Spa RNC............................ 510,000 1,450,921
Telecom Italia Spa....................................... 90,666 579,467
Telecom Italia Spa RNC................................... 368,034 1,623,633
-----------
17,894,600
-----------
JAPAN -- 19.44%
Amada Co., Ltd........................................... 186,000 693,790
Asahi Glass Co., Ltd..................................... 83,000 395,770
Bank of Tokyo-Mitsubishi, Ltd............................ 152,000 2,104,211
Canon, Inc............................................... 126,000 2,945,895
Canon Sales Co., Inc..................................... 61,000 699,019
Citizen Watch Co., Ltd................................... 149,000 1,002,692
Dai Nippon Printing Co., Ltd............................. 155,000 2,920,592
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Daiichi Pharmaceutical Co., Ltd............................ 152,000 $ 1,718,439
Daikin Industries Ltd...................................... 180,000 681,100
Daiwa House Industry Co., Ltd.............................. 93,000 493,521
Fanuc...................................................... 63,700 2,420,135
Fujitsu.................................................... 98,000 1,055,182
Hitachi Ltd................................................ 313,000 2,238,723
Honda Motor Co............................................. 54,000 1,989,310
Hoya Corp.................................................. 22,000 693,713
Inax....................................................... 132,000 384,757
Ito Yokado Co., Ltd........................................ 61,000 3,119,785
Kaneka Corp................................................ 177,000 801,792
Keio Teito Electric Railway................................ 195,000 748,356
Kinki Nippon Railway....................................... 195,000 1,045,299
Kirin Brewery Co., Ltd..................................... 184,000 1,344,357
Kokuyo..................................................... 56,000 969,044
Kuraray Co., Ltd........................................... 198,000 1,644,607
Kyocera Corp............................................... 20,300 924,253
Marui Co., Ltd............................................. 90,000 1,405,114
Matsushita Electric Industrial Co.......................... 258,000 3,789,887
Mitsubishi Paper Mills..................................... 168,000 236,447
NGK Insulators............................................. 284,000 2,533,667
Nintendo Corp., Ltd........................................ 15,500 1,525,860
Nippon Denso Co., Ltd...................................... 87,000 1,572,390
Nippon Meat Packers, Inc................................... 108,000 1,478,485
Nippon Steel Co............................................ 156,000 231,555
Okumura.................................................... 203,000 483,984
Osaka Gas Co............................................... 312,000 715,062
Sankyo Co., Ltd............................................ 162,000 3,675,447
Secom Co., Ltd............................................. 40,000 2,565,660
Seino Transportation....................................... 135,000 675,908
Sekisui House Ltd.......................................... 272,000 1,755,109
Shinmaywa Industries Ltd................................... 27,000 66,449
Sony Corp.................................................. 33,500 2,988,656
Sumitomo Bank.............................................. 183,000 2,097,058
Sumitomo Chemical Co....................................... 222,000 512,209
Sumitomo Electric Industries............................... 137,000 1,875,485
Takeda Chemical Industries................................. 103,000 2,946,818
TDK Corp................................................... 28,000 2,118,977
Tokio Marine & Fire Insurance Co........................... 162,000 1,843,953
Tokyo Electric Power....................................... 41,000 750,471
Tokyo Steel Mfg............................................ 67,000 227,241
Tonen Corp................................................. 120,000 649,721
Toray Industries, Inc...................................... 581,000 2,613,997
Toshiba Corp............................................... 424,000 1,770,675
Toyo Suisan Kaisha......................................... 86,000 597,916
Toyota Motor Corp.......................................... 100,000 2,876,370
Yamazaki Baking Co., Ltd................................... 80,000 781,388
-----------
80,396,301
-----------
MALAYSIA -- 1.54%
Hume Industries (Malaysia) Bhd............................. 151,000 158,274
Kuala Lumpur Kepong Bhd.................................... 337,000 722,916
Land & General Holdings Bhd................................ 324,500 60,023
Malayan Banking Bhd........................................ 136,000 394,811
Malaysia International Shipping Bhd (Frgn.)................ 147,000 215,260
Nestle (Malaysia) Bhd...................................... 83,000 383,815
New Straits Times Press Bhd................................ 169,000 209,269
Perusahaan Otomobil Nasional Bhd........................... 102,000 99,576
Petronas Gas Bhd........................................... 139,000 316,031
Public Bank Bhd............................................ 128,400 39,914
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
MALAYSIA (CONTINUED)
Public Bank Bhd (Frgn.).................................. 204,000 $ 70,227
Public Bank Bhd Rights (b)............................... 21,400 1,155
Public Bank Bhd Rights (Frgn.) (b)....................... 34,000 1,747
Resorts World Bhd........................................ 152,000 255,774
Rothmans of Pall Mall Bhd................................ 91,000 707,193
Sime Darby Bhd........................................... 475,000 456,390
Telekom Malaysia Bhd..................................... 347,000 1,025,177
Tenaga Nasional Bhd...................................... 410,000 874,245
UMW Holdings Bhd......................................... 63,000 47,746
United Engineers Bhd..................................... 122,000 101,549
YTL Corp. Bhd............................................ 177,000 238,728
YTL Power International Bhd (b).......................... 4,900 3,764
-----------
6,383,584
-----------
NETHERLANDS -- 4.31%
ABN AMRO Holdings NV..................................... 75,352 1,468,162
Akzo Nobel NV............................................ 2,430 419,044
Elsevier NV.............................................. 88,210 1,427,163
Heineken NV.............................................. 6,310 1,098,717
Hoogovens NV............................................. 7,737 317,143
ING Groep NV............................................. 43,369 1,826,919
KLM Royal Dutch Air Lines NV............................. 11,150 412,494
KPN NV................................................... 43,716 1,824,285
Philips Electronics NV................................... 23,070 1,383,768
Royal Dutch Petroleum Co................................. 101,460 5,570,216
Unilever NV.............................................. 33,560 2,069,255
-----------
17,817,166
-----------
NEW ZEALAND -- 3.12%
Brierley Investments Ltd................................. 2,601,500 1,858,150
Carter Holt Harvey Ltd................................... 897,100 1,385,716
Fletcher Challenge Building.............................. 297,850 608,824
Fletcher Challenge Energy................................ 328,550 1,150,457
Fletcher Challenge Forests Ltd........................... 639,793 531,285
Fletcher Challenge Paper................................. 591,800 773,231
Lion Nathan Ltd.......................................... 298,000 667,967
Telecom Corp. of New Zealand Ltd......................... 1,071,500 5,195,536
Telecom Corp. of New Zealand Ltd. ADS (c)................ 19,300 747,875
-----------
12,919,041
-----------
SINGAPORE -- 1.88%
City Developments Ltd.................................... 97,000 449,021
DBS Land Ltd............................................. 184,000 281,733
Development Bank of Singapore Ltd........................ 92,000 786,231
Elec & Eltek International Co., Ltd...................... 28,600 130,988
Fraser & Neave Ltd....................................... 38,000 164,629
Hotel Properties Ltd..................................... 323,000 210,861
Keppel Corp., Ltd........................................ 106,750 306,629
Keppel Land Ltd.......................................... 115,000 158,338
NatSteel Ltd............................................. 82,000 110,956
Oversea-Chinese Banking Corp., Ltd....................... 159,400 927,074
Singapore Airlines Ltd. (Frgn.).......................... 165,000 1,077,151
Singapore Press Holdings Ltd. (Frgn.).................... 47,000 588,546
Singapore Telecommunications, Ltd........................ 767,000 1,429,306
United Overseas Bank Ltd. (Frgn.)........................ 174,000 965,519
Venture Manufacturing (Singapore) Ltd.................... 14,000 39,050
Wing Tai Holdings Ltd.................................... 126,000 147,312
-----------
7,773,344
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
SPAIN -- 2.44%
Acerinox S.A............................................... 1,050 $ 155,482
Banco Bilbao-Vizcaya, S.A.................................. 37,590 1,215,843
Banco Central Hispanoamericano............................. 27,320 664,986
Banco Popular Espanol S.A.................................. 9,880 690,342
Banco Santander S.A........................................ 29,880 997,830
Empresa National de Electridad S.A......................... 72,480 1,286,304
Fomento Construcctiones y Contratas S.A.................... 12,880 490,119
Gas Natural SDG S.A........................................ 12,220 633,368
Iberdrola S.A.............................................. 67,710 890,687
Mapfre Corp................................................ 11,420 302,695
Repsol S.A................................................. 12,710 542,022
Repsol S.A. ADR (c)........................................ 7,130 303,471
Tabacalera S.A............................................. 1,600 129,642
Telefonica de Espana....................................... 43,960 1,254,599
Vallehermoso S.A........................................... 9,210 282,185
Viscofan Envolturas Celulosicas S.A........................ 10,060 252,457
-----------
10,092,032
-----------
SWEDEN -- 1.69%
ABB AB, A Shares........................................... 30,700 363,698
AssiDoman AB............................................... 2,000 50,664
Astra AB, A Shares......................................... 71,000 1,230,371
Electrolux AB, B Shares.................................... 4,800 333,325
Hennes & Mauritz AB, B Shares.............................. 16,800 741,058
Nordbanken Holding AB...................................... 163,700 926,339
Securitas AB, B Shares..................................... 12,400 375,066
Skanska AB, B Shares....................................... 9,200 377,410
Svenska Handelsbanken, A Shares............................ 14,600 505,092
Swedish Match AB........................................... 136,000 454,213
Telefonaktiebolaget LM Ericsson, B Shares.................. 24,700 929,215
Volvo AB, B Shares......................................... 26,200 703,325
-----------
6,989,776
-----------
SWITZERLAND -- 5.03%
ABB AG (Bearer)............................................ 373 469,255
CS Holdings AG (Reg.)...................................... 12,902 1,999,076
Holderbank Financiere Glarus, B Shares..................... 722 590,034
Nestle S.A. (Reg.)......................................... 1,635 2,453,733
Novartis AG (Reg.)......................................... 3,407 5,535,849
Roche Holding AG (Gen.).................................... 379 3,768,953
Sairgroup (b).............................................. 408 559,441
Schweizerische Lebensversicherungs-und
Rentenastalt.............................................. 886 696,724
Sulzer AG.................................................. 697 442,494
Swiss Reinsurance Co. (Reg.)............................... 917 1,717,568
UBS (Bearer)............................................... 944 1,366,878
Zurich Versicherungs (Reg.)................................ 2,527 1,205,808
-----------
20,805,813
-----------
UNITED KINGDOM -- 22.28%
Abbey National PLC......................................... 100,100 1,796,941
Barclays PLC............................................... 47,000 1,251,271
Bass PLC................................................... 60,600 941,780
B.A.T. Industries PLC...................................... 495,200 4,514,040
BG PLC..................................................... 532,675 2,401,530
Billiton PLC (b)........................................... 384,000 985,668
Booker PLC................................................. 222,100 1,169,428
British Energy PLC......................................... 251,000 1,746,985
British Petroleum Co. PLC.................................. 297,069 3,910,410
British Sky Broadcating Group PLC.......................... 136,000 1,020,420
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
British Steel PLC......................................... 307,600 $ 660,499
British Telecommunications PLC............................ 454,800 3,580,778
BTR PLC................................................... 238,900 723,284
Cable & Wireless PLC...................................... 101,000 889,099
Cadbury Schweppes PLC..................................... 180,000 1,817,030
Centrica PLC (b).......................................... 414,500 610,411
Charter PLC............................................... 100,518 1,238,799
Coats Viyella PLC......................................... 441,700 661,369
Diageo PLC................................................ 209,300 1,926,834
FKI PLC................................................... 500,425 1,572,705
General Electric Co. PLC.................................. 439,800 2,854,810
Glaxo Wellcome PLC........................................ 256,200 6,070,391
Greenalls Group PLC....................................... 134,000 965,726
Hanson PLC................................................ 184,312 823,756
Hillsdown Holdings PLC.................................... 538,200 1,310,631
House of Fraser PLC....................................... 566,400 1,873,244
HSBC Holdings PLC......................................... 110,300 2,831,230
Inchcape PLC.............................................. 301,300 808,094
Legal & General Group PLC................................. 256,700 2,247,049
Lloyds TSB Group PLC...................................... 348,585 4,513,968
Marks & Spencer PLC....................................... 309,700 3,052,411
Mirror Group PLC.......................................... 535,500 1,718,182
National Westminster Bank PLC............................. 102,400 1,705,122
Northern Foods PLC........................................ 301,900 1,311,421
Peninsular & Oriental Steam Navigation Co................. 191,700 2,184,323
Reckitt & Colman PLC...................................... 54,346 853,977
Reuters Holdings PLC...................................... 115,100 1,259,424
Rio Tinto PLC............................................. 112,100 1,381,537
RJB Mining PLC............................................ 303,800 634,843
Royal & Sun Alliance Insurance Group PLC.................. 218,814 2,207,042
Scottish Hydro-Electric PLC............................... 124,400 1,027,541
Sears PLC................................................. 769,400 670,970
Sedgwick Group PLC........................................ 451,500 1,054,924
SmithKline Beecham PLC.................................... 266,600 2,732,897
Smurfit (Jefferson) Group PLC............................. 432,929 1,203,867
Tate & Lyle PLC........................................... 132,000 1,088,145
Tesco PLC................................................. 196,300 1,598,824
Thames Water PLC.......................................... 133,100 1,985,276
The Great Universal Stores PLC............................ 160,000 2,019,251
Unilever PLC.............................................. 116,600 999,566
Vodafone Group PLC........................................ 272,000 1,964,755
Williams PLC.............................................. 316,400 1,759,658
------------
92,132,136
------------
Total Non-U.S. Equities
(Cost $377,962,629)...................................... 389,397,273
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Short-Term Investments-- 5.49%
COMMERCIAL PAPER -- 5.49%
Case Credit Corp.
6.110%, due 01/20/98 $1,500,000 $ 1,495,163
6.030%, due 03/10/98 1,500,000 1,482,915
6.020%, due 03/13/98 1,500,000 1,482,191
GTE Corp.
6.120%, due 02/20/98 2,000,000 1,983,000
6.020%, due 03/02/98 1,500,000 1,484,950
Marriott Corp.
6.300%, due 01/16/98 3,000,000 2,992,125
Nabisco, Inc.
6.700%, due 01/05/98 5,000,000 4,996,278
Safeway, Inc.
6.700%, due 01/02/98 3,000,000 2,999,441
5.920%, due 01/22/98 1,500,000 1,494,820
Vastar Resources, Inc.
7.100%, due 01/02/98 2,298,000 2,297,547
------------
Total Short-Term Investments
(Cost $22,708,430) 22,708,430
------------
Total Investments
(Cost $400,671,059)--99.66% (a) 412,105,703
------------
Cash and other assets, less liabilities -- 0.34% 1,397,658
------------
Net Assets--100% $413,503,361
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $400,671,059; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $54,880,226
Gross unrealized depreciation................................ (43,445,582)
-----------
Net unrealized appreciation................................ $11,434,644
===========
</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 currency contracts as
of December 31, 1997:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Canadian Dollar......... 2/19/98 9,200,000 $ 6,438,744 $ (245,359)
Danish Kroner........... 2/19/98 25,200,000 3,689,615 63,716
Dutch Guilder........... 2/19/98 12,700,000 6,283,614 (75,607)
French Franc............ 2/19/98 47,500,000 7,918,475 179,167
Hong Kong Dollar........ 2/19/98 15,500,000 1,993,151 13,197
Japanese Yen............ 2/19/98 2,952,000,000 22,868,948 (1,659,011)
Norwegian Krona......... 2/19/98 15,700,000 2,135,842 (7,605)
Swedish Krona........... 2/19/98 77,500,000 9,780,957 55,406
Swiss Franc............. 2/19/98 23,000,000 15,859,553 392,169
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Australian Dollar....... 2/19/98 12,550,000 8,186,509 1,019,749
Belgian Franc........... 2/19/98 320,000,000 8,661,289 (173,226)
British Pound........... 2/19/98 14,900,000 24,457,905 (841,405)
Dutch Guilder........... 2/19/98 5,900,000 2,919,159 (42,794)
German Mark............. 2/19/98 4,900,000 2,732,941 (42,851)
Hong Kong Dollar........ 2/19/98 44,500,000 5,722,273 (63,215)
Italian Lira............ 2/19/98 3,550,000,000 2,007,247 30,863
Japanese Yen............ 2/19/98 15,757,627 122,073 10,291
Malaysian Ringgit....... 2/19/98 9,900,000 2,541,994 978,632
Singapore Dollar........ 2/19/98 6,300,000 3,715,346 439,231
Swedish Krona........... 2/19/98 54,800,000 6,916,083 159,175
Swiss Franc............. 2/19/98 6,525,059 4,499,327 30,108
----------
Total................. $ 220,631
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $400,671,059) (Note 1)............... $412,105,703
Cash............................................................. 919,098
Foreign currency, at value (Cost $466,106)....................... 462,654
Receivables:
Investment securities sold...................................... 193,234
Dividends....................................................... 1,078,507
Fund shares sold................................................ 265,165
Variation margin (Note 5)....................................... 3,702
Net unrealized appreciation on forward foreign currency con-
tracts.......................................................... 220,631
Other assets..................................................... 80,990
------------
TOTAL ASSETS.................................................. 415,329,684
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 959,539
Investment advisory fees (Note 2)............................... 273,612
Variation margin (Note 5)....................................... 436,337
Accrued expenses................................................ 156,835
------------
TOTAL LIABILITIES............................................. 1,826,323
------------
NET ASSETS........................................................ $413,503,361
============
NET ASSETS CONSIST OF:
Paid in capital (Note 7)......................................... $400,607,722
Accumulated undistributed net investment income.................. 55,030
Accumulated net realized gain.................................... 1,189,903
Net unrealized appreciation...................................... 11,650,706
------------
NET ASSETS.................................................... $413,503,361
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $405,396,793 and 37,537,642 shares is-
sued and outstanding) (Note 7)................................. $ 10.80
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$929 and 86 shares issued and outstanding) (Note 7)............ $ 10.80
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $8,105,639 and 756,307 shares issued
and outstanding) (Note 7)...................................... $ 10.72
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $516,253 for foreign taxes withheld).......... $ 3,571,336
Interest........................................................ 788,825
------------
TOTAL INCOME................................................. 4,360,161
------------
EXPENSES:
Advisory (Note 2)............................................... 1,633,467
Administrative.................................................. 142,058
Custodian....................................................... 127,605
Distribution (Note 6)........................................... 34,648
Other........................................................... 130,129
------------
TOTAL EXPENSES............................................... 2,067,907
------------
NET INVESTMENT INCOME ....................................... 2,292,254
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................... 7,396,068
Futures contracts.............................................. (1,031,399)
Foreign currency transactions.................................. 821,079
------------
Net realized gain............................................ 7,185,748
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency .............................. (38,295,004)
Futures contracts ............................................. (107,626)
Forward contracts.............................................. (637,141)
Translation of other assets and liabilities denominated in for-
eign currency................................................. (37,238)
------------
Change in net unrealized appreciation or depreciation........ (39,077,009)
------------
Net realized and unrealized loss................................. (31,891,261)
------------
Net decrease in net assets resulting from operations............. $(29,599,007)
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
----------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................... $ 2,292,254 $ 5,529,755
Net realized gain............................. 7,185,748 24,421,499
Change in net unrealized appreciation or de-
preciation .................................. (39,077,009) 35,391,730
------------ ------------
Net increase (decrease) in net assets result-
ing from operations.......................... (29,599,007) 65,342,984
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I ............................. (3,973,110) (4,371,883)
Brinson Class N.............................. (8) --
SwissKey Class............................... (42,036) (40,369)
Distributions from net realized gain:
Brinson Class I.............................. (25,288,399) (12,209,010)
Brinson Class N.............................. (59) --
SwissKey Class............................... (521,640) (94,152)
------------ ------------
Total distributions to shareholders........... (29,825,252) (16,715,414)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................... 132,897,867 232,045,893
Shares issued on reinvestment of distribu-
tions........................................ 29,067,629 16,204,754
Shares redeemed............................... (117,690,199) (81,854,223)
------------ ------------
Net increase in net assets resulting from cap-
ital share transactions (Note 7)............. 44,275,297 166,396,424
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..... (15,148,962) 215,023,994
------------ ------------
NET ASSETS:
Beginning of year............................. 428,652,323 213,628,329
------------ ------------
End of year (including accumulated undistrib-
uted net investment income of $55,030 and
$1,777,930, respectively).................... $413,503,361 $428,652,323
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30, AUGUST 31, 1993*
DECEMBER 31, 1997 ----------------------------- THROUGH
BRINSON CLASS I (UNAUDITED) 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 12.59 $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------- -------
Income from investment
operations:
Net investment income. 0.07 0.18 0.18 0.15 0.10
Net realized and
unrealized gain
(loss)............... (1.00) 1.97 2.05 (0.16) (0.34)
-------- -------- -------- -------- -------
Total income (loss)
from investment
operations......... (0.93) 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------- -------
Less distributions:
Distributions from net
investment income.... (0.12) (0.17) (0.18) -- (0.07)
Distributions from net
realized gain........ (0.74) (0.56) (0.56) -- --
-------- -------- -------- -------- -------
Total distributions. (0.86) (0.73) (0.74) -- (0.07)
-------- -------- -------- -------- -------
Net asset value, end of
period................. $ 10.80 $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== ======== =======
Total return (non-
annualized)............ (7.36)% 20.27% 23.64% (0.10)% (2.45)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $405,397 $420,855 $212,366 $148,319 $71,544
Ratio of expenses to
average net assets:
Before expense reim-
bursement............ 1.00%** 1.00% 1.20% 1.23% 1.60%**
After expense reim-
bursement............ N/A N/A 1.00% 1.00% 1.00%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement............ 1.14%** 1.83% 1.67% 1.93% 1.28%**
After expense reim-
bursement............ N/A N/A 1.87% 2.16% 1.88%**
Portfolio turnover
rate.................. 22% 25% 20% 14% 12%
Average commission rate
paid per share........ $ 0.0269 $ 0.0245 $ 0.0219 N/A N/A
</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 the period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997
BRINSON CLASS N (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.......................... $ 12.59
-------
Income from investment operations:
Net investment income....................................... 0.06
Net realized and unrealized loss............................ (1.02)
-------
Total loss from investment operations..................... (0.96)
-------
Less distributions:
Distributions from net investment income.................... (0.10)
Distributions from net realized gain........................ (0.73)
-------
Total distributions....................................... (0.83)
-------
Net asset value, end of period................................ $ 10.80
=======
Total return (non-annualized)................................. (7.49)%
Ratios/Supplemental data:
Net assets, end of period (in 000s).......................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................ 1.25%*
After expense reimbursement................................. N/A
Ratio of net investment income to average net assets:
Before expense reimbursement................................ 0.89%*
After expense reimbursement................................. N/A
Portfolio turnover rate...................................... 22%
Average commission rate paid per share....................... $0.0269
</TABLE>
Commencement of Brinson Class N was June 30, 1997.
* Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR JULY 31, 1995*
DECEMBER 31, 1997 ENDED THROUGH
SWISSKEY CLASS (UNAUDITED) JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 12.49 $ 11.12 $ 10.26
------- ------- -------
Income from investment opera-
tions:
Net investment income......... 0.00 0.11 0.12
Net realized and unrealized
gain......................... (0.98) 1.93 1.45
------- ------- -------
Total income (loss) from in-
vestment operations........ (0.98) 2.04 1.57
------- ------- -------
Less distributions:
Distributions from net invest-
ment income.................. (0.05) (0.11) (0.15)
Distributions from net real-
ized gain.................... (0.74) (0.56) (0.56)
------- ------- -------
Total distributions......... (0.79) (0.67) (0.71)
------- ------- -------
Net asset value, end of period.. $ 10.72 $ 12.49 $ 11.12
======= ======= =======
Total return (non-annualized)... (7.71)% 19.32% 15.78%
Ratios/Supplemental data
Net assets, end of period (in
000s)......................... $ 8,106 $ 7,797 $ 1,262
Ratio of expenses to average
net assets:
Before expense reimbursement.. 1.84%** 1.81% 2.04%**
After expense reimbursement... N/A N/A 1.84%**
Ratio of net investment income
to average net assets:
Before expense reimbursement.. 0.29%** 1.02% 0.83%**
After expense reimbursement... N/A N/A 1.03%**
Portfolio turnover rate........ 22% 25% 20%
Average commission rate paid
per share..................... $0.0269 $0.0245 $0.0219
</TABLE>
* Commencement of SwissKey Class
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of seven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond
Fund and Non-U.S. Equity Fund. The Fund has three classes of shares
outstanding, Brinson Class I, Brinson Class N, and SwissKey Class. There are an
unlimited number of shares of each class with par value of $0.001 authorized.
Each share of the Fund represents an identical interest in the investments of
the Fund and has the same rights. The following is a summary of significant
accounting policies consistently followed by the Non-U.S. Equity Fund (the
"Fund") in the preparation of its financial statements.
A.INVESTMENT VALUATION:Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward foreign currency contracts are valued daily using quoted
forward exchange rates. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION:Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS:Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME:Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E.FEDERAL INCOME TAXES:It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the six months ended December 31, 1997,
therefore, no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS:It is the policy of the Fund to distribute its
net investment income on a semi-annual basis and net capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing tax treatments for foreign
currency transactions. Differences in dividends per share between the classes
are due to distribution expenses.
G.INCOME AND EXPENSE ALLOCATION:All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the SwissKey Class.
- --------------------------------------------------------------------------------
20
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
H.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. As compensation for
these services, the Fund pays the Advisor a monthly fee based on the Fund's
average daily net assets. The Advisor has agreed to waive its fees and
reimburse the Fund to the extent total annualized expenses exceed a specified
percentage of the Fund's average daily net assets. The expense cap is 1.00%,
1.25% and 1.84% of the average daily net assets of the Brinson Class I, Brinson
Class N and SwissKey Class, respectively. Investment advisory fees and other
transactions with affiliates for the six months ended December 31, 1997, were
as follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY
FEE FEES
-------- ----------
<S> <C> <C>
Non-U.S. Equity Fund........................................ 0.80% $1,633,467
</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 $2,944.
3.INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1997, excluding
short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ -----------
<S> <C> <C>
Non-U.S. Equity Fund................................... $107,166,089 $82,459,445
</TABLE>
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Fund realizes a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the six months ended December
31, 1997, was the Fund's custodian.
5.FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such contracts to hedge a portion of
its portfolio. Risks of entering into futures contracts include the possibility
that there may be an illiquid market or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Fund, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
- --------------------------------------------------------------------------------
21
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the SwissKey Class, and effective June 30,
1997, the Brinson Class N shares. Annual fees under the SwissKey Plan, which
include a 0.25% service fee, shall not exceed 0.84% of the average daily net
assets of the SwissKey Class. Annual fees under the Brinson Class N Plan shall
not exceed 0.25% of daily net assets of the Brinson Class N.
7.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 10,958,617 $130,290,326 19,910,853 $225,344,857
Brinson Class N............... -- -- 79 1,000
SwissKey Class................ 217,732 2,607,541 590,377 6,700,036
---------- ------------ ---------- ------------
Total Sales................ 11,176,349 $132,897,867 20,501,309 $232,045,893
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 2,668,222 $ 28,549,975 1,461,013 $ 16,110,105
Brinson Class N............... 7 67 -- --
SwissKey Class................ 48,737 517,587 8,477 94,649
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,716,966 $ 29,067,629 1,469,490 $ 16,204,754
========== ============ ========== ============
Redemptions:
Brinson Class I............... 9,525,571 $116,078,085 6,945,571 $ 80,838,515
Brinson Class N............... -- -- -- --
SwissKey Class................ 134,550 1,612,114 87,985 1,015,708
---------- ------------ ---------- ------------
Total Redemptions.......... 9,660,121 $117,690,199 7,033,556 $ 81,854,223
========== ============ ========== ============
</TABLE>
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22
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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 APPEARS HERE]
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY .
http://www.swisskey funds
